SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2)
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
TAG-IT PACIFIC, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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 transactions applies:
- --------------------------------------------------------------------------------
(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:
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[ ] 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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TAG-IT PACIFIC, INC.
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 15, 2000
-----------
TO OUR STOCKHOLDERS:
Notice is hereby given that the 2000 Annual Meeting of Stockholders of
Tag-It Pacific, Inc. (the "Company") will be held at the Luxe Summit Hotel
Bel-Air, 11461 Sunset Boulevard, Los Angeles, California 90049, on Thursday June
15, 2000 at 10:30 a.m., Pacific Daylight Savings time. The Annual Meeting is
being held for the following purposes:
1. To elect two Class III Directors to hold office for three years and
until their respective successors have been elected. The persons
nominated by the Board of Directors of the Company (Messrs. Mark Dyne
and Colin Dyne) are described in the accompanying Proxy Statement;
2. To approve an amendment to the Company's 1997 Stock Plan to increase
the maximum number of shares of Common Stock that may be issued
pursuant to awards granted under the plan from 1,177,500 shares to
1,777,500 shares; and
3. To transact such other business as may properly come before the Annual
Meeting or any of its adjournments or postponements.
Only stockholders of record of the Common Stock of the Company at the close
of business on April 24, 2000 are entitled to notice of, and to vote at, the
Annual Meeting and at any of its adjournments or postponements.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to mark, sign and return the enclosed Proxy as promptly as possible in the
postage prepaid envelope enclosed for that purpose. Any stockholder of record
attending the Annual Meeting may vote in person, even though he or she has
returned a Proxy. Any stockholder whose shares are held in the name of a bank,
broker or other holder of record must obtain a proxy, executed in the
stockholder's favor, from the holder of record to be able to vote in person at
the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael Dodo
Michael Dodo
VICE PRESIDENT, ADMINISTRATION
Los Angeles, California
May 12, 2000
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOU OWN SHARES
REGISTERED IN DIFFERENT NAMES OR AT DIFFERENT ADDRESSES, EACH CARD SHOULD BE
COMPLETED AND RETURNED.
TAG-IT PACIFIC, INC.
3820 SOUTH HILL STREET
LOS ANGELES, CALIFORNIA 90037
(323) 234-9606
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 15, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Tag-It Pacific, Inc., a Delaware
corporation (the "Company"), for use at the 2000 Annual Meeting of Stockholders
(the "Annual Meeting") to be held at the Luxe Summit Hotel Bel-Air, 11461 Sunset
Boulevard, Los Angeles, California 90049, on Thursday, June 15, 2000 at 10:30
a.m., Pacific Daylight Savings time, and at any of its adjournments or
postponements, for the purposes set forth herein and in the attached Notice of
Annual Meeting of Stockholders. Accompanying this Proxy Statement is the Board
of Directors' Proxy for the Annual Meeting, which you may use to indicate your
vote on the proposals described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will,
unless otherwise directed by the stockholders, be voted in accordance with the
recommendations of the Board of Directors set forth in this Proxy Statement. A
stockholder who submits the enclosed proxy will not limit his or her right to
vote at the Annual Meeting if the stockholder later decides to attend in person.
A stockholder whose shares are held in the name of a bank, broker or other
holder of record must obtain a proxy, executed in the stockholder's favor, from
the holder of record to be able to vote in person at the Annual Meeting. A
stockholder of record may revoke his or her Proxy at any time before it is voted
either by filing with the Secretary of the Company, at its principal executive
offices, a written notice of revocation or a duly executed proxy bearing a later
date, or by attending the Annual Meeting and expressing a desire to vote his or
her shares in person.
The close of business on April 24, 2000 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting or at any adjournments or postponements of the Annual Meeting. At
the record date, 6,777,556 shares of Common Stock, par value $.001 per share
(the "Common Stock"), were outstanding. The Common Stock is the only outstanding
class of capital stock of the Company entitled to vote at the Annual Meeting.
It is anticipated that this Proxy Statement and the accompanying Proxy will
be mailed to stockholders on or about May 12, 2000.
VOTING PROCEDURES
A stockholder is entitled to cast one vote for each share of Common Stock
held on the record date on all matters to be considered at the Annual Meeting. A
majority of the outstanding shares of Common Stock must be represented in person
or by proxy at the Annual Meeting in order to constitute a quorum for the
transaction of business. The two nominees for election as Class III directors at
the Annual Meeting who receive the highest number of affirmative votes will be
elected. The amendment of the 1997 Stock Plan to increase by 600,000 the number
of shares of Common Stock that may be issued pursuant to awards under the 1997
Stock Plan will require the affirmative vote of a majority of the votes entitled
to be cast by holders of outstanding shares of Common Stock that are present or
represented by proxy at the Annual Meeting. Abstentions and broker non-votes
will be included in the number of shares present at the Annual Meeting for the
purpose of determining the presence of a quorum. Abstentions will be counted
toward the tabulation of votes cast on proposals submitted to stockholders and
will have the same effect as negative votes, while broker non-votes will not be
counted as votes cast for or against such matters.
ELECTION OF DIRECTORS
In accordance with the Certificate of Incorporation of the Company, the
Board of Directors is divided into three classes. At each annual meeting of
stockholders, directors constituting one class are elected, each for a
three-year term. Two Class III directors will be elected at the Annual Meeting.
Unless otherwise instructed, the Proxy holders will vote the Proxies
received by them for the nominees named below. If any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting or at any of
its postponements or adjournments, the Proxies will be voted for such other
nominee(s) as shall be designated by the current Board of Directors to fill any
vacancy. The Company has no reason to believe that any nominee will be unable or
unwilling to serve if elected as a director.
The Board of Directors proposes the election of the following nominees as
Class III directors:
Mark Dyne
Colin Dyne
If elected, each nominee is expected to serve until the 2003 Annual Meeting
of Stockholders. The two nominees for election as Class III directors at the
Annual Meeting who receive the highest number of affirmative votes will be
elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEES LISTED ABOVE.
Page 2
INFORMATION WITH RESPECT TO NOMINEES, CONTINUING DIRECTORS AND OFFICERS
The following table sets forth certain information with respect to the
nominees, continuing directors and officers of the Company as of April 14, 2000.
YEAR FIRST
ELECTED OR
APPOINTED
NAME AGE DIRECTOR POSITION
---- --- ---------- --------
NOMINEES:
CLASS III DIRECTORS
(terms to expire in 2003)
Mark Dyne (1)................... 39 1997 Chairman of the Board
Colin Dyne (1).................. 36 1997 Chief Executive Officer and Director
CONTINUING DIRECTORS:
CLASS I DIRECTORS
(terms to expire in 2001)
Kevin Bermeister (2)(3)......... 39 1999 Director
Brent Cohen (2)(3).............. 41 1998 Director
CLASS II DIRECTORS
(terms to expire in 2002)
Michael Katz (3)................ 58 1998 Director
Paul Markiles (2)(4)............ 66 1998 Director
Jonathan Burstein (5)........... 33 1999 Executive Vice President, Sales and
Marketing, and Director
OTHER OFFICERS:
Jonathan Markiles (4)........... 35 Executive Vice President, Strategic
Planning and Business Development,
and Secretary
Michael Dodo.................... 28 2000 Vice President, Administration
<FN>
- ----------------------
(1) Colin Dyne and Mark Dyne are brothers.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
(4) Jonathan Markiles is the son of Paul Markiles.
(5) Jonathan Burstein is Colin Dyne and Mark Dyne's brother-in-law.
</FN>
MARK DYNE has served as Chairman of the Board of Directors of the Company
since September 1997. Mr. Dyne currently is Chairman of the Board of Directors
and Chief Executive Officer of Brilliant Digital Entertainment, Inc., a publicly
traded corporation, positions he has held since October 1996. He is a founder
and director of Ozisoft Pty Ltd., a leading distributor of entertainment
software in both Australia and New Zealand. Mr. Dyne also serves as Chairman of
Sega Gaming Technology Inc., a Las Vegas based gaming company. Mr. Dyne has
served as Chief Executive Officer of Sega Enterprises (Australia) Pty. Ltd., a
theme park developer, and as a director of Monto Holdings Pty., Ltd., a private
investment company. Mr. Dyne was a founder of Packard Bell NEC Australia Pty.
Ltd., a manufacturer and distributor of personal computers through the
Australian mass merchant channel. Until January 2000, Mr. Dyne was Chairman and
Chief Executive Officer of Virgin Interactive Entertainment Ltd., a distributor
of computer software programs and video games that is based in London, England.
COLIN DYNE has served as Chief Executive Officer and a director of the
Company since October 1997. Mr. Dyne founded Tag-It, Inc., a subsidiary of the
Company, in 1991 with his father, Harold Dyne, and has served as its President
since inception. Prior to founding Tag-It, Inc. in 1991, Mr. Dyne worked in
numerous positions within the
Page 3
stationery products industry, including owning and operating retail stationery
businesses and servicing the larger commercial products industry through
contract stationery and printing operations.
KEVIN BERMEISTER has served as a director of the Company since May 1999.
Mr. Bermeister currently is President and is a director of Brilliant Digital
Entertainment, Inc., positions he has held since 1996. Mr. Bermeister is a
director and equity owner of Sega Ozisoft Pty. Ltd. and previously served as its
Co-Chief Executive Officer. Mr. Bermeister helped found Sega Ozisoft in 1982.
Mr. Bermeister also is a director of Packard Bell NEC Australia Pty. Ltd. and
Jacfun Pty. Ltd.
BRENT COHEN has served as a director of the Company since 1998. Mr. Cohen
currently is President and Chief Executive Officer of US Search.com, a position
he has held since February 2000. Mr. Cohen served on the advisory boards of
several Internet start-up companies from October 1998 through January 2000. From
July 1987 through October 1998, Mr. Cohen held senior management positions with
Packard Bell NEC (formerly Packard Bell Electronics), including Chief Operating
Officer, Chief Financial Officer and President- Consumer and International. From
January 1980 through December 1982 and from January 1985 through June 1987 Mr.
Cohen held various management positions in both the consulting and auditing
practice of Arthur Young & Company (now Ernst & Young). Mr. Cohen is a charted
accountant.
MICHAEL KATZ has served as a director of the Company since 1998. From 1987
to the present, Mr. Katz has served as President, Chief Operating Officer and
director of Transducer Controls Corporation, a manufacturer of position and
pressure transducers. During the same period, Mr. Katz has also served as
President, Chief Operating Officer and director of Tedea-Huntleigh, Inc., a
manufacturer of load-cells and force-transducers. Since September 1996, Mr. Katz
has held the position of Chairman of the Board of Filtomat, Inc., a manufacturer
of automatic industrial water filters. Since 1999, Mr. Katz has also served as
President, Chief Operating Officer and Director of Lebow Products, a
manufacturer of torque-transducers.
PAUL MARKILES has served as a director of the Company since 1998. Prior to
his retirement in 199l, Mr. Markiles served as President and Chief Executive
Officer of Windshields America, Inc., a subsidiary of South African Breweries.
Mr. Markiles was responsible for the founding and expansion of Windshields
America into a national chain of over 120 retail autoglass stores.
JONATHAN BURSTEIN has served as a director of the Company since October
1999. Mr. Burstein currently serves as Executive Vice President, Sales and
Marketing of the Company. From 1987 until the present, Mr. Burstein also has
been responsible for managing many of the Company's largest customer accounts
and supervising the Company's sales force and brand managers. Currently, Mr.
Burstein is responsible for transitioning customers to the Company's TAG-IT
TURNKEY e-commerce system.
JONATHAN MARKILES is Executive Vice President, Strategic Planning and
Business Development, and Secretary of the Company. Mr. Markiles joined Tag-It,
Inc. in May 1994 as its General Manager where he has been responsible for
production, distribution and international operations. Prior to joining Tag-It,
Inc., Mr. Markiles received his M.B.A. from the University of Southern
California in May 1994. From 1987 until August 1992, Mr. Markiles held various
operational positions with Windshields America, Inc., a national chain of
autoglass stores.
MICHAEL DODO is Vice President, Administration of the Company, a position
he has held since March 2000. Mr. Dodo joined the company in April 1996 as its
Corporate Controller. Mr. Dodo currently is the Company's principle financial
and accounting officer, and is responsible for the Company Hong Kong operations.
From 1994 to 1996, Mr. Dodo worked at Mercantile Lisbon Bank, South Africa in
various positions, culminating with the position of Business Development
Manager.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held three meetings and acted one additional time by
unanimous written consent during fiscal 1999. Each of Michael Katz, Colin Dyne
and Kevin Bermeister did not attend one meeting of the Board of Directors in
fiscal 1999. Other than these directors, no director attended less than 75% of
all the meetings of the Board of Directors and those committees on which he or
she served in fiscal 1999.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee currently consists of Messrs. Bermeister, Cohen and Katz.
The Audit Committee recommends the engagement of the Company's independent
public accountants, reviews the scope of the audit to be conducted by such
independent
Page 4
public accountants and meets with the independent public accountants and the
Chief Financial Officer of the Company to review matters relating to the
Company's financial statements, the Company's accounting principles and its
system of internal accounting controls, and the committee reports its
recommendations as to the approval of the financial statements of the Company to
the Board of Directors. One meeting of the Audit Committee was held during
fiscal 1999.
The Compensation Committee currently consists of Messrs. Bermeister, Cohen
and Markiles. The Compensation Committee is responsible for considering and
making recommendations to the Board of Directors regarding executive
compensation and is responsible for administering the Company's stock option and
executive incentive compensation plans. The Compensation Committee held one
meeting during fiscal 1999.
COMPENSATION OF DIRECTORS
Nonemployee directors of the Company currently are paid $1,500 for their
personal attendance at any meeting of the Board of Directors and $500 for
attendance at any telephonic meeting of the Board of Directors or at any meeting
of a committee of the Board of Directors. Mark Dyne, Brent Cohen and Kevin
Bermeister, all nonemployee directors, also received options to purchase 40,000,
15,000 and 30,000 shares of Common Stock, respectively, in fiscal 1999.
Directors also are reimbursed for their reasonable travel expenses incurred in
attending Board or committee meetings.
Page 5
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, as to the Chief Executive Officer and
as to each of the other four most highly compensated officers whose compensation
exceeded $100,000 during the last fiscal year (the "Named Executive Officers"),
information concerning all compensation paid for services to the Company in all
capacities during the last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NUMBER OF
OTHER SECURITIES
FISCAL YEAR ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION ENDED(1) SALARY COMPENSATION(2) OPTIONS(3)
--------------------------- ----------------- --------- --------------- ------------
Colin Dyne............................ December 31, 1999 $ 229,251 $ 27,921 145,000
Chief Executive Officer December 31, 1998 $ 229,251 $ 23,040 98,000
December 31, 1997 $ 229,251 $ 22,773 --
Harold Dyne (4)....................... December 31, 1999 $ 208,904 $ 32,684 --
President December 31, 1998 $ 214,234 $ 30,156 98,000
December 31, 1997 $ 214,814 $ 24,832 --
Jonathan Burstein..................... December 31, 1999 $ 175,168 $ 35,929 20,000
Executive Vice President, December 31, 1998 $ 167,979 $ 26,347 30,000 (5)
Sales and Marketing December 31, 1997 $ 152,981 $ 12,393 8,000 (6)
Jonathan Markiles..................... December 31, 1999 $ 154,462 $ -- 15,000
Executive Vice President, December 31, 1998 $ 111,497 $ -- 20,000 (7)
Strategic Planning and Business December 31, 1997 $ 82,897 $ -- 8,000 (6)
Development, and Secretary
Francis Shinsato (8).................. December 31, 1999 $ 102,247 $ 2,520 --
Chief Financial Officer December 31, 1998 $ 98,760 $ 2,096 30,000 (9)
December 31, 1997 $ 11,874 $ -- 20,000 (6)
- --------------------
<FN>
(1) The Company changed its fiscal year end from August 31 to December 31,
effective December 31, 1998.
(2) Consists of car and expense allowances and medical and disability
insurance.
(3) In October 1998, all of the Company's then outstanding stock options were
repriced under the Company's option repricing program. Under the program,
options to purchase a total of 170,000 shares of Common Stock were
exchanged by the holders thereof for repriced stock options to purchase the
same number of shares at a lower exercise price.
(4) Harold Dyne served as President of the Company until his death in October
1999. Compensation for fiscal 1999 reflects amounts paid to Mr. Dyne or his
estate through October 1999.
(5) Consists of options to purchase 22,000 shares of Common Stock granted in
October 1998, and options to purchase 8,000 shares of Common Stock granted
in October 1997 which were repriced in October 1998 under the Company's
option repricing program.
(6) These options were cancelled in October 1998 in connection with the grant
of a repriced option under the Company's option repricing program.
(7) Consists of options to purchase 12,000 shares of Common Stock granted in
October 1998, and options to purchase 8,000 shares of Common Stock granted
in October 1997 which were repriced in October 1998 under the Company's
option repricing program.
(8) Francis Shinsato served as Chief Financial Officer of the Company until his
resignation in November 1999. Compensation for fiscal 1999 reflects amounts
paid to Mr. Shinsato through November 1999.
(9) Consists of options to purchase 10,000 shares of Common Stock granted on
October 1998, and options to purchase 20,000 shares of Common Stock granted
in October 1997 which were repriced in October 1998 under the Company's
option repricing program.
</FN>
Page 6
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding the grant of
stock options made during the fiscal year ended December 31, 1999 to the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTION EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED FISCAL YEAR(1) BASE PRICE(2) DATE
---- ----------- -------------- ------------- ----------
Colin Dyne.............. 145,000 (3) 47.1% $ 4.31 12/19/09
Harold Dyne............. -- -- -- --
Jonathan Burstein....... 20,000 (3) 6.5% $ 4.31 12/19/09
Jonathan Markiles....... 15,000 (3) 4.9% $ 4.31 12/19/09
Francis Shinsato........ -- -- -- --
- ------------------------
<FN>
(1) Options covering an aggregate of 308,000 shares of Common Stock were
granted to employees during the fiscal year ended December 31, 1999.
(2) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares, subject to certain conditions.
(3) This option vested immediately on the date of grant.
</FN>
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND STOCK OPTIONS HELD AT
FISCAL YEAR END
The following table sets forth, for each of the Named Executive Officers,
certain information regarding the exercise of stock options during the fiscal
year ended December 31, 1999, the number of shares of Common Stock underlying
stock options held at fiscal year end and the value of options held at fiscal
year end based upon the last reported sales price of the Common Stock on the
American Stock Exchange on December 31, 1999 ($5.625 per share).
AGGREGATED FISCAL YEAR-END OPTION VALUES
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ON VALUE OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME EXERCISE REALIZED DECEMBER 31, 1999 DECEMBER 31, 1999 (1)
- ---- -------- -------- -------------------------- --------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Colin Dyne.............. -- -- 243,000 -- $ 614,525 $ --
Harold Dyne (2)......... -- -- 98,000 -- $ 423,850 $ --
Jonathan Burstein....... -- -- 44,000 6,000 $ 130,100 $ 25,950
Jonathan Markiles....... -- -- 29,000 6,000 $ 80,275 $ 25,950
Francis Shinsato........ 30,000 $109,200 -- -- $ -- $ --
- ------------
<FN>
(1) Based on a closing price of $5.625 per share of Common Stock on December
31, 1999, all options were in-the-money at fiscal year end.
(2) Harold Dyne's stock options are held by Mr. Dyne's estate.
</FN>
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
None of the Named Executive Officers have employment agreements with the
Company and their employment may be terminated at any time.
STOCK OPTION PLAN
The Company adopted the Tag-It Pacific, Inc. 1997 Stock Plan (the "1997
Plan") in October 1997. The purpose of the 1997 Plan is to attract, retain and
motivate certain key employees of the Company and its subsidiaries by giving
them incentives which are linked directly to increases in the value of the
Common Stock of the Company. Each director, officer, employee or consultant of
the Company or any of its subsidiaries is eligible to be considered
Page 7
for the grant of awards under the 1997 Plan. The maximum number of shares of
Common Stock that may be issued pursuant to awards granted under the 1997 Plan
is 1,177,500, subject to certain adjustments to prevent dilution. Any shares of
Common Stock subject to an award which for any reason expires or terminates
unexercised are again available for issuance under the 1997 Plan.
The 1997 Plan authorizes its administrator to enter into any type of
arrangement with an eligible participant that, by its terms, involves or might
involve the issuance of (1) shares of Common Stock, (2) an option, warrant,
convertible security, stock appreciation right or similar right with an exercise
or conversion privilege at a price related to the Common Stock, or (3) any other
security or benefit with a value derived from the value of the Common Stock. Any
stock option granted may be an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or a
nonqualified stock option. The 1997 Plan currently is administered by the
Compensation Committee of the Board of Directors of the Company. Subject to the
provisions of the 1997 Plan, the Compensation Committee will have full and final
authority to select the executives and other employees to whom awards will be
granted thereunder, to grant the awards and to determine the terms and
conditions of the awards and the number of shares to be issued pursuant thereto.
No participant may receive awards representing more than 25% of the aggregate
number of shares of Common Stock that may be issued pursuant to all awards under
the 1997 Plan.
As of December 31, 1999, 273,000 shares of Common Stock remained available
for grant of awards to eligible participants under the 1997 Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, requires the
Company's executive officers, directors, and persons who own more than ten
percent of a registered class of the Company's equity securities to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Executive officers, directors and greater-than-ten
percent stockholders are required by SEC regulations to furnish the Company with
all Section 16(a) forms they file. Based solely on its review of the copies of
the forms received by it and written representations from certain reporting
persons that they have complied with the relevant filing requirements, the
Company believes that, during the year ended December 31, 1999, all the
Company's executive officers, directors and greater-than-ten percent
stockholders complied with all Section 16(a) filing requirements with the
exception of Colin Dyne and Francis Shinsato. Colin Dyne did not report on a
Form 5 his gift of an aggregate of 6,000 shares of Common Stock in fiscal 1999.
Francis Shinsato did not report on a Form 4 his exercise of a stock option and
purchase of 30,000 shares of Common Stock, and his subsequent sale of 5,000 of
these shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
D.P.S. Associates, a general partnership in which Harold Dyne, the former
President and director of the Company was a general partner, is the lessor of
the Company's executive offices located at 3820 South Hill Street in Los
Angeles, California pursuant to a Lease Agreement with Pacific Trim & Belt,
Inc., a subsidiary of the Company. The lease with D.P.S. Associates provides for
a base rent of $9,072 per month and expires on April 30, 2000.
Certain affiliated parties have made loans to the Company's subsidiaries to
be used for general working capital purposes, all of which are evidenced by
promissory notes executed by the respective subsidiary and are due and payable
on the fifteenth day following the date written demand for payment is made by
the holder thereof. The loans include (i) a loan by Monto Holdings Pty. Ltd. in
February 1996 of $300,000 to AGS Stationery, Inc. at an interest rate of 7.5%
per annum, which loan was repaid in January 1998, (ii) a loan by Monto Holdings
in January 1995 of $124,626 to Pacific Trim at an interest rate of 10.0% per
annum, and (iii) a loan by NPM Investments, Inc. in August 1996 of $715,000 to
Tag-It, Inc. at an interest rate of 7.5% per annum, of which $400,000 was
converted into 266,666 shares of Common Stock on October 15, 1998 and the
balance was repaid in February 1999. Mark Dyne, the Chairman of the Board of the
Company holds a significant equity interest in Monto Holdings and NPM
Investments, Inc. Alan Saloner, a significant stockholder of the Company, holds
a significant equity interest in NPM Investments, Inc. Kevin Bermeister, a
director of the Company, holds an equity interest in Monto Holdings.
In September and October 1997, NPM Investments, Inc. made an additional
loan of $126,972 to Tag-It, Inc. to fund expenses incurred in connection with
the Company's initial public offering. The loan, which was repaid in July 1998,
had an interest rate of 7.5% per annum and was due and payable on the fifteenth
day following the date of delivery by NPM Investments, Inc. of written demand
therefor.
Page 8
Effective October 15, 1998, $400,000 of indebtedness owed by the Company's
subsidiaries to NPM Investments, Inc. was converted into 266,666 shares of
Common Stock, which shares were issued to Heathmount International Limited, a
company in which Alan Saloner holds an equity interest. Mark Dyne did not
receive any interest, directly or indirectly, in the shares issued to Heathmount
International Limited upon conversion of the indebtedness owed to NPM
Investments, Inc.
In October and November 1997, Monto Holdings made additional loans of
$12,000 to AGS Stationery and $110,000 to Pacific Trim, respectively, to fund
expenses incurred in connection with the Company's initial public offering. The
loans bear simple interest at a rate of 7.5% per annum, are due and payable on
the fifteenth day following the date of delivery by Monto Holdings of written
demand therefor. As of December 31, 1999, $40,000 had been repaid to Monto
Holdings.
As of December 31, 1999, Colin Dyne was indebted to Tag-It in the aggregate
amount of $193,713. A portion of this indebtedness is evidenced by a promissory
note dated August 31, 1997 in the principal amount of $71,542, which is due and
payable on demand, and a promissory note dated October 15, 1997 in the principal
amount of $6,089, which was due and payable on demand. Both promissory notes
bear interest at a rate of 7.5% per annum. The remaining indebtedness is due and
payable on demand.
As of December 31, 1999, Jonathan Burstein was indebted to Tag-It in the
aggregate amount of $75,336. This indebtedness bears interest of 7.5 % and is
due and payable on demand.
In August 1999, Mark Dyne loaned the Company $160,000. This indebtedness is
evidence by an unsecured promissory note, dated August 17, 1999 and is due and
payable on demand. The promissory note bears interest at a rate of 7% per annum.
Averil Capital Markets Group, Inc., a financial advisory firm founded and
controlled by Diana Maranon, has, since January 1, 1996, performed various
services for AGS Stationery and the Company including investigation of strategic
financing and other corporate growth initiatives. Ms. Maranon served as a
director of the Company from January 1998 until May 1999. As consideration for
such services, AGS Stationery paid to Averil the aggregate amount of $26,123,
including out of pocket expenses. As additional compensation for services
rendered, AGS Stationery granted to Chloe Holdings, Inc., an affiliate of Averil
warrants to purchase up to 135 shares of common stock of AGS Stationery, and the
Company paid to Averil $175,000 upon consummation of the Company's initial
public offering. Immediately prior to the Company's initial public offering, the
warrants granted to Chloe Holdings became exercisable for 22,841 shares of
Common Stock of the Company. In November 1999, Chloe Holdings exercised the
options on a cashless basis and received 19,379 shares of Common Stock. The
Company plans to continue to engage Averil; however, the Company is unable to
currently estimate the extent to which it will use Averil in the future.
In October 1998, KG Investment, LLC, a Los Angeles-based private investment
company, purchased 2,390,000 restricted shares of the Company's Common Stock for
an aggregate price of $2,688,750. KG Investment is owned by Gerard Guez and Todd
Kay. Mr. Guez is the Chairman of the Board and Chief Executive Officer and a
significant stockholder of Tarrant Apparel Group. Mr. Kay is the President and a
significant stockholder of Tarrant Apparel Group. Tarrant Apparel Group is the
Company's largest customer. During fiscal 1998 and 1999, Tarrant Apparel Group
purchased approximately $569,000 and $15,500,000, respectively, in products from
the Company.
In connection with its investment in the Company, KG Investment agreed not
to dispose of its shares of Common Stock prior to October 16, 2000, except to
certain affiliated parties, without the prior written consent of the Company.
After October 16, 2000, KG Investment may sell or transfer any of the shares in
accordance with applicable law; provided that if the sale is made other than (i)
in accordance with the volume restrictions of Rule 144 under the Securities Act
of 1933 or (ii) in connection with a public offering initiated by the Company,
then the Company shall have a right of first refusal to purchase the shares
(which right may be assigned by the Company) upon the same or economically
equivalent terms and conditions. The Company granted KG Investment piggyback
registration rights which entitles it to sell its shares of Common Stock in a
registered public offering in the same proportion as shares of Common Stock sold
in the same offering by any of Colin Dyne, Mark Dyne, Harold Dyne, Larry Dyne
and/or Jonathan Burstein (the "Dyne Shareholders").
KG Investment has agreed to certain restrictions on the voting of the
shares it purchased until after October 16, 2000. KG Investment has agreed not
to vote in favor of any merger, asset sale or other extraordinary transaction
involving the Company, if such transaction is not approved by the majority of
the Company's Board of Directors;
Page 9
provided, however, in the event that the price to be paid per share of Common
Stock pursuant to such transaction is at least $8.00, KG Investment is not
prohibited from voting in favor of the transaction. In addition, so long as the
Dyne Shareholders hold more than 1,000,000 shares of Common Stock, KG Investment
has agreed to vote 386,778 of its shares of Common Stock (as the same are
adjusted for stock splits, stock dividends and other similar transactions) (the
"Neutral Shares") in the same proportion as all other outstanding shares of
Common Stock are voted on all matters presented to the Company's stockholders.
The number of Neutral Shares will be reduced share by share by any shares of
Common Stock purchased from the Company by the Dyne Shareholders. KG Investment
has the right to vote its shares, other than the Neutral Shares, in accordance
with its own objectives; provided, that KG Investment has agreed that neither KG
Investment, nor an entity affiliated with or controlled by KG Investment, will
solicit proxies against, or promote or initiate, or encourage another party to
promote or initiate, a proxy solicitation or vote contest in opposition to, the
management or the Board of Directors of the Company. Furthermore, KG Investment
has agreed that until after the 2000 Annual Meeting of Stockholders of the
Company, it will not nominate, or cause to be nominated, any directors for
election at any annual meeting, and to vote its shares of Common Stock in the
same proportion as all other outstanding shares of Common Stock voted with
respect to the election of directors of the Company.
Murray Markiles, who is Jonathan Markiles' brother and Paul Markiles' son,
is a partner with Troop Steuber Pasich Reddick & Tobey, LLP ("TSPRT"). TSPRT is
legal counsel to Company. As compensation for legal services performed by TSPRT
in connection with the Company initial public offering, the Company granted to
TSPRT a warrant to purchase 35,555 shares of Common Stock at an exercise price
of $3.60 per share. In October 1998, the Company repriced the warrants issued to
TSPRT from $3.60 per share to $1.50 per share. The warrant is currently
exercisable, expires on December 31, 2003 and provides for piggyback
registration rights.
Page 10
PROPOSAL TO AMEND THE 1997 STOCK PLAN
GENERAL
The Board of Directors has approved an amendment (the "Plan Amendment") to
the Tag-It Pacific, Inc. 1997 Stock Plan to increase the number of shares of
Common Stock available for issuance under the 1997 Plan from 1,177,500 shares to
1,777,500 shares. The Plan Amendment is being submitted to the Company's
stockholders for approval.
The Board of Directors approved the Plan Amendment to ensure that a
sufficient number of shares of Common Stock are available for issuance under the
1997 Plan. At April 14, 2000, only 130,000 shares remained available for grants
of awards under the 1997 Plan. The Board of Directors believes that the ability
to grant stock-based awards is important to the future success of the Company.
The grant of stock options and other stock-based awards can motivate high levels
of performance and provide an effective means of recognizing employee
contributions to the success of the Company. In addition, stock-based
compensation can be valuable in recruiting and retaining highly qualified
technical and other key personnel who are in great demand as well as rewarding
and providing incentives to its current employees. The increase in the number of
shares available for awards under the 1997 Plan will enable the Company to
continue to realize the benefits of granting stock-based compensation.
At April 14, 2000, the last reported sales price of the Common Stock on the
American Stock Exchange was $4.50 per share.
SUMMARY OF THE 1997 PLAN
PURPOSE. The purpose of the 1997 Plan is to advance the interests of the
Company and its stockholders by strengthening the Company's ability to obtain
and retain the services of the types of employees, consultants, officers and
directors who will contribute to the Company's long term success and to provide
incentives which are linked directly to increases in stock value which will
inure to the benefit of all stockholders of the Company.
ADMINISTRATION. The 1997 Plan may be administered by the Board of
Directors, or a committee of two or more directors appointed by the Board of
Directors whose members serve at the pleasure of the Board. The 1997 Plan
currently is administered by the Compensation Committee of the Board of
Directors. The party administering the 1997 Plan is referred to as the
"Administrator." Subject to the provisions of the 1997 Plan, the Administrator
has full and final authority to (i) select from among eligible directors,
officers, employees and consultants, those persons to be granted awards under
the 1997 Plan, (ii) determine the type, size and terms of individual awards to
be made to each person selected, (iii) determine the time when awards will be
granted and to establish objectives and conditions (including, without
limitation, vesting and performance conditions), if any, for earning awards,
(iv) amend the terms or conditions of any outstanding award, subject to
applicable legal restrictions and to the consent of the other party to such
award, (v) authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of the 1997 Plan, and (vii) make
any and all other determinations which the Administrator determines to be
necessary or advisable in the administration of the 1997 Plan. The Administrator
has full power and authority to administer and interpret the 1997 Plan and to
adopt, amend and revoke such rules, regulations, agreements, guidelines and
instruments for the administration of the 1997 Plan and for the conduct of its
business as the Administrator deems necessary or advisable.
ELIGIBILITY. Any person who is a director, officer, employee or consultant
of the Company, or any of its subsidiaries (a "Participant"), is eligible to be
considered for the grant of awards under the 1997 Plan. No Participant may
receive awards representing more than 25% of the aggregate number of shares of
Common Stock that may be issued pursuant to all awards under the 1997 Plan. At
April 14, 2000, approximately 127 officers, directors and employees of the
Company were eligible to receive awards under the 1997 Plan.
TYPES OF AWARDS. Awards authorized under the 1997 Plan may consist of any
type of arrangement with a Participant that, by its terms, involves or might
involve or be made with reference to the issuance of shares of the Company's
Common Stock, or a derivative security with an exercise or conversion price
related to the Common Stock or with a value derived from the value of the Common
Stock. Awards are not restricted to any specified form or structure and may
include sales, bonuses and other transfers of stock, restricted stock, stock
options, reload stock options, stock purchase warrants, other rights to acquire
stock or securities convertible into or redeemable for stock, stock appreciation
rights, phantom stock, dividend equivalents, performance units or performance
shares, or any other type of award which the Administrator shall determine is
consistent with the objectives and limitations of the
Page 11
1997 Plan. An award may consist of one such security or benefit, or two or more
of them in tandem or in the alternative.
CONSIDERATION. The Common Stock or other property underlying an award may
be issued for any lawful consideration as determined by the Administrator,
including, without limitation, a cash payment, services rendered, or the
cancellation of indebtedness. An award may provide for a purchase price of the
Common Stock or other property at a value less than the fair market value of the
Common Stock or other property on the date of grant. In addition, an award may
permit the recipient to pay the purchase price of the Common Stock or other
property or to pay such recipient's tax withholding obligation with respect to
such issuance, in whole or in part, by delivering previously owned shares of
capital stock of the Company or other property, or by reducing the number of
shares of Common Stock or the amount of other property otherwise issuable
pursuant to such award.
TERMINATION OF AWARDS. All awards granted under the 1997 Plan expire ten
years from the date of grant, or such shorter period as is determined by the
Administrator. No option is exercisable by any person after such expiration. If
an award expires, terminates or is canceled, the shares of Common Stock not
purchased thereunder shall again be available for issuance under the 1997 Plan.
AMENDMENT AND TERMINATION OF THE 1997 PLAN. The Administrator may amend the
1997 Plan at any time, may suspend it from time to time or may terminate it
without approval of the stockholders; provided, however, that stockholder
approval is required for any amendment which materially increases the number of
shares for which awards may be granted, materially modifies the requirements of
eligibility, or materially increases the benefits which may accrue to recipients
of awards under the 1997 Plan. However, no such action by the Board of Directors
or stockholders may unilaterally alter or impair any award previously granted
under the 1997 Plan without the consent of the recipient of the award. In any
event, the 1997 Plan shall terminate on October 1, 2007 (ten years following the
date it was approved by the Company's stockholders) unless sooner terminated by
action of the Board of Directors. The 1997 Plan was amended in fiscal 1999 to
increase the number of shares of Common Stock available for issuance under the
1997 Plan from 562,500 shares to 1,177,500 shares. The Company's stockholders
approved this amendment to the plan at the 1999 Annual Meeting of Stockholders.
FEDERAL INCOME TAX CONSEQUENCES FOR STOCK OPTIONS
As of April 14, 2000, the only type of award granted by the Company under
the 1997 Plan had been stock options. The following is a general discussion of
the principal United States federal income tax consequences of both "incentive
stock options" within the meaning of Section 422 of the Code ("Incentive Stock
Options") and non-statutory stock options ("Non-statutory Stock Options") based
upon the United States Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, all of which are subject to
modification at any time. The 1997 Plan does not constitute a qualified
retirement plan under Section 401(a) of the Code (which generally covers trusts
forming part of a stock bonus, pension or profit-sharing plan funded by employer
and/or employee contributions which are designed to provide retirement benefits
to participants under certain circumstances) and is not subject to the Employee
Retirement Income Security Act of 1974 (the pension reform law which regulates
most types of privately funded pension, profit sharing and other employee
benefit plans).
CONSEQUENCES TO EMPLOYEES: INCENTIVE STOCK OPTIONS. No income is recognized
for federal income tax purposes by an optionee at the time an Incentive Stock
Option is granted, and, except as discussed below, no income is recognized by an
optionee upon his or her exercise of an Incentive Stock Option. If the optionee
makes no disposition of the Common Stock received upon exercise within two years
from the date such option was granted or one year from the date such option is
exercised (the "ISO Holding Period Requirements"), the optionee will recognize
long-term capital gain or loss when he or she disposes of his or her Common
Stock. Such gain or loss generally will be measured by the difference between
the exercise price of the option and the amount received for the Common Stock at
the time of disposition.
If the optionee disposes of the Common Stock acquired upon exercise of an
Incentive Stock Option without satisfying the ISO Holding Period Requirements,
any amount realized from such "disqualifying disposition" will be taxed at
ordinary income tax rates in the year of disposition to the extent that (i) the
lesser of (a) the fair market value of the shares of Common Stock on the date
the Incentive Stock Option was exercised or (b) the fair market value of such
shares at the time of such disposition exceeds (ii) the Incentive Stock Option
exercise price. Any amount realized upon disposition in excess of the fair
market value of the shares of Common Stock on the date of exercise will be
treated as long-term or short-term capital gain depending upon the length of
time the shares have been held.
Page 12
The use of stock acquired through exercise of an Incentive Stock Option to
exercise an Incentive Stock Option will constitute a disqualifying disposition
if the ISO Holding Period Requirements have not been satisfied.
For alternative minimum tax purposes, the excess of the fair market value
of the shares of Common Stock as of the date of exercise over the exercise price
of the Incentive Stock Option is included in computing that year's alternative
minimum taxable income. However, if the shares of Common Stock are disposed of
in the same year, the maximum alternative minimum taxable income with respect to
those shares is the gain on disposition of the shares. There is no alternative
minimum taxable income from a disqualifying disposition in subsequent years.
CONSEQUENCES TO EMPLOYEES: NON-STATUTORY STOCK OPTIONS. No income generally
is recognized by a holder of Non-statutory Stock Options at the time
Non-statutory Stock Options are granted under the 1997 Plan. In general, at the
time shares of Common Stock are issued to a holder pursuant to the exercise of
Non-statutory Stock Options, the holder will recognize ordinary income equal to
the excess of the fair market value of the shares on the date of exercise over
the exercise price.
A holder will recognize gain or loss on the subsequent sale of Common Stock
acquired upon exercise of Non-statutory Stock Options in an amount equal to the
difference between the sales price and the tax basis of the Common Stock, which
will include the exercise price paid plus the amount included in the holder's
income by reason of the exercise of the Non-statutory Stock Options. Provided
the shares of Common Stock are held as a capital asset, any gain or loss
resulting from a subsequent sale will be short-term or long-term capital gain or
loss depending upon the length of time the shares have been held.
CONSEQUENCES TO THE COMPANY: INCENTIVE STOCK OPTIONS. The Company will not
be allowed a deduction for federal income tax purposes at the time of the grant
or exercise of an Incentive Stock Option. There are also no federal income tax
consequences to the Company as a result of the disposition of Common Stock
acquired upon exercise of an Incentive Stock Option if the disposition is not a
"disqualifying disposition." At the time of a disqualifying disposition by an
optionee, the Company will be entitled to a deduction for the amount received by
the optionee to the extent that such amount is taxable to the optionee at
ordinary income tax rates.
CONSEQUENCES TO THE COMPANY: NON-STATUTORY STOCK OPTIONS. Generally, the
Company will be entitled to a deduction for federal income tax purposes in the
Company's taxable year in which the optionee's taxable year of income inclusion
ends and in the same amount as the optionee is considered to have realized
ordinary income in connection with the exercise of Non-statutory Stock Options.
REQUIRED VOTE
The approval of the Plan Amendment requires the affirmative vote of a
majority of the votes entitled to be cast by the holders of shares of the
Company's Common Stock present or represented and entitled to vote on this
matter at the Annual Meeting. An abstention will be counted toward the
tabulation of votes cast and will have the same effect as a vote against the
proposal. A broker non-vote, however, will not be treated as a vote cast for or
against approval of the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE PLAN AMENDMENT.
Page 13
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth as of April 14, 2000 certain information
relating to the ownership of the Common Stock by (i) each person known by the
Company to be the beneficial owner of more than five percent of the outstanding
shares of the Company's Common Stock, (ii) each of the Company's directors,
(iii) each of the Named Executive Officers, and (iv) all of the Company's
executive officers and directors as a group. Except as may be indicated in the
footnotes to the table and subject to applicable community property laws, each
such person has the sole voting and investment power with respect to the shares
owned. The address of each person listed is in care of the Company, 3820 South
Hill Street, Los Angeles, California 90037, unless otherwise set forth below
such person's name.
NUMBER OF SHARES OF
COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OWNED(1) PERCENT(1)
---------------- --------------------- ----------
KG Investments, LLC................... 2,390,000 35.3 %
3151 East Washington Blvd.
Los Angeles, CA 90023
Colin Dyne (2)........................ 871,541 12.3
The Estate of Harold Dyne (3)......... 757,507 11.0
Mark Dyne (4)......................... 579,401 8.4
Alan Saloner (5)...................... 423,234 6.2
Kevin Bermeister (6).................. 187,117 2.7
Jonathan Burstein (7)................. 156,788 2.3
Jonathan Markiles (8)................. 99,248 1.4
Brent Cohen (9)....................... 35,000 *
Francis Shinsato...................... 25,000 *
Michael Katz (10)..................... 15,000 *
Paul Markiles (10).................... 15,000 *
Directors and executive officers
as a group (8 persons) (11)........ 1,959,095 26.4 %
- ------------------------------
<FN>
* Less than one percent.
(1) Under Rule 13d-3, certain shares may be deemed to be beneficially owned by
more than one person (if, for example, persons share the power to vote or
the power to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the date
as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in this table does
not necessarily reflect the person's actual ownership or voting power with
respect to the number of shares of Common Stock actually outstanding at
April 14, 2000.
(2) Includes 293,000 shares of Common Stock reserved for issuance upon exercise
of stock options which currently are exercisable.
(3) Harold Dyne died in October 1999, and his estate now exercises beneficial
ownership over shares previously owned by Mr. Dyne. The shares consist of
(i) 659,507 shares of Common Stock held by H&A Dyne Holdings, LP, and (ii)
98,000 shares of Common Stock reserved for issuance upon exercise of stock
options which currently are exercisable.
(4) Includes 118,000 shares of Common Stock reserved for issuance upon exercise
of stock options which currently are exercisable.
(5) Consists of (i) 156,568 shares of Common Stock held by Saloner Family
Investments Limited Partnership, and, (ii) 266,666 shares of Common Stock
held by Heathmount International Limited. The Company believes that Alan
Saloner is a principal executive officer and shareholder of Safcor, Inc.,
which is the general partner of Saloner Family Investments Limited
Partnership, and that Mr. Saloner is a principal executive officer and
shareholder of Heathmount International Limited.
Page 14
(6) Consists of 30,000 shares of Common Stock reserved for issuance upon
exercise of stock options which currently are exercisable.
(7) Includes 61,000 shares of Common Stock reserved for issuance upon exercise
of stock options which currently are exercisable.
(8) Includes (i) 46,000 shares of Common Stock reserved for issuance upon
exercise of stock options which currently are exercisable, and (ii) 39,235
shares of Common Stock reserved for issuance upon exercise of warrants
which currently are exercisable.
(9) Consists of 35,000 shares of Common Stock reserved for issuance upon
exercise of stock options which currently are exercisable.
(10) Consists of 15,000 shares of Common Stock reserved for issuance upon
exercise of stock options which currently are exercisable.
(11) Includes (i) 613,000 shares of Common Stock reserved for issuance upon
exercise of stock options which currently are exercisable, and (ii) 39,235
shares of Common Stock underlying warrants which currently are exercisable.
</FN>
Page 15
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the next Annual
Meeting of Stockholders, for inclusion in the Company's Proxy Statement and
Proxy form relating to such Annual Meeting, must submit that proposal to the
Company at its principal executive offices by January 11, 2000.
INDEPENDENT PUBLIC ACCOUNTANTS
BDO Seidman LLP, independent public accountants, were selected by the Board
of Directors to serve as independent public accountants of the Company for the
year ended December 31, 1999 and have been selected by the Board of Directors to
serve as independent auditors for the fiscal year ending December 31, 2000.
Representatives of BDO Seidman LLP are expected to be present at the Annual
Meeting, and will be afforded the opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions from
stockholders.
SOLICITATION OF PROXIES
It is expected that the solicitation of proxies will be primarily by mail.
The cost of solicitation by management will be borne by the Company. The Company
will reimburse brokerage firms and other persons representing beneficial owners
of shares for their reasonable disbursements in forwarding solicitation material
to such beneficial owners. Proxies may also be solicited by certain of the
Company's directors and officers, without additional compensation, personally or
by mail, telephone, telegram or otherwise for the purpose of soliciting such
proxies.
ANNUAL REPORT ON FORM 10-KSB
THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, WHICH HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1999, WILL BE
MADE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO MICHAEL
DODO, VICE PRESEIDENT, ADMINISTRATION, TAG-IT PACIFIC, INC., 3820 SOUTH HILL
STREET, LOS ANGELES, CALIFORNIA 90037.
ON BEHALF OF THE BOARD OF DIRECTORS
/s/ Michael Dodo
Michael Dodo
VICE PRESIDENT, ADMINISTRATION
Los Angeles, California
May 12, 2000
Page 16
TAG-IT PACIFIC, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned, a stockholder of TAG-IT PACIFIC, INC., a Delaware
corporation (the "Company"), hereby appoints COLIN DYNE and MICHAEL DODO, and
each of them, the proxy of the undersigned, with full power of substitution, to
attend, vote and act for the undersigned at the Company's Annual Meeting of
Stockholders (the "Annual Meeting"), to be held on June 15, 2000, and at any of
its postponements or adjournments, and in connection herewith, to vote and
represent all of the shares of the Company which the undersigned would be
entitled to vote, as follows:
The Board of Directors recommends a WITH vote on Proposal 1 and a FOR vote
on Proposal 2.
1. ELECTION OF CLASS III DIRECTORS, as provided in the Company's Proxy
Statement:
___ WITH
___ WITHOUT Authority to vote for the nominees listed below.
(Instructions: To withhold authority for a nominee, line through
or otherwise strike out the name of the nominee below)
Mark Dyne Colin Dyne
2. The approval of the amendment to the Company's 1997 Stock Plan to
increase the maximum number of shares of Common Stock that may be
issued pursuant to awards granted under the plan.
FOR ______ AGAINST _______ ABSTAIN ________
The undersigned hereby revokes any other proxy to vote at the Annual
Meeting, and hereby ratifies and confirms all that the proxy holders may
lawfully do by virtue of this Proxy. As to any other business that may properly
come before the Annual Meeting and any of its postponements or adjournments, the
proxy holder is authorized to vote in accordance with his best judgment.
This Proxy will be voted in accordance with the instructions set forth
above. This Proxy will be treated as a GRANT OF AUTHORITY TO VOTE FOR the
election of the Class III Directors named, the approval of the amendment to the
Company's 1997 Stock Plan and as the proxy holder shall deem advisable on any
other business that may come before the Annual Meeting, unless otherwise
directed.
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement dated May 12, 2000 relating to the
Annual Meeting.
Date: ____________________________, 2000
---------------------------------------
---------------------------------------
Signature(s) of Stockholder(s)
(See Instructions Below)
The above signature(s) should correspond exactly with the
name(s) of the Stockholder(s) appearing on the Stock
Certificate. If stock is jointly held, all joint owners
should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such. If signer is a corporation, please sign the full
corporation name, and give title of signing officer.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF TAG-IT
PACIFIC, INC.