SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[X] Preliminary Information Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
[_] Definitive Information Statement
CYPRESS FINANCIAL SERVICES, INC.
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(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required.
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class 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.
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Notes:
CYPRESS FINANCIAL SERVICES,INC.
5400 Orange Avenue, Suite 200
Cypress, California 90630
To Our Stockholders:
On March 27, 2000, the holders of a majority of the outstanding voting
securities (the "Consenting Stockholders") of CYPRESS FINANCIAL SERVICES, INC.
("CYPRESS" or the "Company") executed written consents approving the following
action by the Company:
An Amendment to the 1995 Stock Option Plan increasing the number of
authorized shares of common stock reserved under the Plan from 950,000
to 2,450,000 shares.
On May 19, 2000, the Consenting Stockholders executed written consents
approving the following actions by the Company:
Amendments to the Company's Articles of Incorporation (i) increasing
the Company's capital stock to 55,000,000 shares, consisting of
50,000,000 shares of common stock and 5,000,000 shares of preferred
stock; and (ii) changing the Company's name to RevCare, Inc.
Amendments to the 1995 Stock Option Plan (i) increasing the number of
authorized shares of common stock reserved under the Plan from
2,450,000 to 3,250,000 shares; and (ii) amending the definition of
"Fair Market Value" to allow the Board of Directors to more accurately
determine the exercise price of options granted when the common stock
is not listed on a national securities exchange or the NASDAQ National
Market Reporting System.
The Board of Directors had previously approved the above actions and fixed
the close of business on March 31, 2000 as the record date for the determination
of stockholders entitled to vote with respect to the above actions. The
Consenting Stockholders, whose shares represent approximately 65.8% of the
Company's outstanding voting securities entitled to vote, have consented to the
above actions. Therefore, no meeting of stockholders will be held. Management
is not soliciting proxies in connection with this Information Statement and
stockholders are requested not to send proxies to the Company.
Your attention is directed to the enclosed Information Statement.
By Order of the Board of Directors
Manuel Occiano
Chief Executive Officer
Cypress, California
June ___, 2000
CYPRESS FINANCIAL SERVICES, INC.
5400 Orange Avenue, Suite 200
Cypress, California 90630
____________________________________________
INFORMATION STATEMENT
____________________________________________
INTRODUCTION
This Information Statement is furnished by the Board of Directors of
CYPRESS FINANCIAL SERVICES, INC. (the "Company") in connection with amendments
of the Company's 1995 Stock Option Plan (the "Plan") and amendments to the
Company's Articles of Incorporation. This Information Statement and enclosed
materials are first being sent on or before the close of business on June ___,
2000, to every security holder entitled to vote or give an authorization or
consent in regard to any matter to be acted upon. On March 27, 2000, the
holders of a majority of the outstanding voting securities of the Company (the
"Consenting Stockholders") executed written consents approving an amendment to
the Plan. On May 19, 2000, the Consenting Stockholders executed written
consents approving further amendments to the Plan and amendments to the Articles
of Incorporation. The Company will cause the amendments to the Plan and the
amendments to the Articles of Incorporation to become effective twenty (20) days
after this Information Statement is first sent to the stockholders.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
Outstanding Securities and Voting Rights
As of March 31, 2000, there were issued and outstanding 6,493,904 shares of
the Company's Common Stock, $.001 par value (the "Common Stock") and 345,000
shares of the Company's Preferred Stock, $.001 par value (the "Preferred Stock")
(collectively the "Voting Securities"), for the purpose of determining
stockholders entitled to receive this Information Statement. The Consenting
Stockholders held approximately 4,261,457 shares of Common Stock and 238,148
shares of Preferred Stock or approximately 65.8% of the Company's issued and
outstanding Voting Securities.
Each holder of Voting Securities would normally be entitled to one vote in
person or by proxy for each share of Voting Securities in his or her name on the
books of the Company on any matter submitted to the vote of the stockholders.
However, under Nevada law, any action, which may be taken at any stockholders'
meeting, may be taken by written consent of the requisite number of stockholders
required to take such action. The approval of the amendments to the Plan and
the amendments to the Articles of Incorporation requires the affirmative vote or
written consent of a majority of the Company's outstanding Voting Securities.
On March 27, 2000, the Consenting Stockholders consented to the approval of an
amendment to the Plan to increase the number of
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shares of Common Stock reserved under the Plan to 2,450,000 shares. On May 19,
2000, the Consenting Stockholders consented to the approval of an amendment to
the Plan to further increase the number of shares of Common Stock reserved under
the Plan to 3,250,000 shares and to amend the definition of "Fair Market Value."
On that same date, the Consenting Stockholders also consented to the approval of
amendments to the Articles of Incorporation to increase the Company's capital
stock to 55,000,000 shares and to change the Company's name to RevCare, Inc.
Therefore, the Company is not soliciting proxies and will not hold a meeting on
these matters.
The Consenting Stockholders
The Consenting Stockholders, including one of the three current Directors
of the Company, representing voting rights equal to approximately 65.8% of the
Voting Securities, have delivered written consents to the approval of the
amendments to the Plan and the amendments to the Articles of Incorporation.
The names of the Consenting Stockholders and the number of shares of Common
Stock and Preferred Stock such persons are entitled to vote on matters such as
those proposed in this Information Statement are as follows:
Number of Common Percentage of
Name Shares Entitled to Vote Common Stock
- ---- ----------------------- ------------
Pacific Life Insurance Company (1) 2,300,000 35.4%
Farrest Hayden 865,109 13.3%
Lacayo Family Trust 672,048 10.3%
Euro-American Production, Ltd. 350,900 5.4%
The Belgravia Fund, Ltd. 73,400 1.1%
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Total: 4,261,457 65.6%
Number of Preferred Percentage of
Name Shares Entitled to Vote Preferred Stock
- ---- ----------------------- ---------------
Farrest Hayden 121,088 35.1%
Otto J. Lacayo 117,060 33.9%
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Total: 238,148 69.0%
_______________________
(1) Ms. Diane W. Dales, a Director of the Company, is a director of
Pacific Life Insurance Company ("Pacific Life"). Pacific Life is
holder of the stock and Ms. Dales has voting power over these shares.
These shares represent approximately 65.8% of the Voting Securities.
Therefore, the proposals have been approved by written consent of the
Consenting Stockholders and will take effect twenty (20) days after the
Information Statement is sent to stockholders.
2
Recent Transaction
Effective May 30, 2000, the Company completed the sale of 15,000,000 shares
of Common Stock at $0.50 per share to FBR Financial Fund II, L.P. ("FBR") which
has become the principal stockholder of the Company, owning 69.8% of the
outstanding Common Stock.
In connection with the FBR investment in the Company, the Company's Board
of Directors (the "Board") has been reconstituted at five (5) members. Four of
the five former members of the Board have resigned. The remaining director,
Diane Dales, has appointed George McCabe and Edward Wheeler as Directors to fill
two of the vacancies.
The reconstituted Board appointed Manuel Occiano as Chief Executive Officer
("CEO") of the Company on May 30, 2000 and approved the terms of his employment
agreement, which is described on page 5, as well as the granting of options to
him as described below. It is also expected that the Board will appoint Mr.
Occiano as a Director of the Company. Mr. Occiano had previously served as CEO
of the Company, as well as being a Director of the Company, until he resigned
from both positions in December 1999.
In connection with the FBR investment in the Company, the principal
stockholders of the Common Stock, FBR (69.8%) and Pacific Life (10.7%), have
entered into a Voting Agreement under which they agree to appoint one director
nominated by Pacific Life to the Board and one director nominated by FBR to the
Board. FBR will have the ability to elect the remaining directors to the Board
by virtue of its voting control of the Company. Diane Dales is the designee of
Pacific Life. George McCabe is the designee of FBR. Edward Wheeler was
nominated by FBR and approved by Pacific Life.
The Articles of Incorporation were amended to increase the number of shares
of the Company's capital stock to 55,000,000, consisting of 50,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock, in order to provide an
adequate number of shares to effect the FBR investment and for other purposes.
The Articles of Incorporation were also amended to change the Company's name to
RevCare, Inc. in connection with the FBR investment.
The Plan was amended pursuant to the FBR investment to reserve an
additional 2,300,000 shares of Common Stock for future option grants to key
employees of the Company. In connection with the FBR investment in the Company,
Mr. Occiano has received options to purchase 692,308 shares of Common Stock.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the annual and long-term cash and non-cash
compensation paid by the Company for services rendered in all capacities during
the fiscal years ended September 30, 1999, 1998 and 1997 to those persons who
were, as of September 30, 1999, Chief Executive Officer and the other most
highly compensated executive officers of the Company whose total annual salary
and bonus exceeded $100,000 during the fiscal year ended September 30, 1999 (the
"Named Executive Officers"):
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Long-Term Compensation
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Annual Compensation
Awards Payout
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Restricted All Other
Name and Principal Fiscal Stock Options/ LTIP Compen-
Position Year Salary($) Bonus ($) Other($) Award(s)($) SARs(#) Payout($) sation($)(1)
- ------------------------------------------------------------------------------------------------------------------------------
Farrest Hayden,/(2)/ 1999 169,000 -0- -0- -0- -0- -0- -0-
Chairman of the Board 1998 221,000 -0- -0- -0- -0- -0- -0-
and President 1997 221,000 -0- -0- -0- -0- -0- -0-
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Manuel Occiano,/(3)/ 1999 180,000 -0- -0- -0- -0- -0- -0-
Chief Executive 1998 7,500 -0- -0- -0- 300,000 -0- -0-
Officer 1997 0 -0- -0- -0- -0- -0- -0-
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John C. Hindman,/(4)/ 1999 125,000 -0- -0- -0- -0- -0- -0-
Chief Financial 1998 8,996 -0- -0- -0- 100,000 -0- -0-
Officer 1997 0 -0- -0- -0- -0- -0- -0-
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Daniel R. Eder, 1999 115,000 -0- -0- -0- -0- -0- -0-
Chief Operating 1998 127,023 -0- -0- -0- 50,000 -0- -0-
Officer 1997 126,929 -0- -0- -0- -0- -0- -0-
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(1) The remuneration described in the table does not include the cost to the
Company of benefits furnished to the Named Executive Officers, including
premiums for health insurance and other personal benefits provided to such
individuals in connection with their employment. The value of such benefits
cannot be precisely determined; however, the Named Executive Officers did
not receive other compensation in excess of the lesser of $50,000 or 10% of
such officers' cash compensation.
(2) Mr. Hayden resigned his position as President on December 22, 1999 and
resigned his position as Chairman of the Board on April 14, 2000.
(3) Mr. Occiano began his employment with the Company on September 16, 1998
under a three-year contract. He resigned his positions as Director and
Chief Executive Officer on December 22, 1999. See "Employment Agreements"
below. On May 30, 2000, he was reappointed as Chief Executive Officer.
(4) Mr. Hindman began his employment with the Company on September 1, 1998 under
a three-year contract. On December 22, 1999, he was appointed as interim
Chief Executive Officer and elected as a Director. See "Employment
Agreements" below. On May 30, 2000, Mr. Hindman resigned his positions as
Director and Chief Executive Officer. He continues in the position of Chief
Financial Officer.
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Director Compensation
The Company compensates independent Directors at the rate of $4,000 per
year for service on the Board of Directors, plus $500 per Board meeting.
Employment Agreements
In connection with the FBR investment, Mr. Manuel Occiano was reappointed
CEO on May 30, 2000 under a three-year employment agreement expiring on May 30,
2003 that is renewable for one-year periods. He will receive a base salary of
$250,000. If he is terminated by the Company without cause or if he resigns
within 60 days after he is removed from his position by the Company, he is
forced to relocate more than 100 miles from the site of his present employment
or his salary is reduced by the Company, he will continue to receive his base
salary for 180 days after such termination or resignation. He has been granted
options to purchase 692,308 shares of Common Stock exercisable at $0.50 per
share, 45,692 of which are immediately vested. Mr. Occiano had previously
served as CEO and a Director of the Company from September 16, 1998 until
December 22, 1999 when he resigned his positions. The 300,000 options that he
had been granted in 1998 expired 90 days after Mr. Occiano's resignation. His
employment as CEO at that time was subject to a three-year employment agreement
at a base salary of $180,000 per year.
Mr. John C. Hindman serves as Chief Financial Officer under a three-year
agreement expiring August 31, 2001. On December 22, 1999, the Board of
Directors appointed him to serve as interim Chief Executive Officer as well as
continuing as Chief Financial Officer. Mr. Hindman receives a base salary of
$125,000 per year and is eligible to participate in the management bonus pool to
be established by the Board of Directors. Mr. Hindman holds fully vested
options to purchase 100,000 shares of the Common Stock at an exercise price of
$0.625 per share. In connection with the FBR investment, Mr. Hindman will
receive a one-time lump sum bonus of $62,500. For every month of service (up to
six months) that Mr. Hindman completes subsequent to the closing of the FBR
transaction, he is eligible to receive a bonus of $10,417.
Stock Option Grants
No options were granted during the fiscal year ended September 30, 1999.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners and Management
The following tables set forth information, as of May 30, 2000, concerning
shares of the Company's voting securities beneficially owned by (i) each
stockholder known by the Company to be the beneficial owner of more than 5% of
any class of the Company's outstanding voting securities, (ii) each Director or
nominee for Director of the Company, (iii) each of the Named Executive Officers,
and (iv) all officers and Directors of the Company as a group. Unless otherwise
indicated, each person listed has sole voting and investment power over the
shares beneficially owned by him.
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership(1) of Class
- -------------- ------------------- ----------------------- --------
Common Stock FBR Financial Fund II, L.P. 15,000,000 69.8%
1001 19/th/ Street North
Arlington, VA 22209
Common Stock Pacific Life Insurance Company (2) 2,310,000 10.7%
700 Newport Center Drive
Newport Beach, CA 92660
Common Stock Farrest Hayden (3) 965,109 4.5%
Preferred Stock 5400 Orange Ave., Suite 200 121,088 35.1%
Cypress, CA 92026
Common Stock Lacayo Family Trust (4) 772,048 3.6%
Preferred Stock 5400 Orange Ave., Suite 200 117,060 33.9%
Cypress, CA 92026
Common Stock Manuel Occiano (5) 111,692 1.0%
Common Stock John C. Hindman (6) 100,000 *
Common Stock Daniel Eder (7) 14,800 *
All Directors and officers Common Stock 3,501,601 16.1%
as a Group (5 persons) Preferred Stock 121,088 35.1%
_____________________________
(1) Beneficial ownership is determined in accordance with the applicable rules
under the Securities Exchange Act of 1934. In computing the number of
shares beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options held by that person that
are currently exercisable, or will become exercisable within 60 days from
the date hereof, are deemed outstanding. However, such shares are not
deemed outstanding for purposes of computing the percentage ownership
deemed outstanding of any other person. Percentage of ownership is based
on 21,493,904 shares of Common Stock and 345,000 shares of Preferred Stock.
(2) Ms. Diane W. Dales, a Director of the Company, is a director of Pacific
Life Insurance Company. Includes 10,000 shares of Common Stock that can be
acquired within 60 days of the date of this Information Statement upon the
exercise of options.
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(3) Mr. Farrest Hayden was President until he resigned on December 22, 1999 and
was Chairman of the Board of Directors until he resigned on April 14, 2000.
Includes 100,000 shares of Common Stock that can be acquired within 60 days
of the date of this Information Statement upon the exercise of options.
(4) Mr. Otto Lacayo, who was a Director of the Company, is a Trustee for the
Lacayo Family Trust. Mr. Lacayo resigned as Director on May 30, 2000.
Includes 100,000 shares of Common Stock that can be acquired within 60 days
of the date of this Information Statement upon the exercise of options.
(5) Mr. Manuel Occiano was a Director of the Company and Chief Executive
Officer until he resigned both positions on December 22, 1999. He was
reappointed Chief Executive Officer on May 30, 2000. Includes 45,692 shares
of Common Stock that can be acquired within 60 days of the date of this
Information Statement upon the exercise of options.
(6) Mr. John C. Hindman is Chief Financial Officer and was appointed by the
Board of Directors on December 22, 1999 to serve as a Director as well as
interim Chief Executive Officer. Mr. Hindman resigned his positions as
Director and interim Chief Executive Officer on May 30, 2000. Includes
100,000 shares of Common Stock that can be acquired within 60 days of the
date of this Information Statement upon the exercise of options.
(7) Mr. Daniel Eder is Chief Operating Officer. Includes 10,000 shares of
Common Stock that can be acquired within 60 days of the date of this
Information Statement upon the exercise of options.
*Represents less than 1% of the class of shares
7
1995 Stock Option Plan
Background of the Plan
The Company's 1995 Stock Option Plan (the "Plan") was originally adopted by
the Board of Directors and approved by the Company's stockholders on October 30,
1995. The Plan originally reserved 450,000 shares of Common Stock for issuance
under the Plan. On August 20, 1998, the Board of Directors approved an
amendment of the Plan to increase the number of shares subject to the Plan from
450,000 to 950,000 shares. The Plan is administered by the stock option
committee (the "Committee") appointed by the Board of Directors. Subject to the
limitations set forth in the Plan, the Committee has the authority to determine
to whom options will be granted; the size of each grant; the exercise price; the
term during which an option may be exercised; the rate at which the options will
vest; whether the options will qualify as "incentive" or "nonqualified" options;
and all other terms and conditions of each grant.
The Plan provides for granting of options to Directors, employees,
consultants and advisors of the Company. The potential number of participants
in the Plan is six officers and directors and 88 employees. The exact number of
options to be granted to any single individual or class of individuals is within
the discretion of the Committee and is not determinable. Such options may be
either "incentive stock options" ("Incentive Options") as defined by Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or options that
do not so qualify ("Nonqualified Options"). Only employees are eligible for the
grant of Incentive Stock Options.
All options are nontransferable. The maximum term of an option is ten
years, but the option generally expires earlier if the optionee's service
terminates. The exercise price of each stock option will not be less than 100
percent of fair market value of the underlying shares on the date of the grant.
No options are exercisable until at least six months after the date of the
option grant.
In general, an optionee realizes no income upon the grant of Incentive
Options. The amount paid by the optionee for the common stock received pursuant
to the exercise of Incentive Options will generally constitute his or her basis
(or cost) for tax purposes. The holding period for such common stock generally
begins on the date the optionee exercises Incentive Options. Although no
current taxable income is realized upon the exercise of Incentive Options, the
excess of the fair market value of the common stock on the date of exercise of
the Incentive Option over the option price is an item of income for purposes of
the alternative minimum tax. As such, the exercise of Incentive Options may
result in the optionee being subject to the alternative minimum tax for the year
during which Incentive Options are exercised. In general, an optionee that
receives a Nonqualified Option realizes ordinary compensation income either at
the date of grant or at the date of exercise, but not at both. Unless the
Nonqualified Option has a "readily ascertainable fair market value" at the date
of grant, the optionee recognizes no income on the date of grant and recognizes
ordinary compensation income when the Nonqualified Option is exercised to the
extent of the difference between the fair market value of the stock at the time
of exercise of the Nonqualified Option and the exercise price paid by the
optionee.
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Unless terminated earlier by the Board of Directors, the Plan will
terminate on October 30, 2005. No additional options may be granted after the
termination date, but options granted before the termination date will remain
outstanding. The Board of Directors may amend the Plan at any time, subject in
certain cases to stockholder approval. Plan amendments are subject to
stockholder approval only to the extent required by law.
Amendments to the Plan
On March 27, 2000, the Board of Directors approved an amendment to the
Plan to reserve an additional 1,500,000 shares of common stock under the Plan,
increasing the number of shares reserved for option awards under the Plan from
950,000 shares to 2,450,000 shares. On May 19, 2000, the Board of Directors
approved an amendment to the Plan to further increase the number of shares
subject to the Plan from 2,450,000 shares to 3,250,000 shares. The number of
shares subject to the Plan is being increased to provide for option awards in
future years as described above. The Company intends to grant options to
executive officers and key employees in order to provide incentives to such
individuals to focus on critical long-range objectives of the Company and to
encourage the attraction and retention of such individuals. As of May 30, 2000,
options granted pursuant to the Plan for 1,434,358 shares are outstanding.
These options were issued at fair market value of the Common Stock on the dates
of the option grants. All options granted expire ten years from the date of
grant. The market value of the securities underlying the options as of June 12,
2000 is $0.97 per share of Common Stock. If options to purchase the 3,250,000
shares that have been authorized under the Plan were all granted and exercised,
such shares would constitute approximately 15.1% of the Common Stock outstanding
as of May 30, 2000.
In addition, the Board of Directors approved an amendment to the Plan on
May 19, 2000 to the definition of "Fair Market Value" which provides a formula
for determining the exercise price of options granted under the Plan, to allow
the Board of Directors to more accurately determine the exercise price when the
common stock is not listed on a national securities exchange or the NASDAQ
National Market Reporting System.
The amendments to the Plan will become effective twenty days after this
Information Statement is sent to the Company's stockholders.
The Company expects to file an S-8 Registration Statement by August 15,
2000 in order to register the additional 2,300,000 shares being reserved under
the Plan.
OTHER BUSINESS
No further business will be transacted by Written Consent to corporate
action in lieu of a meeting of stockholders regarding matters to which this
Information Statement pertains.
9
COSTS OF INFORMATION STATEMENT
This Information Statement has been prepared by the Company and its Board
of Directors, and the Company will bear the costs of distributing this
Information Statement to stockholders, including the expense of preparing,
assembling, printing, and mailing the Information Statement and attached
materials. Although there is no formal agreement to do so, the Company may
reimburse banks, brokerage houses, and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding this Information
Statement and related materials to stockholders. The Company may pay for and use
the services of other individuals or companies not regularly employed by the
Company in connection with the distribution of this Information Statement if the
Board of Directors of the Company determines that this is advisable.
By Order of the Board of Directors,
Manuel Occiano,
Chief Executive Officer
Cypress, California
June _____, 2000
10