CYPRESS FINANCIAL SERVICES, INC.
5400 ORANGE AVENUE, SUITE 200
CYPRESS, CALIFORNIA 90630
____________________________________________
NOTICE OF AND INFORMATION STATEMENT
FOR ACTION TAKEN BY WRITTEN CONSENT
____________________________________________
To our Stockholders:
On January 15, 1997 certain stockholders (the "Consenting Stockholders") of
CYPRESS FINANCIAL SERVICES, INC. ("the "Company") consented to the election of
four (4) directors to serve for one-year terms, and until their successors are
duly qualified and elected. The election of directors will take effect 20 days
after this Information Statement is first sent to stockholders of the Company.
The Board of Directors has fixed the close of business on January 12, 1997
as the record date for the determination of stockholders entitled to vote with
respect to the election of directors. Management proposed the election of the
nominees set forth in the Information Statement and the directors and the
Consenting Stockholders of the Company whose shares represent approximately
78.64% of the outstanding voting securities entitled to vote for the election of
directors have consented to their election. Each of the nominees for the Board
of Directors has received the requisite approval by written consent of the
Company's stockholders. Therefore no annual meeting of stockholders will be held
with respect to the election of directors. Management is not soliciting proxies
in connection with this Information Statement and stockholders are requested not
to send proxies to the Company. A copy of the Company's Annual Report on Form
10-K for the year ended September 30, 1996, which includes certified financial
statements of the Company will be mailed with this Information Statement to all
stockholders of record as of the record date.
Your attention is directed to the attached Information Statement.
By Order of the Board of Directors
Farrest Hayden,
Chairman and
Chief Executive Officer
Cypress, California
January 27, 1997
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 the election
of directors pursuant to the written consent of the holders of a majority of
the outstanding voting securities. This Information Statement and enclosed
materials are first being sent on or before the close of business on January 27,
1997 to stockholders of record as of January 12, 1997 (the "Record Date").
The election of directors pursuant to written consent of the Consenting
Stockholders will take effect 20 days after this Information Statement is first
sent to stockholders of the Company.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
The information included herein should be reviewed in conjunction with the
financial statements, notes to financial statements, auditor's report and other
information included in the Company's 1996 Annual Report on Form 10-KSB that is
being mailed with this Information Statement to all stockholders of record as of
the Record Date.
OUTSTANDING SECURITIES AND VOTING RIGHTS
As of the Record Date, there were issued and outstanding 4,500,271 shares
of the Company's Common Stock, $.001 par value (the "Common Stock") and 345,000
shares of the Company's $.001 par value Preferred Stock (the "Preferred Stock")
(collectively the "Voting Securities") on January 12, 1997, the date set as the
Record Date, for the purpose of determining stockholders entitled to receive
this Information Statement. Stockholders who have agreed to consent to the
election of directors (the "Consenting Stockholders") hold approximately
3,465,291 shares of Common Stock and 345,000 shares of Preferred Stock or
approximately seventy-nine (79%) percent 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 name on the books
of the Company, as of the Record Date, on any matter submitted to the vote of
the stockholders. However, under Nevada law, any action which may be taken at
any shareholders' meeting may be taken by consent of the requisite number of
stockholders required to take such action. The election of directors requires
the affirmative vote of the majority of the stockholders and on January 15, 1997
the Consenting Stockholders, who hold a majority of the Company's outstanding
Voting Securities, consented to the election of the nominees set forth herein.
Therefore, the Company is not soliciting proxies and will not hold a meeting
with respect to the election of directors. The Company will cause such action
taken upon the written consent of the requisite number of stockholders required
to elect directors to take effect 20 days after this Information Statement is
first sent to the stockholders.
ELECTION OF DIRECTORS
INFORMATION CONCERNING NOMINEES
The Bylaws of Company authorize the Board of Directors to fix the number of
directors up to a maximum of seven (7) directors. The Board of Directors has
currently fixed the number of directors at five (5), four (4) of whom will be
elected by the Consenting Stockholders. The fifth position on the Board is
vacant and is expected to be filled by vote of the Board of Directors when a
suitable candidate for the independent director position is selected. Each
director will be elected to hold office until the next annual meeting of
stockholders and until his successor has been duly elected and qualified.
All of the four (4) nominees for election to the Board of Directors are
members of the current Board of Directors. Each of the nominees named herein
has consented to be named in this Information Statement and has consented to
serve as a director. However, should any nominee named herein for the office of
director become unable or unwilling to accept nomination or election, the Board
of Directors may recommend and nominate another person in the place and stead of
such person. The Board of Directors has no reason to believe that any
substitute nominee will be required.
FARREST HAYDEN, 51, joined the Company as the Chief Executive Officer and
Chairman in 1995. Mr. Hayden is the founder, Chief Executive Officer and
Director of Medical Control Services, Inc. (" MCSI") the Company's predecessor,
which was founded in 1977.
OTTO LACAYO, 61, joined the Company as the Executive Vice President, Chief
Financial Officer, Secretary and Director in 1995. Mr. Lacayo has served as
Executive Vice President of MCSI, the Company's predecessor, since 1977.
DANIEL NAJOR, 42 has been the President of Contexual Trading Co., Inc.
since 1975 and is President of DLN Financial Inc. and CEO of Virtual Gaming
Technologies, Inc. He is also a business and financial consultant in the
wholesale/retail grocery industry.
GRAHAM E. GILL, 66, has been the President of The Belgravia Fund (London)
Ltd., a London -based mutual fund since 1990. He has also served as President
of Euro-American Productions, Ltd. since 1989.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The Executive Officers serve subject to the control of the Company's Board
of Directors under three-year employment agreements expiring August 1, 1998.
For biographical information regarding Messrs. Hayden and Lacayo, who are
nominees for directors of the Company, see "Information Concerning Nominees."
KEY EMPLOYEES
Thomas Ziegler has been the Vice President-Sales of MCSI, the Company's
predecessor, since 1977 and became the Senior Vice President-Sales of the
Company in October 1995.
Daniel Eder has served as the General Manager of MCSI, the Company's
predecessor, since 1987, and became the President of the Company's other
operating subsidiaries in 1995.
2
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors meets during its fiscal year to review significant
developments affecting the Company and to act on matters requiring board
approval. The Board of Directors met two (2) times and acted by unanimous
written consent seven (7) times during the 1996 fiscal year. During such
period, all members of the Board participated in at least 75% of all Board and
applicable committee meetings.
The Board of Directors has established audit, executive, stock option and
nominating committees to devote attention to specific subjects and to assist it
in the discharge of its responsibilities. The functions of those committees,
their members and the number of meetings held during the 1996 fiscal year are
described below:
Audit Committee. The Audit Committee was established to recommend to the
Board of Directors the appointment of the firm selected to be the independent
public accountants for the Company and monitor the performance of such firm; to
review and approve the scope of the annual audit and quarterly reviews and
evaluate with the independent public accountants the Company's annual audit and
annual financial statements; to review with management the status of the
internal accounting controls; to evaluate any problem areas having a potential
financial impact on the Company which may be brought to its attention by
management, the independent public accountants or the Board of Directors; and to
evaluate all public financial reporting documents of the Company. Messrs. Gill
and Najor are members of the Audit Committee. The Audit Committee did not meet
during the fiscal year, but the Committee did meet in January 1997, to review
the management letter from the Company's accountants in connection with their
audit for the fiscal year ended September 30, 1996, and found no material
deficiencies.
Executive Committee. The Executive Committee is empowered to act in lieu
of the Board of Directors on any matter except that for which the Board of
Directors has specifically reserved authority to itself and except for those
matters specifically reserved to the full Board of Directors by law. Messrs.
Lacayo and Najor are members of the Executive Committee. The Executive
Committee did not meet during the fiscal year.
Stock Option Committee. The Stock Option Committee develops and
administers incentive plans, including the Company's 1995 Stock Option Plan.
Messrs. Hayden, Lacayo, Najor and Gill are members of the Options Committee,
which held one meeting during the fiscal year.
Nominating and Compensation Committee. The Nominating and Compensation
Committee was established to recommend and nominate qualified persons to serve
as independent directors of the Company and to determine the compensation of
executive officer and key employees of the Company. Messrs. Gill and Najor are
members of the Committee. The Committee has not adopted procedures for the
consideration of nominees recommended by security holders. The Committee did
not meet during the fiscal year.
The Company pays director's fee of $500 for each meeting of the Board of
Directors attended by each independent director and provides reimbursement of
costs and expenses of all directors for attending such meetings. The Company
did not grant any stock options to any of the Company's directors during the
fiscal year.
3
THE CONSENTING STOCKHOLDERS
Stockholders of the Company, including all of the Directors of the Company,
representing voting rights equal to at least 50.01% of the shares entitled to
vote on Company matters, have agreed to consent to the election of the above
nominees as directors of the Company to serve until the next annual meeting of
stockholders and until their successors are duly elected and qualified as set
forth in this Information Statement.
The names of such 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
Shares Entitled to Vote Common Stock
Name As of Record Date As of Record Date
- ---- ----------------------- -----------------
Farrest Hayden 824,415 18.3%
Otto Lacayo 687,048 15.3%
Tom Ziegler 628,828 14.0%
The Najor Family
Investment Trust 475,000 10.6%
Euro-American Production, Ltd. 437,500 9.2%
The Keyes Family Trust 412,500 9.2%
------- -----
Total: 3,465,291 62.30%
Number of Preferred Percentage of
Shares Entitled to Vote Preferred Stock
Name As of Record Date As of Record Date
- ---- ----------------------- ------------------
Farrest Hayden 121,088 35.1%
Otto Lacayo 117,060 33.9%
Thomas Ziegler 106,852 31.0%
Total: 345,000 100.0%
These shares represent approximately 78.64% of the outstanding Voting
Securities of the Company. Therefore, the proposal has been approved by
written Consent of the Consenting Stockholders and will take effect 20 days
after the Information Statement is sent to stockholders.
4
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, 1996, 1995 and 1994 to those persons who
were, as of September 30, 1996, Chief Executive Officer and the other most
highly compensated executive officers of the Company whose total annual salary
and bonus exceeded $100,000 during the fiscal year ended September 30, 1996 (the
"Named Officers"):
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Long-Term Compensation
-----------------------------------
Annual Compensation Awards Payout
----------------------------- ----------------------- ----------
Restricted All Other
Name and Principal Fiscal Stock Options/ LTIP Compen-
Position Year Salary($) Bonus($) Other($) Award(s)($) SARs(#) Payout($) sation($)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Farrest Hayden CEO 1996 225,000 -0- -0- -0- -0- -0- -0-
1995(2) 87,500 -0- -0- -0- -0- -0- -0-
1994 203,165 -0- -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Otto Lacayo, CFO 1996 113,500 -0- -0- -0- -0- -0- -0-
1995(2) 68,000 -0- -0- -0- -0- -0- -0-
1994 120,610 -0- -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas Ziegler, EVP 1996 126,000 -0- -0- -0- -0- -0- -0-
1995(2) 76,500 -0- -0- -0- -0- -0- -0-
1994 151,615 -0- -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel Eder, 1996 108,125 -0- -0- -0- -0- -0- -0-
President MCSI and 1995(2) 69,700 -0- -0- -0- -0- -0- -0-
other subsidiaries 1994 106,450 -0- -0- -0- -0- -0- -0-
operations
- -----------------------------------------------------------------------------------------------------------------------------
_____________
(1) The remuneration described in the table does not include the cost to the
Company of benefits furnished to the Named 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 Officers did not receive other
compensation in excess of the lesser of $50,000 or 10% of such officers' cash
compensation.
(2) For the nine-month fiscal period ended September 30, 1995.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of September 30, 1996, the Company entered into a Preferred Stock
Purchase Agreement with Messrs. Hayden, Lacayo and Ziegler, whereby the Company
sold 345,000 shares of Series A Preferred Shares at $2.00 per share. Messrs.
Hayden, Lacayo and Ziegler paid for the Preferred shares by cancelling
promissory notes totaling $690,000.
5
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth information, as of January 17, 1997,
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 the Company's Outstanding Voting Securities, and (ii) each director of the
Company, and (iii) 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 of Class
- -------------- ----------------------------------- -------------------- --------
Common Stock Farrest Hayden 824,415 18.3%
Preferred Stock 5400 Orange Ave., Suite 200 121,088 35.1%
Cypress, CA 92026
Common Stock Otto Lacayo 687,048 15.3%
Preferred Stock 5400 Orange Ave., Suite 200 117,060 33.9%
Cypress, CA 92026
Common Stock Tom Ziegler 628,828 14.0%
Preferred Stock 5400 Orange Ave., Suite 200 106,852 31.0%
Cypress, CA 92026
Common Stock The Najor Family 475,000 10.6%
Investment Trust (1)
12625 High Bluff Drive, Suite 205A
San Diego, CA 92130
Common Stock The Keyes Family Trust 412,500 9.2%
Common Stock Euro-American Productions, Ltd. (2) 437,500 9.7%
Common Stock All Directors and officers
as a Group (5 persons) 3,052,791 67.8%
Preferred Stock 345,000 100.0%
Total Voting Stock 3,810,291 78.64%
- ------------------
(1) Daniel Najor disclaims beneficial ownership of the shares owned by the
Najor Family Investment Trust.
(2) Graham Gill is the beneficial owner of these shares by virtue of having
voting power over the shares.
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ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, INCLUDING FINANCIAL STATEMENTS AND NOTES
THERETO, IS BEING MAILED TO EACH STOCKHOLDER TOGETHER WITH THIS PROXY STATEMENT.
ADDITIONAL COPIES OF THE ANNUAL REPORT MAY BE OBTAINED BY STOCKHOLDERS WITHOUT
CHARGE BY WRITING TO THE COMPANY AT THE ADDRESS OF THE COMPANY SET FORTH ON THE
COVER OF THIS INFORMATION STATEMENT.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and certain of its officers, and persons who own more than
10% 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"). Officers, directors and greater than 10% stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Form 5's were
required for those persons, the Company believes that during the year ended
September 30, 1996, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with during the
fiscal year.
OTHER BUSINESS
No further business will be transacted by Written Consent to corporate
action in lieu of meeting of stockholders to which this Information Statement
pertains.
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 Statements if the Board of
Directors of the Company determines that this is advisable.
By the order of the Board of Directors,
Farrest Hayden,
Chairman and Chief Executive Officer
Cypress, California
January 27, 1997
7