SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
Calprop Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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CALPROP CORPORATION
13160 MINDANAO WAY, #180
MARINA DEL REY, CALIFORNIA 90292
NOTICE OF THE 2003 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 29, 2003
To the Shareholders of
Calprop Corporation:
We will be holding our 2003 Annual Meeting of Shareholders on August 29,
2003 at 2:00 p.m., local time, at the Company's principal offices at 13160
Mindanao Way, #180, Marina Del Rey, California. The purposes of the meeting are
the following:
1. To elect three directors of the Company to serve until the Next Annual
Meeting of Shareholders and until their successors are elected and qualified;
2. To approve a 100:1 reverse stock split; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on June 30, 2003 as
the record date for determining shareholders entitled to notice of and to vote
at the meeting and any adjournments thereof.
By Order of the Board of Directors,
Mark F. Spiro
VICE PRESIDENT/SECRETARY/TREASURER
Dated: July __, 2003
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT EXPECT TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
1
CALPROP CORPORATION
13160 MINDANAO WAY, #180
MARINA DEL REY, CALIFORNIA 90292
----------------
PROXY STATEMENT FOR THE 2003 ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON AUGUST 29, 2003
----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE TRANSACTION CONTEMPLATED IN THIS
PROXY STATEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE TRANSACTION OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
WE URGE YOU TO READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT IN ITS
ENTIRETY.
----------------
2
TABLE OF CONTENTS
SUMMARY TERM SHEET..................................................................4
Overview.........................................................................4
Quarterly Performance of Company's Common Stock..................................4
Dividend History.................................................................4
GENERAL INFORMATION.................................................................5
VOTING RIGHTS.......................................................................5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................6
Beneficial Ownership of Principal Shareholders...................................6
Beneficial Ownership of Management...............................................7
PROPOSAL No. 1 NOMINATION AND ELECTION OF DIRECTORS.................................8
Nominees For Election As Directors...............................................8
Board of Directors Meetings and Committees.......................................9
Board Stock Option/Compensation Committee Report on Executive Compensation.......9
COMPENSATION AND IDENTIFICATION OF EXECUTIVE OFFICERS; TRANSACTIONS WITH
MANAGEMENT.........................................................................10
Executive Compensation..........................................................10
Summary Compensation Table......................................................10
Summary Restricted Stock Awards Table...........................................12
Fiscal Year End Option Values...................................................13
Compensation of Directors.......................................................13
Deferred Compensation Plan......................................................13
Certain Transactions with Management and Others.................................14
PROPOSAL No. 2 1-FOR-100 REVERSE STOCK SPLIT.......................................15
Introduction....................................................................15
SPECIAL FACTORS....................................................................16
Reasons for the Proposed Reverse Split..........................................16
Effect of De-Registering........................................................16
Vote Required to Pass the Reverse Split Amendment...............................16
Redemption in Violation of California Corporations Code Section 500.............16
General Effects of Proposal.....................................................17
No Exchange of Stock Certificates Required......................................18
Fees and Expenses...............................................................18
Federal Income Tax Consequences.................................................19
No Dissenters' Rights Under California Law......................................19
Fairness........................................................................19
Conclusion......................................................................19
3
SUMMARY TERM SHEET
This summary term sheet highlights selected information from this proxy
statement but does not contain all of the information that may be important to
you. We encourage you to read this proxy statement related to Proposal No. 2,
1-For-100 Reverse Stock Split and the attached appendices before voting on this
Proposal. The actual terms and conditions of the proposed reverse split are
described in further detail below under Proposal No. 2, 1-For-100 Reverse Stock
Split. The information contained in this summary term sheet is qualified in its
entirety by reference to the more detailed information, beginning on page 15 of
this proxy statement.
OVERVIEW
We are furnishing this proxy statement to our shareholders to allow you to
consider and vote on a proposal to amend the Articles of Incorporation of
Calprop Corporation, a California corporation (the "Company") to effect a
1-for-100 reverse stock split of the Company's Common Stock (the "Reverse
Split") and proportionate reduction in the authorized but unissued Common Stock.
The ultimate purpose of the Reverse Split is to de-register the Company under
the Securities and Exchange Act of 1934 and take the Company private.
The number of outstanding shares of Common Stock as of the record date for
the meeting, June 30, 2003 (the "Record Date") is 10,239,105, which would be
reduced to approximately 102,391 shares as a result of the Reverse Split. The
number of authorized shares will be reduced from 20,000,000 shares to 200,000
shares as a result of the Reverse Split. The approximate number of holders of
record as of the record date is 440.
Our Common Stock is traded on the OTCBB under the symbol "CLPO." As of the
Record Date, the market price per share of the stock was $0.42. Trading volume
is extremely light.
QUARTERLY PERFORMANCE OF COMPANY'S COMMON STOCK
The following table provides the high and low sales prices for the
Company's Common Stock during the past two years.
QUARTER ENDING ON HI VALUE LOW VALUE
---------------------------------------------------------------------
June 30, 2003 .55 .31
March 31, 2003 .85 .70
December 31, 2002 .93 .75
September 30, 2002 .95 .80
June 30, 2002 1.01 .60
March 31, 2002 1.01 .80
December 31, 2001 1.10 .76
September 30, 2001 1.50 1.01
Source: Yahoo Finance Historical Prices.
DIVIDEND HISTORY
The Company has not issued any dividends during the past two years.
4
GENERAL INFORMATION
This Proxy Statement is being mailed to the shareholders of Calprop
Corporation, a California corporation, in connection with our 2003 Annual
Meeting of Shareholders. The meeting will be held on August 29, 2003, at our
main office in Marina Del Rey. The Board of Directors is soliciting your proxy
to be used at the Meeting and any adjournment or adjournments thereof. If you
send in your proxy, you may revoke it later on in one of three ways, so long as
you take that action before the proxy is voted at the meeting: (1) you may send
the Secretary of the Company a signed written notice revoking the proxy; (2) you
may send the Secretary a signed proxy bearing a later date; or (3) you may
attend the meeting and elect to vote in person. All shares represented by
properly signed and unrevoked proxies that are received in time for the Meeting
will be voted in accordance with your instructions on the proxy card.
The Company will pay the expenses of soliciting proxies, including the
charges and expenses of brokerage firms and others for forwarding solicitation
material to beneficial owners of shares. In addition to the use of the mails,
some of the Company's directors, officers and regular employees, without extra
compensation, may solicit proxies by telegram, telephone and personal interview.
Our Annual Report for 2002 (which includes our Form 10-K for the year ended
December 31, 2002) is being mailed to shareholders at the same time as this
Notice of Annual Meeting and Proxy Statement. You may also look at these
documents on our website at WWW.CALPROP.COM. In addition to this mailing, both
Internet voting (www.eproxy.com/CLPO) and telephonic voting (1-800-435-6710) are
being offered as an alternative to sending in a signed proxy.
VOTING RIGHTS
We have fixed the close of business on June 30, 2003, as the record date
for the meeting. If you were a shareholder on that date, you are entitled to
notice of the meeting and may vote at the meeting and any adjournment or
adjournments. On the Record Date, we had 10,239,105 shares of Common Stock, no
par value, outstanding. We have only one class of stock outstanding. All of
these shares are entitled to be voted at the meeting, and in the election of
directors, we will use cumulative voting. This is described in "Election of
Directors" below.
A majority of the outstanding shares will constitute a quorum at the
meeting. Shares represented by proxies that reflect abstentions or "broker
non-votes" (i.e., shares held by a broker or nominee which are represented at
the meeting, but with respect to which such broker or nominee is not empowered
to vote on a particular proposal) will be counted as to determine if we have a
quorum. If you send in your proxy but abstain on an issue, your shares will be
counted in the tabulation of votes cast on that issue, but broker non-votes are
not counted for purposes of determining whether a proposal has been approved.
Victor Zaccaglin, Chairman of the Board and Chief Executive Officer of the
Company, beneficially owns approximately 43.8% of the outstanding shares of our
Common Stock. He has advised management that he intends to vote his shares for
the nominees for director listed below and for the reverse stock split. The
other officers, directors and affiliates of the Company beneficially own in the
aggregate approximately 45.8% of the outstanding shares of the Common Stock. It
is anticipated that they will vote for the nominees for director and for the
reverse stock split. If all such shares are voted for the nominees and for the
Reverse Split, no additional affirmative vote of the outstanding shares will be
required in order for all the nominees to be elected and for the Reverse Split
to be approved.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
BENEFICIAL OWNERSHIP OF PRINCIPAL SHAREHOLDERS
The following table shows, as of the record date for the meeting,
information about the beneficial ownership of our Common Stock by each person
known to us who owns beneficially five percent or more of our Common Stock. A
person is considered the beneficial owner of securities, whether or not he has
any economic interest in them, if he has, directly or indirectly (or shares with
others), voting or investment power over the securities or has the right to
acquire such power within sixty days. The percentages shown in the table below
and in the table under the caption ''Beneficial Ownership of Management'' are
based on the 10,239,105 shares of Common Stock outstanding on the record date,
plus any shares which may be acquired upon exercise of stock options by such
person which are exercisable on or within sixty days after such date.
Accordingly, the percentages are based upon different denominators.
NUMBER OF
SHARES OF
COMMON STOCK PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
-----------------------------------------------------------------------------------
Victor and Hannah Zaccaglin(2) 4,485,129 43.8%
13160 Mindanao Way, #180
Marina Del Rey, California 90292
John Curci(3) 2,993,619 29.2%
717 Lido Park Drive
Newport Beach, California 92663
Ronald S. Petch (4) 625,409(5) 6.0%
13160 Mindanao Way, #180
Marina Del Rey, CA 90292
(1) Information with respect to beneficial ownership is based on
information furnished to the Company by each shareholder included in the table
or included in filings with the Securities and Exchange Commission. Except as
indicated in the notes to the table, each shareholder included in the table has
sole voting and dispositive power with respect to the shares shown to be
beneficially owned by such shareholder. The table may not reflect limitations on
voting power and investment power arising under community property and similar
laws.
(2) Various members of Victor and Hannah Zaccaglin's family own Common
Stock of the Company. Although there is no agreement or understanding between
such parties as to the holding or voting of their respective shares of Common
Stock, it is anticipated that such persons (including John Curci and Ronald S.
Petch) will vote for the nominees for director and for the reverse stock split.
(3) John Curci is Victor Zaccaglin's cousin.
(4) Ronald S. Petch is Victor Zaccaglin's nephew.
(5) This amount also includes 230,000 shares acquirable under options which
were exercisable by Mr. Petch on or within sixty (60) days after the record
date.
6
BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table shows as of the record date, certain information
concerning the beneficial ownership of our Common Stock by (i) each of our
directors and nominees for director, (ii) each of our executive officers and
(iii) all directors and executive officers of the Company as a group.
NUMBER OF SHARES OF
COMMON STOCK BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED (1)(2) OF CLASS
------------------------------------------------------------------------------------------------------
Victor Zaccaglin(3), CEO and Director 4,485,129 43.8%
Ronald S. Petch (4), formerly President and Director 625,409 6.0%
Mark F. Spiro, CFO and Director 455,000 4.4%
Richard Greene, Vice President 188,000 1.8%
Susan Soh. Controller 18,000 0.2%
Curtis Gullett, Vice President 11,100 0.1%
Mark T. Duvall, Director 32,500 0.3%
All Directors and Executive Officers as a group (6 persons) 5,189,729 47.7%
(1) See Note 1 to the preceding table.
(2) Includes the following numbers of shares of Common Stock acquirable
under options which were exercisable on or within sixty days after April 17,
2003: Ronald S. Petch, 230,000; Mark F. Spiro, 220,000; Richard Greene, 150,000;
Curtis Gullett, 8,600; Susan Soh, 16,000; Mark T. Duvall, 22,500; all Directors
and Executive Officers as a group, 647,100.
(3) See Notes 2 and 3 to the preceding table.
(4) See Notes 4 and 5 to the preceding table. Mr. Petch resigned as a
director and officer on April 10, 2003.
7
PROPOSAL No. 1
NOMINATION AND ELECTION OF DIRECTORS
Our Board of Directors is comprised of five directors. Three directors are
standing for re-election at the meeting, and we will have two vacancies. Each
director elected at the meeting will hold office for a term expiring at the 2004
Annual Meeting of Shareholders and until his successor is duly elected and
qualified.
It is intended that the shares represented by the enclosed proxy will be
voted, unless otherwise instructed, for the election of the three nominees named
below. While the Company has no reason to believe that any of the nominees will
be unable to serve as a director, it is intended that if such an event should
occur, such shares will be voted for such substitute nominee or nominees as may
be selected by the Board of Directors. The candidates receiving a plurality of
the votes of the shares present and entitled to vote at the meeting, in person
or by proxy, will be elected.
Pursuant to California law, the election of directors is by cumulative
voting. Under cumulative voting, you are entitled to multiply the number of
shares you hold by the number of directors to be elected (in this case, three)
and then you cast that number of votes for one nominee or distribute your votes
among all of the nominees as you see fit. For example, if you hold 1,000 shares,
you may cast 3,000 votes, all for one person or divide your 3,000 votes among
all three candidates in varying numbers. By sending in your proxy, you are
authorizing the proxyholders to vote your shares for the nominees as they
determine is appropriate.
Set forth below is certain information regarding the nominees for director
of the Company. Messrs. Zaccaglin, Duvall and Spiro are currently serving as
directors for terms expiring at the meeting.
NOMINEES FOR ELECTION AS DIRECTORS
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE AND OTHER POSITIONS WITH THE COMPANY SINCE
-----------------------------------------------------------------------------------------
Victor Zaccaglin 82 Chairman of the Board and Chief Execu- 1961
tive Officer of the Company since 1961 and
also President from 1961 to October, 1987
and from March, 1992 to November, 1993.
Mark F. Spiro 51 Chief Financial Officer of the Company since 1993 1998
and formerly, Chief Financial Officer of Inco
Homes from 1989 to 1993.
Mark T. Duvall 42 Portfolio Manager at Wells Fargo since 1994; 1999
Chief Financial Analyst at Strategic Wealth
Management 1992 to 1994; and Financial Analyst at
Simpson Investment Company 1987 to 1992.
In December 2002, Mr. E. James Murar resigned as a director of the Company. Mr.
Murar advised management that he did not wish to continue serving as a director
in light of new requirements and exposure to liability brought about by the
Sarbanes-Oxley Act passed in mid-2002. In April 2003, Mr Ronald Petch resigned
as the president and a director of the Company to pursue other business
opportunities. Neither resigned as a result of any dispute with current
management of the Company. As more fully discussed under "Proposal No.2
1-For-100 Reverse Stock Split" below, management has been unable to find other
suitable candidates who are willing to take on the responsibility of serving as
a director of a public company. As a result, the Company has elected to leave
two vacancies on its board.
8
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held a total of three regular meetings during
calendar year 2002. All directors attended no less than 66% of the aggregate of
(a) the total number of meetings of the Board of Directors and (b) the total
number of meetings of all committees of the Board on which he served.
The Company has an Audit Committee, the function of which is to assist the
Board of Directors in fulfilling its responsibilities with respect to corporate
accounting, auditing, and reporting practices. In performing such function, the
Audit Committee is responsible for selecting the firm of certified auditors to
be retained as the Company's auditors and maintains a direct line of
communication with the Company's independent auditors. The Audit Committee has
met and discussed with management the Company's audited financial statements at
and for the years ended December 31, 2002. Based on the Committee's review of
the audited statements and its discussion of certain items with the Company's
independent auditors (including matters required under Statement of Auditing
Standards 61 as well as the letter and disclosures required by Independence
Standards Board Standard No. 1), the Committee recommended that the audited
statements for 2002 be included in the Form 10-K Annual Report, a copy of which
accompanies this proxy statement. The Audit Committee held two meetings during
calendar year 2002 in which its then-current members, Messrs. Duvall, Zaccaglin
and Murar (the Chairman of the Audit Committee) were present. As noted above,
Mr. Murar resigned at the end of 2002.
The Company also has a Stock Option/Compensation Committee which authorizes
and reviews the chief executive officer's compensation and the granting of stock
options and stock to key employees and directors of the Company. This committee
held one meeting during calendar year 2002 in which its then-current members,
Messrs. Duvall, Zaccaglin and Murar (the Chairman of the Stock
Option/Compensation Committee) were present.
The Company has no Nominating Committee.
BOARD STOCK OPTION/COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Executive Compensation Program is administered by the Stock
Option/Compensation Committee (the "Committee") of the Board of Directors. Until
Mr. Murar's resignation as a director, the Committee included two independent,
nonemployee directors and one director who is an officer of the Company. The
Committee strives to set an executive compensation program which emphasizes both
business performance and shareholder value. It attempts to do this by
attracting, rewarding, and retaining qualified and productive individuals, tying
compensation to both Company and individual performance, ensuring competitive
and equitable compensation levels, and fostering executive stock ownership. The
Committee also relies on recommendations from the Company's management regarding
executive compensation levels.
The Committee reviews each management employee's salary annually. In
determining an appropriate salary level, the Committee considers the level and
scope of responsibility, experience, individual performance, an evaluation of
the Company's performance, and pay practices among similar companies in the
industry. There are no specific performance or other criteria assigned to any of
these measurements. The salary of the Chief Executive Officer was set at
$208,499 for 2002 and is currently at $145,125 for 2003.
The Company has implemented an annual incentive compensation plan and as
discussed below, has adopted incentives as a component of the compensation of
its officers and other certain employees. The Company's long term incentive
philosophy is that compensation should be related to an improvement in
shareholder value, thereby creating a mutuality of interest with the Company's
stockholders. In furtherance of this objective, the Company awards its officers
and certain other employees stock options, the objective being to provide a
competitive total long-term incentive opportunity.
The Committee believes that the Company's stock option plan is compatible
with shareholder interest in that it encourages executives to maintain a
long-term equity interest in the Company. The provisions of the plan are also
consistent with prevailing practices in the home-building industry. The
Committee is currently reviewing ways in which both the award of options and
their exercise may be tied more closely to the performance of the Company's
stock.
9
Each of the members of the Company's Stock Option/Compensation Committee
has specifically concurred in the foregoing report.
COMPENSATION AND IDENTIFICATION OF EXECUTIVE OFFICERS;
TRANSACTIONS WITH MANAGEMENT
EXECUTIVE COMPENSATION
The following table shows the annual and long-term compensation for
services rendered in all capacities to the Company during the 2002, and the two
preceding fiscal years by our Chief Executive Officer, the other executive
officers of the Company and one additional person who received compensation in
excess of $100,000 in 2002.
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION
--------------- ------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY AWARD(S) OPTION(S) COMPENSATION(9)
- ------------------------------------------------------------------------------------------------------------------
Victor Zaccaglin(2) 2002 $208,500 -- -- $887
Chairman of the Board and 2001 208,500 -- -- 887
Chief Executive Officer and Director 2000 178,500 -- -- 887
Ronald S. Petch(3) 2002 $277,659 -- -- $1,320
Director, Chief Operating 2001 286,000 -- -- 1,320
Officer and President 2000 173,250 -- -- 1,320
Mark F. Spiro(4) 2002 $253,308 -- -- $512
Director and Chief Financial Officer 2001 265,000 -- -- 512
2000 165,000 -- -- 512
Richard L. Greene(5) 2002 $169,192 -- -- $924
Vice President of Northern California 2001 169,243 -- -- 924
Division
2000 120,000 -- -- 804
Curtis Gullet (6) 2002 $117,500 -- -- $246
Vice President of Southern California 2001 111,222 -- -- 246
Division
2000 76,250 -- -- 219
Susan Soh (7) 2002 $125,000 -- -- $298
Controller 2001 133,750 -- -- 298
2000 95,000 -- -- 282
Jim Gibson (8) 2002 $111,000 -- -- $81
Project Manager 2001 121,837 -- -- 81
2000 80,000 -- -- 54
(1) Does not include certain amounts paid by the Company which may have
value to the recipient as personal benefits. Although such amounts cannot be
precisely determined, the Company has concluded that the aggregate
10
amount thereof does not exceed 10% of the cash compensation of Messrs.
Zaccaglin, Petch, Spiro, Greene, Gullett, Gibson, and Ms Soh.
(2) Mr. Zaccaglin, age 82, has been Chairman of the Board and Chief
Executive Officer of the Company since 1961. He was President from March, 1992
to November, 1993 and prior to that from 1961 to October, 1987.
(3) Mr. Petch, age 58, was President from November, 1993 until his
resignation in April 2003. Prior to that he was Vice President, Operations for
appproximately 22 months. Since 1974, he has been a director of the Company, and
from March 1981 until February 1992, he was engaged in real estate investments,
development and marketing.
(4) Mr. Spiro, age 51, has been employed by the Company since November 1993
as its Vice President of Finance, Secretary and Treasurer. From July 1989 until
September 1993 he was employed as chief financial officer at Inco Homes, a
residential builder in Southern California.
(5) Mr. Greene, age 55, is a Vice President of the Northern California
Division of the Company. He has been employed by the Company since July 1985,
and prior to September 1991, was a senior project manager for the Company.
(6) Mr. Gullett, age 39, is a Vice President of the Southern California
Division of the Company. He has been employed by the Company since February
1997, and prior to December 2000, was general superintendent for the Company.
(7) Ms Soh, age 33, has been employed by the Company since June 1997 as its
Controller. From January 1997 to June 1997 she was employed as Financial Manager
at DFS North American and from September 1993 to December 1997 at Deloitte &
Touche, LLP as a Senior Accountant.
(8) Mr. Gibson, age 49, is a Project Manager of the Company. He has been
employed by the Company since September 1995, and prior to June 1997 was
Customer Service Manager for the Company.
(9) Such other compensation represents the amount of insurance premiums
paid by the Company with respect to term life insurance for the benefit of
Messrs. Zaccaglin, Petch, Spiro, Greene, Gullett, Gibson and Ms. Soh.
All of the Company's executive officers serve at the pleasure of the Board
of Directors.
11
SUMMARY RESTRICTED STOCK AWARDS TABLE
The amount shown in this table is based upon the closing market price of
shares of the Company's Common Stock on the date of the restricted stock award
multiplied by the number of shares awarded:
NO. OF SHARES
DATE OF SHARES AGGREGATE NO. OF VESTED AT VALUE AT
NAME GRANT GRANTED SHARES GRANTED 12/31/02 12/31/02
- -----------------------------------------------------------------------------------------------
Victor Zaccaglin 10/31/91 20,000 110,000 110,000 $84,700
10/6/93 30,000
10/4/95 30,000
10/8/97 30,000
Ronald S. Petch 2/2/92 10,000 120,000 114,000 $97,780
10/6/93 20,000
10/4/94 20,000
10/4/95 20,000
10/8/97 20,000
10/5/98 30,000
Mark F. Spiro 11/3/93 10,000 70,000 64,000 $49,280
10/4/94 10,000
10/4/95 10,000
10/8/97 10,000
10/5/98 30,000
Richard Greene 10/31/91 3,000 38,000 35,000 $26,950
10/6/93 5,000
10/4/94 5,000
10/4/95 5,000
10/8/97 5,000
10/5/98 15,000
Curtis Gullett 10/8/97 1,000 2,500 2,200 $1,694
10/5/98 1,500
Susan Soh 10/5/98 2,000 2,000 1,600 $1,232
Jim Gibson 10/5/98 2,500 2,500 2,000 $1,540
12
FISCAL YEAR END OPTION VALUES
The following table shows information about the unexercised options granted
to our officers under our 1983 and 1993 Stock Option Plans.
SHARES OF COMMON
STOCK UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
SHARES ACQUIRED OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
UPON EXERCISE DECEMBER 31, 2002 DECEMBER 31, 2002 (1)
------------- ----------------- ---------------------
VALUE
NAME NUMBER RECEIVED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------
Victor Zaccaglin 330,000 -- 100,000 -- $8,250 --
Ronald S. Petch 325,000 -- 230,000 -- 5,775 --
Mark F. Spiro 170,000 -- 220,000 -- 4,950 --
Richard L. Greene 10,000 $8,125 152,000 -- 2,675 --
Curtis Gullett -- -- 8,600 -- 165 --
Susan Soh -- -- 16,000 -- -- --
Jim Gibson -- -- 10,000 -- -- --
(1) Options are "In-the-Money" if the fair market value of the underlying
Common Stock at year-end exceeds the exercise price of the option.
COMPENSATION OF DIRECTORS
Each non-employee director (Messrs. Murar prior to his resignation and Mr.
Duvall) received annual compensation of $2,000 for serving as a director and no
additional fees for serving as a member of any committee of the Board of
Directors.
DEFERRED COMPENSATION PLAN
The Company has established a plan under which executive officers who have
received grants of restricted stock may defer the receipt of any stock which has
not become vested until the earliest of 2004, their separation from service with
the Company or a change in control of the Company. Participants in the plan may
elect to further defer receipt of such stock until 2007. Stock which is deferred
under the plan is held in a trust for the benefit of the participants; however,
assets in the trust (i.e., shares of the Common Stock) are subject to the claims
of the Company's creditors. Other than minor administrative costs borne by the
Company, the plan does not entail material costs to the Company nor income to
the participating officers (other than the value of the stock previously granted
to the participants, which the Company believes has been deferred for federal
income tax purposes until the stock is distributed to the participants).
13
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
At December 31, 2002, we had outstanding the following notes payable to the
Curci-Turner Company. Mr. John Curci, Sr., a principal shareholder of the
Company, is a principal of Curci-Turner Company . Under the terms of certain of
the notes payable, Curci receives interest and participates in "Net Proceeds"
from certain projects, as defined in the loan agreement. Net proceeds is
generally is comparable to net profit:
DECEMBER 31,
PROJECT PROFIT SHARE 2002
------------------------------------------------------
Secured loans:
High Ridge 50% $2,366,102
Court
Saddlerock 50% 2,413,597
------------------
4,779,699
Unsecured loans 5,000,000
------------------
------------------
$9,779,699
==================
The $5,000,000 unsecured loan shown in the table is a working capital loan
we obtained from Curci in 2002. The loan bears interest at 15% and matures on
July 16, 2004. During 2001, we had obtained a $2,200,000 unsecured loan from
Curci which bore interest at 20% with a maturity date of June 30, 2002. In 1999,
Curci made an unsecured loan to the Company for $1,000,000 which bore interest
at 12% had a maturity date of June 30, 2002. The 1999 and 2001 loans were paid
in their entirety as of December 31, 2002.
During 1999, the Company purchased from Rereaction Group of Companies its
50% ownership interest in a joint venture called RGCCLPO Development Co., LLC
("RGC"). The Company owned the other 50% interest in the venture. The venture
was established to develop a parcel of real property in Milpitas, California.
Mr. E. James Murar, formerly a director of the Company, was a partner in RGC. We
paid $3,000,000 for the interest, consisting of $1,000,000 in cash and a
$2,000,000 note. The note was paid in full as of December 31, 2002.
During 1996, the Company converted its Preferred Stock to Common Stock and
the accrued Preferred Stock dividend due to Messrs. Zaccaglin and Curci of
$581,542 and $472,545, respectively, was exchanged for notes with interest
payable at 10%. As of December 31, 2002 the outstanding principal due on these
notes was $581,542 and $462,330, respectively. The notes mature on December 31,
2003.
Included in notes payable to related parties is a note payable to Mission
Gorge, LLC which bears interest at 12%. Mission Gorge, LLC was formed by the
Company and the Curci-Turner Company to develop a 200 acre parcel in the City of
San Diego, California. The outstanding balance as of December 31, 2002 was
$2,000,000. Also included in notes payable to related parties are notes payable
to Victor Zaccaglin which bear interest at 12%. Outstanding balances as of
December 31, 2002 aggregated $424,063. The Company has other loans from related
parties, which provide for interest at 10% per annum and in which certain loans
are due on demand. As of December 31, 2002 these loans totaled $740,000.
On March 10, 1998, three officers, Messrs. Zaccaglin, Petch, Spiro and a
former director of the Company, John L. Curci, exercised options to purchase a
total of 720,000 shares of Common Stock with a weighted-average exercise price
of $0.89 per share. The Company received $199,395 cash from Mr. Zaccaglin and
received $447,813 in notes receivable from Messrs. Spiro, Petch and Curci as a
result of the exercise of these options. The notes receivable accrue interest at
4.987% and had an original maturity date of March 10, 2001. The notes' maturity
dates have been extended to March 10, 2004. During 2002, Mr. Curci paid his note
in the amount of $22,188. As of December 31, 2002, accrued interest for the
stock purchase loans was $102,233.
14
On October 15, 1998, an officer of the Company, Mr. Richard Greene,
exercised options to purchase a total of 10,000 shares of Common Stock with a
weighted-average exercise price of $0.8125 per share. The Company received a
note receivable for $8,125 from the officer as a result of the exercise of these
options. The note receivable accrues interest at 4.987% and had an original
maturity date of October 15, 2001. The note's maturity date was extended to
October 15, 2002. During 2001, Mr. Greene partially paid the note, and retired
the remaining balance in 2002.
PROPOSAL No. 2
1-FOR-100 REVERSE STOCK SPLIT
INTRODUCTION
The Board of Directors has adopted a resolution approving a 1-for-100
Reverse Split of our outstanding Common Stock. This would also cause a
proportionate reduction in the authorized but unissued Common Stock. If
implemented, as a result of the Reverse Split, the number of outstanding shares
of Common Stock will be reduced from 10,239,105 shares to approximately 102,391
shares. Simultaneously, the number of authorized shares will be reduced from
20,000,000 shares to 200,000 shares.
Our ultimate purpose for the Reverse Split is to de-register the Company
under the Securities and Exchange Act of 1934 and take the Company private. In
order to de-register, we must have fewer than 300 shareholders of record. ny's
stock be reduced to 300 or less.
We recommend a vote FOR the proposal.
The Reverse Split is subject to approval by a majority of outstanding
shares of Common Stock. As reflected under the heading "Vote Required to Pass
the Reverse Split Amendment," members of management hold a majority of the
outstanding Common Stock. Members of management and other principal shareholders
have indicated their intention to vote for the Reverse Split. Thus, it is
expected that the proposal will pass.
If the proposal passes, the Reverse Split will automatically occur when we
file the amendment to our Articles of Incorporation (the "Reverse Split
Amendment"), a copy of which is attached as Appendix A. However, even if the
proposal passes, the Reverse Split will only be undertaken at the option of the
Board of Directors. Thus, the Board of Directors may abandon the Reverse Split
if it determines the split not to be in the best interests of our shareholders.
If the proposal passes and we elect go forward with the Reverse Split, each
holder of 100 shares of Common Stock will automatically become the holder of one
post-Reverse Split share. No fractional shares will be issued, and any
fractional shares that may result will be redeemed in cash based on the fair
market value of the Common Stock. Shares held by shareholders affiliated with
one another will be aggregated for this purpose to the extent commercially
practicable. The redemption of the fractional shares will allow us to reduce the
number of shareholders for the purpose of de-registering the Company. It will
also result in the liquidation of the interest of minor shareholders. The fair
market value of the Common Stock will be determined (for purposes of the payment
for fractional shares) based upon the average of the last reported sale prices
on the OTCBB on each of the ten trading days ending on the day prior to the
Effective Date. The Board of Directors believes that the public sale price of
the Common Stock measured over a ten-day trading period will accurately reflect
the fair market value of the Common Stock.
You will not be required to exchange the certificates representing your old
(pre-Reverse Split) shares of Common Stock for new ones. Instead, existing
certificates will be deemed automatically to constitute and represent the
correct number of post-Reverse Split shares without further action by the
shareholders. New certificates will only be issued as old certificates are
delivered to us for transfers of shares that occur after the effective date of
the Reverse Split.
15
SPECIAL FACTORS
REASONS FOR THE PROPOSED REVERSE SPLIT
The Company is currently registered under the Securities Exchange Act of
1934. This means that we must file quarterly and annual reports with the
Securities and Exchange Commission, solicit proxies and comply with new rules
regarding the composition of our board and various committees. This is expensive
for a company of our size and makes it difficult to attract and retain directors
who are willing to take on the responsibilities required of public Company
directors in the post-Enron era.
Our Common Stock is traded on the OTCBB under the symbol "CLPO." As of the
record date for the meeting, June 30, 2003, the market price per share of the
stock was $0.42. Trading volume is extremely light. The Company has been
consistently losing money. As a result of the low share price and the Company
losing money, there has been a limited market for our stock.
The new legal requirements imposed on public companies under the
Sarbanes-Oxley Act add to the expense burden of being a public company.
Management does not believe that the Company can afford the expense of complying
with these legal requirements and continue to conduct our business affairs.
Therefore, we believe that de-registering the Company will result in significant
savings.
We are not aware of any efforts by any person or persons to accumulate our
Common Stock in order to obtain control of the Company, and the proposed Reverse
Split is not intended to be an anti-takeover device. The approval of the
proposal is being sought simply to provide the shareholders with an opportunity
to have their shares redeemed for fair market value, and to allow the Company to
go private and avoid the expenses of being a public company.
EFFECT OF DE-REGISTERING
Assuming the proposal passes and we are able to de-register, we will no
longer be required to (i) file quarterly or annual reports with the SEC; (ii)
send annual reports to shareholders, except as may be required by California
law; (iii) solicit proxies; or (iv) have audited financial statements (although
we anticipate that we will continue to obtain annual financial audits). Further,
in order for shareholders who continue to hold shares to dispose of their Common
Stock, they may have to register their shares under federal and state securities
laws. Shareholders holding "restricted securities" will no longer be able to
rely on Rule 144 because the Company will not meet the public availability of
information requirement under that rule.
VOTE REQUIRED TO PASS THE REVERSE SPLIT AMENDMENT
The Company must receive the approval of a majority of outstanding shares
in order to pass the Reverse Split Amendment. Victor Zaccaglin, Chairman of the
Board and Chief Executive Officer, and John Curci, Sr., a principal shareholder
of the Company, together have the requisite shares to pass the Reverse Split
Amendment. For the reasons stated above, they intend to vote in favor of the
proposal. The vote of a majority of unaffiliated shareholders will not be
required to pass the Reverse Split Amendment. Therefore, the Reverse Split will
pass.
REDEMPTION IN VIOLATION OF CALIFORNIA CORPORATIONS CODE SECTION 500
The total cost to the Company of the redemption of fractional shares is
expected to be no more than $40,000, and management expects that the Company
will continue to be able to meet all of its obligations as they come due.
Nevertheless, the redemption could violate California Corporations Code Section
500. That section prohibits the redemption of stock unless certain financial
tests are met. Under Section 316, if a redemption is made in violation of
Section 500, the directors are jointly and severally liable for the amount of
the illegal distribution plus interest and
16
various costs. As a result, the directors of the Company have agreed to fund the
cost of the redemption on behalf of the Company.
GENERAL EFFECTS OF PROPOSAL
EFFECT ON STOCK
The effect of the Proposal on the aggregate number of shares of the
Company's Common Stock is as follows:
NUMBER OF SHARES
----------------
PRO FORMA FOR THE REVERSE
ACTUAL SPLIT(1)(2)
------ -----------
Common Stock:
-------------
Authorized 20,000,000 200,000
Outstanding 10,239,105 102,391
Available for issuance 9,713,165 97,132
less 47,730 treasury
shares
Shareholders' equity
--------------------
(deficit):
----------
$10,235,305 $10,235,305
Common stock
25,849,446 25,849,446
Additional paid-in capital
Deferred Compensation (28,600) (28,600)
Stock Purchase Loans (527,858) (527,858)
(28,649,573) (28,649,573)
Accumulated deficit
$6,878,720 $6,878,720
Total shareholders' equity
(deficit)
(1) As adjusted on a pro forma basis to give effect to the decrease in the
number of authorized shares of Common Stock and the automatic conversion of such
shares following the Reverse Split.
(2) Subject to minor adjustment due to the cash-out of fractional shares. The
Company estimates that it will pay an aggregate of approximately $40,000 to
holders of fractional shares of Common Stock after the Reverse Split, based on
the reported sale price of $0.42 per share, as of June 30, 2003.
EFFECT ON SHAREHOLDERS
The effect of the Reverse Split on shareholders will depend on whether your
shares are redeemed or you continue to hold shares.
Shareholders who continue to hold whole shares of the Common Stock will no
longer have a market for their shares once the Company is de-registered. This
will make it difficult for you to dispose of your interest in the Company. We do
not anticipate taking any steps to create a market for shares of the stock,
although we may
17
develop a mechanism for shareholders to dispose of their shares following
de-registration. In the future the Company may approach shareholders whose
shares are not redeemed through the Reverse Split to buy back their shares.
Shareholders with fractional shares will have their shares redeemed by the
Company; the purchase price for the redemption of your shares will be the fair
market value of the shares as determined by the established trading price of the
Company's stock on the OTCBB as of the date Proposal No. 2 is adopted and
approved. This means that those of you who currently hold less than 100 shares
will be completely divested of your interest in the Company. You may not be able
to purchase shares of the Company in the future if we are able to de-register.
In addition, the redemption of your shares may or may not be beneficial, since
it will result in a gain or loss for tax purposes and you will have no ability
to control the timing of such gain or loss.
For a description of the Company's business and future prospects,
shareholders should refer to the Annual Report attached to this proxy statement.
EFFECT ON MANAGEMENT
Currently there are two major shareholders and several other individuals
who own large interests in the Company. The existing managers will continue to
manage the Company after the Reverse Split. Therefore, the Reverse Split should
not have an effect on the management of the Company. There are no plans to
change management after the Reverse Split or de-registration.
NO EXCHANGE OF STOCK CERTIFICATES REQUIRED
As noted above under "Introduction," each current certificate representing
issued and outstanding shares of Common Stock prior to the Reverse Split will
automatically be deemed to represent the correct number of post-split shares
without further action on your part. It will not be necessary for any
shareholder to surrender the existing certificates representing such Common
Stock.
However, holders of shares constituting less than one (1) share of
post-Reverse Split stock will be required to surrender their existing
certificates in order to receive payment for their fractional share.
Nevertheless, they will no longer be considered shareholders of the Company
following the filing of the Reverse Split Amendment to our articles of
incorporation. We will send you a separate announcement if your shares are being
redeemed with instructions on how to return the shares in exchange for payment.
FEES AND EXPENSES
The fees and expenses to be incurred and paid by us in connection with the
Reverse Split are estimated as follows:
Financial Advisory Fees $-0-
Legal Fees $5,000
Printing $2,500
Filing Fees $4
Miscellaneous $-0-
--------------------------------------------------------------------------
TOTAL $7,504
18
FEDERAL INCOME TAX CONSEQUENCES
A summary of all material federal income tax consequences of the proposed
Reverse Split is set forth below. The following discussion is based upon present
federal tax law and does not purport to be a complete discussion of such
consequences. Accordingly, SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS FOR MORE DETAILED INFORMATION REGARDING THE EFFECTS OF THE PROPOSED
REVERSE SPLIT ON THEIR INDIVIDUAL TAX STATUS.
The Reverse Split will not be a taxable transaction to the Company.
A shareholder will not recognize any gain or loss as a result of the
Reverse Split, except that you may recognize gain to the extent of the cash you
receive, if any, for fractional shares. The maximum cash payment that will be
received by a shareholder for fractional shares is 99 times the share price of
the Company's Common Stock. As of June 30, 2003 the share price was $0.42,
resulting in a possible maximum payment of $41.58, per record holder.
The aggregate tax basis of a shareholder's post-Reverse Split shares will
equal the aggregate tax basis of your shares pre-Reverse Split, but this will be
reduced by any basis allocable to the fractional shares for which you receive
cash, if any. The holding period of the post-Reverse Split shares generally will
include the holding period of your pre-Reverse Split shares, assuming your held
the pre-Reverse Split shares as capital assets.
NO DISSENTERS' RIGHTS UNDER CALIFORNIA LAW
Under California law, shareholders are not entitled to dissenters' rights
with respect to the Reverse Split, and the Company will not independently
provide shareholders with any such rights.
FAIRNESS
Management and the Board of Directors are of the opinion that the Reverse
Split will not unfairly impact unaffiliated shareholders. During the past two
years the Company has seen its share price steadily decline in value. As of the
record date for the meeting, June 30, 2003, the market price per share of the
stock was $0.40. Additionally, the Company has been consistently losing money.
The combination of the large amounts of stock owned by management and other key
shareholders, the low share price and the fact that the Company is losing money
has resulted in an extremely light trading volume for the Company's stock. The
reporting requirements and potential liability under the Sarbanes-Oxley Act have
also made it difficult for the Company to operate effectively. During the past
year the Company has already had one director resign as a result of the new
exposure to liability under the Sarbanex-Oxley Act. Continuing to operate as a
public company will have a negative effect on both minority and majority
shareholders. Therefore, Management and the Board of Directors believe that the
proposed Reverse Split is fair to all shareholders.
CONCLUSION
For the reasons discussed above, the Board of Directors encourages the
shareholders to vote in favor of the Reverse Split to provide shareholders with
an opportunity to have their shares redeemed by the Company, and to allow the
Company to go private, avoiding the significant expenses associated with being a
public company.
19
INDEPENDENT AUDITORS
Deloitte & Touche LLP served as our auditors in calendar year 2002. The
Audit Committee of the Board of directors selected Deloitte & Touche LLP as the
Company's independent auditors for calendar year 2003 and considers the firm to
be well qualified. If Deloitte & Touche LLP shall decline to act, or otherwise
become incapable of acting, or if its engagement is otherwise terminated by the
board or the Audit Committee (none of which events are currently anticipated),
the Audit Committee will appoint other auditors for 2003. A representative of
Deloitte & Touche LLP will be present at the meeting and will be given an
opportunity to make a statement if he or she so desires and will be available to
respond to questions raised during the meeting.
The Company's Audit Committee approves in advance all audit and non-audit
services to be performed by the Company's independent auditors and considers the
possible effect on the independence of the accountants.
Audit Fees. The aggregate fees billed for professional services rendered by
Deloitte & Touche, LLP for the annual financial statements for the year ended
December 31, 2002 and the reviews of financial statemens included in our
Quarterly reports on Form 10-Q for the year was $88,000.
Other Fees. The aggregate fees billed for the services rendered to us by
Deloitte & Touche, other than the fees for services discussed above, during our
2002 fiscal year were $48,750. These services consisted of tax preparation.
No relationship exists between the Company and Deloitte & Touche LLP other
than the usual relationship between independent auditors and client.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Act, 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 SEC. Officers, directors and greater than 10% shareholders
are required by the SEC's regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely upon a review of the copies of the
forms furnished to the Company and the representations made by the reporting
persons to the Company, the Company believes that during the calendar year ended
December 31, 2002, its directors, officers and 10% shareholders complied with
all filing requirements under Section 16(a) of the Act.
20
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the Russell 2001 Index and an average of a group of six home
builders, which includes California Coastal Communities, Inc. (CALC), Capital
Pacific Holdings, Inc. (CPH), Century Builders Group, Inc. (CNYB), Dover
Investments Corp., (DOVRA), Fortress Group, Inc. (FRTG), and Oriole Homes Corp.
(OHC.B) for the five years ended December 31, 2002. The graph assumes that the
value of the investment in the Common Stock and each index was $100 at December
31, 1997, and that all dividends were reinvested. The Company believes that such
comparison remains a fair reflection of companies with comparable market
capitalization to that of the Company.
CUMULATIVE TOTAL RETURN
BASED UPON AN INITIAL INVESTMENT OF $100 ON dECEMBER 31, 1997
WITH DIVIDENDS REINVESTED
[PERFORMANCE GRAPH]
SOURCE: GEORGESON SHAREHOLDER COMMUNICATIONS INC.
- -------------------- ------------- ------------- ------------- ------------- ------------- -------------
DEC-97 DEC-98 DEC-99 DEC-00 DEC-01 DEC-02
- -------------------- ------------- ------------- ------------- ------------- ------------- -------------
CALPROP CORP. $100 $218 $232 $155 $124 $115
- -------------------- ------------- ------------- ------------- ------------- ------------- -------------
RUSSELL 2000 $100 $97 $118 $115 $117 $93
- -------------------- ------------- ------------- ------------- ------------- ------------- -------------
CUSTOM COMPOSITE $100 $64 $57 $34 $50 $62
INDEX (6 STOCKS)
- -------------------- ------------- ------------- ------------- ------------- ------------- -------------
THE CUSTOM COMPOSITE INDEX CONSISTS OF CALIFORNIA COASTAL, CAPITAL PACIFIC
HOLDINGS, CENTURY BUILDERS (THROUGH 1Q02),
DOVER INVESTMENTS, FORTRESS GROUP (THROUGH 2Q02) AND ORIOLE HOMES -
CLASS B.
21
SHAREHOLDER PROPOSALS
A shareholder proposal intended to be presented at the Company's 2004
annual shareholders meeting must be received by the Company at its principal
executive offices on or before January 3, 2004, for inclusion in the Company's
proxy statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors does not intend to present any other business at the
meeting and knows of no other matters which will be presented at the meeting.
By order of the Board of Directors
Mark F. Spiro
Vice President/Secretary/Treasurer
Dated: July ___, 2003
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT EXPECT TO
ATTEND THE MEETING, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
22
APPENDIX A
CERTIFICATE OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CALPROP CORPORATION
-------------------
a California Corporation
Mark F. Spiro hereby certifies that:
1. He is the duly elected and acting Vice President and Secretary of said
Corporation.
2. Article Four of the Articles of Incorporation of said corporation is hereby
amended to read in full as follows:
"ARTICLE 4
The corporation is authorized to issue one class of shares designated
'Common Stock'. The number of shares of Common Stock shall be 200,000 of no par
value. Upon the amendment of this Article to read as herein set forth, each
outstanding share of Common Stock is hereby converted into 1/100th (0.01) share
of Common Stock shares.
The holders of Common Stock shares shall be entitled to one vote for each
such share at all meetings of shareholders and to notice thereof."
3. The foregoing amendment has been approved by the Board of Directors of said
corporation.
4. The foregoing amendment has been approved by the required vote of the
shareholders of said corporation in accordance with Sections 902 and 903 of the
California Corporations Code. The total number of outstanding shares entitled to
vote with respect to the foregoing amendment was 10,239,105 shares of Common
Stock. The number of shares of Common Stock voting in favor of the foregoing
Amendment equaled or exceeded the vote required, such required vote being a
majority of the outstanding shares of Common Stock.
I further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true and
correct of my own knowledge.
DATE: July ___, 2003
/s/ Mark F. Spiro
- -----------------------------------------------------
Mark F. Spiro, Vice President and Secretary
23