<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
ELECTRONIC PROCESSING, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING
ON
JUNE 1, 1999
AND
PROXY STATEMENT
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
April 29, 1999
Dear Shareholder:
The Annual Meeting of Shareholders of Electronic Processing, Inc. will be held
at 10:00 a.m., local time, on Tuesday, June 1, 1999, at the Ritz Carlton Hotel,
401 Ward Parkway, Kansas City, Missouri 64112. The enclosed notice of the
meeting and proxy statement contain detailed information about the business to
be transacted at the meeting.
On behalf of the Board of Directors and Management of the Company, I cordially
invite you to attend the Annual Meeting of Shareholders.
The prompt return of your Proxy in the enclosed business reply envelope will
help insure that as many shares as possible are represented.
I personally look forward to seeing you at the Shareholders Meeting.
Sincerely,
ELECTRONIC PROCESSING, INC.
[SIGNATURE]
Tom W. Olofson
Chairman and
Chief Executive Officer
<PAGE>
ELECTRONIC PROCESSING, INC.
501 KANSAS AVENUE
KANSAS CITY, KANSAS 66105
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 1, 1999
------------------------
TO THE SHAREHOLDERS OF ELECTRONIC PROCESSING, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Electronic
Processing, Inc. (the "Company") will be held at the Ritz Carlton Hotel, 401
Ward Parkway, Kansas City, Missouri 64112 at 10:00 a.m., local time, on Tuesday,
June 1, 1999, for the following purposes:
1. To elect four Directors to the Board of Directors of the Company, each
for a term of one year and until their successors are elected and
qualified;
2. To consider and vote upon a proposal to ratify the appointment of Baird,
Kurtz & Dobson as independent certified public accountants for the
Company for the year ending December 31, 1999;
3. To consider and vote upon a proposal to amend the Company's Articles of
Incorporation to create a class of preferred stock that may be issued by
the Board of Directors in one or more series and to eliminate Article
Twelfth of the Articles of Incorporation;
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 23, 1999, are
entitled to notice of and to vote at the meeting or any adjournment thereof. On
April 23, 1999, the record date for the Annual Meeting, there were 4,635,068
shares of Common Stock outstanding. Each outstanding share is entitled to one
vote.
The Board of Directors of the Company encourages you to sign, date and
promptly mail the proxy in the enclosed postage prepaid envelope, regardless of
whether or not you intend to be present at the Annual Meeting. You are urged,
however, to attend the Annual Meeting.
By Order of the Board of Directors
Nanci R. Trutna, Secretary
Kansas City, Kansas
April 29, 1999
<PAGE>
ELECTRONIC PROCESSING, INC.
501 KANSAS AVENUE
KANSAS CITY, KANSAS 66105
---------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, JUNE 1, 1999
SOLICITATION AND REVOCABILITY OF PROXIES
---------------------
This Proxy Statement and the enclosed proxy card (the "Proxy") are furnished
to the shareholders of Electronic Processing, Inc., a Missouri corporation (the
"Company") in connection with the solicitation of proxies by the Company for use
at the Company's Annual Meeting of Shareholders, and any adjournments or
postponement thereof (the "Annual Meeting"), to be held at the Ritz Carlton
Hotel, Kansas City, Missouri at 10:00 a.m., local time, on Tuesday, June 1,
1999. The mailing of this Proxy Statement, the Proxy, the Notice of Annual
Meeting and the accompanying 1998 Annual Report to Shareholders is expected to
commence on April 29, 1999.
You are requested to complete, date and sign the accompanying Proxy and
return it promptly in the enclosed postage prepaid envelope. Your Proxy may be
revoked by written notice of revocation delivered to the Secretary of the
Company, by executing and delivering a later dated Proxy or by voting in person
at the Annual Meeting. Attendance at the Annual Meeting will not constitute a
revocation of your Proxy unless you vote in person at the Annual Meeting or
deliver an executed and later dated Proxy. Proxies duly executed and received in
time for the Annual Meeting will be voted in accordance with the shareholders'
instructions. If no instructions are given, Proxies will be voted as follows:
a. to elect Tom W. Olofson, Christopher E. Olofson, Robert C. Levy and W.
Bryan Satterlee as Directors to serve for a one year term until the 2000
Annual Meeting of Shareholders and until their respective successors are
duly elected and qualified;
b. to ratify and approve the selection of Baird, Kurtz & Dobson as the
Company's independent auditors for the year ending December 31, 1999;
c. to ratify and approve the creation of a class of preferred stock that
may be issued by the Board of Directors in one or more series, and to
eliminate Article Twelfth of the Articles of Incorporation;
d. in the discretion of the proxy holder as to any other matter coming
before the Annual Meeting.
OUTSTANDING VOTING SECURITIES OF THE COMPANY
Only the holders of record of shares of Common Stock as of the close of
business on April 23, 1999, are entitled to vote on the matters to be presented
at the Annual Meeting, either in person or by proxy. At the close of business on
April 23, 1999, there were outstanding and entitled to vote a total of 4,635,068
shares of Common Stock, constituting all of the outstanding voting securities of
the Company.
The presence at the Annual Meeting, in person or by proxy, of the holders of
at least a majority of the shares of Common Stock as of the record date is
necessary to constitute a quorum. Each share of Common
1
<PAGE>
Stock is entitled to one vote for each director to be elected and upon all other
matters to be brought to a vote of the shareholders at the Annual Meeting. The
affirmative vote of a plurality of the shares of Common Stock present or
represented at the Annual Meeting is required to elect the directors. The
affirmative vote of a majority of the shares of Common Stock present or
represented at the Annual Meeting is required to ratify the appointment of
Baird, Kurtz & Dobson. The vote by the holders of a majority of all outstanding
shares of Common Stock in favor of the proposed amendment to the Company's
Articles of Incorporation (the "Articles") to authorize the creation of a class
of preferred stock is required under Missouri law for this proposal to be
approved. Abstentions and broker non-votes are counted for purposes of
determining the presence of a quorum at the Annual Meeting, but have the effect
of a negative vote on the ratification of the selection of auditors and the
proposed amendment to the Articles.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock as of the April 23, 1999 for (i) each
director of the Company; (ii) each person known to the Company to be the
beneficial owner of more than 5% of the outstanding shares; and (iii) all
directors and executive officers as a group. Except pursuant to applicable
community property laws or as otherwise indicated, each stockholder has sole
voting and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) SHARES PERCENTAGE OWNED
- ----------------------------------------------------------------------------------- ----------- -------------------
<S> <C> <C>
Tom W. Olofson..................................................................... 1,400,000(2) 30.2%
Christopher E. Olofson............................................................. 209,500(3) 4.5%
Robert C. Levy..................................................................... 22,500 *
W. Bryan Satterlee................................................................. 10,000(4) *
All directors and executive officers as a group (9 persons)........................ 1,656,000(5) 35.7%
</TABLE>
- ------------------------
* Less than 1%
(1) The address of all of the named individuals is c/o Electronic Processing,
Inc., 501 Kansas Avenue, Kansas City, Kansas 66105.
(2) Excludes 40,500 shares owned by Mr. Olofson's adult son, Scott W. Olofson,
as to which shares Mr. Olofson disclaims beneficial ownership.
(3) Includes 130,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable.
(4) Includes 3,000 shares of Common Stock issuable upon exercise of options that
are currently exercisable or exercisable within 60 days. Excludes 4,500
shares of Common Stock issuable upon exercise of options held by Mr.
Satterlee that are not currently exercisable and will not become exercisable
within 60 days.
(5) Includes 146,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days. Excludes
78,000 shares of Common Stock issuable upon exercise of options held by
directors and executive officers that are not currently exercisable and will
not become exercisable within 60 days.
ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect four directors to hold
office for one year terms ending at the Company's 2000 Annual Meeting of
Shareholders and until their successors are duly elected
2
<PAGE>
and qualified. It is intended that the names of the nominees listed below will
be placed in nomination at the Annual Meeting to serve as directors and that the
persons named in the Proxy will vote for their election. All nominees listed
below are currently members of the Board of Directors. Each nominee has
consented to being named in this Proxy Statement and to serve if elected. If any
nominee becomes unavailable to serve as a director for any reason, the shares
represented by the Proxies will be voted for the person, if any, designated by
the Board of Directors. The Board of Directors has no reason to believe that any
nominee will be unavailable to serve.
The nominees for directors of the Company, as well as certain information
about them, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ---------------------------------------------------------
<S> <C> <C>
Tom W. Olofson*................................. 57 Chairman, Chief Executive Officer, and Director
Christopher E. Olofson.......................... 29 President, Chief Operating Officer, and Director
Robert C. Levy*................................. 52 Director
W. Bryan Satterlee*............................. 64 Director
</TABLE>
- ------------------------
* Member of Audit Committee
TOM W. OLOFSON led a private investor group that acquired the Company in
July 1988, and has served as Chief Executive Officer and Chairman of the Board
since that time. During his business career, Mr. Olofson has held various
management positions with Xerox Corporation and was a Senior Vice President and
member, Office of the President of Marion Laboratories, Inc. Mr. Olofson is a
director of Saztec International, Inc., a provider of information management
services, and also serves as a director of various private companies in which he
is an investor. He earned a BBA from the University of Pittsburgh in 1963, and
is currently a member of the Board of Visitors of the Katz Graduate School of
Business at the University of Pittsburgh. He is the father of Christopher E.
Olofson.
CHRISTOPHER E. OLOFSON joined EPI as a Vice President in June 1993, and was
a part-time employee of the Company from 1988 to 1993. In January 1994, he was
named Senior Vice President--Operations, and became Executive Vice President and
a member of the Board of Directors effective January 1, 1995. Effective July 1,
1996, Mr. Olofson also assumed the duties of Chief Operating Officer, and
effective October 1, 1998, Mr. Olofson was named President of the Company. He
earned an AB degree from Princeton University in 1992, SUMMA CUM LAUDE. He was
named a Fulbright Scholar and he completed a one-year program of study at the
Stanford University Center in Taipei, Taiwan in 1993. He is the son of Tom W.
Olofson.
ROBERT C. LEVY is a director, stockholder and executive committee member of
the law firm of Seigfreid, Bingham, Levy, Selzer & Gee in Kansas City, Missouri.
He has been a Director of the Company since July 1988. He earned a BS from
Northwestern University in 1968, and a J.D. from the University of California at
Berkeley in 1971. Mr. Levy formerly was Chairman of the Board of Directors of
Blue Cross and Blue Shield of Kansas City.
W. BRYAN SATTERLEE was elected to the Company's Board of Directors on
February 7, 1997. Mr. Satterlee has been a partner since 1989 in NorthEast
Ventures, a consulting firm based in Hartford, Connecticut which specializes in
business development services for and evaluations of technology-based venture
companies. He has extensive general management and marketing experience in
technology-based firms. Mr. Satterlee's background includes ten years of
management experience with IBM, as well as having been a founder of a computer
leasing/software business, telecommunications company and a venture investment
services business. He earned a BS in 1956 from Lafayette College.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
FOR DIRECTOR NAMED ABOVE.
3
<PAGE>
BOARD MEETINGS AND COMMITTEES
During 1998, the Board of Directors met four times. No director attended
fewer than 75% of the total number of meetings of the Board of Directors and the
committees on which he served.
The Audit Committee of the Board of Directors consists of Tom W. Olofson,
Robert C. Levy, and W. Bryan Satterlee. The function of the committee is to make
recommendations concerning the selection each year of independent auditors of
the Company, to review the effectiveness of the Company's internal auditing
methods and procedures, to determine through discussions with the independent
auditors whether any instructions or limitations have been placed upon them in
connection with either the scope of the audit or its implementation, to review
the financial statements and related notes with the independent auditors to
ensure such statements and notes fully disclose all material affairs of the
Company, and to recommend approval or non-approval of such financial statements
and related notes. The Company does not have a nominating or compensation
committee.
The Company pays its non-employee directors a fee of $750 per quarter and
$750 per Board meeting attended. The Company also reimburses non-employee
directors for out-of-pocket expenses incurred in attending such meetings. In
1997, the Company granted W. Bryan Satterlee a 10 year option to acquire 7,500
shares of Common Stock at an exercise price of $3.50 per share, which vests 20%
per year over five years.
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon the Company's review of Forms 3, 4 and 5 filed by directors,
officers and beneficial owners of more than 10% of the Common Stock of the
Company with respect to calendar year 1998, the Company has determined that Ms.
Butler and Mr. Winegar failed to file on a timely basis an initial statement of
beneficial ownership of securities in the Company on Form 3 after each was named
an officer of the Company. The required Form 3's were filed by Ms. Butler and
Mr. Winegar at the time Form 5's were filed on behalf of certain other directors
and officers of the Company.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and other compensation paid in 1998,
1997, and 1996 to the Company's Chief Executive Officer and each other executive
officer of the Company who earned in excess of $100,000 in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) COMPENSATION (2)(3)
- ----------------------------------------------- --------- --------- --------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
Tom W. Olofson, 1998 $ 100,114 $ 0 $ 2,688 $ 11,026
Chairman/CEO................................. 1997 $ 100,489 $ 0 $ 31,573 $ 11,537
1996 $ 50,000 $ 24,000 $ 36,827 $ 11,434
Christopher E. Olofson, 1998 $ 138,102 $ 0 $ 3,063 $ 6,000
President/COO................................ 1997 $ 120,101 $ 0 $ 2,754 $ 3,600
1996 $ 108,101 $ 0 $ 3,349 $ 1,620
</TABLE>
- ------------------------
(1) Includes $28,562 in 1997, and $33,782 in 1996 for payment of annual life
insurance premiums on policies owned by Tom W. Olofson, which designate
Jeanne H. Olofson, his wife, as the beneficiary, and $2,688 in 1998, $3,011
in 1997 and $3,045 in 1996 for personal use of a Company automobile.
Includes $3,063 for 1998, $2,754 for 1997 and $3,349 for 1996 for
Christopher E. Olofson for personal use of Company automobile.
(2) Includes $5,026 in 1998, $6,789 in 1997 and $9,075 in 1996 for group
insurance and $6,000 in 1998, $4,748 in 1997 and $2,359 in 1996 for Company
matching contributions under the 401(k) plan for Tom W. Olofson. Includes
$6,000 in 1998, $3,600 in 1997 and $1,620 in 1996 for Company matching
contributions under the 401(k) plan for Christopher E. Olofson.
(3) Does not include interest of $7,778 in 1997 and $40,000 in 1996 on amounts
borrowed by the Company from Tom W. Olofson. See "Certain Transactions."
The Company does not have a long-term incentive compensation plan.
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made to the Named Executive Officers in the year ended December 31, 1998:
OPTION GRANTS
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
<S> <C> <C> <C> <C>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE
- ---------------------------------------------------- ----------- --------------- ------------- -----------
Tom W. Olofson...................................... -- -- -- --
Christopher E. Olofson.............................. 25,000 14.6% $ 12.00 06/25/08
30,000 17.5% $ 9.00 09/01/08
</TABLE>
5
<PAGE>
The following table sets forth information concerning stock options
exercised by the Named Executive Officers during the year ended December 31,
1998 and the number of shares and the value of options outstanding as of
December 31, 1998 for each Named Executive Officer:
AGGREGATE OPTION EXERCISES AND
OPTION VALUES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTION AT
SHARES 12/31/98(#) 12/31/98($)(1)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- ----------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tom W. Olofson.................... -- -- -- -- -- --
Christopher E. Olofson............ -- -- 130,000 -- $ 340,000 --
</TABLE>
- ------------------------
(1) Based on the closing sales price of the Common Stock on the Nasdaq National
Market of $10.00 per share on December 31, 1998, less the exercise price.
6
<PAGE>
EXECUTIVE OFFICERS
Officers are elected on an annual basis by the Board of Directors and serve
at the discretion of the Board. The executive officers of the Company, as well
as certain biographical information about them are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ---------------------------------------------------------
<S> <C> <C>
Tom W. Olofson*................................. 57 Chairman, Chief Executive Officer, and Director
Christopher E. Olofson*......................... 29 President, Chief Operating Officer, and Director
Richard A. Winegar.............................. 58 Senior Vice President
Albert T. Annillo............................... 48 Senior Vice President
Reve Butler..................................... 48 Vice President--Human Resources
Reed A. Eichner................................. 41 Vice President--Operations
Nanci R. Trutna................................. 45 Vice President-Finance and Secretary
</TABLE>
- ------------------------
* Information is provided under the heading "Election of Directors" above, for
the following officers: Tom W. Olofson and Christopher E. Olofson.
Information relating to the Company's executive officers, not already
described herein, with respect to their principal occupations and positions
during the past five years is as follows:
RICHARD A. WINEGAR joined EPI in October 1998 as a Senior Vice President.
Mr. Winegar was previously President of CFDS Limited, a Toronto based subsidiary
of Boston Financial Data Services from 1994 to 1997, and Executive Vice
President/Chief Operations Officer with Investors Fiduciary Trust Company from
1981 to 1994, a Kansas City based unit of State Street Corporation. Mr. Winegar
earned a BS from Central Missouri State University.
ALBERT T. ANNILLO has been Senior Vice President since January 1995. Mr.
Annillo joined the Company in October 1992 as a corporate Vice President. He was
Assistant Director, Executive Office for United States Trustees, Department of
Justice, Washington, D.C. for six years before his association with the Company.
He earned an MBA and an MED from William Patterson College in 1975 and 1979,
respectively.
REED A. EICHNER joined the Company as Vice President--Sales and Marketing in
September 1995. He became Vice President--Operations on September 1, 1996. From
May 1991 through August 1995 he served as President and owner of Connexions,
Inc., a company which provided system integration and document conversion
services. He was General Manager of Innovision Systems, Inc. from September 1989
to May 1991. Mr. Eichner earned a BA from the University of North Carolina in
1982.
REVE BUTLER joined the Company as Vice President Human Resources in June,
1998. During 1998, Ms. Butler was Human Resources Manager in the corporate
office at Sprint Corp. She was Human Resources Manager for Investors Fiduciary
Trust Company from 1986 to 1998. Ms. Butler has a BS in Business Administration
from Culver Stockton College, and an MS in Counseling from Central Missouri
State University.
NANCI R. TRUTNA assumed her present position as Vice President--Finance in
June 1993. In 1998, she assumed the position of Corporate Secretary. She was
with Merchants Bank, Kansas City, Missouri from 1981 to June 1993 where she
became a Senior Vice President. Ms. Trutna is a Certified Public Accountant and
earned a BSBA in 1975 from the University of North Dakota.
7
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1988, an unaffiliated venture capital firm purchased a $400,000
subordinated note and a stock purchase warrant from the Company. In October
1991, the Company's Board of Directors deemed it in the best interest of the
Company to purchase the subordinated note and stock purchase warrant from the
venture capital firm. Because the Company could not then complete this
transaction without incurring additional debt, Tom W. Olofson, Chairman and
Chief Executive Officer, purchased the subordinated note and stock purchase
warrant. The note provided for interest at the rate of 10% with a maturity date
of July 1998. The stock purchase warrant provided for the acquisition of 969,228
shares of the Company's Common Stock at $.4125 per share at any time prior to
July 14, 1998 (giving retroactive effect to a six-for-one stock split). The
Company recorded a value of such stock purchase warrant in the amount of
$41,000, with the value being calculated using the difference between net book
value and exercise price per share. In an October 11, 1996 agreement between the
Company and Mr. Olofson, it was agreed that the Company would pay $41,000 to Mr.
Olofson on or before December 31, 1996, at which time the stock purchase warrant
would be retired. The Company repaid the $400,000 outstanding face value of the
subordinated note to Mr. Olofson from the proceeds of its Common stock offering
in February, 1997.
The Company has a noncancellable operating lease for its corporate
headquarters which expires in February 28, 2001 with options if exercised, to
extend the lease to February 28, 2011. Tom W. Olofson holds a 50% interest, as a
general partner, in T & J Investment Company, a Kansas general partnership ("T &
J Investment Company") that leases this facility to the Company. The lease
requires the Company to pay all executory costs (property taxes, maintenance and
insurance).
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION
The Company's Board of Directors recommends that the Company's shareholders
approve an amendment (the "Amendment") to the Company's Articles of
Incorporation that would create a new class of preferred stock consisting of
2,000,000 shares and would eliminate ARTICLE TWELFTH of the Articles primarily
because it conflicts with the creation of the new class of preferred stock. If
the Amendment is approved by the Company's shareholders, ARTICLE THIRD of the
Company's Articles of Incorporation, as amended, will read in its entirety as
set forth in EXHIBIT A attached hereto, and ARTICLE TWELFTH, which currently
reads as set forth in EXHIBIT A attached hereto, would be deleted in its
entirety.
The preferred stock could be issued at any time in one or more series by
resolution of the Board of Directors. The authorizing resolution of the Board of
Directors would determine and fix the voting powers and designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations and restrictions of the preferred stock, including
without limitation, dividend rights, conversion rights, redemption privileges
and liquidation preferences, all to the full extent permitted by the General and
Business Corporation Law of Missouri. Unless an authorizing resolution provides
otherwise, no vote of the shareholders of any series of common or preferred
stock would be required to issue any series of the preferred stock authorized by
the Amendment.
If the Amendment is approved, the voting, dividend and liquidation rights of
the holders of the Common Stock would be subject to and qualified by the rights
of the holders of any series of preferred stock designated by the Board of
Directors. Similarly, the dividends, if any, declared and paid on the Common
Stock as and when determined by the Board of Directors would be subject to any
preferential dividend rights of any then outstanding series of preferred stock,
and upon the dissolution or liquidation of the Company, holders of Common Stock
would be entitled to receive all assets of the Company available for
distribution to its shareholders, subject to any rights of any then outstanding
series of preferred stock.
The Company proposes to amend ARTICLE THIRD to create a class of preferred
stock consisting of 2,000,000 shares to provide an additional class of capital
stock that could be issued in one or more series by the Board of Directors for
general corporate purposes, including stock dividends, raising additional
capital
8
<PAGE>
and possible future acquisitions. The Company has no present plans to create any
series of preferred stock or to issue any shares of preferred stock. The Board
of Directors believes that the creation of the preferred stock will better
enable the Company to meet its future needs, and give the Board of Directors
greater flexibility in responding quickly to advantageous business
opportunities. A new series of preferred stock could be created by the Board of
Directors without any further action or consent by the shareholders (other than
approval of the Amendment), and could be issued by the Company in a registered
public offering or a private placement.
The 2,000,000 shares of authorized but unissued preferred stock that would
become available if the Amendment is approved could be used to make a change in
control of the Company more difficult and expensive, even if the proposed
transaction were in the best interest of the shareholders of the Company. Under
certain circumstances, the preferred stock could be used to create impediments
or to frustrate persons seeking to cause a takeover or to otherwise gain control
of the Company. The Amendment is not proposed as a result of the management's
knowledge of any specific effort to accumulate Common Stock of the Company or to
obtain control of the Company. The Company does not have any present plans to
adopt any other "anti-takeover" measures or to propose to the shareholders any
other changes to its governance or structure that might have an anti-takeover
effect.
The Company's potential issuance of up to 2,000,000 shares of preferred
stock, could dilute the present equity ownership position or voting rights of
the current holders of Common Stock and could be made without shareholder
approval.
The Board of Directors of the Company also proposes to delete ARTICLE
TWELFTH in its entirety in order to eliminate those provisions that would
conflict with ARTICLE THIRD as proposed to be amended.
The Board of Directors believes that, as proposed, the approval of the
Amendment is in the best interests of the shareholders of the Company. Approval
of this proposal requires a vote in favor of the Amendment by the holders of a
majority of the Company's outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO CREATE A NEW CLASS OF PREFERRED STOCK AND TO ELIMINATE
ARTICLE TWELFTH OF THE ARTICLES OF INCORPORATION.
9
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APPOINTMENT OF AUDITORS
At the Annual Meeting, a vote will be taken on the proposal to ratify the
appointment by the Board of Directors of Baird, Kurtz & Dobson, independent
certified public accountants, as auditors of the Company and its subsidiaries
for the year ending December 31, 1999. Baird Kurtz & Dobson has examined the
accounts of the Company annually since 1990.
Representatives of Baird Kurtz & Dobson are expected to be present at the
Annual Meeting, with the opportunity to make a statement if they desire to do
so, and such representatives are expected to be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE PROPOSAL TO RATIFY THE APPOINTMENT OF AUDITORS.
2000 SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Annual Meeting of
shareholders to be held in 2000 must be received by the Secretary of the
Company, at Electronic Processing, Inc., 501 Kansas Avenue, Kansas City, Kansas
66105-1309, no later than January 7, 2000, to be eligible for inclusion in the
Company's Proxy Statement and proxy related to that meeting.
FINANCIAL STATEMENTS
The Annual Report to Shareholders of the Company for the year ended December
31, 1998, which includes the Company's annual report on Form 10-KSB, is enclosed
with this Proxy Statement.
OTHER MATTERS
The Board of Directors is not aware of any matter that will be presented for
action at the Annual Meeting other than the matters set forth herein. If other
matters properly come before the meeting, it is intended that the holders of the
proxies hereby solicited will vote thereon in accordance with their best
judgment.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
Tom W. Olofson
April 29, 1999 Chairman and Chief Executive Officer
10
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EXHIBIT A
ARTICLE THIRD as proposed to be amended will read in its entirety as
follows:
THIRD: The total number of shares of all classes of stock which the
corporation shall have the authority to issue is Twelve Million (12,000,000)
consisting of Ten Million (10,000,000) shares of Common Stock, $0.01 par value
per share, and Two Million (2,000,000) shares of Preferred Stock, $1.00 par
value per share.
A. COMMON STOCK
1. GENERAL. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. VOTING. The holders of the Common Stock are entitled to one vote for each
share held at all meetings of shareholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
3. DIVIDENDS. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding series of Preferred Stock.
4. LIQUIDATION. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
shareholders, subject to any rights of any then outstanding series of Preferred
Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Authority is
hereby expressly granted to the Board of Directors from time to time to issue
the Preferred Stock in one or more series, and in connection with the creation
of any such series, by resolution or resolutions providing for the issue of the
shares thereof, to determine and fix such voting powers, full or limited, or no
voting powers and such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations and
restrictions thereof, including without limitation, dividend rights, conversion
rights, redemption privileges and liquidation preferences, as shall be stated
and expressed in such resolutions, all to the full extent now or hereafter
permitted by the General and Business Corporation Law of Missouri. Without
limiting the generality of the foregoing, except as otherwise provided in the
resolutions providing for the issuance of any series of Preferred Stock, the
resolutions providing for issuance of any series of Preferred Stock may provide
that such series shall be superior or rank equally or be junior to the Preferred
Stock of any other series to the extent permitted by law. Except as otherwise
provided in the resolutions providing for the issuance of any series of
Preferred Stock, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the issuance of any shares of any series of the
Preferred Stock authorized by and complying with the conditions of these
Articles of Incorporation.
C. GENERAL.
No shareholder shall be entitled as a matter of right to subscribe for,
purchase or receive any part of any new or additional issue of stock of any
class, whether now or hereafter authorized, or of any bonds, debentures or other
securities convertible into stock of any class, and all such additional shares
of stock, bonds, debentures or other securities convertible into stock may be
issued by the Board of Directors to such person or persons, on such terms and
for such consideration as the Board of Directors, in their discretion, may
determine.
A-1
<PAGE>
ARTICLE TWELFTH which is proposed to be deleted in its entirety, currently
reads as follows:
TWELFTH. The corporation reserves the right to alter, amend or repeal
any provision contained in its articles of incorporation in the manner now
or hereafter prescribed by the statutes of Missouri, and all rights and
powers conferred herein are granted subject to this reservation; and, in
particular, the corporation reserves the right and privilege to amend its
articles of incorporation from time to time so as to authorize other or
additional classes of shares (including preferential shares), to increase or
decrease the number of shares of any class now or hereafter authorized, to
establish, limit or deny to shareholders of any class the right to purchase
or subscribe for any shares of stock of the corporation of any class,
whether now or hereafter authorized or whether issued for cash, property or
services or as a dividend or otherwise, or to purchase or subscribe for any
obligations, bonds, notes, debentures, or securities or stock convertible
into shares of stock of the corporation or carrying or evidencing any right
to purchase shares of stock of any class, and to vary the preference,
priorities, special powers, qualifications, limitations, restrictions and
the special or relative rights or other characteristics in respect of the
shares of each class, and to accept and avail itself of, or subject itself
to, the provisions of any statutes of Missouri hereafter enacted pertaining
to general and business corporations, to exercise all the rights, powers and
privileges conferred upon corporations organized thereunder or accepting the
provisions thereof and to assume the obligations and duties imposed therein,
upon the affirmative vote of the holders of a majority of the shares of
stock entitled to vote thereon, or, in the event the laws of Missouri
require a separate vote by classes of shares, upon the affirmative vote of
the holders of a majority of the shares of each class whose separate vote is
required thereon.
A-2
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[LOGO]
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ELECTRONIC PROCESSING, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING
JUNE 1, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ELECTRONIC
PROCESSING, INC.
The undersigned hereby appoints Tom W. Olofson and Christopher E. Olofson,
and each of them in the order named, proxies with full power of substitution to
vote all shares of Common Stock of Electronic Processing, Inc. of record in the
name of the undersigned at the close of business on April 23, 1999 the Annual
Meeting of Shareholders of Electronic Processing, Inc. to be held on June 1,
1999, or at any adjournment or adjournments, hereby revoking all former proxies.
1. Election of Directors:
Tom W. Olofson, Christopher E. Olofson, Robert C. Levy, W. Bryan Satterlee
To withhold authority for a nominee, strike a line through such nominee's
name.
2. Ratification of appointment of Baird, Kurtz & Dobson as Independent
Accountants.
3. Approval of Amendment to the Company's Articles of Incorporation to create a
class of preferred stock and to eliminate ARTICLE TWELFTH of the Articles of
Incorporation.
(CONTINUED, AND TO BE COMPLETED AND SIGNED ON THE REVERSE SIDE)
<PAGE>
<TABLE>
<C> <S> <C> <C>
1. Election of Directors: FOR ALL NOMINEES / / WITHHOLD FOR ALL NOMINEES / /
2. Ratification of Accountants: FOR / / AGAINST / / ABSTAIN / /
3. Amendment of Articles of Incorporation FOR / / AGAINST / / ABSTAIN / /
</TABLE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1), (2) and (3)
in accordance with the specifications made and "for" each proposals if no
specification is made.
DATED:___________________, 1999
_______________________________
PLEASE SIGN NAME(S) EXACTLY AS
SHOWN AT LEFT. WHEN SIGNING AS
EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, GIVE FULL
TITLE AS SUCH; WHEN SHARES HAVE
BEEN ISSUED IN NAMES OF TWO OR
MORE PERSONS, ALL SHOULD SIGN.
