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 i
(as permitted by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to '240.14a-11(c) or '240.14a-12.
PREMIS Corporation
(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):
[ ] No fee required
[ * ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
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: $200.00
[ * ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
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4) Date Filed:
PREMIS CORPORATION
13220 County Road 6
Plymouth, Minnesota 55441
(612) 550-1999
June 7, 1999
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders to be held at 2:00
p.m., on July 15, 1999, at the Ramada Plaza Hotel, located at 12201
Ridgedale Drive in Minnetonka, Minnesota.
The agenda for this year's meeting includes proposals (a) to sell the
Company's ownership of its subsidiary, PREMIS Systems Canada Incorporated
("PSC") and its OpenEnterprise software to ACA Facilitair BV (the
"Transaction"); (b) to adopt a Plan of Complete Liquidation and
Dissolution of the Company (the "Plan of Liquidation"); (c) if the Transaction
is approved and the second payment under the NCR Agreement is recieved, to
authorize to the Board to retain up to $1 million, in net proceeds of the
liquidation for a period of up to 12 months to identify and secure a business
combination which may provide shareholders with additional value (the
"Holdback"); (d) to elect five directors named herein and on the proxy card;
and (e) to appoint PricewaterhouseCoopers LLP as auditors for the fiscal
year ending March 31, 2000. Following the formal business of the meeting,
management of the Company will respond to questions from shareholders.
Whether or not you plan to attend, it is important that your shares be
represented. Accordingly, you are requested to sign and date the enclosed
proxy and mail it in the envelope provided at your earliest convenience.
Very truly yours,
F.T. Biermeier
President and Chief Executive Officer
PREMIS CORPORATION
13220 County Road 6
Plymouth, Minnesota 55441
(612) 550-1999
_________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD July 15, 1999
_________________________________________
To the Shareholders of PREMIS Corporation:
The Annual Meeting of Shareholders of PREMIS Corporation (the "Company)
will be held on July 15, 1999, at 2:00 p.m., at the Ramada Plaza Hotel, located
at 12201 Ridgedale Drive in Minnetonka, Minnesota, for the purpose of
considering and acting upon the following proposals:
(i) to sell the Company's ownership of its subsidiary, PREMIS
Systems Canada Incorporated ("PSC") and its OpenEnterprise software to
ACA Facilitair BV (the "Transaction");
(ii) to adopt a Plan of Complete Liquidation and Dissolution of
the Company (the "Plan of Liquidation");
(iii) if the Transaction is approved and the second payment under the NCR
Agreement is received, authorize the Board to distribute the cash
proceeds of the liquidation while retaining up to $1 million
for a period of up to 12 months to identify and secure a business
combination which may provide shareholders with additional value, and
thereby delaying or terminating the Plan of Liquidation (the
"Holdback");
(iv) to elect five (5) directors of the Company; and
(v) to approve the appointment of PricewaterhouseCoopers LLP as auditors
for the fiscal year ending March 31, 2000.
(vi) to act upon such other business as may properly come before the
Meeting.
If the Transaction is not approved, or if the Transaction is approved but is
not consummated for any reason, management will implement the Plan of
Liquidation.
ALL SHAREHOLDERS VOTING BY PROXY SHOULD GIVE DIRECTION ON ALL PROPOSALS TO THE
PROXY HOLDER ON THE ENCLOSED PROXY CARD.
The Board of Directors has fixed the close of business on June 1, 1999
as the record date for the determination of shareholders entitled to vote at
the Annual Meeting and to receive notice thereof. The transfer books of the
Company will not be closed.
A PROXY STATEMENT AND FORM OF PROXY ARE ENCLOSED. SHAREHOLDERS ARE
REQUESTED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY TO WHICH NO POSTAGE NEED
BE AFFIXED IF MAILED IN THE UNITED STATES. IT IS IMPORTANT THAT PROXIES BE
RETURNED PROMPTLY WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON.
SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON
IF THEY DESIRE.
By Order of the Board of Directors
F. T. Biermeier
Chairman of the Board
June 7, 1999
TABLE OF CONTENTS
GENERAL INFORMATION 1
RECORD DATE AND VOTING 2
PRINCIPAL SHAREHOLDERS AND OWNERSHIP OF MANAGEMENT 3
MARKET FOR THE COMPANY'S STOCK 4
BUSINESS 5
PROPOSAL 1: SALE OF THE SUBSIDIARY OF THE COMPANY 6
DISSENTERS' APPRAISAL RIGHTS 11
PROPOSAL 2: HOLDBACK OF PORTION OF NET PROCEEDS 16
PROPOSAL 3: PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION 17
ACCOUNTING TREATMENT 19
CERTAIN TAX MATTERS 19
PROPOSAL 4: ELECTION OF DIRECTORS 23
MANAGEMENT 24
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 29
PROPOSAL 5: APPOINTMENT OF AUDITORS 30
SHAREHOLDER PROPOSALS 30
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 30
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING INFORMATION 31
DIRECTIONS TO ANNUAL MEETING OF SHAREHOLDERS 32
APPENDICES:
A PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION OF PREMIS CORPORATION
B Provisions of the Minnesota Business Corporaton Act
PREMIS CORPORATION
13220 County Road 6
Plymouth, Minnesota 55441
(612) 550-1999
________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD July 15, 1999
________________________________________
GENERAL INFORMATION
This proxy statement is furnished to shareholders by the Board of
Directors of PREMIS Corporation (the "Company") for solicitation of proxies for
use at the Annual Meeting of Shareholders on July 15, 1999, to be held at the
Ramada Plaza Hotel, located at 12201 Ridgedale Drive in Minnetonka, Minnesota,
at 4:00 p.m., and at all adjournments thereof for the purposes set forth in the
attached Notice of Annual Meeting of Shareholders. The purposes of the meeting
and the matters to be acted upon are set forth in the accompanying Notice of
Annual Meeting of Shareholders.
Shareholders may revoke proxies before exercise by submitting a
subsequently dated proxy or by voting in person at the Annual Meeting. Unless
a shareholder gives contrary instructions on the proxy card, proxies will be
voted at the Annual Meeting (a) for a proposal to sell the Company's ownership
of its subsidiary, PREMIS Systems Canada Incorporated ("PSC") and its
OpenEnterprise software to ACA Facilitair BV (the "Transaction"); (b) for a
proposal to adopt a Plan of Complete Liquidation and Dissolution of the Company
(the "Plan of Liquidation"); (c) if the Transaction is approved and the second
payment under the NCR Agreement is received, to authorize the Board to retain
up to $1 million in net proceeds of the liquidataion for a period of up
to 12 months to identify and secure a business combination which may
provide shareholders with additional value (the "Holdback"); (d) for
the election of the nominees named herein and on the proxy card; (e)
for the appointment of PricewaterhouseCoopers LLP as auditors for the
fiscal year ending March 31, 2000; and (f) in the discretion of the proxy
holder as to other matters which may properly come before the meeting. This
proxy statement and the enclosed proxy are being mailed to the shareholders of
the Company on or about June 7, 1999.
The Company will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of the shares and will reimburse them for their expenses in
so doing. To ensure adequate representation of shares at the Annual Meeting,
officers, agents and employees of the Company may communicate with
shareholders, banks, brokerage houses and others by telephone, facsimile, or in
person to request that proxies be furnished. All expenses incurred in
connection with this solicitation will be borne by the Company.
RECORD DATE AND VOTING
The Board of Directors has fixed June 1, 1999, as the record date for
the determination of shareholders entitled to vote at the Annual Meeting. As
of the close of business on the record date, there were outstanding 5,028,952
shares of Common Stock, par value $.01 per share, which is the only outstanding
class of stock of the Company. Each share is entitled to one vote on the
proposals to be presented to the meeting.
The presence at the Annual Meeting in person or by proxy of a majority
of the outstanding shares of the Company's Common Stock entitled to vote
constitutes a quorum for the transaction of business. Shares voted as
abstentions will be counted as present and entitled to vote for purposes of
determining a quorum and for purposes of calculating the vote, but will not be
deemed to have been voted in favor. Shares held by brokers or nominees which
are present in person or represented by proxy, but which are not voted because
instructions have not been received from the beneficial owner (and the broker
does not have discretionary authority to vote the shares), will be counted as
present for purposes of determining a quorum (assuming that such shares can be
voted on at lease one issue presented at the Annual Meeting), but will not be
considered present and entitled to vote for purpose of calculating the vote.
Approval of the Transaction and adoption of the Plan of Liquidation
require the affirmative vote of the majority of the outstanding shares of the
Company's Common Stock entitled to vote, either in person or by proxy.
Approval of the Holdback and approval of the appointment of
PricewaterhouseCoopers LLP require the affirmative vote of the majority of the
outstanding shares present at the Annual Meeting and entitled to vote, in
person or by proxy. Election of directors is by plurality vote (i.e. the
directors receiving the highest number of votes would be elected in the event
of more nominees than positions). All of the directors and officers of the
Company who are also shareholders of the Company have indicated that they
intend to vote FOR approval of the Transaction, FOR the Holdback, FOR the Plan
of Liquidation, FOR the election of all of the nominees, and FOR the appointment
of PriceWaterhouseCoopers LLP. These persons hold of record, as of the record
date for the Annual Meeting, and are entitled to vote at the Annual Meeting, an
aggregate of 1,923,751 shares (which excludes shares underlying options and
warrants otherwise included in their beneficial ownership), or 38% of the
shares issued and outstanding.
The Board of Directors unanimously recommends a vote FOR approval of
each proposal and each nominee and it is intended that proxies solicited by the
Board of Directors will be voted in this manner unless otherwise directed by
the shareholder submitting the proxy.
PRINCIPAL SHAREHOLDERS AND OWNERSHIP OF MANAGEMENT
The following table sets forth as of June 1, 1999 the beneficial
ownership of Common Stock held by (1) each person who is known to the Company
to be the beneficial owner of more than 5% of the Common Stock of the Company;
(ii) each current director; (iii) each nominee for election as director; and
(iv) all executive officers and current directors of the Company as a group.
Securities reported as "beneficially owned" include those for which the named
persons may exercise voting power or investment power, alone or with others.
Voting power and investment power are not shared with others unless so stated.
The number and percent of shares of Common Stock of the Company beneficially
owned by each such person as of June 1, 1999 includes the number of shares which
such person has the right to acquire within sixty (60) days after such date.
Name Shares Beneficially Percent
Owned(1)
F.T. Biermeier 1,907,751(2) 37.9%
Mary Ann Calhoun 25,000(3) *
Gerald F. Schmidt 15,000(3) *
S. Albert D. Hanser 20,000(4) *
Terrence W. Glarner 11,000(5) *
All directors and executive
officers as a group (5 persons) 1,978,751(6) 39.0%
* Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of
the individual's right to acquire them as of the record date, or
within 60 days after such date, are treated as outstanding when
determining the percent of the class owned by such individual and
when determining the percent owned by the group. Unless otherwise
indicated, each person named or included in the group has sole voting
and investment power with respect to the shares of Common Stock set
forth opposite the shareholder's name.
(2) Includes 75,000 shares held of record by Sandra J. Biermeier.
(3) Represents shares that may be acquired pursuant to exercise of
options.
(4) Includes 15,000 shares that may be acquired pursuant to exercise of
options.
(5) Includes 10,000 shares that may be acquired pursuant to exercise of
options.
(6) See notes (2) - (5) above.
The business address of Ms. Calhoun, and Mr. Biermeier is the address of
PREMIS Corporation, 13220 County Road 6, Plymouth, Minnesota 55441; the
business address of Mr. Schmidt is Cordova Capital, Inc., 2500 Northwinds
Parkway, Suite 475, Alpharetta, Georgia 30004; the business address of Mr.
Hanser is 1685 Fox, Wayzata, Minnesota 55391; and the business address of Mr.
Glarner is Norwest Venture Capital, 2800 Piper Jaffray Building 222 South 9th
Street, Minneapolis, Minnesota 55402.
MARKET FOR THE COMPANY'S STOCK
The following table sets forth, for the fiscal quarters indicated, a summary of
the high and low closing prices of the Common Stock. Prices for the period
from September 26, 1996 through July 17, 1998 are high and low closing sale
prices as reported by the Nasdaq National Market. The Company's Common Stock
was delisted from the Nasdaq National Market, effective the close of business
on July 17, 1998, for failure to satisfy the revised listing maintenance
standards adopted by The Nasdaq Stock Market, Inc. Prices for the periods
prior to September 26, 1996 and after July 17, 1998 represent high and low bids
as reported on the Over-the-Counter Bulletin Board system of the National
Association of Securities Dealers, Inc. (the "NASD"). Such bid information
reflects inter-dealer prices, without retail mark-up, mark-down, or commissions
and does not necessarily reflect actual transactions.
Common Stock
Low High
Fiscal 1997
First Quarter $2.125 $4.50
Second Quarter 3.00 5.125
Third Quarter 4.938 6.875
Fourth Quarter 2.625 6.25
Fiscal 1998
First Quarter $1.625 $3.25
Second Quarter 1.813 2.875
Third Quarter 1.438 2.25
Fourth Quarter .813 1.75
Fiscal 1999
First Quarter $1.125 $1.797
Second Quarter .75 1.406
Third Quarter .75 1.313
Fourth Quarter .375 1.00
The Company's Common Stock currently trades on the NASD's
Over-the-Counter Bulletin Board System under the symbol PMIS.
As of June 1, 1999, the Company had 113 shareholders of record and
approximately 997 beneficial holders of its Common Stock.
The Company has never declared or paid any dividends on its Common Stock.
BUSINESS
PREMIS Corporation, a Minnesota corporation, develops, markets and supports a
line of enterprise-wide solutions to meet the information needs of multi-store
specialty and general merchandise retailing chains. The Company's development
efforts have focused on developing leading-edge, industry-specific software
systems to collect business information, analyze the collected data and provide
timely and meaningful reports to individuals within an organization. The
Company's information management software systems are designed to assist
businesses with the day-to-day management of their operations and long-term
strategic planning. The Company's systems, which remain in development,
provide retailers with a variety of integrated functions and benefits, such as:
. point of sale ("POS") data collection
. "real time" sales analysis reporting
. enterprise inventory tracking
. improved customer loyalty
. gross margin improvement
. increased inventory productivity
. improved loss prevention
. on-line enterprise communications by and between stores and corporate
offices
PREMIS OpenEnterprise retail software combines an easy-to-use POS transaction
processing interface with sophisticated data analysis and information reporting
capabilities at the store and head office. The graphical user interface
significantly reduces the cost of training cashier personnel and shortens the
time required to process a sale. This software is designed to accelerate
information access and provide a wide variety of management reports on a "real
time" basis to various levels of an organization. Although initially developed
for use by general merchandise and specialty retailing businesses, the
sophisticated data acquisition and processing features of the OpenEnterprise
products are applicable to the needs of the entire retail market.
PROPOSAL 1: SALE OF SUBSIDIARY OF THE COMPANY
Terms of the Transaction
On April 20, 1999, the Company and ACA Facilitair BV, a corporation
organized under the laws of the Netherlands ("ACA"), entered into a Stock
Purchase Agreement, an Exclusive Software License Agreement, and an Escrow
Agreement with a bank in Minneapolis, Minnesota. ACA is a leading supplier
of enterprise systems for retailers in the Netherlands. ACA plans to utilize
the OpenEnterprise suite of products developed by PSC as product offerings in
North America with later introduction in Europe.
Pursuant to the terms of the Stock Purchase Agreement, ACA agrees to purchase
and the Company agrees to sell all of the Company's shares of its wholly-owned
subsidiary, PREMIS Systems Canada Incorporated ("PSC"). PSC owns the
OpenEnterprise software, related customer contracts and maintenance agreements,
and rights to the NCR Payment (see "Recent History," below). Sale of the PSC
shares (the "Transaction") is contingent upon approval by the shareholders of
the Company at the Annual Meeting. Pursuant to the terms of the Stock Purchase
Agreement, ACA will purchase the PSC shares for $1,000,000 (US) (which has been
deposited in escrow pursuant to the Escrow Agreement in the form of $100,000
cash and a $900,000 irrevocable direct pay letter of credit), plus an amount
equal to the after tax proceeds of the NCR Payment (see "Recent History,"
below).
ACA has, in effect, operated the business of PSC since April 20, 1999
pursuant to the terms of the Exclusive Software License Agreement, which was
executed simultaneously with the Stock Purchase Agreement. If the shareholders
do not approve the sale of the PSC shares, the funds and letter of credit
currently held under the Escrow Agreement will be released in payment of the
one-time license fee under the Exclusive Software License Agreement and the
Exclusive Software License Agreement will remain in force and effect in
perpetuity, absent an event of default giving rise to a right of termination.
In the event that the sale of the PSC shares is not approved by the
shareholders, the Company will continue to own the PSC shares (unless
subsequently sold) and will retain all rights to receipt of the NCR Payment, if
any.
Economic Effect of Approval or Disapproval of the Transaction
IN THE EVENT THAT THE SHAREHOLDERS DO NOT APPROVE THE TRANSACTION AND
THE COMPANY RECEIVES ACA'S $1 MILLION PAYMENT AS A LICENSE FEE, SUCH PAYMENT
WILL BE FULLY TAXABLE, UP TO 44.6%, AS A LICENSE SALE UNDER THE CANADIAN TAX
CODE. IF THE TRANSACTION IS APPROVED AND THE PAYMENT IS RECEIVED IN PAYMENT
FOR THE PSC SHARES, THE PAYMENT WILL REPRESENT A RETURN OF CAPITAL TO THE
COMPANY AND WILL NOT BE TAXED UNDER CANADIAN TAX CODE.
Fairness Opinion
The Company has not obtained any valuation or other fairness opinion
concerning the fairness of the terms or price of the proposed Transaction to
the shareholders of the Company.
Regulatory Approvals
The Company believes that no regulatory approvals are or will be
required in connection with the Transaction.
Recent History
Since the Company's acquisition of REF Retail Systems Corporation ("REF") on
October 1, 1996 the strategy has been to rapidly grow the Company and achieve
and secure a leadership position as a provider of enterprise-wide information
management systems. The Company's business strategy for attainment of its
objective was to provide innovative leading edge systems, expand the Company's
marketing and sales efforts to capitalize on first to market product
advantages, and pursue strategic acquisitions of complementary products and
service capabilities.
In September 1996 (prior to the Company's acquisition of REF), REF entered into
a sub-contractor arrangement with NCR Corporation ("NCR") in support of the
United States Postal Service ("USPS") POS ONE project. The USPS POS ONE
project was awarded on August 13, 1996 to NCR and IBM Corporation. Under this
project, the USPS is upgrading and opening new retail stores in various post
office locations throughout the United States. NCR's portion of the POS ONE
contract involves installation of new POS software and equipment for
approximately half of the USPS retail workstations. Under the subcontractor
arrangement with NCR, the Company's OpenStore product framework and
architecture served as the foundation of the point-of-sale software utilized by
NCR in support of NCR's POS ONE contract with the USPS.
Prior to the acquisition of REF by the Company, REF and NCR, decided to make
significant changes to the underlying framework architecture of OpenStore,
a component of OpenEnterprise in connection with the sub-contractor
arrangement with NCR in support of the USPS POS ONE project. The changes
to the framework were expected to enhance the marketability of the
commercial release of OpenStore. However, the time and effort devoted to these
changes resulted in a delay of the commercial release of OpenStore. The USPS
POS ONE project was originally scheduled to commence roll-out in the first half
of calendar 1997 with the underlying framework architecture changes
incorporated into the OpenStore product. As a result of these underlying
framework changes and other factors, the roll-out of the POS ONE project
was ultimately delayed to August 1998. These development delays further
impacted the commercial release of OpenStore since the framework
architecture used in the USPS POS ONE project was to be utilized in the
commercial version of OpenStore. In summary, critical Company resources
were assigned to the USPS POS ONE project which suffered a series of delays,
all of which worked to the detriment of the Company's commercial prospects.
In September 1997, the Company announced the first commercial sale of
OpenEnterprise to Cotton Ginny Limited, a Toronto, Ontario-based specialty
fashion retailer. As of the date of this Proxy Statement, the Company has not
installed its OpenEnterprise products at Cotton Ginny Limited beyond the
initial eight test sites which were installed in September 1998. The Company
announced the second sale of OpenEnterprise in June 1998 to LA Weight Loss
Centers, Inc. ("LAWL") headquartered in Horsham, Pennsylvania. The Company as
of the date of this Proxy Statement, has not installed any production sites at
LAWL. Prior to the Company's announcement on February 8, 1999 of its intent to
liquidate and dissolve, the Company anticipated installing a lab version of the
OpenEnterprise products at LAWL in early March 1999.
In August 1998, the Company announced a software license agreement with NCR
which amended the terms of utilization of the Company's commercial OpenStore
technology in the USPS POS ONE program (the "NCR Agreement"). The NCR
Agreement eliminated the Company's obligations under its previous POS ONE
subcontract with NCR to deliver point-of-sale software to the USPS in support
of the POS ONE project and allowed the Company to focus its resources
exclusively on the commercial development of OpenEnterprise products. In
August 1998, the Company received the first of two payments of $3,250,000 under
the NCR Agreement.
The second $3,250,000 payment (the "NCR Payment") is contingent upon award by
the USPS of Phase II of the POS One Project to NCR. As of the date of this
Proxy Statement, such award has not been made and no date for decision has been
announced.
Since the acquisition of REF (discussed above), the Company has remained
focused on its strategy to rapidly grow the Company and achieve and secure a
leadership position as a provider of enterprise-wide information management
systems with an initial market focus on the general merchandise and specialty
retailing. However, as a result of the initial delays encountered with the
release of OpenStore, discussed above, and other factors (See "Risk Factors
Associated With Continued Operations"), including the continued depletion of
cash reserves, the Company undertook a search for a corporate partner and/or a
purchaser of the Company.
From April 1998 until February 1999, when the Board of Directors of the Company
made its final decision to propose the liquidation of the Company to its
shareholders, the Company engaged in an exhaustive search for a corporate
partner and/or a purchaser of the Company. In July and August 1998, with the
assistance of an investment banking firm, the Company sent a description of its
business and other solicitation materials to numerous potential strategic
partners and potential purchasers of the Company. Throughout the remainder of
1998 the Company continued to pursue these leads. This effort resulted in
several inquiries but failed to produce any viable prospects. Although, the
Company was successful in securing a strategic relationship with Siemens
Nixdorf, which it announced in October 1998, that relationship does not
provide the Company with the required marketing, sales and financial strength
necessary in the near time frame to bring OpenEnterprise to market beyond its
first two customers (Cotton Ginny Limited and LAWL).
On Febrary 4, 1999, the Board of Directors of the Company voted to propose the
liquidation of the Company to its shareholders. On February 8, 1999, the
Company publicly announced this decision and reduced its staff in Canada to 12
employees from 31. The remaining 12 employees in Canada consisted of 9
development team members and 3 administrative personnel. The 9 development
team members focused their efforts on specific development initiatives to
enhance the saleability of the Company's OpenEnterprise product offering while
maintaining the Company's two existing customers. The administrative personnel
focused their efforts on winding down various administrative activities. The
Company terminated all remaining development and administrative staff on
March 31, 1999. As of May 1, 1999, the Company's Plymouth, Minnesota
headquarters operations consist of 4 employees. The Company will continue to
support existing non-OpenEnterprise customers from the U. S. throughout the
remaining wind down process. The personnel consists of 3 support staff and the
Company's CEO. The Company expects to reduce the number of employees to 2 by
the end of June 1999.
Risk Factors Associated with Continued Operations
The following Risk Factors were carefully considered by the Board of Directors
of the Company prior to the decision to propose the liquidation of the Company
to its shareholders:
Significant New Capital Requirements. The Board of Directors of the Company
believes that to continue development, attract new customers and achieve market
acceptance of its products, the Company would require substantial new capital.
For the successful positioning of the Company in a marketplace as broad as
"enterprise software for retailers," the Company would be required to fund
engineering/software development, marketing, sales, customer sales fulfillment
and support activities. In order to extend its cash and ensure completion of
the OpenEnterprise products, PREMIS has been reducing expenditures in all these
areas, including engineering/software development, since approximately January
1998. As a result of these reductions, activities that are critical to the
successful roll-out of the OpenEnterprise product and ramp up of sales have
been deferred while the OpenEnterprise product was being completed. As
OpenEnterprise moves into production installations in fiscal 2000 it will be
necessary to significantly increase expenditures to procure and install
additional OpenEnterprise customer sales.
Continued Development and Installation of OpenEnterprise. In 1998, the Company
expected to commence the full roll-out of OpenEnterprise to its first customer,
Cotton Ginny Limited, in February 1999. However, in early February 1999,
certain new technical issues concerning the OpenNet component of
OpenEnterprise, plus other existing issues, caused the Company and Cotton Ginny
Limited to postpone the scheduled February roll-out to a date which has not yet
been determined. The Company estimates the continued development effort to
ready the OpenEnterprise product line could delay complete roll-out to its two
current customer locations until as late as October 1999. If the Company were
successful with the roll-out to its current customer locations within this
timeframe it would not expect additional OpenEnterprise product roll-outs until
calendar year 2000 at the earliest. At the time of the February 1999
liquidation announcement by the Company, Cotton Ginny Limited made the decision
to continue operating its eight test stores pending the sale of the
OpenEnterprise technology.
Development of Direct Sales Force. As of February 4, 1999, the Company had no
direct sales force in place to market OpenEnterprise. During fiscal 1998, the
Company hired a vice president of sales and two direct sales associates.
Principally as a result of product development delays, the Company was not able
to retain either the vice president of sales or the direct sales associates.
The Company believes that it would require substantial resources and time to
attract and retain high quality sales management and direct sales associates.
The Company does not believe other sales channels could be created in the near
term to produce an adequate number of sales opportunities.
Marketing and Brand Recognition. Since the acquisition of REF the Company has
invested in the promotion and brand recognition of its OpenEnterprise products.
The Company has participated in several trade shows, including Retail Systems
and NRF (National Retail Federation). The Company believes that significant
promotional and brand recognition expenditures would be necessary over the next
12 months to continue positioning the product. The Company believes its brand
recognition has been negatively impacted by the OpenEnterprise product
development delays and estimates that it would require substantial resources
along with successful installations of the product before the Company would be
in a position to secure additional OpenEnterprise product sales.
Client Services and Support. Since January 1998, the Company has continued to
reduce its client services and support staff. The reductions in staff have
resulted from the continued attrition of its older non-OpenEnterprise customer
account base and OpenEnterprise product development delays. The Company has
not invested in additional customer support staff due to development delays
encountered with its OpenEnterprise products and the limited financial
resources available for needs other than continuing with the OpenEnterprise
development efforts. As of February 4, 1999, the Company employed a total of 4
customer support and development support staff. The Company has determined
that to support the OpenEnterprise product line a significant investment in a
client services group is essential. Such resource investment would include
attracting and hiring key management personnel, customer support associates and
state of the art support tools.
Highly Competitive Market Place and Technological Obsolescence. The markets
for the Company's OpenEnterprise products are highly competitive. Several
companies offer products with certain features competitive with the Company's
products. These competitors and potential competitors include established
companies that have significantly greater financial, technical and marketing
resources than the Company. The Company believes as a result of the delays
encountered with the development of OpenEnterprise its technological lead has
been adversely affected. From the time the Company began the development of
OpenEnterprise the marketplace and the competitive landscape have undergone
significant change. Since the Company has continued its focus on OpenEnterprise
development it has not invested in important areas such as internet commerce,
alternative store applications, merchandising tools, forecasting, gift registry
and kiosk applications. The Company believes that the lack of these product
extensions will have an adverse impact on new sales activity beginning in
calendar year 2000. Substantial resources would be required to develop these
product extensions and functionality.
Adoption Rate of New Technology. The Company's OpenEnterprise products are
Windows NT based end-to-end retail management software. The Company has
encountered a tendency to defer Windows NT adoption by many retailers, whose
decision involves not only purchase of the Company's software but an investment
in new hardware which may cost two to three times as much as the Company's
software. Although the Company believes that many retailers eventually will
make the decision to utilize the Windows NT operating platform, the transition
for many retailers is not expected until calendar year 2000. The deferral of
decisions to purchase new hardware along with the Company's OpenEnterprise
software has been exacerbated by diversion of retailers' available IT budgets
and other resources to Year 2000 investigation and remediation.
Cash Shortfall. The Company believes that its estimated capital requirement
needs for continued operations exceed the Company's current cash resources,
reported at March 31, 1999 as $2,781,592, plus the additional $3,250,000 NCR
Payment expected under its contract with NCR for Phase II of USPS POS ONE
program. Estimated capital requirements include funding the development of the
OpenEnterprise products, rebuilding the sales and marketing organization, and
augmenting the infrastructure for installation and support of the
OpenEnterprise products. As discussed above, other factors such as limited
brand recognition, limited customer references and limited financial resources,
as well as fast encroaching competition and technological obsolescence, will
have a considerable impact on the Company's ability to market and sell its
OpenEnterprise products during the next 12 to 18 months.
Recommendation of the Board of Directors
The Company's Board of Directors and management carefully considered all of the
above factors and evaluated the effect of these factors on future financial
projections. Although future financial projections are subject to several
assumptions, the financial scenarios evaluated all indicate a significant
short fall in required financial resources by the end of fiscal 2000. In
addition, the Board of Directors believes that the tax impact of the
Transaction is favorable when compared to other transactions involving
licensing or sale of the Company's assets. (See "Economic Effect of Approval
or Disapproval of the Transaction," above). Accordingly, the Board of
Directors unanimously recommends approval of the Transaction.
DISSENTERS' APPRAISAL RIGHTS
Shareholders who do not vote in favor of the Transaction and who do not
vote in favor of the Plan of Liquidation are entitled to dissenters' rights
under the Minnesota Business Corporation Act ("MBCA").
Pursuant to Sections 302A.471 and 302A.473, the MBCA holders of the
Company's Common Stock are entitled to assert appraisal rights in connection
with the Transaction if the Company does not proceed to liquidate and dissolve.
Pursuant to Section 302A.471, Subd. 1(b), no shareholder will have dissenters'
rights if the Plan of Liquidation is approved.
If the Transaction is approved and the Plan of Liquidation is not approved,
dissenting shareholders are entitled to obtain payment of the "fair value" of
their Common Stock, provided that such shareholders comply with the
requirements of the MBCA. In this context, the term "fair value" means the
value of the shares of the Common Stock immediately before the effective date
of the Transaction.
Procedures for Dissent
The following is a summary of the statutory procedures to be followed
by holders of Common Stock electing to exercise their appraisal rights in order
to perfect such rights under the MBCA, and is qualified in its entirety by
reference to Sections 302A.471 and 302A.473 of the MBCA, the full text of which
is attached hereto as Appendix B. These sections should be reviewed carefully
by holders of Common Stock who wish to assert their appraisal rights or wish to
preserve the right to do so, since failure to comply with those provisions will
result in the loss of such appraisal rights.
Shareholders who elect to exercise appraisal rights must satisfy each
of the following conditions: (a) such holder must file with the Company,
before the taking of the vote with respect to the Transaction, written notice
of their intention to demand payment of the fair value of their Common Stock
(this written notice must be in addition to and separate from any proxy or vote
against the Transaction; neither voting against nor a failure to vote for the
Transaction will constitute such a notice within the meaning of the Sections
302A.471 and 302A.473); and (b) such holders must not vote in favor of the
Transaction and must not vote in favor of the Plan of Liquidation (a failure
to vote will satisfy this requirement, but a vote in favor, by proxy or in
person, will constitute a waiver of holders' appraisal rights and will nullify
any previously filed written notice of intent to demand payment). The Company
will consider a proxy that is returned by a shareholder without indicating a
direction as to how it should be voted (or an abstention) as constituting such
a waiver. Shareholders who fail to comply with either of these conditions will
have no appraisal rights with respect to their Common Stock.
All written notices should be addressed to: F. T. Biermeier,
President, PREMIS Corporation, 13220 County Road 6, Plymouth, MN 55441, and
filed before the taking of the vote on the Transaction at the Annual Meeting
and should be executed by, or with the consent of, the holder of record. The
notice must reasonably inform the Company of the identity of the shareholder
and the intention of such shareholder to demand appraisal rights.
After a vote approving the Transaction, the Company must give written
notice to each shareholder who has filed written notice of intent to demand
appraisal and who did not vote in favor of the Transaction or the Plan of
Liquidation, setting forth the address to which a demand for payment and stock
certificates must be sent by such shareholder in order to obtain payment, and
the date by which they must be received. This notice will also include a form
for demanding payment to be completed by the shareholder and a request for
certification of the date on which the shareholder (or the person on whose
behalf the holder is asserting appraisal rights) acquired beneficial ownership
of the Common Stock. Shareholders who fail to demand payment or deposit
their stock certificates as required by the notice within 30 days after the
notice is given will irrevocably forfeit their appraisal rights.
If a demand for payment and deposits of stock certificates is duly made
by a shareholder with the Company as required by the notice, then upon the
effectiveness of the Transaction or the receipt of the demand, whichever is
later, the Company will pay such holder an amount which the Company estimates
to be the fair value of the Common Stock, with interest, if any. For purposes
of a holder's appraisal rights under the MBCA, "fair value" means the value of
a share of Common Stock immediately before the effectiveness of the
Transaction, and "interest" means interest from the effective date of the
Transaction until the date of payment at the rate provided by Minnesota law for
interest on verdicts and judgments.
If a shareholder believes the payment received from the Company is less
than the fair value of the Common Stock, with interest, if any, such holder
must give written notice to the Company of his or her own estimate of the fair
value of the Common Stock, with interest, if any, within 30 days after the date
of the Company's remittance and demand payment of the difference between his or
her estimate and the Company's remittance. If the holder fails to give written
notice of such estimate to the Company within the 30-day time period, such
shareholder will be entitled only to the amount remitted by the Company.
If the Company and the shareholder cannot settle the shareholder's
demand within 60 days after the Company receives the shareholder's estimate of
the fair value of his or her Common Stock, then the Company will file an action
in a court of competent jurisdiction in Hennepin County, Minnesota, requesting
that the court determine the fair value of the Common Stock. All shareholders
whose demands are not settled within the applicable 60-day settlement periods
shall be made parties to this proceeding.
After notice to such shareholders, the court will institute proceedings
to determine the fair value of the Common Stock. The court may appoint one or
more persons as appraisers to receive evidence and make recommendations to the
court. Dissenting shareholders will be entitled to discovery on the same basis
as any other party to a civil action. The court will determine the fair value
of the shares of Common Stock, taking into account any and all factors the
court finds relevant, computed by any method or combination of methods that the
court, in its discretion, sees fit to use. The fair value of the Common Stock
as determined by the court is binding on all shareholders. If the court
determines that the fair value of the Common Stock is in excess of the
Company's estimate of the fair value of the Common Stock, then the court will
enter a judgment in favor of the holders in an amount by which the value
determined by the court exceeds the Company's estimated value, plus interest.
If the court determines that fair value of the Common Stock is less than the
Company's estimate, the dissenting shareholder will not be liable to the
Company for the amount by which the estimate exceeds the fair value as
determined.
Certain Federal Income Tax Consequences of Dissent
Dissenting shareholders of the Company may be subject to state and
federal income tax, as described below.
Under currently existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), the Treasury Regulations promulgated thereunder,
applicable judicial decisions and administrative rulings, all of which are
subject to change, the federal income tax consequences described below are
expected to arise in connection with the exercise of dissenters' rights. Due
to the complexity of the Code, the following discussion is limited to the
material federal income tax aspects for a shareholder who properly exercises
his or her dissenters' rights under the MBCA, who is a citizen or resident of
the United States and who, on the date of disposition of such holder's shares
of Common Stock, holds such shares as a capital asset. The general tax
principles discussed below are subject to retroactive changes that may result
from subsequent amendments to the Code. The following discussion does
not address the material federal income tax aspects for any dissenting
shareholder who is not a citizen or resident of the United States. The
following discussion does not address potential foreign, state, local
and other tax consequences, nor does it address taxpayers subject to
special treatment under the federal income tax laws, such as life
insurance companies, tax-exempt organizations, S corporations, trusts,
and taxpayers subject to the alternative minimum tax. In addition, the
following discussion may not apply to dissenting shareholders who acquired
their shares upon the exercise of employee stock options or otherwise as
compensation. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, FOREIGN, STATE, AND LOCAL TAX CONSEQUENCES OF
THE DISPOSITION OF THEIR SHARES PURSUANT TO EXERCISE OF DISSENTERS' RIGHTS.
For federal income tax purposes, the Transaction will be treated as a
taxable redemption of Common Stock from each holder of the Company's Common
Stock who properly exercises dissenters' rights, subject to the provisions of
Section 302 of the Code. Under the rules of Section 302, the determination of
whether the exchange of Common Stock for cash pursuant to the exercise of
dissenters' rights has the effect of a distribution of a dividend will be made,
on a shareholder by shareholder basis, by comparing the proportionate,
percentage interest of a shareholder after the Transaction with the
proportionate, percentage interest of such shareholder before the Transaction.
In making this comparison, there must be taken into account (1) any
other shares of Common Stock actually owned by such shareholder, and (2) any
such shares considered to be owned by such shareholder by reason of the
constructive ownership rules set forth in Section 318 of the Code. These
constructive ownership rules apply in certain specified circumstances to
attribute ownership of shares of a corporation from the shareholder actually
owning the shares, whether an individual, trust, partnership or corporation, to
certain members of such individual's family or to certain other individuals,
trusts, partnerships or corporations. Under these rules, a shareholder is also
considered to own any shares with respect to which the shareholder holds stock
options.
Under applicable Internal Revenue Service guidelines, such a redemption
involving a holder of a minority interest in the Company whose relative stock
interest in the Company is minimal, who exercises no control over the affairs
of the Company and who experiences a reduction in the shareholder's
proportionate interest in the Company, both directly and by application of the
foregoing constructive ownership rules, generally will not be deemed to have
received a distribution of a dividend under the rules set forth in Section
302(b)(1) of the Code. Accordingly, the federal income tax consequences to the
Company's shareholders who exercise dissenters' rights will generally be as
follows:
(i) Assuming that the shares of Common Stock exchanged by a
dissenting shareholder for cash in connection with the Transaction are capital
assets in the hands of the dissenting shareholder, such dissenting shareholder
may recognize a capital gain or loss by reason of the consummation of the
Transaction.
(ii) The capital gain or loss, if any, will be long-term with
respect to shares of the Company's Common Stock held for more than twelve (12)
months and short-term with respect to such shares held for twelve (12) months
or less.
(iii) The amount of capital gain or loss to be recognized by
each dissenting shareholder will be measured by the difference between the
amount of cash received by such dissenting shareholder in connection with the
exercise of dissenters' rights and such dissenting shareholder's adjusted tax
basis in the Common Stock.
(iv) An individual's long-term capital gain is subject to
federal income tax at a maximum rate of 20%, while any capital loss can be
offset only against other capital gains plus $3,000 of other income in any tax
year ($1,500 in the case of a married individual filing a separate return).
An Individual's capital losses in excess of these limits can be carried forward
to future years.
(v) A corporation's long-term capital gain is subject to federal
income tax at a maximum rate of 35%, while any capital loss can be offset only
against other capital gains in any tax year, subject to the carryback and
carryforward rules of the Code.
Cash payments made pursuant to the Transaction will be reported to the
extent required by the Code to dissenting shareholders and the Internal Revenue
Service. Such amounts will ordinarily not be subject to withholding of U.S.
federal income tax. However, backup withholding of such tax at a rate of 31%
may apply to certain dissenting shareholders by reason of the events specified
in Section 3406 of the Code and the Treasury Regulations promulgated
thereunder, which include failure of a dissenting shareholder to supply the
Company or its agent with such dissenting shareholder's taxpayer identification
number. Accordingly, dissenting shareholders (or other payees) will be asked to
provide the dissenting shareholder's taxpayer identification number (social
security number in the case of an individual, or employer identification number
in the case of other dissenting shareholders of the Company) on a Form W-9 and
to certify that such number is correct. Withholding may also apply to
dissenting shareholders who are otherwise exempt from such withholding, such as
a foreign person, if such person fails to properly document its status as an
exempt recipient. Each dissenting shareholder of the Company, and, if
applicable, each other payee, should complete and sign a Form W-9 to provide the
information and certification necessary to avoid backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to the
Company.
The federal income tax consequences set forth above are for general
information only. Each holder of shares of common stock is urged to consult
his or her own tax advisor to determine the particular tax consequences to such
shareholder of the transaction (including the applicability and effect of
foreign, state, local and other tax laws).
PROPOSAL 2: HOLDBACK OF PORTION OF NET PROCEEDS
If the Stock Purchase Agreement is approved and the Transaction becomes
effective, the Company will receive a cash purchase price of $1,000,000, plus
the net after tax NCR Payment (if there is an NCR Payment). In addition, ACA
will assume the Company's obligations under existing OpenEnterprise customer
contracts.
Subject to shareholder approval of this Proposal 2, the sale of PSC shares (See
Proposal 1), and receipt of the NCR Payment, management of the Company intends
to distribute substantially all of the net proceeds to the shareholders, with a
holdback up to $1,000,000 (the "Holdback"). It is the intention of management
to use the Holdback to seek a business combination with another entity in an
industry management deems suitable. Management believes that the Company's
cash and its status as a publicly traded entity filing reports with the
Securities and Exchange Commission may be attractive to potential partners and
that such a business combination may provide value to the Company's
shareholders which exceeds the value of the cash being held back from
distribution. The nature and extent of participation by the shareholders
in any such business combination would be determined in connection
with such a transaction. If it is determined that there will be no
NCR Payment (and, accordingly, that no additional payment will be received by
the Company in connection with the Transaction) the Company will cease its
search for a business combination and will fully implement the Plan of
Liquidation.
Until distribution to the shareholders (and with respect to the Holdback, until
application to a business combination), the net proceeds of the Transaction
(net after deduction of the expenses incurred by the Company in connection with
the Transaction and satisfaction of certain other obligations) will be invested
in U.S. government securities, AAA corporate securities or a money market
mutual fund. If no suitable business combination is identified within twelve
months following completion of the Transaction, management will fully implement
the Plan of Liquidation and will distribute the remaining Holdback to the
shareholders. Management may elect to distribute the remaining Holdback in
complete liquidation prior to the expiration of twelve months, in its sole
discretion.
Consummation of any business combination will be subject to vote and
approval by the shareholders. If a business combination is approved by the
shareholders, the Plan of Liquidation will be terminated.
The Company's future operating costs are expected to be approximately
$20,000 per month in the event of disapproval of the Holdback and adoption of
the Plan of Liquidation, or $8,000 per month (for a longer period of time than
contemplated in the event of immediate implementation of the Plan of
Liquidation) in the event of approval of the Holdback and search for a business
combination. Such costs consist of salary, benefits and incidental expenses
and will be paid from retained cash, monies related to the NCR Payment (if
any), liquidation of assets, and interest income on the net proceeds of the
Transaction (if approved). The amount of cash, after monthly operating
expenses and interest income, available for either a business combination or
to be distributed to the shareholders is expected to be greater than $950,000,
PROPOSAL 3: PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION
On May 7, 1999, the Board of Directors of the Company adopted the Plan
of Liquidation, a copy of which is attached to this Proxy Statement as Appendix
A. At the Annual Meeting, the Company is seeking ratification and approval of
the Board's action and the affirmative adoption of the Plan of Liquidation by
the shareholders. The summary description of the Plan of Liquidation and its
effects set forth below is qualified in its entirety by reference to the Plan
itself. The Plan of Liquidation provides that upon adoption by the
shareholders, the Company will proceed to liquidate its assets and to dissolve
its corporate existence in accordance with Minnesota law. If the shareholders
approve the Holdback (See Proposal 2), complete implementation of the Plan will
be deferred for up to 12 months. If a business combination is identified and
approved by the shareholders, as described in Proposal 2, the Plan of
Liquidation will be abandoned.
Assuming the Plan of Liquidation is approved by the shareholders at the
Annual Meeting and is implemented, the Board of Directors will proceed in the
following manner:
1. The Company will file a Notice of Intent to Dissolve with the
Minnesota Secretary of State.
2. The Board will collect monies owed to the Company and sell the
Company's assets in one or more transactions.
3. The Company will give notice, by mail and publication, to known and
unknown creditors and claimants, and will pay or provide for payment of all
debts and liabilities of the Company and all expenses of liquidation and
dissolution (to the extent of available funds realized upon the sale of the
Company's assets plus existing cash on hand).
4. After all assets of the Company have been reduced to cash and all
creditors' claims have been paid or provided for, and if there then are no
pending legal, administrative or arbitration proceedings (or adequate
provisions have been made to satisfy any liability arising from such
proceedings), the Company will distribute all remaining assets (consisting
solely of cash) to the shareholders in one or more installments. Following
this distribution, the Company will file Articles of Dissolution with the
Secretary of State of Minnesota and will take any and all other necessary or
appropriate actions to dissolve and to terminate the Company's existence.
It is currently anticipated that the Company will make an initial distribution
to shareholders not later than December 31, 1999, assuming receipt by that date
of the NCR Payment or the portion of the Transaction purchase price related to
the NCR Payment or a determination by that date that such payment will not be
received.
The following unaudited pro forma information is presented on the basis of
future projections for the amount of cash available for distribution to
shareholders of the Company. The amounts are based on management's estimates
of future events related to the liquidation and dissolution of the Company.
There can be no assurance that such estimates will actually result in either
the collection or distribution of cash. The Company anticipates that it will
have an initial distribution of net cash during the third quarter of fiscal
2000 (by the end of December 1999). However, the Company does not expect any
cash distribution prior to (a) the receipt of the NCR Payment of $3,250,000
which may become due in connection with the USPS POS ONE project (or the
portion of the Transaction purchase price related to the NCR Payment), or (b) a
determination that such additional payment will not be due and payable.
Selected Pro Forma Cash Distribution Information
Complete With Without NCR
Liquidation Holdback Payment
Cash and cash equivalents at May 1, 1999 (1) $2,562,000 $2,562,000 $2,562,000
Cash Inflows
Operating receipts (2) 240,000 240,000 240,000
Sale of Company assets (3) 45,000 45,000 45,000
Estimated US Federal tax refund for F1999 264,000 264,000 264,000
Cash from Sale of PSC Stock 1,000,000 1,000,000 1,000,000
Cash Outflows
Continued operating & other wind down expenses 465,000 465,000 465,000
Severance and related expenses (4) 110,000 110,000 110,000
Estimated net cash available for distribution
to shareholders before NCR Payment 3,536,000 3,536,000 3,536,000
NCR Payment, net of taxes (5) 3,150,000 3,150,000 -
Holdback to seek a business combination 0 1,000,000 0
Net cash available for distribution
to shareholders $6,686,000 5,686,000 3,536,000
Estimated distribution per common share (6) $1.25 $1.06 $.66
Footnotes:
(1) Cash and cash equivalents (unaudited)
(2) Estimated receipts collected in the ordinary course of business.
(3) Estimated proceeds primarily related to the sale of the Company's
office furniture and computers and related equipment.
(4) As of May 1, 1999, the Company has paid all amounts due related to
severance for employees of PSC, its Canadian subsidiary. As of May
1, 1999, the Company had five full time employees and 1 part time
employee. The above amount represents the severance and related
expenses for the remaining employees. This amount will be paid prior
to the final distribution to shareholders.
(5) The NCR Payment is the second payment of $3,250,000 due under the
software license agreement with NCR Corporation under which a
one-time software license fee will be paid to the Company by NCR in
two installments of $3,250,000. The first license fee installment was
received in August 1998). The second installment is payable only if
NCR receives an order for Phase II application software as part of
the POS ONE program, which includes PREMIS OpenStore. As part of the
purchase price for the PSC shares, ACA will pay an amount equal to
the NCR Payment net of taxes (after application of the available
loss carried forwards and investment tax credits).
(6) Consists of 5,028,952 shares of Common Stock outstanding, plus
exercisable options to purchase 224,000 shares of Common Stock.
ACCOUNTING TREATMENT
If the proposed Plan of Liquidation is approved, the Company will adopt
the liquidation basis of accounting. The liquidation basis of accounting will
not be adopted in Company financial statements issued prior to such approval.
Financial statements prepared on a liquidation basis of accounting
generally consist of a statement of net assets in liquidation and a statement
of changes in net assets in liquidation. In general the statement of net
assets would be unclassified; the excess of assets over liabilities would be
presented as a single amount designated "net assets in liquidation," with
disclosure of the related per share amount. The statement of changes in net
assets would include summarized increases and decreases in net assets resulting
from (1) liquidating activities including liquidating dividends and (2) net
operating results.
CERTAIN TAX MATTERS
The Company
The Internal Revenue Code of 1986, as amended (the "Code"), provides
that, in general, gain or loss is recognized by a corporation on the sale of
its property, whether in contemplation of liquidation or otherwise (other than
a corporate liquidation under Section 332 of the Code). The distribution of
cash proceeds from the sale to its shareholders is not a separate taxable event
to the Company. In the case of the proposed distribution pursuant to the Plan
of Liquidation, the only assets to be distributed will be cash proceeds.
Therefore, no gain or loss will be recognized to the Company as a result of the
distribution.
If Proposal 2 is adopted and the Company actually invests the Holdback in
another business, the Company will treat the distribution of its remaining cash
proceeds as a "partial liquidation" distribution within the meaning of Section
302(b)(4) and (e) of the Code with respect to its non C-corporation
shareholders (i.e. shareholders who are individuals or who are entities that are
not C-corporations). The distribution will be treated as a dividend to the
Company's C-corporation shareholders. The Company will not seek a private
letter ruling from the Internal Revenue Service or an opinion of counsel that
the distribution under Proposal 2 will qualify as a partial liquidation. The
Internal Revenue Service may disagree with the Company's characterization of
such distributions as partial liquidating distributions and may characterize
them as dividend distributions. If the Internal Revenue Service attempts to
recharacterize the distributions as dividends, the recharacterization will have
no impact on the Company.
Under Section 6043(a)(1) of the Code, a liquidating corporation must
file Form 966 with the Internal Revenue Service (the "IRS") within thirty (30)
days after its adoption of a plan of liquidation. In addition and subject to
certain exceptions, a liquidating corporation that makes a distribution of $600
or more in a calendar year to any shareholder must file Form 1099-DIV with
respect to each such shareholder. Such forms must be sent to the shareholders
on or before January 31 of the year following the calendar year in which the
distribution occurs and must be filed with the Internal Revenue Service on or
before February 28 of the year following the calendar year in which the
distribution occurs.
The Shareholders
Pursuant to Section 331 of the Code, amounts received by a shareholder
in a complete liquidation distribution are treated as full payment in exchange
for all of the shareholder's stock. The foregoing rule applies to both
C-corporation shareholders and non C-corporation shareholders, which includes
individual shareholders. Amounts received by a non-C-corporation shareholder
as a partial liquidation distribution are treated as full payment in exchange
for part of the shareholder's stock pursuant to Sections 302(a) and (b)(4) of
the Code. A non C-corporation shareholder will be deemed to have sold that
portion of his or her stock that the amount distributed to such shareholder
bears to the fair market value of the Company's stock owned by
such shareholder immediately before the distribution. Amounts received by
C-corporation shareholders pursuant to the partial liquidation proposal will be
treated as dividend distributions with respect to their stock in the Company
pursuant to Section 346(b)(4) and 316. For the purposes of determining whether
stock in the Company is owned by a C-corporation or not, stock of the Company
owned by a partnership, estate or trust shall be considered as owned by its
partners or beneficiaries.
The amount of gain or loss realized by a non C-corporation shareholder of the
Company will be computed by comparing (a) the amount of cash received by such
shareholder to (b) the shareholder's basis in all of his or her Common Stock if
the distribution is in complete liquidation or in the part of his or her Common
Stock which is deemed to be purchased if the distribution is in partial
liquidation. Under applicable Treasury Regulations, gain or loss is computed
on a "per share" basis. Accordingly, if a shareholder of the Company has
acquired shares of Common Stock at different prices or at different times, the
shareholder can have a different basis amount for shares of Common Stock in
each block. If the distribution is in partial liquidation, a non-C-corporation
shareholder has the opportunity to select and designate the block or blocks of
Common Stock from which the shares of Common Stock are being purchased. The
amount the non C-corporation shareholder receives in a liquidating distribution
(complete or partial) must be allocated pro rata to each share of stock being
purchased. In the case of a complete liquidation, this allocation will be to
all of the shares of Common Stock owned by the shareholder and, in the case of
a partial liquidation, to only a part of the shares owned by the shareholder.
With respect to each share of Common Stock sold, a cost recovery approach is
applied; i.e. the full basis of each share of stock sold must be recovered
before any gain is recognized on that share. In the case of the Company, two
or more distributions are possible. A shareholder whose basis exceeds the amount
of the partial liquidation distribution cannot claim a loss until complete
liquidation of the company (if ever) or sale of the stock. The basis recovery i
rules discussed above apply to the aggregate basis of all of the non
C-corporation shareholder's stock in the case of a complete liquidation or to
the part of the stock being purchased in the case of a partial liquidation,
even though only a portion of the shares may be surrendered at the time of the
first distribution.
The character of a shareholder's gain or loss is determined by the
character of the Common Stock in that shareholder's hands. If the stock is a
capital asset, the gain or loss is generally a capital gain or loss. However,
if the shareholder is deemed to be a dealer in securities, or if the Common
Stock otherwise falls under an exception to the definition of "capital asset,"
the gain or loss may be ordinary rather than capital.
If the stock is a capital asset, the gain or loss will be long-term or
short-term depending on how long the shareholder has owned the stock.
Generally, for a liquidating distribution received after December 31, 1997, the
gain or loss will be long-term capital gain or loss if the shareholder has
owned the Common Stock for more than twelve (12) months. If a shareholder of
the Company has acquired blocks of Common Stock at different times, the holding
period for each block of stock is computed separately based upon the date that
the block of stock was acquired. In certain circumstances, such as stock
acquired by gift or inheritance, the present owner's holding period is
increased by the period the Common Stock was owned by certain predecessor
owners. In the case of a partial liquidation, a non-C-corporation shareholder
has the opportunity to select and designate the block or blocks of Common Stock
from which the shares of Common Stock are being purchased.
If the gain is a long-term capital gain for any non C-corporation
shareholder, the federal income tax rate cannot exceed 20% (10% for taxpayers
in the 15% tax bracket). On the other hand, capital losses (both long-term and
short-term) are only deductible to the extent of capital gains plus up to
$3,000 of other income for non C-corporation taxpayers. Favorable lower tax
rates are not available to C-corporation taxpayers under the current Code.
Excess capital losses may be carried forward for an unlimited number of years
by non C-corporation taxpayers. C-corporation taxpayers may carry excess
capital losses back three (3) years and forward five (5) years.
If the distribution is in complete liquidation, the foregoing discussion
applies equally to shareholders that are C-corporations and to those who are
not. If the distribution is in partial liquidation, the foregoing discussion
does not apply to shareholders of the Company that are C-corporations,
determined at the partner or beneficiary level for any stock owned by a
partnership, estate or trust. For a C-corporation shareholder, distributions
pursuant to the partial liquidation proposal will be dividends, (a) taxable as
ordinary income to the extent of the pro rata portion of Company's current or
accumulated earnings and profits attributable to the shares of Common Stock
owned by the C-corporation shareholder, (b) then, any excess is a nontaxable
return of basis to the extent of any distribution in excess of earnings and
profits determined on a share by share basis up to the amount of each share's
basis and, (c) finally, any remaining excess is a gain from the sale of each
share to the extent all basis attributed to that share is recovered. Because
favorable lower tax rates are not available to C-corporations under the current
Code, it does not matter whether any gain is a capital gain to a C-corporation
shareholder. C-corporation taxpayers may carry excess capital losses back three
(3) years and forward five (5) years. For C-corporation shareholders, the
dividend should qualify for the so-called dividend received deduction provided
for by Section 243 of the Code, subject to the limitations set forth in that
Section. In addition, to the extent the dividend distribution is an
"extraordinary dividend" with the meaning of Section 1059 of the Code,
C-corporation shareholders may be required to reduce its basis in their Common
Stock as set forth in Section 1059 of the Code.
If the Internal Revenue Service is successful in recharacterizing the partial
liquidation distributions as dividends, the resultant income tax treatment to
C-corporation and non C-corporation shareholders will be the same as that
described in the preceding paragraph for partial liquidation distributions to
C-corporation shareholders except that the comments with respect to Sections
243 and 1059 will not apply to non C-corporation shareholders. Dealing with
the Internal Revenue Service with respect to any such recharacterization will
be the responsibility of each shareholder.
The Company has not made a separate calculation of it accumulated earnings and
profits and cannot precisely estimate it earnings and profits for the current
year. However, the Company believes that it presently has no accumulated
earnings and profits, that it will have no earnings and profits in the current
year, and that to the extent that it has earnings and profits in the year or
years of distribution they will be small. To the extent that the Company
actually has no accumulated earnings and profits, distributions to both
C-corporation and non C-corporation shareholders will be treated as a recovery
of basis with the remainder as gain, as discussed above.
THE FOREGOING IS NOT A DEFINITIVE DISCUSSION OF ALL OF THE POSSIBLE
FEDERAL INCOME TAX CONSEQUENCES OF THE LIQUIDATION OF THE COMPANY. FURTHER,
THE FOREGOING DISCUSSION DOES NOT DEAL WITH ANY STATE INCOME TAX CONSEQUENCES.
EACH SHAREHOLDER IS ADVISED TO CONSULT HIS OR HER INCOME TAX ADVISER.
PROPOSAL 4: ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of directors shall be
as fixed from time to time by resolution of the Board of Directors. The
current number of members of the Board of Directors is five (5). The directors
elected at this Annual Meeting, and at Annual Meetings thereafter unless
otherwise determined by the Board or the shareholders, will serve a one-year
term expiring upon the election of their successors at the next annual meeting.
The five persons designated by the Board of Directors as nominees for election
as directors at the Annual Meeting are F.T. Biermeier, Mary Ann Calhoun, Gerald
F. Schmidt, S. Albert D. Hanser and Terrence W. Glarner.
In the event any nominee should be unavailable to stand for election at
the time of the Annual Meeting, the proxies may be voted for a substitute
nominee selected by the Board of Directors.
See "MANAGEMENT" for biographical information concerning F.T. Biermeier
and Mary Ann Calhoun, who are employees of the Company. The following
biographical information is furnished with respect to each of the other
nominees.
Gerald F. Schmidt has been a Director of the Company since June of
1986. Since 1989, Mr. Schmidt has been President and CEO of Cordova Capital,
Inc., a venture capital firm located in Atlanta, Georgia. Cordova Capital is
the General Partner in four growth funds with $92 million dollars under
management. From 1984 to 1988, he was a Senior Vice President and partner at
O'Neill Development Inc., a commercial real estate development firm in Atlanta,
Georgia. From 1966 to 1984, he held various positions in sales and marketing
management and was Vice President and General Manager of two divisions at
Jostens in Minneapolis, Minnesota.
S. Albert D. Hanser was elected as a Director of the Company in September 1996.
He has served as Chairman of Hanrow Financial Group, Ltd., a merchant banking
firm, since 1989; as chairman of Astrocom Corporation since 1992; and as
chairman of Prevention First Inc. since 1997. Mr. Hanser is also currently a
member of the Boards of Directors of Hawkins Chemical, Inc. and E-Z Gard
Industries, Inc.
Terrence W. Glarner has been a director since October 1997. Since
1993, Mr. Glarner has been President of West Concord Ventures, Inc. Mr.
Glarner also currently consults with Norwest Venture Capital, an entity
affiliated with Norwest Growth Fund, Inc. Prior to starting West Concord
Ventures, Inc., Mr. Glarner was President of North Star Ventures, Inc. from
1988 to February 1993, a firm which he joined in 1976. Mr. Glarner currently
serves as a director of Aetrium, Cima Labs, Datakey, and FSI, all of which are
publicly-held companies.
For information concerning compensation of directors, see "MANAGEMENT -
Director Compensation."
MANAGEMENT
Directors and Officers
The directors and executive officers of the Company as of June 1, 1999
are as follows:
Name Age Position
_______________________ ______ _____________________________________________
F.T. Biermeier 59 President and Chief Executive Officer,
Chief Financial Officer and Director
Mary Ann Calhoun 40 Vice President, Secretary and Director
Gerald F. Schmidt 59 Director
S. Albert D. Hanser 62 Director
Terrence W. Glarner 56 Director
F.T. Biermeier has been a Director of the Company since its inception
in April 1982. Since May of 1988, he has been President and Chief Executive
Officer. From June 1986 to May 1988, he was Chairman and Chief Executive
Officer. From April 1982 to June 1986, he was President and Secretary. He
also functions as the Company's Treasurer. From 1980 to 1983, he operated an
independent management consulting firm, F.T. Biermeier & Associates, Inc. From
July of 1986 to January 1988, Mr. Biermeier was President and Chief Executive
Officer of Intran Corporation, a supplier of imaging software to publishing
organizations, and devoted part-time efforts to the Company. Mr. Biermeier
assumed the role of Chief Financial Officer of the Company on April 6, 1999,
effective with the resignation of Richard R. Peterson. Mr. Biermeier is
married to Mary Ann Calhoun, a Director and Vice President of the Company.
Mary Ann Calhoun has been a Director and Vice President of the Company
since June of 1986. From 1983 to 1986, she held positions of Customer Support
Representative, Manager Customer Support and Director of Software Development
and Customer Support of PREMIS. From 1980 to 1983, she held positions in the
United States Senate office of Senator David Durenberger, including Assistant
to the Press Secretary and Manager of Information Systems. Ms. Calhoun is
married to F. T. Biermeier, a Director and President of the Company.
See "ELECTION OF DIRECTORS" for information concerning the non-employee
members of the Board of Directors.
All directors of the Company hold office until the next regular meeting
of the shareholders or until their successors are elected and qualify. All
officers hold office until their successor is appointed by the Board. There
are no arrangements or understandings between any of the directors or officers
or any other person pursuant to which any person was or may be elected as a
director or selected as an officer of the Company.
Officers
The officers of the Company are elected annually by the Board of
Directors and serve until their successors are elected and qualified, subject
to earlier removal by the Board.
Director Compensation
Non-employee directors receive $500 per meeting and are reimbursed by
the Company for their actual out-of-pocket expenses for telephone, travel, and
miscellaneous items incurred on behalf of the Company. In addition, during the
fiscal year ended March 31, 1999, each non-employee director received a
five-year non-qualified option to purchase 5,000 shares of Common Stock
exercisable at fair market value as of the date of grant.
Board Committees and Meetings
The Board of Directors has established an Audit Committee comprised of
Gerald F. Schmidt and S. Albert D. Hanser, who are non-employee members of the
Board. The purpose of the Audit Committee is to (1) annually select a firm of
independent public accountants as auditors of the books, records and accounts
of the Company; (2) review the scope of audits made by the independent public
accountants; and (3) receive and review the audit reports submitted by the
independent public accountants and take such action in respect of such reports
as the Audit Committee may deem appropriate to assure that the interests of the
Company are adequately protected.
During the year ended March 31, 1999, the Board of Directors met five
times and otherwise conducted business by unanimous written action; and the
audit committee of the Board met one time. Each incumbent director attended at
least 75% of the meetings of the Board of Directors and each member of the Audit
Committee attended the single meeting of that committee.
Executive Compensation and Employment Agreements
The following table discloses compensation received by the Company's
President and Chief Executive Officer and each other executive officer whose
aggregate cash compensation exceeded $100,000 (the "Named Executive Officers")
during the fiscal year ended March 31, 1999.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
___________________________________ ___________
Year
Name and Ended Other Annual Options
Principal Position March 31 Salary Bonus Compensation(1) (#shares)
________________________ ______ _________ _________ _______________ ___________
F.T. Biermeier 1999 $128,000 -0- $3,950 -0-
Chief Executive Officer 1998 128,000 -0- 3,382 -0-
And President 1997 141,057 -0- 1,112 -0-
Richard R. Peterson 1999 129,146(2) $50,000 712 95,000
Chief Financial Officer 1998 80,625 -0- 1,007 -0-
1997 21,875 -0- -0- 50,000
Jeffrey A. Imm 1999 126,621(3) 50,000 923 75,000
Chief Operating Officer 1998 83,749 -0- 879 -0-
1997 38,510 -0- -0- 80,000
(1) Represents contributions to the Company's Employee Retirement 401(k)
Plan and other fringe benefits.
(2) Include separation payments and payments for accrued vacation paid
April 1, 1999 totaling $34,146.
(3) Include separation payments and payments for accrued vacation in
fiscal 1999 totaling $32,256.
The Company currently has no employment agreement with Mr. Biermeier or
any executive officer. However, in connection with the termination of most of
the Company's operations in March and April 1999, and the separation of
substantially all of its employees, including Jeffrey A. Imm, Chief Operating
Officer, in March, and Richard R. Peterson, Chief Financial Officer, in April,
the Company has agreed to pay these executive officers, as separation payment,
four months' salary, plus benefits, from the date of separation. F. T.
Biermeier and Mary Ann Calhoun, the two remaining executive officers, will
continue to draw salaries (i) until liquidation or a business combination is
concluded, in the case of Mr. Biermeier (except that his
salary may be reduced to reflect part-time engagement if appropriate in light
of the Company's needs) and (ii) until arrangements have been concluded for the
support and maintenance of certain remaining non-OpenEnterprise customer
contracts, in the case of Ms. Calhoun. Both Mr. Biermeier and Ms. Calhoun will
receive four months' salary, plus benefits, after the date of termination of
their regular salary and their separation from employment with the Company.
Stock Options
The Company's 1994 Employee Incentive Stock Option Plan (the "Option
Plan"), was adopted to provide incentives to selected employees of the Company.
The Board of Directors is authorized to grant options under the Option Plan
for purchase of up to 500,000 shares of Common Stock at exercise prices not
less than the fair market value of the Common Stock as of the grant date. As
of April 30, 1999, there were outstanding options to purchase an aggregate of
399,000 shares of Common Stock pursuant to the Option Plan, at an average
exercise price of $1.02 per share. One fourth of the options granted become
exercisable one (1) year from the date of the grant with an additional
twenty-five percent becoming exercisable each succeeding year.
In addition to the Option Plan, the Board authorized grant of
non-qualified stock options for an aggregate of up to 600,000 shares of Common
Stock to employees (including officers) and non-employee directors. As of
April 30, 1999, non-qualified options to purchase 49,126 shares were
outstanding. Such options are exercisable at an average exercise price of
$3.33 per share and, in each case, the exercise price is equal to the fair
market value of the Common Stock as of the grant date.
Report by Board of Directors on Option Repricing
On April 2, 1998, the Board of Directors authorized the reduction of
the exercise price for all outstanding stock options to purchase Company Common
Stock held by then current employees (including officers other than Mr.
Biermeier and Ms. Calhoun). The Board of Directors believed that the market
price of the Company's Common Stock had been negatively affected by several
factors, including general market factors, the Company's revenue and earnings
performance and limited investment analyst coverage. As a result, the
outstanding stock options, which had been granted at exercise prices ranging
from $2.00 to $6.25 per share, no longer represented an effective retention or
motivational incentive for employees to work to achieve long-term success for
the Company. In order to motivate the grantees, the Board of Directors
canceled and reissued these options at an exercise price equal to the market
price of the Common Stock on the date of repricing ($1.31 per share). Option
vesting remained the same.
F. T. Biermeier
Mary Ann Calhoun
Gerald F. Schmidt
S. Albert D. Hanser
Terrence W. Glarner
Option/SAR Grants in Last Fiscal Year
The following table contains information concerning stock option grants
to the Named Executive Officers during the fiscal year ended March 31, 1999.
Number of Percent of Total
Securities Options/SARs
Underlying Granted to
Options/SARS Emplyees in Exercise or Base
Name granted(#) Fiscal Year Price($/Sh) Expiration Date
___________________ __________ ______________ _______________ _______________
F.T. Biermerier None Not Applicable Not Applicable Not Applicable
Richard R. Peterson 95,000 12.4% $1.00 7/14/03
Jeffrey A. Imm 75,000 9.8% $1.00 7/14/03
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
The following table contains information concerning exercises of stock
options during the last fiscal year by the Named Executive Officers and the
value of options which were held by the Named Executive Officers at the end of
the fiscal year ended March 31, 1999.
Option Exercises
Value of
Number of Unexercised
Unexercised In-The-Money
Options at Options at
Options Exercises FY-End FY-End(1)
_______________________________ ______________ _____________
Shares Acquired
Name on Exercise Value Realized Exercisable Exercisable
___________________ _______________ _______________ ______________ _____________
F.T. Biermeier 300,000 $80,250 (2) 0 $0
Richard R. Peterson None None 145,000 $0
Jeffrey A. Imm None None 155,000 $0
(1) Value is calculated based on the difference between the option exercise
price and the closing price for the Common Stock at March 31, 1999, as
reported on the Over-the-Counter Bulletin Board System under the symbol
PMIS, multiplied by the number of shares underlying the option.
(2) Value Realized is calculated based on the difference between the option
exercise price and the closing price for the Common Stock on the date of
exercise, as reported on the Over-the-Counter Bulletin Board System under
the symbol PMIS, multiplied by the number of shares underlying the option.
Retirement Plan
During fiscal year 1995, the Company established a retirement savings
plan which qualifies under Internal Revenue Code Section 401(k) ("401(k)
Plan"). All employees with at least 90 days of employment are eligible to
participate in the 401(k) Plan. The Company's contributions to the 401(k) Plan
are based on 15% of employee contributions, which are subject to salary
limitations. The Company's contributions to the 401(k) Plan were approximately
$7,533 during fiscal 1999.
Certain Transactions
Effective September 1, 1996, the Company entered into a lease for executive
offices in a building owned by a limited liability partnership which is
controlled by F. T. Biermeier, the Company's President and Chief Executive
Officer, a member of the Board of Directors, and a principal shareholder of the
Company, and his spouse Mary Ann Calhoun, another officer and director of the
Company. The Company believes that, notwithstanding the absence of arms length
negotiation, this lease was entered into on terms which are commercially
reasonable and comparable to the terms of leases for other properties which
would have been available to the Company. In addition, the Company guaranteed
the mortgage loan obligation of the limited liability partnership with respect
to this property in the principal amount of $945,000. This loan had an interest
at 2.75% over the rate on five year U.S. Treasury Notes. As of December 31,
1998, the limited liability partnership sold the entire premises to a third
party. In connection with the sale, the lease between the Company and the
limited liability partnership was terminated. Effective January 1, 1999, the
Company entered into a new 36 month lease term with the same third party buyer
for approximately 7,000 square feet at a minimum monthly base rent of $4,333.
Indemnification of Directors and Officers
Under Section 302A.521, Minnesota Statutes, the Company is required to
indemnify its directors, officers, employees, and agents against liability
under certain circumstances, including liability under the Securities Act of
1933, as amended (the "Act"). The general effect of such provisions is to
relieve the directors and officers of the Company from personal liability which
may be imposed for certain acts performed in their capacity as directors or
officers of the Company, except where such persons have not acted in good
faith.
As permitted under Minnesota Statutes, the Articles of Incorporation of
the Company provide that directors shall have no personal liability to the
Company or to its shareholders for monetary damages arising from breach of the
director's duty of care in the affairs of the Company. Minnesota Statutes do
not permit elimination of liability for breach of a director's duty of loyalty
to the Company or with respect to certain enumerated matters, including payment
of illegal dividends, acts not in good faith, and acts resulting in an improper
personal benefit to the director.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who beneficially own
more than ten percent of the Company's Common Stock, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission (the "SEC"). Executive officers, directors and greater than ten
percent beneficial owners are required by the SEC to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers and directors were complied with, except that F. T.
Biermeier was delinquent in the filing of one Form 4 concerning the exercise of
an option. Such filing has now been completed.
PROPOSAL 5: APPOINTMENT OF AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers, LLP,
independent auditors, to audit the financial statements of the Company for the
fiscal year ending March 31, 2000. If the shareholders fail to ratify such
appointment, the Board of Directors will select another firm to perform the
required audit function. A representative of PricewaterhouseCoopers is
expected to be present at the shareholders meeting with the opportunity to make
a statement if such representative desires to do so and is expected to be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Rule 14a-8 of the SEC permits shareholders of a company, after timely
notice to the company, to present proposals for shareholder action in the
company's proxy statement where such proposals are consistent with applicable
law, pertain to matters appropriate for shareholder action and are not properly
omitted by the company in accordance with the proxy rules. The Company's
Annual Meeting of Shareholders in 2000 is expected to be held on or about
August 15, 2000, unless liquidation and dissolution of the Company has been
completed prior to that date. Proxy materials for that meeting are expected to
be mailed on or about July 15, 2000. Under SEC Rule 14a-8, shareholder
proposals to be included in the proxy statement for that meeting must be
received on or before the date which is 120 days prior to the anticipated date
of
mailing. Additionally, if the Company receives notice of a shareholder
proposal which may be presented for shareholder action at the meeting, but
which has not been included in the Company's proxy statement, after the date
which is 45 days prior to the scheduled date of mailing, the proposal will be
considered untimely pursuant to SEC Rules 14a-4 and 14a-5(e) and the persons
named in proxies solicited by the Board of Directors of the Company may
exercise discretionary voting power with respect to the proposal.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1999 filed by the Company with the Securities and Exchange Commission
is enclosed with this Proxy Statement and is incorporated by reference. All of
the information which would be contained in the Annual Report to Shareholders
is contained in the Report on Form 10-KSB and, accordingly, the Company will
not be disseminating a separate Annual Report to Shareholders.
All documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Proxy Statement and prior to
the Annual Meeting shall also be deemed to be incorporated by reference in this
Proxy Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superceded
for the purposes of this Proxy Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or
deemed to be incorporated by reference herein modifies or supercedes such
statement. Any such statement so modified or superceded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement.
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING INFORMATION
The following are or may constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995:
(i) certain statements contained in this Proxy Statement or the
Company's Form 10-KSB or other filings which are incorporated herein by
reference (the "Incorporated Information"), concerning any forecasts,
projections, including especially statements regarding (a) the development of
possible or assumed future results of operations of the Company's business, (b)
the markets for the Company's services and products, (c) anticipated
expenditures, (d) competition, (e) the effect of the Transaction, and (f) the
timing and amounts of proposed distributions to shareholders;
(ii) any statements preceded by, followed by or that include the
words "believes," "expects," "anticipates," "intends," "will likely result,"
"estimates," "projects" or other similar expressions contained in this Proxy
Statement or the Incorporated Information; and
(iii) other statements contained in this Proxy Statement or the
Incorporated Information regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. The Company's shareholders are cautioned not to
place undue reliance on such statements, which speak only as of the date hereof
or, in the case of documents incorporated by reference, the date of such
document.
All subsequent written and oral forward-looking statements attributable
to the Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
The Company does not undertake any obligation to release publicly any
revisions to such forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
By Order of the Board of Directors
F. T. Biermeier
Chairman of the Board
Dated: June 7, 1999
Plymouth, Minnesota
*********************************
DIRECTIONS TO ANNUAL MEETING OF SHAREHOLDERS
* Ramada Plaza Hotel, located at 12201 Ridgedale Drive in Minnetonka,
Minnesota, (612)593-0000.
* Highway 169 runs north and south and intersects with major highways: I494 and
I394
* From highway 169 take highway 394 west.
* From 394 west take Ridgedale Drive, take a left at the lights, go through 2
stop lights.
* The Ramada Plaza Hotel is on the left.
APPENDIX A
PLAN OF COMPLETE LIQUIDATION AND
DISSOLUTION OF PREMIS CORPORATION
This Plan of Complete Liquidation and Dissolution (the "Plan") is
intended to accomplish the complete liquidation and dissolution of PREMIS
Corporation, a Minnesota corporation (the "Company") The Board of Directors of
the Company has adopted a resolution recommending that the Company liquidate and
dissolve. This Plan has been approved and adopted by the Board of Directors of
the Company as being in the best interest of the Company and its shareholders.
The Board of Directors of the Company has directed that this Plan be submitted
to the Company's shareholders for approval and adoption.
1. Approval and Adoption of Plan. This Plan shall be adopted and become
effective when all of the following steps have been completed:
1.1 Annual Meeting of Shareholders. The Board of Directors has called a
Annual Meeting of the Shareholders of the Company for the purpose of allowing
the shareholders to consider and act on the liquidation of the Company and its
dissolution pursuant to Section 302A.721 of the Minnesota Business Corporation
Act, or has otherwise submitted such matter to a vote of the shareholders of
the Company.
1.2 Adoption of This Plan by Shareholders. The shareholders of the Company
have approved such liquidation and dissolution and have adopted this Plan by
an affirmative vote of at least a majority of the outstanding shares of Common
Stock of the Company.
2. Purpose of Plan; Sale of Assets; Amendment. This Plan is intended to be a
plan of complete liquidation and dissolution, and is intended to effect a
dissolution of the Company pursuant to the Minnesota Business Corporation Act.
Subject to any rights of third parties, the Board of Directors may,
notwithstanding shareholder authorization of the Plan and of the dissolution of
the Company, amend this Plan.
3. Liquidation Procedure. The steps set forth below shall be completed as
expeditiously as practicable after adoption of this Plan by the shareholders of
the company:
3.1 The Company shall collect all monies owed to the Company and sell
substantially all of the property and assets of the company;
3.2 The Company shall give notice to known and unknown creditors by
publication and mail.
3.3 The Company shall pay or make adequate provision for payment, of all debts
and liabilities of the Company, including all expenses of the sale of its
assets and of the liquidation and dissolution provided for in this Plan;
3.4 To the extent deemed necessary by the Board of Directors, the Company
shall establish and aside a reasonable amount (the "Contingency Reserve") to
meet claims against the Company, including ascertained or contingent
liabilities and expenses;
3.5 The Company shall cease all business activities and withdraw from any
jurisdiction in which it is qualified to do business;
3.6 The Company shall distribute the assets of the Company (except any
Contingency Reserve) to the shareholders in one or more distributions;
3.7 The Company shall file Articles of Dissolution of the Company, when
appropriate, pursuant to Section 302A.727 of the Minnesota Business
Corporation Act and complete all actions that may be necessary or appropriate
to dissolve and terminate the corporate existence of the Company; and
3.8 After the earlier (a) expiration of the statutory period for claims by
creditors or (b) resolution of all matters provided for by the Contingency
Reserve, the Company shall pay the costs of establishment and maintenance of
the Contingency Reserve and distribute the remainder to the shareholders.
4. Authority of Officers. The adoption of the Plan by its shareholders shall
constitute full and complete authority for the Board of Directors and the
proper officers of the Company, without further shareholder action, to do and
perform any and all acts and to make, execute and deliver any and all
agreements, conveyances, assignments, transfers, certificates and other
documents of any kind and character which such officers deem necessary or
appropriate: (ii) to sell, dispose, convey, transfer and deliver the assets of
the Company, (ii) to satisfy or provide for the satisfaction of the obligations
of the Company; (iii) to distribute any remaining assets of the Company to its
shareholders or for their benefit to the extent provided above and (iv) to
dissolve the Company in accordance with the laws of the State of Minnesota and
cause its withdrawal from all jurisdictions in which it is authorized to do
business.
PROXY BAlLOT
PREMIS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement dated June 7, 1999, hereby appoints F. T. Biermeier as proxy, with
full power of substitution, to vote all of the shares of Common Stock which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders of PREMIS Corporation to be held on, July 15, 1999 at
4:00 p.m. at the Ramada Plaza Hotel, located at 12201 Ridgedale Drive in
Minnetonka, Minnesota, or at any adjournment thereof, upon any and all matters
which may properly be brought before the meeting or any adjournment thereof,
hereby revoking all former proxies.
SHAREHOLDERS MUST VOTE ON ALL PROPOSALS.
1. Sale of the Company's ownership of its subsidiary, PREMIS Systems Canada
Incorporated ("PSC") and PSC's OpenEnterprise software to ACA Facilitair
BV (the "Transaction"):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Adoption of a Plan of Complete Liquidation and Dissolution of the Company
(the "Plan of Liquidation"):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Holdback of up to $1 million of the proceeds of the Transaction for a
period of up to 12 months to identify and secure a business combination which
may provide shareholders with additional value, and thereby delaying or
terminating implementation of the Plan of Liquidation:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Election of five (5) Directors:
F. T. Biermeier, Mary Ann Calhoun, Gerald F. Schmidt, Albert D. Hanser,
and Terrence W. Glarner
[ ] FOR ALL [ ] WITHHOLD FOR ALL
[ ] WITHHELD FOR THE FOLLOWING ONLY:
(Write the nominee's name in space below):
5. Ratification of appointment of PriceWaterhouseCoopers, LLP as the
independent auditors of the Company for the year ending March 31, 2000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. The authority to vote, in his discretion, on all other business that
may properly come before the meeting:
[ ] AUTHORITY GRANTED [ ] AUTHORITY WITHHELD
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, AND 5, FOR EACH NOMINEE, AND IN THE DISCRETION OF
THE PROXY HOLDER ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
PLEASE SIGN exactly as name appears below. When shares are held by joint
tenants, both should sign. If signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or authorized officer. If
partnership, please sign in partnership name by an authorized person.
Dated: , 1999.
Signature Signature
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Consent of Independant Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-03161) and the Proxy Statement on Schedule 14A
of PREMIS Corporation, of our report dated May 7, 1999 appearing in this
Form 10-KSB.
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
June 7, 1999
Report of Independent Accountants
To the Stockholders and
Board of Directors of
PREMIS Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
PREMIS Corporation and its subsidiary at March 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As described in Note 1 to the financial statements, the Company intends to
submit a plan of liquidation to the stockholders of PREMIS Corporation at its
annual meeting.
PRICEWATERHOUSECOOPERS LLP
May 7, 1999
