SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule
14a-12
DATAGUARD RECOVERY SERVICES, INC.
(Name of Registrant as Specified in Its Charter)
DATAGUARD RECOVERY SERVICES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rule 0-11(c)(1)(ii),
14a-6(i)(1),
14a-6(j)(3).
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rule
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 of other underlying value of
transaction
computer pursuant to Exchange Act Rule 0-11:*
_________________________________________________________________
____
(4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
____
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by
registration statement number, or the form or schedule and the date
of
its filing.
(1) Amount previously paid:
_________________________________________________________________
____
(2) Form, schedule or registration statement no.:
_________________________________________________________________
____
(3) Filing party:
_________________________________________________________________
____
(4) Date filed:
_________________________________________________________________
____
__________
*Set forth the amount on which the filing fee is calculated and
state
how it was determined.
DATAGUARD RECOVERY SERVICES, INC.
Notice of Annual Meeting of Shareholders
To Be Held July 12, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
of
Dataguard Recovery Services, Inc. (the "Corporation"), will be held
at
the Corporation's offices at 10301 Linn Station Road, Louisville,
Kentucky, on Friday, July 12, 1996, at 10:00 a.m., local time, for
the
purposes of:
(1) Electing four directors.
(2) Acting on a proposal to change the Corporation's name
to
Strategia Corporation.
(3) Acting on a proposal to approve a 1-for-2 reverse
stock split.
(4) Acting on a proposal to increase the number of common
shares the
Corporation is authorized to issue from 6,000,000 to
15,000,000
shares.
(5) Transacting such other business as may properly be
brought
before the meeting or any adjournments thereof.
All shareholders are cordially invited to attend the meeting,
but
whether or not you expect to attend the meeting in person, please
sign
and date the enclosed proxy form and return it promptly so that
your
shares may be voted.
By Order of the Board of
Directors
Richard W. Smith
President
Louisville, Kentucky
July 1, 1996
YOUR VOTE IS IMPORTANT
Please date, sign and promptly return the enclosed
proxy card in the accompanying postage paid envelope.
DATAGUARD RECOVERY SERVICES, INC.
10301 Linn Station Road
Louisville, Kentucky 40223
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD July 12, 1996
This Proxy Statement is furnished in connection with the
solicitation
by the Board of Directors of Dataguard Recovery Services, Inc. (the
"Corporation"), a Kentucky corporation, of the accompanying proxy
card for
use at the Annual Meeting of Shareholders to be held on July 12,
1996, and
at any adjourned meeting thereof (the "Annual Meeting").
The close of business on May 17, 1996, has been fixed as the
record date
for the determination of shareholders entitled to notice of and to
vote at
the Annual Meeting (the "Record Date"). On the Record Date, the
Corporation had 5,045,770 shares of Common Stock outstanding. A
majority of
the shares entitled to vote, represented in person or by proxy,
will constitute
a quorum for the Annual Meeting.
This Proxy Statement and enclosed proxy card are first being
sent or
given to shareholders on or about July 1, 1996.
ACTION TO BE TAKEN BY PROXIES
When the enclosed proxy card is properly executed and returned
in the
envelope provided, the shares represented by the proxy card will be
voted
at the Annual Meeting in accordance with the shareholder's
instructions.
If no instructions are specified, such shares will be voted in
favor of
management's nominees to the Board of Directors.
Each shareholder has one vote per share on all matters coming
before
the Annual Meeting, but in the election of directors, each
shareholder may
vote in the aggregate the number of shares held by him on the
Record Date
multiplied by the number of directors to be elected at the
election. A
shareholder may cast all his votes for one nominee, or he may
distribute
his votes among as many nominees as he chooses. The Board of
Directors is
soliciting discretionary authority for the proxy holders to
cumulate votes
in this fashion.
A shareholder may revoke a proxy card at any time before its
exercise
by filing a written notice of revocation or a duly executed proxy
card
bearing a later date with the Secretary of the Corporation. The
powers of
proxy holders will be suspended if the person executing the proxy
card
attends the Annual Meeting in person and so requests. Attendance
at the
Annual Meeting will not in itself constitute a revocation of the
proxy
appointment.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of the
Record Date
with respect to the shares of Common Stock owned (i) by each person
known
to the Corporation to own beneficially more than 5% of the
outstanding
shares of Common Stock (ii) by each of the Corporation's directors
and
executive officers, and (iii) by all directors and officers as a
group.
As of the Record Date, there were 5,045,770 outstanding shares of
Common
Stock, which is the Corporation's only class of voting shares.
<TABLE>
<CAPTION>
Directors and Number Percent
Executive Officers of Shares(1) of Class(2)
<S> <C> <C>
John P. Snyder
EPI Corporation
9707 Shelbyville Rd.
Louisville, KY 40223 2,006,532(3) 38.4%
Richard W. Smith
10301 Linn Station Rd.
P. O. Box 37144
Louisville, KY 40233 174,750(4) 3.4%
James P. Buren
10301 Linn Station Rd.
P. O. Box 37144
Louisville, KY 40233 171,657(5) 3.4%
John A. Brenzel
3501 Graham Rd.
Louisville, KY 40207 142,538(6) 2.8%
All current directors
and officers as a
group (4 persons) 2,495,477 47.4%
5% Beneficial Owners
H. Joseph Schutte
1410 Hadleigh Place
Louisville, KY 40222 333,336(7) 6.5%
EPI Corporation
9707 Shelbyville Rd.
Louisville, KY 40223 1,964,732(8) 37.8%
</TABLE>
<TABLE>
<CAPTION>
Number Percent
5% Beneficial Owners of Shares(1) of Class(2)
<S> <C> <C>
EPI Corporation,
John P. Snyder,
Max G. Baumgardner,
James E. Buchart,
J. Ben Cress,
Robert H. Loeffler,
Henry A. Schumpf,
Grace W. Wilkins
9707 Shelbyville Rd.
Louisville, KY 40223 2,307,432(8)(9) 43.7%
</TABLE>
(1) Based on information furnished to the Corporation by the
named
person, and information contained in filings with the
Securities and Exchange Commission (the "Commission").
Under
the rules of the Commission, a person is deemed to
beneficially
own shares over which the person has or shares voting or
investment power or has the right to acquire beneficial
ownership within 60 days. Except as otherwise noted, each
person or entity named in the table has sole voting and
investment power with respect to all shares of Common Stock
shown as beneficially owned.
(2) Shares of Common Stock subject to options or warrants that
are
or will become exercisable within 60 days or are subject to
issuance upon the conversion of the Corporation's Series A
Preferred Stock ("Series A Preferred") have been deemed
outstanding for computing the percentage of class of the
listed
person or the group, but are not deemed outstanding for
computing the percentage of class for any other person.
(3) Includes 1,964,732 shares of Common Stock beneficially
owned by
EPI Corporation. (See footnote 8.) Mr. Snyder is
President,
a director, and largest single shareholder of EPI
Corporation.
Mr. Snyder shares voting and investment power with respect
to,
and disclaims beneficial ownership of, the shares owned by
EPI
Corporation, which are included once in the shares
beneficially
owned by all directors and officers as a group. Mr.
Snyder's
total also includes 5,000 shares subject to currently
exercisable stock options, 20,000 shares issuable upon the
conversion of 2,500 shares of Series A Preferred, and 5,000
shares issuable upon the exercise of warrants.
(4) Includes 18,673 shares subject to currently exercisable
stock
options and 1,000 shares owned individually by Mr. Smith's
wife.
(5) Includes 15,738 shares subject to currently exercisable
stock
options.
(6) Includes 5,000 shares subject to currently exercisable
stock
options.
(7) Includes 53,336 shares issuable upon the conversion of
6,667
shares of Series A Preferred and 13,334 shares issuable
upon
the exercise of warrants.
(8) Includes 120,000 shares issuable upon the conversion of
15,000
shares of Series A Preferred and 30,000 shares issuable
upon
the exercise of warrants.
(9) Includes 1,964,732 shares of Common Stock beneficially
owned by
EPI Corporation, for which the named individuals, as
directors
of EPI Corporation, share voting and investment power. The
individual members of this group together own the majority
of
shares of EPI Corporation. Also includes 60,000 shares
issuable upon the conversion of 7,500 shares of Series A
Preferred, 15,000 shares issuable upon the exercise of
warrants, 5,000 shares issuable upon the exercise of
options,
13,000 shares held as custodian or trustee for children,
and
6,000 shares held by spouses and children for which
beneficial
ownership is disclaimed.
ELECTION OF DIRECTORS
The Corporation's Board of Directors consists of four members,
all
of whose terms expire at the Annual Meeting. The Corporation's
four
present directors, John A. Brenzel, James P. Buren, Richard W.
Smith,
and John P. Snyder, have been nominated for reelection as
directors.
Article 4 of the Corporation's Articles of Incorporation
provides
that the Board of Directors may consist of four to nine directors,
the
exact number to be fixed by the Board of Directors or the
shareholders.
The term of any director elected by the Board to vacant
directorships,
whether created by increasing the number of directors or otherwise,
between meetings of the shareholders to elect directors will expire
at
the next shareholders meeting at which the directors are elected.
If any named nominee should refuse or be unable to serve, the
Board of Directors believes the proxy holders will vote the shares
represented by the enclosed proxy card for such substitute nominee,
if
any, as may be proposed by the Board of Directors. No
circumstances
are known, however, that would prevent any of the nominees from
serving. The four candidates receiving the four highest vote
totals
under cumulative voting will be elected as directors at the Annual
Meeting. Abstentions and broker non-votes will not be counted as
a
vote for any candidate.
BOARD OF DIRECTORS
The following information is furnished as of the Record Date,
with
respect to each person nominated for election as a director at the
1996
Annual Meeting. If elected, all directors will hold office until
the
Corporation's next annual meeting of shareholders to be held in
1997,
and until their successors are elected and qualified.
<TABLE>
<CAPTION>
Name Age Position with the
Corporation
<S> <C> <C>
Richard W. Smith 42 President and Director
James P. Buren 57 Executive Vice President -
Technology and Director
John P. Snyder 57 Secretary and Director
John A. Brenzel 55 Director
</TABLE>
Richard W. Smith has been President and a director of the
Corporation since its inception in September 1984. Mr. Smith
previously served as General Manager of PDW Computer Systems, Inc.,
which markets computer systems.
James P. Buren has been Executive Vice President-Technology
and a
director of the Corporation since its inception in September 1984.
From 1980 to 1984, Mr. Buren was President and sole shareholder of
Buren & Company, Inc., a data processing consulting firm.
John P. Snyder has been a director of the Corporation since
November 1984 and Secretary since 1985. During the past five
years,
Mr. Snyder has served as President and Chairman of EPI Corporation,
which currently operates 20 nursing homes.
John A. Brenzel, a director of the Corporation since November
1984, is a business consultant. From January 1991 until June 1994,
Mr.
Brenzel was President and Chief Executive Officer of Commonwealth
Bank
& Trust Company, Middletown, Kentucky. From 1984 to 1990, he was
Chairman and Chief Executive Officer of Shelby County Trust Bank,
Shelbyville, Kentucky.
Richard W. Smith and James P. Buren are the Corporation's two
executive officers.
Meetings and Committees
The Corporation's Board of Directors has three standing
committees, the Audit Committee, the Executive Compensation
Committee,
and the Stock Option Committee. The members of each of these
committees are John A. Brenzel and John P. Snyder. The Audit
Committee
had one meeting in 1995. This committee reviews the audit plans and
the
results of audits performed by its independent certified public
accountants. The Executive Compensation Committee, which
determines
the compensation of the Corporation's executive officers, and the
Stock
Option Committee, which administers the 1988 Stock Option Plan and
the
1990 Stock Grant Plan, met four times in 1995.
The Corporation's Board of Directors had six meetings during
1995.
All directors attended these meetings.
The Board of Directors considers the nomination of directors
but
does not have a standing committee. The following is the provision
in
the Corporation's Bylaws regarding the nomination of directors by
shareholders:
2.4 Nominations for election to the Board of
Directors may be made by the Board of Directors or by
any shareholder. Any shareholder who intends to
nominate
or to cause to have nominated any candidate for
election
to the Board of Directors (other than a candidate
nominated by the Board of Directors) shall deliver or
mail
written notification of the nomination to the
Secretary of
the Corporation not less than three days after the
giving
of the notice of the meeting nor more than fifty days
before any meeting of shareholders held for the
election
of directors. Any such notification shall contain the
following information to the extent known to the
notifying
shareholder or shareholders:
(a) the name and address of each proposed
nominee;
(b) the principal occupation of each proposed
nominee;
(c) the total number of shares that to the
knowledge
of the notifying shareholder or shareholders will be
voted
for each proposed nominee;
(d) the name and residence address of each
notifying
shareholder; and
(e) the number of shares owned by each notifying
shareholder.
The chairman of any meeting of shareholders held for
the
election of directors may in his discretion disregard
any
votes cast for any nominee whose nomination was not
made
in accordance with these nomination provisions.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation earned by
the
Corporation's two executive officers for each of the last three
fiscal
years.
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Name and Other Annual Compensation
Principal Position Year Salary Bonus Compensation Stock
Options#
<S> <C> <C> <C> <C> <C>
Richard W. Smith, 1995 $103,500 $ 28,437 $6,000 50,000
President 1994 99,000 366 6,000 0
1993 99,000 0 6,000 0
James P. Buren, 1995 $ 93,000 $ 14,788 $6,000 35,000
Executive Vice- 1994 89,000 0 6,000 0
President 1993 89,000 6,335 6,000 0
</TABLE>
The Corporation currently does not have a retirement plan for
its
officers and employees.
Stock Options
The following table sets forth information relating to grants
of stock
options to the Corporation's two executive officers during 1995.
The
option exercise price is $.6875, which was the market price of the
Common
Stock on October 1, 1995, the date of the grant.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
Exercise
Number of Securities % of Total Options/ or
Base
Underlying Options/ SARs Granted to Price
Expiration
Name SARs Granted Employees in 1995 ($/sh)
Date
<S> <C> <C> <C>
<C>
Richard W. Smith 50,000 58.8% $.6875
10/1/2005
James P. Buren 35,000 41.2% $.6875
10/1/2005
</TABLE>
The following table sets forth as of December 31, 1995 the
value of
unexercised options granted to the Corporation's two executive
officers.
In 1995, no options were exercised by either officer under the 1988
Plan.
The average of the closing bid and asked price of the Common Stock
on
December 31, 1995 was $.66 per share.
<TABLE>
<CAPTION>
Number of Shares Subject Value of
to Unexercised Options Unexercised
Name Exercisable Unexercisable In-the-Money
Options
<S> <C> <C> <C>
Richard W. Smith 18,673 50,000 $ 788.54
James P. Buren 15,738 35,000 $ 539.50
</TABLE>
Director Compensation
Under the Corporation's 1988 Stock Option Plan, nonemployee
directors
first elected after May 15, 1989 are awarded options for 5,000
shares of
Common Stock on the May 15th following election to the Board by the
Corporation's shareholders, and each nonemployee director in office
on May
15, 1989 or May 15th of any succeeding year automatically receives
an option
for 1,000 shares of Common Stock. The exercise price for options
granted
to nonemployee directors is the fair market value of the Common
Stock
on the date of grant, and options for approximately one-third of
the
shares become exercisable on May 15th of each of the first three
years
following grant. Options granted to nonemployee directors have a
term
of ten years.
An automatic grant of options to acquire 1,000 shares of
Common
Stock at an exercise price of $.63 per share was granted to each of
Mr.
Brenzel and Mr. Snyder under the 1988 Plan during 1995. No options
were exercised in 1995.
Other than the issuance of stock options, the Corporation did
not
pay its directors for attendance at regularly scheduled board
meetings
in 1995. The Corporation has not determined its director
compensation
policy for 1996.
CERTAIN TRANSACTIONS
In 1992, EPI Corporation loaned $300,000 to the Corporation to
finance
the Corporation's purchase of certain equipment to be installed in
its
computer center. On January 17, 1995, EPI extended an additional
$500,000
in credit under the loan to assist in financing the Corporation's
purchase
of certain assets of Societe Twinsys, SA, a French disaster
recovery
company. The loan bears interest at an annual rate of 1.5% above
the
"prime rate" as published in The Wall Street Journal. The current
interest
rate is 9.75%. The term of the loan is 90 days and has been
renewed for
additional 90-day terms through April 10, 1996. The Corporation
granted a
second mortgage on its real estate to EPI Corporation to secure the
loan.
The preexisting first mortgage is held by a commercial bank. The
Corporation also issued 30,000 shares of Common Stock to EPI
Corporation
when the loan was originally made in 1992, and has issued 2,000
shares of
Common Stock per $100,000 outstanding principal balance of the loan
upon
each renewal of the loan for an additional 90-day term. John P.
Snyder, a
director of the Corporation, is President, a director and the
largest
shareholder of EPI Corporation.
On May 30, 1996, the Board of Directors authorized 100,000
shares of
the Corporation's Preferred Stock be designated as Preferred Stock,
Series
AA ("Series AA Preferred"), with a stated value of $10.00 per
share. The
Series AA provides for an annual dividend of 8%, compared to 11.5%
on the
Series A Preferred. The new Series AA Preferred, like the current
Series A
Preferred, is convertible into 8 shares of Common Stock for 5 years
after
issuance, and the limitations, preferences, and relative rights of
the
Series AA Preferred are otherwise identical to those of the Series
A
Preferred. In addition, the Board has also authorized the issuance
of a
five-year warrant to purchase two shares of Common Stock (a "New
Warrant")
to accompany each share of Series AA Preferred. The initial
exercise price
per share of Common Stock subject to the New Warrant is $1.25 and
increases
by $.25 per year to $2.25 per share during the fifth year.
The Board has authorized the Series AA Preferred and New
Warrants for
possible issuance in connection with a plan to restructure certain
of its
current obligations to certain Common and Series A shareholders,
who
include directors of the Corporation, EPI Corporation and certain
of EPI's
directors. The Corporation has offered to issue one share of
Series AA
Preferred and a New Warrant to its current Series A Preferred
shareholders
and certain shareholders who hold promissory notes of the
Corporation (the
"Shareholder Notes") in lieu of (i) each $10.00 of accrued, unpaid
dividends payable on the Series A Preferred, and (ii) each $10.00
of
principal and interest payable on the Shareholder Notes. As of
June 30,
1996 accrued and unpaid dividends on the Series A Preferred
totalled
$59,756 and principal and interest on the Shareholder Notes
totalled
$234,344. In addition, the Corporation has offered to exchange
each
outstanding share of Series A Preferred and the outstanding
five-year
warrant to purchase two shares of Common Stock that was originally
issued
with each Series A Preferred share (an "Old Warrant") for one share
of
Series AA Preferred and one New Warrant. The Old Warrants and the
conversion rights of the Series A Preferred expire during December
1996 and
January 1997. If these offers are accepted, the Corporation would
reduce
the amount of its obligations to shareholders and the future
dividend rate
payable on Preferred Stock, while shareholders who have provided
necessary
capital to the Corporation in past years will have an additional
period in which to convert their Preferred Stock and exercise their
Warrants.
PROPOSAL TO CHANGE NAME
The Board of Directors is submitting a proposal to amend
Article 1 of
the Corporation's Articles of Incorporation so that it would read
in its
entirety as follows:
1. Name. The Corporation's name shall be Strategia
Corporation.
The Board of Directors believes that the proposed name change
will
help promote the identification of the Corporation as a provider of
a full
range of information and computer-related services beyond the
computer
disaster recovery business.
The proposed name change will be approved if more votes are
cast for
than against the proposal at a shareholder's meeting at which a
majority of
the outstanding shares of Common Stock is represented. Abstentions
will be
counted as shares represented at the Annual Meeting but not as
votes either
for or against the proposed name change. Broker nonvotes will not
be
counted as shares represented at the Annual Meeting or as votes
either for
or against the proposal.
The Board of Directors recommends that the shareholders vote
"FOR" the
proposed name change.
PROPOSAL TO EFFECT REVERSE STOCK SPLIT
The Board of Directors is submitting proposals to amend and
restate
the Corporation's Articles of Incorporation (i) to effect a 1-for-2
reverse
stock split (the "Reverse Stock Split") in which every two of the
Corporation's presently issued and outstanding shares of Common
Stock would
be automatically changed into one share and cash would be paid in
lieu of
any fractional share, and (ii) to increase the number of shares of
Common
Stock the Corporation is authorized to issue from 6 million to 15
million
shares. See "Proposal to Authorize Additional Shares of Common
Stock."
The proposals were adopted by the Board on June 21, 1996 and are
subject
to approval by the Corporation's shareholders.
Reasons for the Reverse Stock Split
The Common Stock is currently traded on the over-the counter
market,
but is not listed on either an exchange or the Nasdaq Stock Market.
The
Board of Directors believes that it would be advantageous for the
Common
Stock to trade on the Nasdaq Stock Market, and preferably the
Nasdaq
National Market, because, in the Board's view, the Nasdaq National
Market
possesses higher visibility and prestige in the financial community
and the
investing public. In addition, listing on the Nasdaq National
Market would
qualify trading in the Common Stock to be exempt from registration
under the
"Blue Sky" securities laws in many states.
The Nasdaq National Market listing standards include a minimum
bid
price per share of $5.00, while the Nasdaq Small-Cap Market listing
standards include a minimum bid price per share of $3.00. As of
June 19,
1996, the closing bid price for the Common Stock was $2.44 per
share, below
the minimum bid price per share requirement for both the Nasdaq
National
Market and Small-Cap Market. The reverse stock split would
decrease the
number of shares outstanding and presumably increase the per share
market
price for the Common Stock. However, there can be no assurance
that the
price of the Common Stock after the reverse split actually will
increase
in an amount proportionate to the decrease in the number of
outstanding
shares or which would meet the minimum bid price requirement for
either the
Nasdaq National Market or Small-Cap Market.
The Corporation is currently considering issuing additional
shares of
the Common Stock in a public offering. As currently contemplated,
the
offering under consideration would involve approximately 1.5
million units
comprised of one post-split share and a warrant to purchase one
post-split
share. It is anticipated that if the proposed reverse Stock Split
is
approved, and a public offering of the size currently under
contemplation
is successfully completed, the Common Stock would meet the criteria
for
listing on the Nasdaq Small-Cap Market, and possibly on the Nasdaq
National
Market. In conjunction with the possible offering, the Corporation
would
apply to list its Common Stock on the Nasdaq Stock Market. While
the
Corporation expects that the price of its Common Stock will rise as
a
consequence of the Reverse Stock Split to a level sufficient to
satisfy the
$3.00 per share minimum bid price for listing on the Nasdaq
Small-Cap
Market, there can be no assurance that the $5.00 per share minimum
bid
price for listing on the Nasdaq National Market can be attained.
Moreover,
there can be no assurance that if attained, either of these price
levels
will be maintained. There can also be no assurance that the
Corporation
will be successful in either completing an offering of its Common
Stock or
in applying for the listing of the Common Stock for trading on
either
Nasdaq Market. The Reverse Stock Split is not contingent upon
completion
on a public offering of the Common Stock.
The Reverse Stock Split
Upon the filing of articles of amendment by the Kentucky
Secretary of
State, the Reverse Stock Split will become effective at a
subsequent time
and date specified in the articles of the amendment as filed (the
"Effective Time"). At the Effective Time, each presently issued
and
outstanding share of Common Stock ("Old Common Stock") will be
automatically converted into one-half share of post-split Common
Stock
("New Common Stock").
The Corporation will not issue fractional shares as a result
of the
Reverse Stock Split and will pay cash in the amount of the fair
value of any
fractional interests. The Board of Directors has determined that
the fair
value of a fractional interest of the New Common Stock will be such
fraction multiplied by two times the average of the bid and asked
prices
reported by the National Quotation Bureau, Inc. at the close of
business
on the five trading days immediately preceding the Effective Time.
Appraisal rights will not be available to dissenting
shareholders
under Kentucky law with respect to the approval of the reverse
split or the
payment of cash for fractional shares resulting therefrom.
Principal Effects of the Proposal
At the Effective Time, all holders of record of the
Corporation's Old
Common Stock, without further action on their part, will hold one
share of
New Common Stock in place of two shares of Old Common Stock held by
them
on that date. All stock certificates outstanding on that date will
be
deemed to represent the appropriate number of shares of New Common
Stock,
as adjusted for the Reverse Stock Split. Based upon the 5,045, 770
shares
of Common Stock outstanding on the Record Date, the Reverse Stock
Split
would decrease the outstanding shares of Common Stock by
approximately 50%,
and thereafter approximately 2,522,500 shares of New Common Stock
would be
outstanding. The reverse stock split will not affect any
stockholder's
proportionate equity interest in the Corporation, subject to the
provisions
for the elimination of fractional shares as described above.
All outstanding stock options and warrants will, by their
terms, be
automatically adjusted to reflect the Reverse Stock Split. The
conversion
terms of the Corporation's outstanding shares of Preferred Stock
will also
be adjusted to reflect the Reverse Stock Split. Except for the
effect of
the elimination of fractional shares, the proposed Reverse Stock
Split
would not otherwise affect any stockholder's proportionate equity
interest
in the Corporation.
Exchange of Certificates
As a result of the Reverse Stock Split, each Old Common Stock
certificate will automatically be deemed for all corporate purposes
after
the Effective Time to represent the number of whole shares of New
Common
Stock equal to one-half of the number of whole shares of Old Common
Stock
represented by the certificate. In addition, if such number of
shares of
Old Common Stock is not evenly divisible by two, such Old Common
Stock
certificate, after the Effective Time, the right to receive cash in
lieu
of a fractional share of New Common Stock.
Shareholders will be requested to exchange their certificates
representing shares of Common Stock held before the Reverse Stock
Split
for new certificates representing shares of Common Stock issued as
a result
of the Reverse Stock Split. Shareholders will be furnished the
necessary
materials and instructions to effect such exchange promptly
following the
Effective Time by the Corporation's transfer agent.
No fractional shares of New Common Stock will be issued to any
stockholder. Accordingly, shareholders of record who would
otherwise be
entitled to receive fractional shares of New Common Stock, will,
upon
surrender of their certificates representing shares of Old Common
Stock,
receive a cash payment in lieu thereof equal to the Fair Value of
such
fractional share. Holders of less than two shares of Old Common
Stock (if
any) will, as a result of the Reverse Stock Split, no longer be
shareholders of the Corporation as of the Effective Time.
Shareholders should not submit any stock certificates until
required
to do so.
Federal Income Tax Consequences
The following description of federal income tax consequences
of the
Reverse Stock Split is based on the Internal Revenue Code of 1986,
as
amended (the "Code"). The discussion is for general information
only and
does not discuss consequences which may apply to special classes of
taxpayers (e.g., non-resident aliens, broker-dealers, or insurance
companies) or persons who receive stock as a compensation for
services.
Shareholders are urged to consult their own tax advisors to
determine the
particular federal, state, local and foreign tax consequences to
them.
Shareholders who own two or more shares of the Old Common
Stock and
whose holdings are evenly divisible by two, and who therefore
receive only
a reduced number of shares of New Common Stock in exchange for
their Old
Common Stock, will not recognize gain or loss as a result of the
Reverse
Stock Split. The holding period of the shares will include a
stockholder's
holding period for the shares exchanged therefor, provided such
shares were
held as capital assets. The total basis of the shares received
will be the
same as the total basis of the shares exchanged therefor.
Shareholders who own fewer than two shares of Old Common Stock
and who
receive the Fair Value in cash in exchange for their shares will
recognize
gain equal to the amount, if any, by which the cash received
exceeds their
adjusted basis in their shares, or loss equal to the amount by
which the
cash received is less than such adjusted basis. Such gain or loss
will be
characterized as capital gain or loss if the shares were held as
capital
assets and the transaction results in a reduction in such
stockholder's
percentage ownership interest in the Corporation (including, for
this
purpose, shares constructively owned). Any such capital gain or
loss will
generally constitute long-term or short-term capital gain or loss
depending
on such stockholder's holding period for his shares of stock.
Shareholders who own more than two shares and who receive both
shares
and cash in lieu of fractional shares will measure the difference
between (i)
the amount of cash received plus the fair market value of the
shares
received and (ii) the adjusted basis of the shares converted. Any
gain
realized will be recognized, but only to the extent of cash
received. No
loss will be recognized. Such gain may be characterized as capital
gain
and long-term or short-term, subject to the factors described in
the
immediately preceding paragraph. The basis of the shares received
will be
the same as the basis of the shares exchanged, increased by the
amount of
any gain recognized and decreased by the amount of any cash
received. The
holding period of the shares will include a stockholder's holding
period
for the shares exchanged therefore, provided that the Old Common
Stock was
held as a capital asset.
Recommendation
Approval of the Reverse Stock Split requires the affirmative
vote of a
majority of the outstanding shares of Common Stock entitled to
vote.
Therefore, abstentions and broker nonvotes will have the effect of
votes
against the Reverse Stock Split.
The Board of Directors recommends that shareholders for "FOR"
the
proposed Reverse Stock Split.
PROPOSAL TO AUTHORIZE ADDITIONAL SHARES OF COMMON STOCK
The Board of Directors is also submitting a proposal (the
"Amendment")
to amend Article 2 of the Corporation's Articles of Incorporation
to
increase the number of authorized shares of Common Stock from
6,000,000 to
15,000,000 shares. As amended, Article 2 would not alter any
provision
governing the issuance of Common Stock and Preferred Stock except
for the
number of shares authorized to be issued.
Proposed Article 2 reads in its entirety as follows:
2. Authorized Capital Stock. The aggregate number
of
shares the Corporation shall have authority to issue shall
be
seventeen million (17,000,000) shares divided into (a) one
million
eight hundred thousand (1,800,000) shares of preferred stock
("Preferred Stock") with such preferences, limitations, and
relative
rights as may be determined by the Board of Directors
pursuant to
Article 3(a) and which may be divided and issued in series;
(b) one
hundred thousand (100,000) shares of Preferred Stock, Series
A
("Series A Preferred"), (c) one hundred thousand (100,000)
shares of
Preferred Stock, Series AA ("Series Aa Preferred"), and (d)
fifteen
million (15,000,000) shares of common stock ("Common
Stock").
The Corporation currently has authorized 6,000,000 shares of
Common
Stock, 1,800,000 shares of "blank check" preferred stock, 100,000
shares of
Series A Preferred, and 100,000 shares of Series AA Preferred. As
of May
17, 1996, there were 5,045,770 shares of Common Stock issued,
34,167 shares
of Series A Preferred, and no share of Series AA Preferred issued
and
outstanding. Of the remaining authorized but unissued shares of
Common
Stock, 494,349 shares are reserved for the following uses: (i)
136,679
shares subject to employee stock options; (ii) 16,000 shares
subject to
director stock options (including automatic awards in 1996); (iii)
68,334
shares issuable upon the exercise of warrants held by Series A
Preferred
shareholders; and (iv) 273,336 shares issuable upon the conversion
of
Series A Preferred. The Board of Directors recently authorized the
Series
AA Preferred for possible issuance in connection with a plan to
restructure
certain of its obligations to the Corporation's Common and Series
A
shareholders. See "Certain Transactions."
The Corporation desires to have the additional authorized
shares of
Common Stock available for issuance as the need arises in
connection with
equity financings, future acquisitions, combinations, stock
distributions,
stock splits, stock dividends, employee benefit plans and other
corporate
purposes.
The additional authorized shares would be issuable by the
Corporation
without further authorization by shareholders on such terms as the
Corporation's Board of Directors may lawfully determine. The
effect of the
authorization and issuance of additional shares of Common Stock
(other than
on a pro rata basis among holders of Common Stock) will be to
dilute the
present voting power of some or all holders of Common Stock. In
some
circumstances, issuance of additional shares of Common Stock could
result
in the dilution of the net income per share, net book value per
share, and
voting rights of Common Stock currently outstanding. Holders of
Common
Stock have no preemptive rights.
The additional authorized shares would increase the number of
shares
that, in addition to the general corporate uses discussed above,
could
potentially be issued to the Corporation's shareholders or others
without
further shareholder approval. The effect of such issuance could be
to
discourage the accumulation of substantial amounts of Common Stock
by an
acquirer as a prelude to an attempted takeover, significant
corporate
restructuring, proxy fight or partial tender offer. Shares of
authorized
but unissued Common Stock or Preferred Stock could (within the
limits
imposed by applicable law) be issued to a holder who might thereby
obtain
sufficient voting power to ensure that any proposal to remove
directors, or
any alteration, amendment or repeal of certain of the Corporation's
Articles, would not receive the required shareholder vote.
Accordingly, the power to issue a greater number of shares, in
addition to the other corporate purposes listed above, could enable
the
Board of Directors to make more difficult the replacement of
incumbent
directors or the accomplishment of certain business combinations
opposed
by the Board. The Amendment also could enhance the Board's ability
to
maintain incumbent management or to discourage or defeat proposals
that,
while not in the shareholders' best interest in the view of the
Board of
Directors, might be viewed as favorable by the holders of the
majority of
the Corporation's shares of Common Stock. The Board of Directors
believes
that the proposed Amendment further strengthens the Corporation's
ability
to provide management stability, enhances long-range corporate
planning,
and could allow the Board more time for evaluation of and response
to any
acquisition proposals that may be made.
The Amendment will be approved if more votes are cast for than
against
the Amendment at a shareholders meeting at which a majority of the
shares
of Common Stock entitled to vote is represented. Abstentions will
be
counted as shares represented at the Annual Meeting but not as
votes
either for or against the Amendment. Broker nonvotes will not be
counted
as shares represented at the Annual Meeting or as votes either for
or
against the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE AMENDMENT.
INFORMATION CONCERNING INDEPENDENT AUDITORS
The firm of Ernst & Young LLP, Certified Public Accountants,
served as
independent auditors for the Corporation in 1995. Representatives
of Ernst
& Young LLP, will be present at the 1996 Annual Meeting and will
have the
opportunity to make a statement, if they desire to do so, and to
respond to
appropriate questions.
GENERAL
Proposals of Shareholders
Any proposals by shareholders to be presented at the 1997
Annual
Meeting must be received by the Secretary of the Corporation prior
to
December 2, 1996, to be included in the Proxy Statement for the
1997 Annual
Meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Corporation's
executive
officers and directors and persons who beneficially own more than
10% of
the Corporation's Common Stock (collectively, "Reporting Persons")
to file
reports of ownership and changes in ownership of the Common Stock
with the
Securities and Exchange Commission. Reporting Persons are required
by SEC
regulations to furnish the Corporation with copies of all Section
16(a)
forms that they file. Based solely on its review of the copies of
such
forms received or written representations from certain Reporting
Persons
that no Form 5s were required, the Corporation believes that during
fiscal
1995, all the Reporting Persons complied with all applicable filing
requirements, except that EPI Corporation, John P. Snyder, Max G.
Baumgardner, J. Ben Cress, Robert H. Loeffler, Grace B. Wilkins,
James E.
Buchart and Henry Schumpf each filed a Form 4 report with respect
to one
transaction by EPI Corporation in May 1995 after the Form 4 was
due. Mr.
Buchart's Form 4 also covered a transaction by him which would not
otherwise have been reportable but for the transactions by EPI
Corporation.
Other Matters
All expenses of preparing, printing, mailing, and delivering
the proxy
card and all materials used in the solicitation of proxy cards will
be
borne by the Corporation. In addition to the use of the mail,
proxy cards
may be solicited by personal interview, telephone, and telegraph by
directors, officers, and other employees of the Corporation, none
of whom
will receive additional compensation for such services. The
Corporation
will also request brokerage houses, custodians, and nominees to
forward
soliciting materials to the beneficial owners of the Corporation's
Common
Stock held of record by them and will pay reasonable expenses of
these
persons for forwarding the soliciting materials.
The officers and directors of the Corporation do not know of
any
matters to be presented for shareholder approval at the meeting
other than
those described in this Proxy Statement. If any other matters
should come
before the meeting, the Board of Directors intends that the persons
named
in the enclosed proxy card, or their substitutes, will vote the
shares
represented by the proxy card in accordance with their best
judgment on
such matters.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following periodic reports filed by the Corporation (File
No.
0-21662) with the Commission pursuant to the Exchange Act are
incorporated
by reference in this Proxy Statement:
1. Annual Report on Form 10-KSB for the fiscal year ended
December
31, 1995, as amended by Form 10-KSB/A filed May 10, 1996;
and
2. Quarterly Report on From 10-QSB for the fiscal year ended
March
31, 1996.
A copy of any of Corporation's reports listed above will be
furnished
without charge to shareholders as of the record date upon written
request
to the Secretary, Dataguard Recovery Services, Inc., 10301 Linn
Station
Road, P. O. Box 37144, Louisville, Kentucky 40233-7144, telephone
(502)
426-3434.
By Order of the Board of
Directors
John P. Snyder, Secretary
Louisville, Kentucky
July 1, 1996
DATAGUARD RECOVERY SERVICES, INC.
Proxy Card for 1996 Annual Meeting of Stockholders
THIS PROXY CARD IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Marcia G. Bishop and Leigh Ann
Dauphinais or either of them (with full power to act alone), as
proxy,
with the President of Dataguard Recovery Services, Inc. (the
"Corporation"), having the power to appoint a proxy's substitute,
to
represent me and to vote all of the shares of the Corporation held
of
record or which I am otherwise entitled to vote, at the close of
business on
May 17, 1996, at the 1996 Annual Meeting of Shareholders to be held
at the
Corporations main offices at 10301 Linn Station Road, Louisville,
Kentucky,
on Friday, July 12, 1996, at 10:00 a.m., local time, and at any
adjournments thereof, with all the powers the undersigned would
possess if
personally present, as indicated herein.
THIS PROXY CARD IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE
VOTED AS
SPECIFIED AND IN ACCORDANCE WITH THE ACCOMPANYING PROXY STATEMENT.
IF NO
INSTRUCTION IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY CARD
WILL BE
VOTED "FOR" THE NOMINEES LISTED IN ITEM 1 OR CUMULATIVELY, IN THE
BOARD OF
DIRECTORS' DISCRETION, AND "FOR" ITEMS 2,3 AND 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ALL OF THE NOMINEES LISTED IN ITEM 1, AND Please mark _____
"FOR" ITEMS 2, 3 AND 4. your votes as
indicated in X
this example. _____
1. ELECTION OF DIRECTORS John A. Brenzel, James P. Buren,
Richard W. Smith, and John P.
Snyder
FOR all nominees WITHHOLD
(except otherwise AUTHORITY (INSTRUCTION: To withhold
authority
indicated on the to vote for to vote for any individual
nominee,
line at right). all nominees. write the nominee's name on the
_____ _____ line below.)
_____ _____
___________________________________
2. NAME CHANGE. Proposal to
change the Corporation's name
to Strategia Corporation.
FOR AGAINST ABSTAIN
_____ _____ _____
_____ _____ _____
3. REVERSE STOCK SPLIT. Proposal
to change each share of Common
Stock currently outstanding
into one-half share of Common
Stock.
FOR AGAINST ABSTAIN
_____ _____ _____
_____ _____ _____
4. INCREASE IN AUTHORIZED SHARES.
Proposal to increase the number of
common shares the Corporation is
authorized to issue from 6,000,000
to 15,000,000 shares.
FOR AGAINST ABSTAIN
_____ _____ _____
_____ _____ _____
5. OTHER BUSINESS. In their discretion,
the proxies are authorized to act
upon such other matters as may
properly be brought before the Annual
Meeting or any adjournment thereof.
Please sign exactly as name appears at
left.
When shares are held by joint tenants,
both
should sign. When 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 other authorized
officer.
If a partnership, please sign in
partnership
name by authorized person.
Dated: ________________________________,
1996
______________________________________________
Signature
______________________________________________
Additional signature, if held jointly
PLEASE MARK, SIGN DATE AND RETURN THIS
PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
