THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
U.S. PAWN, INC.
TO BE HELD JUNE 20, 1997
The undersigned hereby appoints Melvin Wedgle as the lawful agent and Proxy
of the undersigned (with all the powers the undersigned would possess if
personally present, including full power of substitution), and hereby authorizes
him to represent and to vote, as designated below, all the shares of common
stock of U.S. Pawn, Inc. held of record by the undersigned on April 29, 1997, at
the Annual Meeting of Shareholders to held June 20, 1997, or any adjournment or
postponement thereof.
1. ELECTION OF DIRECTORS
FOR BOTH NOMINEES listed below WITHHOLD AUTHORITY to vote
(except as marked to the for both nominees listed below _____
contrary below) ______
Melvin Wedgle ______ Charles C. Van Gundy _____
INSTRUCTIONS: To withhold authority to vote for either nominee, mark the
space after the nominee's name as listed above.
2. In his discretion, the Proxy is authorized to vote upon any matters which may
properly come before the Annual Meeting, or any adjournment or postponement
thereof.
It is understood that when properly executed, this proxy will be voted in
the manner directed herein by the undersigned stockholder. WHERE NO CHOICE IS
SPECIFIED BY THE STOCKHOLDER THE PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS PROPOSED IN ITEM (1) ABOVE.
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and confirms all that said Proxy may do by virtue hereof.
Please sign exactly as name appears below. 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:
--------------------------- ---------------------------------------
Signature
PLEASE MARK, SIGN, DATE
AND RETURN THE PROXY
CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. ---------------------------------------
Signature, if held jointly
PLEASE CHECK THIS BOX IF YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OF
SHAREHOLDERS. [ ]
<PAGE>
U.S. PAWN, INC.
7215 Lowell Boulevard
Westminster, Colorado 80030
PROXY STATEMENT AND
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1997
To the shareholders of U.S. Pawn, Inc.:
The annual meeting ("Annual Meeting") of the shareholders of U.S. Pawn,
Inc. (the "Company") will be held at the Company's executive offices, 7215
Lowell Boulevard, Westminster, Colorado 80030, at 9:00 A.M. on June 20, 1997, or
at any adjournment or postponement thereof, for the following purposes:
(1) To elect two (2) directors of the Company;
(2) To transact such other business as may properly come before the Annual
Meeting.
Details relating to the above matters are set forth in the attached Proxy
Statement. All shareholders of record of the Company as of the close of business
on April 29, 1997 will be entitled to notice of and to vote at the Annual
Meeting or at any adjournment or postponement thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IF YOU
DO NOT PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY. A REPLY CARD IS ENCLOSED FOR YOUR
CONVENIENCE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON
IF YOU ATTEND THE ANNUAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
Charles C. Van Gundy
Secretary
April 30, 1997
<PAGE>
PROXY STATEMENT
U.S. Pawn, Inc.
7215 Lowell Boulevard
Westminster, Colorado 80030
Telephone: (303) 657-3550
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of U.S. Pawn, Inc. (the "Company"), a Colorado
corporation, of no par value common stock ("common stock" or "shares") to be
voted at the Annual Meeting of Shareholders of the Company ("Annual Meeting") to
be held at 9:00 A.M. on June 20, 1997, or at any adjournment or postponement
thereof. The Company anticipates that this Proxy Statement and the accompanying
form of proxy will be first mailed or given to all shareholders of the Company
on or about April 30, 1997. The shares represented by all proxies that are
properly executed and submitted will be voted at the meeting in accordance with
the instructions indicated thereon. Unless otherwise directed, votes will be
cast for the election of the two nominees for directors hereinafter named. The
holders of a majority of the shares represented at the Annual Meeting in person
or by proxy will be required to elect the nominees for directors hereinafter
named and to approve all other proposed matters.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by delivering written notice of such revocation to the Company, by
substituting a new proxy executed at a later date, or by requesting, in person,
at the Annual Meeting, that the proxy be returned.
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the materials enclosed herewith and all costs of soliciting
proxies will be paid by the Company. In addition to the solicitation by mail,
proxies may be solicited by officers and regular employees of the Company by
telephone, telegraph or personal interview. Such persons will receive no
compensation for their services other than their regular salaries. Arrangements
will also be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of the
shares held of record by such persons, and the Company may reimburse such
persons for reasonable out of pocket expenses incurred by them in so doing.
VOTING SHARES AND PRINCIPAL SHAREHOLDERS
The close of business on April 29, 1997, has been fixed by the Board of
Directors of the Company as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. At such
date, there were issued 3,668,446 shares of the Company's common stock, each
share entitling the holder to one vote on each matter which may come before the
<PAGE>
Annual Meeting. Cumulative voting is not permitted. A majority of the issued and
outstanding shares of the Company's common stock entitled to vote, represented
at the Annual Meeting in person or by proxy, constitutes a quorum at any
shareholders' meeting.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the holdings of common stock, by each person
who, as of the date hereof, holds of record or is known by the Company to hold
beneficially or of record, more that 5% of the Company's common stock, by each
director, or director-nominee and by all directors and officers as a group.
Shareholdings
Name and Address Number Percent
- ---------------- ------ -------
Melvin Wedgle(1)(2)(5) 607,388 15.1%
7215 Lowell Blvd.
Westminster, CO 80030
Gary A. Agron(1)(5) 56,750 1.4%
5445 DTC Parkway, Suite 520
Englewood, CO 80111
Daniel B. Rudden(5) 8,000 * %
1 Sedgwick Drive
Englewood, CO 80111
Charles C. Van Gundy(3)(5)(6) 31,750 * %
7215 Lowell Blvd.
Westminster, CO 80030
Stanley M. Edelstein(4)(5) 20,500 * %
4343 South 96th Street
Omaha, NE 68127
Larry M. Snyder(5)(6) 20,500 * %
3300 East 1st Avenue
Denver, CO 80206
Theresa R. O'Neill(7) 306,250 7.5%
2381 Juniper Court
Golden, CO 80401
All officers and
directors as a
group(six in number)(1)(2)(3)(4)(5)(6) 744,888 18.5%
* Less than 1%
2
<PAGE>
(1) Includes currently exercisable stock options to purchase 6,250 shares as to
Mr. Wedgle and 12,500 shares as to Mr. Agron all at $2.00 per share until
October 23, 2000.
(2) Includes currently exercisable stock options to purchase 220,000 shares
at$1.81 per share until March 25, 2004.
(3) Includes currently exercisable stock options to purchase 1,250 shares at
$5.12 per share until January 20, 1998, and 10,000 shares at $2.06 per
share until March 25, 2005.
(4) Includes currently exercisable stock options to purchase 12,500 shares at
$4.36 per share until October 2, 1996.
(5) Includes currently exercisable stock options to purchase 8,000 shares at
$1.70 per share until December 28, 2005.
(6) Includes currently exercisable stock options to purchase 12,500 shares at
$4.38 per share until January 16, 2007.
(7) Includes currently exercisable stock options to purchase 6,250 shares at
$2.00 per share until October 23, 2000 and 25,000 shares at $.625 until
September 30, 1998.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
The Company's executive officers and directors are required to file under
the Securities Exchange Act of 1934 reports of ownership and changes of
ownership in securities of the Company with the Securities and Exchange
Commission. Based solely upon copies of such reports and information provided to
the Company by individual executive officers and directors, the Company believes
that during the year ended December 31, 1996 all executive officers and
directors complied with such reporting requirements except for Mr. Rudden, who
did not timely file one statement of changes in ownership on Form 4.
ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect two (2) Class III
directors of the Company. Each director will hold office for a term of three (3)
years and thereafter until his successor is elected and has qualified.
Cumulative voting is not permitted in the election of directors. In the absence
of instructions to the contrary, the person named in the accompanying proxy will
vote in favor of both persons named below as the Company's nominees for
directors of the Company. Both nominees are presently members of the Board of
Directors. Each nominee has consented to be named herein and to serve if
elected.
It is not anticipated that either nominee will become unable or unwilling
to accept nomination or election, but if such should occur, the person named in
the proxy intends to vote for the election in his stead of such person as the
Board of Directors of the Company may recommend.
3
<PAGE>
The following table sets forth certain information as to each nominee's
age, positions with the Company, and the year when the nominee first became an
officer or director of the Company.
Officer or
Director
Name Age Office Since
- ---- --- ------ -----
Melvin Wedgle 44 Chief Executive 1980
Officer, President
and Director
Charles C. Van Gundy 44 Chief Financial 1994
Officer, Vice President,
Secretary and
Director
Melvin Wedgle has been Chief Executive Officer and President of the Company
since its inception in 1980. Mr. Wedgle's grandfather and father operated
pawnshops in Denver, Colorado for many years and Mr. Wedgle was employed in the
family pawnshop business from 1970 until 1980. He devotes substantially all of
his time to the Company's affairs.
Charles C. Van Gundy has been employed by the Company since January 1992,
first as its Assistant Controller, subsequently as its Controller and Vice
President of Accounting, and currently as its Vice President and Chief Financial
Officer. Mr. Van Gundy earned his Bachelor of Science degree in accounting and
finance from Metropolitan State College of Denver in 1979, and subsequently
studied law at the University of San Diego School of Law until 1981. From 1982
to 1992 he served as an accounting officer for various mutual fund, high
technology and economic redevelopment organizations. He devotes substantially
all of his time to the Company's affairs.
4
<PAGE>
DIRECTORS NOT STANDING FOR ELECTION
The members of the Board of Directors who are not standing for election at
the Annual Meeting are set forth below:
Officer or
Director
Name Age Office Since
- ---- --- ------ -----
Stanley M. Edelstein(1) 43 Director 1991
Larry M. Snyder(1) 45 Director 1994
Gary A. Agron(2) 52 Director 1989
Daniel B. Rudden(2) 49 Director 1989
- -----------
(1) Class I directors
(2) Class II directors
Stanley M. Edelstein has been employed by The Pacesetter Corporation
("Pacesetter") since 1978 and is currently its Executive Vice President and
Secretary. Pacesetter manufactures and sells home improvement products. Mr.
Edelstein is also responsible for customer service and legal affairs. Mr.
Edelstein holds a Bachelor's degree from the University of Colorado (1975) and a
Master's degree the University of Nebraska (1977). From 1967 to 1975, Mr.
Edelstein was employed in the pawn shop business in Denver, Colorado. He devotes
such time as is necessary to the Company's affairs.
Larry M. Snyder earned his Bachelor of Arts degree from the University of
Colorado in 1973 and his Juris Doctorate degree from the University of San
Francisco School of Law in 1976. Since 1977 he has been engaged in the private
practice of law in Denver, Colorado, and has been general counsel to the Company
since 1988. He devotes such time as is necessary to the Company's affairs.
Gary A. Agron earned his Bachelor of Arts degree from the University of
Colorado in 1966 and his Juris Doctorate degree from the University of Colorado
School of Law in 1969. Since 1969, he has been engaged in the private practice
of law in Denver, Colorado, and since 1974, has specialized exclusively in
securities law. Mr. Agron has acted as the Company's securities counsel since
1988. He is a director of Xedar Corporation, a publicly-held high technology
research and development firm and Meadow Valley Corporation, a publicly-held
heavy construction contractor. He devotes such time as is necessary to the
Company's affairs.
5
<PAGE>
Daniel B. Rudden owned and operated 50 Colortyme Rent to Own stores from
1979 until December 1989 when he sold 45 of the stores to Colortyme, Inc., a
national franchisor of rent to own stores. Mr. Rudden acted as Colortyme's
president from December 1989 to December 1991. Since December 1991, he owned and
operated seven Colortyme Rent to Own stores in the Denver, Colorado metropolitan
area. In March 1996, he sold all his Colortyme Rent to Own stores to RTO, Inc.
d/b/a Home Choice, a publicly held operator of rent to own stores. Mr. Rudden is
currently a consultant to RTO, Inc. He devotes such time as is necessary to the
Company's affairs.
Remuneration
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Fiscal Annual Other Annual Long-Term Compensation
Name and Position Year Salary Compensation Stock Options(#)
- ----------------- ---- ------ ------------ ----------------
<S> <C> <C> <C> <C>
Melvin Wedgle 12/31/96 $157,000 -0- 200,000
President and
Chief Executive Officer
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
% of Value at Assumed Annual
Total Exercise Rates of Stock Price
Granted Price Appreciation for Option
Options in Fiscal per Share Expiration Term(4)
Name Granted(1) Year ($/Sh)(2) Date(3) 5% ($) 10%($)
- ---- ---------- ---- --------- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Melvin 200,000 87% $1.81 3/25/04 $227,660 $576,935
Wedgle 8,000 3% $1.70 12/28/05 $ 8,553 $ 21,675
</TABLE>
(1) On March 25, 1995, the shareholders approved an option to purchase 600,000
shares of common stock exercisable in equal installments each year commencing
from March 24, 1994 only if certain profitability criteria are met as reported
at September 30, 1994,1995 and December 31, 1996 and to expire in March 2004. As
of the date of this Proxy Statement, 275,000 of the 600,000 options approved for
Mr. Wedgle have expired due to the failure to meet such profitability criteria
for the fiscal years ended September 30, 1994 and 1995. On June 22, 1996, the
shareholders approved the 1995 Directors' Stock Option Plan under which each
director may be granted options to purchase up to 15,000 shares of common stock
exercisable in equal installments each year commencing from September 30, 1995
only if certain profitability criteria are net as reported at September 30, 1995
and December 31, 1996 and 1997. As of the date of this Proxy Statement, 2,000 of
the options approved for each director have expired due to the failure to meet
certain profitability criteria for the fiscal year ended September 30, 1995.
(2) All options were granted at market value at the date of grant.
(3) Mr. Wedgle's options have a ten-year term, subject to termination between 30
days to one year following termination of employment in certain events and is
exercisable only if certain profitability criteria are met.
(4) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are dependent
on the future performance of the common stock, overall stock conditions, as well
as the option holders' continued employment through the vesting period. The
amounts reflected in this table may not necessarily be achieved.
6
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Value of Unexercised
Number of Unexercised Options In-the-Money Options at
Shares Acquired At Fiscal Year End Fiscal Year End(2)
Name on Exercise(#) Value Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------------- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Melvin
Wedgle 119,000 $283,119 251,500 -0- $735,760 -0-
</TABLE>
(1) Represents the difference, if any, between the market value of the Company's
common stock at exercise and the exercise price of the options.
(2) Represents the difference, if any, between the market value of the Company's
common stock on December 31, 1996 and the exercise price of the options.
On December 14, 1988, the Company's shareholders approved an Incentive
Stock Option Plan (the "Plan") for the benefit of the Company's employees. The
Company believes that the Plan provides an appropriate incentive to certain
employees to maintain a continued interest in the operation and future of the
Company. The terms of the Plan provide that the Company is authorized to grant
options to purchase shares of common stock to selected employees including
officers and directors upon the unanimous consent of all of the Company's
directors. The Company will select the optionees and determine the terms and
conditions of the stock option grant. However, the purchase price to be paid by
optionees for the option shares will not be less than the fair market value of
the option shares on the date of grant. Employees owning more than 10% of the
outstanding shares of any class of securities of the Company must be granted
options at a purchase price of at least 110% of the fair market value of the
shares on the date of the grant. No option can be exercised for a period of
twelve months following the date of grant, and the employee must exercise
options during employment or within 30 days of termination of employment. The
Company has registered the shares underlying the options under the Securities
Act of 1933, as amended, so that the shares will be free trading when issued.
The options are granted for a term of six years, and during such term, may be
exercised 33.3% after one year and an additional 33.3% during each of the
succeeding two years. A total of 125,000 shares of the Company's authorized but
unissued common stock had been reserved for possible issuance pursuant to the
Plan. On March 25, 1995, the Company's Board of Directors increased the number
of shares of the Company's authorized but unissued common stock reserved for
possible issuance pursuant to the Plan to 275,000 shares. On July 25, 1995, the
Company registered the increase in shares reserved for possible issuance
pursuant to the Plan. To date, options totaling 316,165 shares have been issued
under the Plan, exercisable at $0.68 to $5.12 per share, options totaling 96,457
shares have been exercised at $0.68 to $2.56 per share and options totaling
99,000 have expired, leaving options totaling 120,708 shares outstanding.
7
<PAGE>
On February 6, 1990, the Company granted to Fred A. Baker options to
purchase 50,000 shares (the "Baker Option") at $0.50 per share at any time until
February 6, 1995. During 1995, the Company extended the Baker Option until
August 1, 1996. On July 25, 1995, the Company registered the Baker Option. At
November 30, 1995, the Baker Option was fully exercised.
On September 30, 1990, the Company agreed to grant Messrs. Wedgle and Baker
options to purchase up to 50,000 shares each (the "Wedgle Option" and "Baker
Option") at $0.625 per share at any time until September 30, 1995, if and only
if the Company realized net after tax income of at least $250,000 for the fiscal
year ended September 30, 1991. Such net income was realized by the Company and
the Wedgle and Baker Options were issued in December 1991. During 1995, the
Company extended the Baker Option until August 1, 1996 and extended the Wedgle
Option until September 30, 1998. On July 25, 1995, the Company registered the
Wedgle and Baker Options. At February 1, 1996, the Baker Option was fully
exercised. As of the date of this Proxy Statement, 25,000 shares of the Wedgle
Option have been exercised.
On March 25, 1995, the shareholders approved a proposal authorizing the
Company to grant Mr. Wedgle options to purchase up to 200,000 shares of the
Company's common stock each year for three years at $1.81 (the "Executive
Options") until March 24, 2004. The Executive Options were further limited based
upon the Company achieving certain levels of after tax net income for the years
ended or ending September 30, 1994, 1995 and December 31, 1996. No Executive
Option was granted for the year ended September 30, 1994 due to the Company's
failure to meet the minimum after tax net income requirement for that year. On
September 30, 1995, the Company granted an Executive Option for 125,000 shares
for the year ended September 30, 1995 based on the Company achieving a certain
level above the minimum after tax net income requirement for that year. On
December 31, 1996, the Company issued an Executive Option for 200,000 shares for
the year ended December 31, 1996 based on the Company achieving a certain level
above the minimum after tax net income requirement for that year. As of the date
of this Proxy Statement, options for 105,000 shares have been exercised and
options for 220,000 shares are outstanding.
On July 21, 1995, the Company established the 1995 Directors' Stock Option
Plan (the "Directors' Plan"). The Directors' Plan was approved by the
shareholders on June 22, 1996. The Company believes that the Directors' Plan
will enhance stockholder investment by attracting, retaining and motivating
directors of the Company and to encourage stock ownership by such directors by
providing a means to acquire a proprietary interest in the Company's success.
Under the Directors' Plan, each director (six in total) may be granted options
to purchase up to 15,000 shares of the Company's common stock in equal
installments over a three year period beginning September 30, 1995 at prices not
less than the fair market value of the option shares on the date of grant and
exercisable for no more than ten years from date of grant. Any director owning
more than 10% of the total combined voting power of all classes of stock of the
8
<PAGE>
Company must be granted options at a purchase price of a least 110% of the fair
value of the option shares on the date of grant.
Each installment granted to each director may be further limited based upon
the Company achieving the following percentage of after tax net income to total
revenues for the three fiscal years ending September 30, 1995 and December 31,
1996 and 1997:
After Tax Options Issuable for Years Ending
Net income % 9-30-95 12-31-96 12-31-97
------------ ------- -------- --------
2.9 or lower % -0- -0- -0-
3.0 to 5.9% 3,000 3,000 3,000
6.0 to 6.9% 4,000 4,000 4,000
7.0 or higher % 5,000 5,000 5,000
Based upon the audited financial statements of the Company for the years
ended September 30, 1995 and December 31, 1996, the percentage of after tax net
income to total revenues was 5.6% and 7.5%, respectively. For the years ended
September 30, 1995 and December 31, 1996, each director as been issued options
to purchase a total of 8,000 shares of the Company's Common Stock at $1.70 per
share exercisable any time until December 28, 2005.
No retirement, pension, profit sharing or other similar program has been
adopted by the Company. Except as stated above, no warrants or options have been
granted to any officer, director or other employee of the Company. In the
future, the Company may offer stock bonus and profit sharing or pension plans to
the employees or executive officers of the Company in such amounts and upon such
conditions as the Board of Directors may determine in its sole discretion.
CERTAIN TRANSACTIONS
The Company leases one of its pawnshop locations from Melvin Wedgle, its
President, at a monthly rental of $6,600. The Company believes the rental rate
is as fair to the Company as rates which could have been obtained in arm's
length transactions with unaffiliated third parties.
The Company was indebted at December 31, 1996 in the aggregate amount of
approximately $838,000 for loans advanced to the Company by shareholders,
employees and by members of Melvin Wedgle's family. These loans are unsecured,
bear interest between 10% and 15% per annum, were used for working capital and
are due on dates ranging from February 1998 to December 1999. The terms of the
loans are believed to be as fair as terms which could have been obtained in
arm's length transactions with unaffiliated third parties.
9
<PAGE>
As of December 31, 1996, Melvin Wedgle owed the Company $74,000 for cash
loans advanced to him during the course of his employment with the Company. Mr.
Wedgle's loan is evidenced by a promissory note which is due September 30, 1997
bears interest of 9% per annum and is collateralized by 100,000 common shares in
the Company.
The Company has adopted a policy that no additional loans will be advanced
to executive officers or directors in the Company except upon the affirmative
vote of a majority of the Company's disinterested directors.
Messrs. Agron and Snyder, directors of the Company, perform legal services
on the Company's behalf. During Fiscal 1996, Messrs. Agron and Snyder received
legal fees from the Company totaling $21,936 and $16,124, respectively.
On January 27, 1996, the Company adopted the 1996 Consultant's Stock Option
Plan (the "Consultant Plan") under which 500,000 shares of the Company's common
stock have been reserved for issuance at prices not less than 75% of the fair
market value of the option stock on the date of grant. On February 7, 1996, the
Company registered all shares reserved under the Consultant Plan. The Company
believes that the Consultant Plan will enhance stockholder investment by
attracting, retaining and motivating consultants and employees of the Company
and encouraging stock ownership by such consultants and employees by providing a
means to acquire a proprietary interest in the Company's success. On February 7,
1996, the Company entered into an agreement with Philip J. Davis (the "Davis
Agreement") to provide investment banking, investor relations and
acquisition/merger related consulting services to the Company. Pursuant to the
Davis Agreement and under the Consultant's Plan, the Company granted Mr. Davis
an option to purchase 150,000 shares at $1.50 per share, 50,000 shares at $2.50
per share and 50,000 shares at $3.50 per share until February 7, 1997. As of the
date of this Proxy Statement, all options granted under the Davis Agreement have
been exercised. On April 24, 1996, the Company entered into an agreement with
James A. Favia (the "Favia Agreement") to provide investment banking consulting
services to the Company. Pursuant to the Favia Agreement and under the
Consultant's Plan, the Company granted Mr. Favia an option to purchase 50,000
shares of the Company's common stock at $2.1875 per share until April 24, 1997.
As of the date of this Proxy Statement, all options granted under the Favia
Agreement have been exercised.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
AJ. Robbins, P.C., Certified Public Accountants and Consultants, conducted
the audit of the Company's financial statements for the year ended September 30,
1995, the three month transition period ended December 31, 1995 and the year
ended December 31, 1996. This firm has performed no accounting services for the
Company other than the audit of its financial statements. It is the Company's
understanding that AJ. Robbins, P.C. is obligated to maintain audit independence
as prescribed by the accounting profession and certain requirements of the
Securities and Exchange Commission. As a result, the directors of the Company do
10
<PAGE>
not specifically approve, in advance, non-audit services provided by the firm,
nor do they consider the effect, if any, of such services on audit independence.
PROPOSALS OF SHAREHOLDERS FOR PRESENTATION
AT NEXT ANNUAL MEETING OF SHAREHOLDERS
Any shareholder of record of the Company who desires to submit a proper
proposal for inclusion in the proxy materials relating to the next annual
meeting of shareholders must do so in writing and it must be received at the
Company's principal executive offices prior to the Company's fiscal year end.
The proponent must be a record or beneficial shareholder entitled to vote at the
next annual meeting of shareholders on the proposal and must continue to own the
securities through the date on which the meeting is held.
OTHER BUSINESS
The management of the Company is not aware of any other matters which are
to be presented to the Annual Meeting, nor has it been advised that other
persons will present any such matters. However, if other matters properly come
before the meeting, the individual named in the accompanying proxy shall vote on
such matters in accordance with his best judgement.
The above notice and Proxy Statement are sent by order of the Board of
Directors.
Charles C. Van Gundy
Secretary
April 30, 1997
11
