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CE SOFTWARE HOLDINGS, INC.
1801 Industrial Circle
West Des Moines, Iowa 50265
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 27, 1998
The Annual Meeting of the Stockholders of CE Software Holdings, Inc. (the
"Company") will be held at the Des Moines Golf and Country Club, 1600 74TH
Street, West Des Moines, Iowa 50265, on the 27th day of February, 1998, at
1:30 p.m. (CST) for the purpose of considering and acting upon the following:
1) To elect five directors to hold office for the ensuing year and until their
successors are elected and qualified;
2) To approve the stock purchase agreement of restricted stock with an
executive; and
3) To transact such other business as may properly come before the meeting or
any adjournment.
The Company's Annual Report to Stockholders for the fiscal year ending
September 30, 1997, the Proxy Statement, and the Proxy card are all included
with this notice.
Only stockholders of record at the close of business on January 8, 1998, will be
entitled to notice of and to vote at the meeting.
By order of the Board of Directors.
John S. Kirk, Secretary
West Des Moines, Iowa
January 14, 1998
You are cordially invited to come early so that you may meet informally with
Management and the Board nominees. Please contact Mary Barry at (515) 221-1801
for directions and a map. The meeting area will be open from 1:00 p.m. until
the meeting time of 1:30 p.m. Refreshments will be served before the meeting.
A tour of the corporate offices will be available after the meeting.
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN, DATE, AND MAIL THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. IT IS IMPORTANT THAT THE PROXY BE RETURNED REGARDLESS OF THE
NUMBER OF SHARES OWNED.
<PAGE>
<PAGE>
CE SOFTWARE HOLDINGS, INC.
1801 Industrial Circle
West Des Moines, Iowa 50265
____________________________
The approximate mailing date of this Proxy Statement is
January 14, 1998.
____________________________
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
February 27, 1998
____________________________
The accompanying proxy is furnished by CE Software Holdings, Inc. (the
"Company") in connection with the solicitation by the Board of Directors and may
be revoked by the stockholder at any time before it is voted by giving written
notice to the Secretary of the Company or by executing and delivering a proxy
with a later date. The expense of this solicitation is to be borne by the
Company, and the Company will reimburse persons holding stock in their name or
in the names of their nominees for their expenses in sending proxies and proxy
material to the principals.
Stockholders of record at the close of business on January 8, 1998, will be
entitled to vote at the meeting. At that date, the outstanding voting
securities of the Company consisted of 1,095,900 shares of $.10 par value common
stock ("Common Stock"). Each share of Common Stock is entitled to one vote on
each matter submitted at the meeting. The Common Stock will vote together on
all matters contained in this Proxy Statement as one class. A majority of the
outstanding shares will constitute a quorum for the transaction of business at
the Annual Meeting. Abstentions and broker non-votes are counted for purposes
of determining the presence of a quorum. Directors will be elected by a
plurality of the votes cast by the holders of shares entitled to vote at the
Annual Meeting, provided a quorum is present. All other corporate action by
vote of the stockholders shall be authorized by a majority of the votes cast by
the holders of shares entitled to vote on such matters at the Annual Meeting,
provided a quorum is present. Abstentions are counted in tabulations of the
votes cast on proposals presented to the stockholders, whereas broker non-votes
are not counted for purposes of determining whether a proposal has been
approved. Cumulative voting is not allowed.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1997, the number and
percentages of outstanding shares of the Company's Common Stock beneficially
owned by each current director (all of whom are nominated for re-election) and
by all directors and current officers as a group and by any individuals known to
be the beneficial owner of more than five percent of the Company's outstanding
stock.
No. of Shares
Name of Beneficial Owner Beneficially Owned (2) Percent of Class
Directors:
Richard A. Skeie (1) 134,806 12.2%
John S. Kirk (1) 73,020 6.6%
Christian F Gurney 22,180 2.0%
Sheldon T. Fleck 24,899 2.3%
David J. Lundquist 5,399 0.5%
All Directors & Executive
Officers as a Group
(6 persons) 261,324 23.6%
Others with More Than 5%
Ownership:
Don Brown (1) 149,020 13.5%
1) The address of Mr. Skeie, Mr. Brown, and Mr. Kirk is c/o CE Software
Holdings, Inc., P.O. Box 65580, West Des Moines, IA 50265.
2) Includes an aggregate of 9,658 shares, underlying stock options, exercisable
within 60 days, from the date of this table (12/31/97). These options are
held as follows: Mr. Gurney, 1,360; Mr. Fleck, 4,899; and Mr. Lundquist,
3,399. See "Stock Option Plans" for further information concerning
outstanding options.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than ten percent stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
October 1, 1996, through September 30, 1997, all filing requirements applicable
to its officers, directors, and greater than ten percent beneficial owners were
complied with, except for the following. A report reflecting the purchase of
20,500 shares and the grant of 25,000 options in July 1997, from Christian F.
Gurney, Vice President and Director of the Company, and President of CE
Software, Inc., was inadvertently filed late.
NOMINEES FOR ELECTION AS DIRECTORS
All directors are elected for a one-year term and hold office until the next
annual meeting of the stockholders and the election and qualification of their
successors. The officers of the Company are elected at the Board's first
meeting following the annual meeting of the stockholders. Officers hold
office until their successors are chosen and qualified or until their deaths,
resignations, or removal.
<PAGE>
The following persons have been nominated to serve as directors for the ensuing
year.
Richard A. Skeie, 44, has been a Director and President of the Company since
February 1990. He was President of its operating subsidiary from its formation
through April 1993 and from June 1996 through July 1997. His exposure to
computer programming at the University of Iowa and Drake University led him to
contract programming in the mid '70s in northern California where he viewed the
birth of the retail computer store concept. He returned to Iowa in April 1978,
and opened what is now Iowa's oldest computer store, Computer Emporium. Mr.
Skeie served as President of that company until 1985. CE Software began as the
programming arm of that computer store. In 1985, Mr. Skeie became President of
the newly independent CE Software, Inc. He has been a speaker at software
industry conferences and was the 1989 president of the Macintosh Special
Interest Group Council for the Software Publishers Association.
John S. Kirk, 52, has been Secretary, Treasurer and a Director of the Company
since February 1990. He is a 1968 graduate of Drake University, with a B.S.
degree in Business Administration. He was employed by Bendix Corporation until
1973 in its corporate offices and as a plant controller, specializing in the
establishment of computerized accounting and cost control systems. He was
employed as a CPA for Miller & Associates and for KPMG Peat Marwick LLP from
1973 to 1978 when he began his own accounting firm specializing in small
business taxation. He became involved in Computer Emporium and CE Software in
1981. Mr. Kirk was a Director of East Des Moines National Bank, Des
Moines, Iowa, until its sale in 1996. He is involved in several family
businesses.
Christian F. Gurney, 33, has been Vice President and Director of the Company,
and President and Chief Executive Officer of the Company's operating subsidiary,
CE Software, Inc., since July 1997. From November 1994 until his promotion in
July 1997 he served as Vice President of Product Lines for CE Software, Inc.
Mr. Gurney is responsible for strategic direction and most notably the Company's
recent move to make the QuickMail products more Internet centric. He joined CE
Software in 1991 as Manager of Technical Support. He later served as Director
of Technical Services and then as Executive Director of Product Lines. Prior to
joining CE Software, Mr. Gurney was the MIS Manager for Catalog Media
Corporation where he managed multi-platform software development, as well as
engineering, support and training staff, programs, and strategies. Mr. Gurney
also has held programming positions at the University of Wisconsin and has done
extensive consulting work in the database programming arena. Mr. Gurney holds a
B.A. in Anthropology from the University of Wisconsin.
Sheldon T. Fleck, 47, has been a Director of the Company since its founding in
1988 and was its President until the merger with CE Software, Inc., in February
1990. Mr. Fleck has been President and a Director of Gaming Corporation of
America from 1991 until November 1995. From 1990 to June 1992, Mr. Fleck served
as President of Anubis II Corp., a blind pool formed by him in 1990 which
became Casino America, Inc., in June 1992. Mr. Fleck has been engaged in real
estate and other business and corporate finance activities. Mr. Fleck was a
practicing attorney from 1977 to 1982. Mr. Fleck is a certified public
accountant and previously had been employed by Ernst & Young, as an auditor, and
by KPMG Peat Marwick LLP, as a tax specialist. Mr. Fleck received a B.B.A.
degree from the University of Iowa with a major in accounting in 1972, a law
degree from Drake University School of Law in 1975 and a Master of Law degree
specializing in taxation from the New York University School of Law in 1977.
David J. Lundquist, 55, has been a Director of the Company since May 1993. He
has been Managing Partner of Lundquist, Schiltz and Associates since January
1996. From 1991 to 1996, Mr. Lundquist was Vice Chairman and Chief Financial
Officer of New Heritage Associates, a company engaged in the acquisition and
operation of cable television systems. Mr. Lundquist was Executive Vice
President - Finance of Heritage Communications, Inc., from 1980 to 1990. Prior
to joining Heritage, Mr. Lundquist was the Vice President - Finance for a
computer services company in Omaha. Mr. Lundquist is chairman of
the board of Da-Lite Screen Company, a manufacturer of movie screens and other
meeting-room products. He serves on the board of directors of Genesis Systems
Group, Ltd., a growth company in industrial robotics software and hardware
systems; the Brenton National Bank of Des Moines;
<PAGE>
Opticon Medical, a medical device company; and MARKETLINK, a telemarketing
company. Mr. Lundquist attended Harvard University and graduated from the in
economics in 1964. He received his M.B.A. degree from Stanford University
Graduate School of Business with a concentration in finance in 1966.
Attendance at Board Committee Meetings
During the fiscal year ended September 30, 1997, the Board of Directors held
nine meetings. All directors attended at least 75 percent of all meetings of
the Board and of their respective Committees.
The Stock Option Committee for the 1990 Plan and the 1992 Plan, currently
consisting of Mr. Fleck and Mr. Lundquist, has the authority to administer the
Plans for employees. This Committee met four times during fiscal 1997.
The Stock Option Committee for the Nonemployee Directors Plan, currently
consisting of Mr. Skeie and Mr. Kirk, has the authority to administer the Plan
for nonemployee Directors. This Committee met once during fiscal 1997.
The Audit Committee, consisting of Mr. Kirk, Mr. Fleck and Mr. Lundquist,
monitors the Company's financial records, represents the Company in dealings
with the Auditing Firm and recommends to the Board the selection of an auditor.
The Audit Committee met once during the fiscal year ended September 30, 1997.
The Compensation Committee, consisting of Mr. Kirk, Mr. Fleck and Mr. Lundquist,
determines executive compensation. The Compensation Committee met once during
the fiscal year ended September 30, 1997.
The Company does not have a nominating committee.
Directors' Fees
The Company pays a $1,500 per month fee to each of its outside directors,
Mr. Fleck, and Mr. Lundquist. In addition, a one-time special consulting fee of
$1,500 was paid to Mr. Lundquist in November 1996.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
Richard A. Skeie, John S. Kirk, Christian F. Gurney, Sheldon T. Fleck, and David
J. Lundquist are all current directors and each has been nominated for
re-election. As nominees, each has a brief biography, describing any officer
positions held, under the section titled "Nominees for Election as Directors"
within this proxy statement. Other executive officers and significant employees
not previously disclosed include:
Daniel E. McCann, 39, is the Chief Financial Officer of the Company, and the
Secretary, Treasurer, and Chief Financial Officer of its operating subsidiary CE
Software, Inc. Mr. McCann joined the Company in September 1994 as Controller
and was promoted to his current position in October 1997. Prior to joining CE
Software, Inc., he had been with Norwest Mortgage since 1992 as Manager of
Financial Reporting and Manager of Treasury Services. Prior to this he spent
six years with Commtron Corporation, most recently as Director of Finance. He
began his career with Deloitte & Touche in 1982. Mr. McCann received a
Bachelor's Degree from the University of Northern Iowa in 1982, his Master's
Degree in Business Administration from Drake University in 1993, and received
his Certified Public Accountant certificate in 1982.
<PAGE>
Donald M. Brown, 38, was a Director of the Company from February 1990 to October
1993, and was Vice President of the Company from February 1990 to May 1997, and
has been associated with CE Software since its inception. Mr. Brown is no
longer an executive officer but is employed by the Company as a software
engineer and is identified here due to his significant contributions to the
Company. Mr. Brown has been known as an early creator of adventure games for
the Apple II, including the classic "Wonderful World of Eamon" while he was
still in college at Drake University. After joining CE Software, he enhanced
the game and it became a seven-part adventure series known as "SwordThrust."
Mr. Brown has been programming the Macintosh since its release in 1984. His
original product was "Desk Accessory Mover," a shareware predecessor to Apple's
Font/DA Mover. Since then, he has written a wide variety of utilities including
MockPackage, CalendarMaker, Widgets, LaserStatus, QuicKeys and portions of
QuickMail LAN, WebArranger and QuickMail Pro.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of the
Chief Executive Officer of the Company and the two other executive officers of
the Company whose total salary and bonus for the year ended September 30, 1997,
exceeded $100,000, for services in all capacities to the Company and its
subsidiaries during such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-
Fiscal Term
Year Compen- All Other
Name and Ended sation Compen-
Principal Position Sept 30, Salary Bonus (1) Options sation(2)
<S> <C> <C> <C> <C> <C>
Richard A. Skeie, 1997 $51,000 $144 6,600 $1,596
CEO, President 1996 $24,000 ----- ----- $749
and Director 1995 $24,000 ----- ----- $749
Christian F. Gurney, 1997 $108,720 $144 40,000 $3,396
President and CFO 1996 $90,336 $9,708 1,000 $3,109
of CE Software, Inc. 1995 $79,670 $11,343 3,000 $2,826
Curtis W. Lack, former 1997 $104,850 $144 15,000 $3,276
Secretary, Treasurer and 1996 $105,188 ----- 3,400 $3,282
CFO of CE Software, Inc. 1995 $100,800 ----- 600 $2,985
</TABLE>
1) On November 14, 1996, the Company awarded each of its employees 20 shares
of the Company's Common Stock. The fiscal year 1997 bonuses are the value
of the stock at the time of the gift.
2) The Company has in effect a 401(k) profit sharing plan and life insurance
plan that covers substantially all of its employees, including executive
officers. The profit sharing component of the plan is funded by employer
contributions at a uniform percentage of salary as set annually by the
Board of Directors. No profit sharing contributions were made during the
three-year period ended September 30, 1997. The 401(k) component of the
plan allows qualified employees to contribute between 1% and 12% of their
compensation. The plan calls for employer matching of contributions as
determined by the Board of Directors. Contributions under the plan vest
33 1/3 percent for each year of credited service. The Company also
provides life insurance coverage at one times the employee's annual base
salary.
<PAGE>
STOCK OPTION PLANS
The Company has three stock option plans in place as described below.
1990 Stock Option Plan
Under the Company's 1990 Stock Option Plan (the "1990 Plan"), options to acquire
up to 80,000 shares of Common Stock may be granted to employees and employee
directors. To the extent that existing options are canceled without exercise,
such as at termination of employment, such options become available for grant in
the future.
The 1990 Plan is administered by the Stock Option Committee, which may determine
whether the particular options are incentive stock options or nonqualified stock
options, and may also determine eligible participants and the number of shares
subject to each grant of options.
The exercise price of the options is 100 percent of fair market value of the
shares on the date of the grant (110 percent for incentive stock options granted
to a person holding more than 10 percent of the voting power of the Company's
stock). The options are subject to a vesting schedule. One-third of the
options become exercisable one year after the date of the grant, and the
remainder pro rata over the following 24 months. Options are exercisable for a
period of ten years from the grant date (five years in the case of incentive
stock options granted to employees who hold more than ten percent of the voting
power of the Company's stock). Upon termination of employment, all options that
have not yet become exercisable shall be forfeited; vested options may remain
exercisable for a specified time period, the length of which is dependent upon
the reason for the employment termination. Upon exercise, the exercise price
may be paid in cash or in Common Stock of the Company.
1992 Stock Option Plan
Under the Company's 1992 Stock Option Plan (the "1992 Plan"), options to acquire
up to 100,000 shares of Common Stock may be granted in the form of nonqualified
stock options to employees, including officers and directors who are employees.
If any award terminates, expires, or lapses, the related stock shall again
become available for grant.
The 1992 Plan is administered by the Stock Option Committee. It has the
authority (i) to select employees to whom awards are granted; (ii) to determine
the size of awards; (iii) to determine the terms and conditions of such awards
in a manner consistent with the 1992 Plan; (iv) to interpret the 1992 Plan and
any instrument or agreement entered into under the 1992 Plan; (v) to establish
such rules and regulations relating to the administration of the 1992 Plan as
it deems appropriate; and (vi) to make all other determinations which may be
necessary or advisable for the administration of the 1992 Plan.
The purchase price per share under any option shall be 100 percent of the fair
market value of a share of Company stock on the date of grant. The term of each
option shall be fixed by the Committee, provided that no option shall have a
term extending beyond ten years from the date the option is granted. Options
shall be subject to such terms and conditions, and shall be exercisable at such
time or times, as determined by the Committee, provided, however, that no option
shall become exercisable any earlier than 12 months after the date of grant.
Generally, it is expected that options will become exercisable one-third after
12 months, and the remainder pro rata over the following 24 months. Options
shall be exercised by payment of the purchase price in cash, in previously
acquired shares of Company stock, or in some combination thereof. Upon
termination of employment, all options that have not yet become exercisable
shall be forfeited; vested options may remain exercisable for a specified
time period, the length of which is dependent upon the reason for the employment
termination.
<PAGE>
Nonemployee Directors Stock Option Plan
Under the Nonemployee Directors Plan, options to acquire up to 20,000 shares of
Common Stock may be granted in the form of nonqualified stock options to outside
directors. If any award terminates, expires, or lapses, the related stock shall
again become available for grant.
The Nonemployee Directors Plan provides for the automatic grant of nonqualified
stock options to outside directors each year on the date of the annual meeting
of stockholders. Any nonemployee Director initially elected to the Board by the
stockholders shall on that date receive options to purchase 2,400 shares of
Common Stock. Any nonemployee Director reelected to the Board by the
Stockholders shall on that date receive options to purchase 500 shares of Common
Stock. Persons appointed by the remainder of the Board to fill a vacancy on the
Board will not receive such options until such time as they are elected or
reelected by the stockholders.
The Nonemployee Directors Plan Committee has the authority, subject to the
nondiscretionary features of the Plan, (i) to interpret the Plan and any
instrument or agreement entered into under the Plan; (ii) to establish such
rules and regulations relating to the administration of the Plan as it deems
appropriate; and (iii) to make all other determinations which may be necessary
or advisable for the administration of the Plan.
The purchase price per share under any option shall be 100 percent of the fair
market value of a share of Company stock on the date of grant. The term of
each option shall be ten years from the date the option is granted. No option
shall become exercisable any earlier than 12 months after the date of grant.
Options will become exercisable one-third after 12 months, and the remainder pro
rata over the following 24 months. Options shall be exercised by payment of the
purchase price in cash, in previously acquired shares of Company stock, or in
some combination thereof. Upon termination of a director's term of office, all
options that have not yet become exercisable shall be forfeited; vested options
may remain exercisable for a specified time period, the length of which is
dependent upon the reason for the termination of the director's term.
Common Elements of the Plans
Nontransferrable
No award or shares subject to an award may be assigned, transferred, pledged, or
otherwise encumbered by a participant, other than by will or by the laws of
descent and distribution, or pursuant to a qualified domestic relations order.
Each award may be exercised during the participant's lifetime only by the
participant.
Change in Control
In order to protect all of the participants' rights in the event of a Change in
Control (as defined below) of the Company, the options granted under the plans
provide for the immediate vesting of all outstanding options upon such event.
A Change in Control of the Company shall be deemed to have occurred if any one
or more of the following conditions are fulfilled: (i) any person or entity
acquires 50 percent or more of the voting securities of the Company; (ii) during
any fiscal year, a majority of the members of the Board of Directors are
replaced; or (iii) the stockholders approve a plan of complete liquidation, an
agreement for sale or disposition of substantially all of the Company's assets,
or a materially dilutive merger or consolidation of the Company. However, in no
event shall a Change in Control be deemed to occur, with respect to a
participant, if that participant is a material equity participant of the
purchasing group that consummates a Change in Control.
<PAGE>
Non-dilution
In the event of a change in the corporate structure that affects the shares
(e.g., a merger, re-capitalization, stock split, stock dividend, etc.), the
Committee shall make adjustments to the number of shares available to the Plans
and to the number and/or price of outstanding awards to prevent dilution or
enlargement of rights. This Non-dilution provision was exercised on June 30,
1997, to take into consideration the impact of the one for five reverse stock
split executed on that date. All stock option numbers and prices within this
proxy statement have accordingly been retroactively restated.
______________________________________________________________________________
At December 31, 1997, options to purchase an aggregate of 138,699 shares were
held by 51 persons, at exercise prices of from $2.44 to $46.25 per share.
The following table provides certain information concerning grants of options to
purchase the Company's Common Stock made during the fiscal year ended September
30, 1997, to the persons named in the Summary Compensation Table:
Options Granted in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
% of Total
Options Granted
Options to Employees Base Price Expiration
Name Granted in Fiscal Year Per Share Date
<S> <C> <C> <C> <C>
Richard A. Skeie (1) 2,000 1.1% $7.19 11/2006
4,600 2.6% $5.00 03/2007
Christian F. Gurney 3,000 1.7% $7.19 11/2006
12,000 6.6% $5.00 03/2007
25,000 13.8% $2.44 07/2007
Curtis W. Lack (1) 1,000 0.6% $7.19 11/2006
(1) 14,000 7.7% $5.00 03/2007
</TABLE>
(1) These options were issued in fiscal 1997, but were subsequently
canceled.
The following table provides certain information concerning exercises of options
to purchase the Company's Common Stock in the fiscal year ended
September 30, 1997, and unexercised options held as of September 30, 1997, by
the persons named in the Summary Compensation Table:
Aggregate Option Exercises In Last Fiscal Year (1)
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In the Money
Options at 9/30/97 Options at 9/30/97
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Richard A. Skeie 0 4,600 0 0
Christian F. Gurney 361 39,639 0 0
Curtis W. Lack 361 14,639 0 0
</TABLE>
(1) There were no options exercised during fiscal 1997.
<PAGE>
APPROVAL OF STOCK PURCHASE AGREEMENT WITH CHRISTIAN F. GURNEY
The terms of the Company's listing agreement with the National Association of
Securities Dealers Automated Quotation National Market System (NASDAQ/NMS)
require that an arrangement whereby an officer or director may purchase stock
from the Company must be approved by the stockholders, except for warrants or
rights generally available to all stockholders, or pursuant to broadly based
plans including other employees. This approval provision generally does not
apply to a person not previously employed by the Company when the arrangement
is an essential inducement to the individual's entering into the employment
relationship, or when the number of securities at issue does not exceed the
lessor of one percent of the shares outstanding, or 25,000 shares.
Christian F. Gurney was hired by CE Software, Inc. in 1991 as Manager of
Technical Support and was subsequently promoted to Director of Technical
Services and then Executive Director of Product Lines and then Vice President
of Product Lines. In July 1997, Mr. Gurney was named President of CE Software,
Inc. As part of the negotiations for Mr. Gurney's employment agreement as
President, the Company agreed to sell Mr. Gurney, subject to stockholders'
approval, 20,500 shares of restricted stock at a price of $2.4375 per share,
which was the closing market price at the time. Mr. Gurney has paid in cash
the par value of the shares, $.10 per share, and has signed a nonrecourse
promissory note for the remaining price of the stock, $49,968.75. The note is
due upon demand, and interest is payable quarterly. In addition, 60% of any
cash dividends or other cash distributions paid on the shares, is to be applied
to the note balance. The shares have been issued and are held by the Company
until the note is paid in full.
The employment agreement also calls for a base salary of $150,000 per year,
reviewable annually, and the grant of options pursuant to existing Employee
Stock Option Plans to purchase 25,000 shares of Common Stock of the Company at
$2.4375, the market price at the date the options were granted.
The agreement was entered into consistent with the philosophy of the Board of
Directors encouraging significant stock ownership by senior executives to create
additional personal incentives for good performance.
The sale of restricted stock was made specifically subject to shareholder
approval, which requires the vote of a majority of the shares represented at the
meeting. Should the arrangement not be approved by the stockholders, the
Company would repurchase the stock at cost.
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the votes present or represented by proxy
and notified to vote at the Annual Meeting of Stockholders, at which a quorum
representing a majority of all outstanding shares of Common Stock of the Company
is present and voting, either in person or by proxy, is required for approval of
the executive's stock purchase agreement. Abstentions and broker nonvotes will
each be counted as present for purposes of determining the presence of a quorum.
Abstentions will have the same effect as a negative note. Broker nonvotes, on
the other hand, will have no effect on the outcome of the vote.
The Board of Directors believes that the executive's stock purchase agreement,
and the issuance of shares thereunder, is in the best interest of the Company
and the Stockholders for the reasons stated above. THEREFORE, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE 'FOR' THE APPROVAL OF THE PROPOSAL TO
ADOPT THE EXECUTIVE'S STOCK PURCHASE AGREEMENT.
<PAGE>
INDEPENDENT PUBLIC ACCOUTANTS
The stockholders are not being asked to approve the selection of the Company's
independent public accountants for fiscal 1998, only because such approval is no
longer required. The selection will be made by the Audit Committee of the Board
of Directors, who at this time do not foresee a reason to change.
The audit of the Company for the year ended September 30, 1997, was conducted by
KPMG Peat Marwick LLP. A representative from such firm is expected to be
present at the meeting to answer appropriate questions, but does not intend to
make a statement.
MANNER IN WHICH PROXIES WILL BE VOTED
The Company proposes to vote the proxies for the election of each of the above
named five nominees to the Board, each to hold office until the next annual
meeting and until his successor is elected and has qualified. In the event that
any nominee is not available to serve as a director at the time of the election
(which the Company has no reason to anticipate), proxies may be voted for such
substitute nominees as the Company may propose.
The Company proposes to vote "for" approval of the stock purchase agreement with
Christian F. Gurney.
The Board knows of no other matter to be presented at the meeting. However, if
any other matter properly comes before the meeting, the persons named in the
proxy form enclosed will vote in accordance with their judgment upon such
matters. Stockholders who do not expect to attend in person are urged to
execute and return the enclosed proxy card promptly.
PROPOSALS OF STOCKHOLDERS
The Company's next Annual Meeting is expected to be held during the second
quarter (January, February, March) of fiscal 1999 at a time and date to be
determined by the Board of Directors. Proposals of stockholders to be presented
at that meeting must be received at the Company's executive offices no later
than September 30, 1998, for inclusion in the proxy statement.
GENERAL
The Company will provide to any stockholder, without charge, upon written
request to the Secretary of the Company, a copy of the Company's annual report
on Form 10-KSB for fiscal year 1997, without exhibits.
John S. Kirk
Secretary
West Des Moines, Iowa
January 8, 1998
