INFONOW CORPORATION
1875 Lawrence Street, Suite 1100
Denver, CO 80202
Dear Stockholder,
You are cordially invited to attend the 1999 Annual Meeting of Stockholders of
InfoNow Corporation (the "Company") to be held at 3:00 p.m. MDT on Friday April
23, 1999 at InfoNow's corporate offices, 1875 Lawrence Street, Suite 1100,
Denver, Colorado.
At this year's Annual Meeting, the agenda includes the annual election of
directors, and a proposal to ratify the appointment of our independent auditing
firm. The Board of Directors recommends that you vote FOR the election of the
slate of nominees for director, and FOR ratification of the appointment of the
independent auditors. Please refer to the enclosed Proxy Statement for detailed
information on each of these proposals.
Whether you plan to attend the Annual Meeting or not, it is important that you
promptly complete, sign, date and return the enclosed proxy card, or vote via
the Internet or by telephone in accordance with the instructions set forth on
the card. This will ensure a quorum at the Annual Meeting and avoid additional
expense to the Company for further solicitation.
Sincerely,
/s/ Michael W. Johnson
Michael W. Johnson
Chairman of the Board and Chief Executive Officer
March 22, 1999
<PAGE>
INFONOW CORPORATION
1875 Lawrence Street, Suite 1100
Denver, CO 80202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of InfoNow
Corporation, a Delaware corporation (the "InfoNow" or the "Company"), will be
held on April 23, 1999 at InfoNow's corporate offices, 1875 Lawrence Street,
Suite 1100, Denver, Colorado at 3:00 p.m. MDT. The items of business, all of
which are more completely set forth in the accompanying proxy statement, are:
1. Election of five (5) directors to serve until the next Annual Meeting of
Stockholders, or until their successors are elected and qualified.
2. Ratification of the appointment of auditors.
3. Such other matters as may properly come before the meeting.
The Board of Directors has fixed the close of business on March 10, 1999 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments thereof. All stockholders are
cordially invited to attend the Annual Meeting but only stockholders of record
are entitled to notice of and to vote at the Annual Meeting. A list of such
stockholders will be available for inspection at InfoNow during ordinary
business hours for the ten-day period prior to the Annual Meeting.
In order for the proposals listed above to be approved, each proposal must be
approved by the affirmative vote of holders of a majority of shares, voting as a
group.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Kevin D. Andrew
Kevin D. Andrew
Secretary of the Company
March 22, 1999
WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING OR NOT, IT IS IMPORTANT THAT YOU
PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD, OR VOTE VIA
THE INTERNET OR BY TELEPHONE IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH ON
THE CARD. THIS WILL ENSURE A QUORUM AT THE ANNUAL MEETING AND AVOID ADDITONAL
EXPENSE TO THE COMPANY FOR FURTHER SOLICITATION. YOUR PROXY MAY BE REVOKED AT
ANY TIME BEFORE IT IS VOTED.
<PAGE>
INFONOW CORPORATION
1875 Lawrence Street, Suite 1100
Denver, CO 80202
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April 23,1999
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of InfoNow Corporation (the "Board"), a
Delaware corporation ("InfoNow" or the "Company"), for use at the Annual Meeting
of Stockholders of the Company to be held on April 23, 1999 at 3:00 p.m. MDT, at
the Company's offices, 1875 Lawrence Street, Suite 1100, Denver, Colorado, and
at any and all adjournments of such meeting.
If the enclosed Proxy Card is properly executed and returned in time to be
voted at the meeting, the shares of Common Stock represented will be voted in
accordance with the instructions contained therein. Executed proxies that
contain no instructions will be voted FOR each of the proposals described
herein. Abstentions (proxies not returned) and broker non-votes will be treated
as Stockholders absent from the Annual Meeting. The proxies will be tabulated
and votes counted by American Securities Transfer & Trust, Inc. It is
anticipated that this Proxy Statement and the accompanying Proxy Card will be
mailed to the Company's Stockholders on or about March 22, 1999.
Stockholders who execute proxies for the Annual Meeting may revoke their
proxies at any time prior to their exercise by delivering written notice of
revocation to the Company, by delivering a duly executed Proxy Card bearing a
later date, or by attending the meeting and voting in person.
The costs of the meeting, including the costs of preparing and mailing the
Proxy Statement and Proxy, will be borne by the Company. Additionally, the
Company may use the services of its Directors, officers and employees to solicit
proxies, personally or by telephone, but at no additional salary or
compensation. The Company will also request banks, brokers, and others who hold
shares of common stock of the Company in nominee names to distribute proxy
soliciting materials to beneficial owners, and will reimburse such banks and
brokers for reasonable out-of-pocket expenses which they may incur in so doing.
OUTSTANDING CAPITAL STOCK
The record date for Stockholders entitled to vote at the Annual Meeting is
March 10, 1999. At the close of business on that day, there were 7,009,243
shares of no par value common stock (the "Common Stock") of the Company
outstanding and entitled to vote at the meeting.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding Common Stock is necessary to constitute a quorum for each matter
voted upon at the Annual Meeting. In deciding all questions, a holder of Common
Stock is entitled to one vote, in person or by proxy, for each share held in his
or her name on the record date. Abstentions and broker non-votes, if any, will
not be included in vote totals and, as such, will have no effect on any
proposal.
3
<PAGE>
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the Stockholder otherwise specifies in the
proxy, will be voted (i) FOR the election of each of the five nominees named
herein for the office of director, (ii) FOR the selection of Hein + Associates
LLP, independent public accountants, as the auditors of the Company for the
fiscal year ending December 31, 1999, and (iii) at the discretion of the proxy
holders, on any other matter that may properly come before the meeting or any
adjournment thereof.
Where Stockholders have appropriately specified how their proxies are to be
voted, they will be voted accordingly. If any other matter of business is
brought before the meeting, the proxy holders may vote the proxies at their
discretion. The directors do not know of any such other matter or business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes set forth as of March 10, 1999, the number of
shares of the Company's outstanding Common Stock beneficially owned by (i) the
Company's Chief Executive Officer and by the highest compensated executive
officers who were serving as executive officers at the end of the 1998 fiscal
year whose individual total cash compensation for the 1998 fiscal year exceeded
$100,000 (the "Named Executive Officers"), (ii) each director and nominee for
director of the Company, (iii) all executive officers and directors of the
Company as a group and (iv) each person or group of persons known by the Company
to beneficially own more than five percent (5%) of the outstanding Common Stock.
All information is taken from or based upon ownership filings made by such
persons with the Commission or upon information provided by such persons to the
Company.
<TABLE>
<CAPTION>
Shares
Amount and Beneficially Owned
Nature of Which May be
Name and Address of Beneficial Percent of Class Acquired Within
Beneficial Owner Ownership Beneficially Owned(2) 60 Days(4)
- ----------------- --------- ------------------ ----------
<S> <C> <C> <C>
Officers and Directors(1):
Donald E. Cohen 555,621 7.9% 66,287
Michael W. Johnson 999,236 13.0% 685,800
W. Brad Browning 245,139 3.4% 178,472
Duane Wentworth 16,667 - 16,667
Michael D. Basch 42,731 - 34,306
Stuart Fullinwider 415,000 5.9% 5,000
Kevin D. Andrew 158,780 2.2% 141,002
Donald Kark 133,390 1.9% 133,390
All Officers and Directors 2,566,564 31.0% 1,260,924
as a Group (8 persons)
Principal Stockholders:
Dieter Heidrich 350,597 5.0% -
1113 Spruce Street
Boulder, CO 80302
Robertson Stephens Orphan Fund 492,814 7.0% -
555 California Street, Suite 2600
San Francisco, CA 94104
Joren Peterson 400,000 5.7% -
P.O. Box 3750
Telluride, CO 81435
4
<PAGE>
Robertson Stephens Investment Mngt. 1,030,858(5) 14.7% -
555 California Street, Suite 2600
San Francisco, CA 94104
Nahum Rand 373,244(3) 5.3% 37,000
2200 Sacramento #105
San Francisco, CA 94115
- -------------------------------
</TABLE>
(1) Unless otherwise indicated, address of record is 1875 Lawrence St., Ste.
1100, Denver, CO 80202.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission, and generally includes voting power and/or investment power
with respect to securities. Shares of Common Stock subject to options or
warrants which are currently exercisable or exercisable within 60 days are
deemed outstanding for computing the percentage of the person holding such
options or warrants but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, the
Company understands that the persons named in the table above have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(3) Includes 125,000 shares of common stock held by the Rand Family Trust. Mr.
Rand and his wife Jane Rand are the trustees of the trust and have sole
voting and disposition power of the Trust.
(4) Represents the number of common shares set forth in column 1 that can be
obtained through the exercise of warrants or options that are currently
exercisable or that are exercisable within the next 60 days from March 10,
1999.
(5) Includes 492,814 shares beneficially owned by Robertson Stephens Orphan
Fund.
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees
Pursuant to the Bylaws of the Company, the authorized number of directors
of the Company has been set at five. The Board has nominated five persons to be
directors and five directors are to be elected at the meeting. Each nominee will
be elected to hold office until the next annual meeting of Stockholders or until
his successor is elected and qualified. Proxy holders will not be able to vote
the proxies held by them for more than five persons. If a quorum is present, the
five nominees having the highest number of votes cast in favor of their election
will be elected. Should any nominee become unable or unwilling to accept
nomination or election, the proxy holders may vote the proxies for the election,
in his stead, of any other person the Board may recommend. Each nominee has
expressed his intention to serve the entire term for which election is sought.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH
NOMINEE FOR THE BOARD OF DIRECTORS.
The Board of Directors' nominees for the office of director are as follows:
Michael W. Johnson, 37, has been Chief Executive Officer and President and
a director of the Company since October 1995. In September of 1998 Mr. Johnson
was elected Chairman of the Board. From 1990 to October 1995, Mr. Johnson was a
consultant with McKinsey & Company, an international management consulting firm,
where he served leading technology companies in the United States and Europe on
issues of growth, strategy, customer service, and mergers and acquisitions. Mr.
Johnson received a Bachelor of Science degree in Applied and Engineering Physics
and a Bachelor of Arts degree in English from Cornell University, a Diplome in
French Literature from Universite de Paris, and a Masters of Business
Administration degree from Stanford University Graduate School of Business.
Donald E. Cohen, 44, has been a director and Vice Chairman of the Company
since May 1995 and served as President and Chief Executive Officer of the
Company from May 1995 until October 1995. Mr. Cohen is President and Chief
Executive Officer of Cimarron, an interactive media company he founded in 1978.
5
<PAGE>
Cimarron was a subsidiary of the Company from May 1995 to December 1997. Under
Mr. Cohen's leadership, Cimarron has won several awards including an EMMY,
TELLY, DAF Alfie, and B/PAA Gold Spike. Mr. Cohen earned a Bachelor of Arts
degree in Mass Communications from the University of Denver. Mr. Cohen is a
member of the Audit and Compensation Committees.
Duane Wentworth, 68, has been a director since July 1997 and has served as
a management consultant to various businesses since 1992. Mr. Wentworth has over
41 years of business experience, including serving in management positions with
IBM and Control Data. During his tenure at Control Data, from 1976 to 1982, he
was responsible for the formation of Professional Services division, which
provided world-wide consulting services for Control Data. Mr. Wentworth has also
served as chairman and owner of Data Decisions, Inc., a supplier of specialized
data processing services. Mr. Wentworth is a member of the Audit and
Compensation Committees.
Michael Basch, 60, has been a director since February 1998 and was elected
Vice President of Marketing and Sales for the Company in September 1998. Prior
to joining the Company Mr. Basch founded and served as President of Service
Impact since 1989 which was established to advance the art, science and practice
of leadership. Mr. Basch was Senior Vice President and a founding officer of
Federal Express Corporation, for the first ten years of its existence, from 1972
to 1982. During his tenure at Federal Express, Mr. Basch established and led a
number of key functions, including Sales, Customer Service, Personnel, Corporate
Development, the Federal Express Southern Division, PartsBank, and Hub
Distribution Services. He also conceived of the Federal Express tracking and
tracing system and designed, built and managed the $100 million Superhub, which
remains the largest system of its kind in the world. Mr. Basch is a member of
the Audit Committee and served on the Compensation Committee until September
1998.
Stuart Fullinwider, 41, has been a director since September 1998. Mr.
Fullinwider has been a private investor since 1997. Mr. Fullinwider brings more
than 10 years experience in strategic and tactical planning, technology,
accounting and developing infrastructure for high growth companies. From 1992
until 1997, Mr. Fullinwider was with Boston Chicken as Senior Vice President and
developed a support services group which provided accounting and administrative
services to Boston Chicken, Einstein/Noah's, their franchisees and 1800
restaurants. Mr. Fullinwider was Director of Strategic Technologies with
Blockbuster Entertainment Corp from 1989 to 1992, and served as Audit Manager in
his 10 years with Arthur Andersen, LLC.
Messrs. Johnson, Cohen, Wentworth, Basch and Fullinwider currently serve on
the Company's Board. Directors are elected annually to serve until the next
annual meeting of stockholders or until their successors are duly elected.
Committees of the Board of Directors
The Board has established an Audit Committee and a Compensation Committee.
The Audit Committee is responsible for (i) reviewing the scope of, and the fees
for, the annual audit, (ii) reviewing with the independent auditors the
corporate accounting practices and policies, (iii) reviewing with the
independent auditors their final report, and (iv) being available to the
independent auditors during the year for consultation purposes. The Audit
Committee met twice in the fiscal year ended December 31, 1998. The Compensation
Committee determines the compensation of the officers of the Company and
performs other similar functions. The Compensation Committee met one time in the
fiscal year ended December 31, 1998. The Board may, from time to time, establish
certain other committees to facilitate the management of the Company.
Directors are reimbursed for expenses incurred for attending any Board or
committee meeting. There is no family relationship between any current or
prospective director of the Company and any other current or prospective
executive officer of the Company except for Michael Basch, who is the
father-in-law of Michael Johnson, the Chief Executive Officer and Chairman of
the Board of the Company.
During the fiscal year ended December 31, 1998, there were nine meetings of
the Board of Directors. All directors attended at least 75% of the meetings of
the Board and committees of the Board on which they were members.
6
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of the
Company's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
of the Company. Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to the Company during the fiscal year ended December 31, 1998
and Forms 5 and amendments thereto furnished to the Company with respect to the
fiscal year ended December 31, 1998, to the best of the Company's knowledge, the
Company's directors, officers and holders of more than 10% of its Common Stock
complied with all Section 16(a) filing requirements, except for Michael Basch
who purchased 7,731 additional shares in 1998.
Executive Officers
The following persons are the executive officers of the Company:
Name Position(s)
- ---- -----------
Michael W. Johnson Chief Executive Officer and President
Kevin D. Andrew Vice President and Chief Financial Officer, Secretary
and Treasurer
W. Brad Browning Vice President and General Manager
Donald Kark Vice President, Engineering and Technology
Michael D. Basch Vice President, Marketing and Sales
Information concerning the business experience of Mr. Johnson and Mr. Basch
is provided under the section above entitled "Election of Directors."
Kevin D. Andrew, 40, was elected to his current positions in March 1996.
Prior to joining InfoNow, Mr. Andrew was President of Andrew Consulting, LLC, a
financial management services firm and served as a consultant to the Company
from October 1995 to March 1996. From 1992 to 1995 he served as Chief Financial
Officer of Air Methods Corporation, a publicly held provider of emergency air
ambulance services, and from 1983 to 1991 served in various senior financial
management positions at CRSS, Inc., a diversified services company listed on the
New York Stock Exchange. During his tenure at CRSS, Mr. Andrew served as chief
accountant, director of general accounting, director of internal audit and Vice
President and controller of Natec Resources, Inc., a 50%-owed affiliate of CRSS,
Inc. Prior to 1983, Mr. Andrew was with KPMG Peat Marwick. Mr. Andrew has held
CPA certificates in both Colorado and Texas. He earned his Bachelor of Science
degree in Business from Arizona State University.
W. Brad Browning, 34, has been a Vice President and General Manager of the
Company since January 1996. From 1990 to 1995, Mr. Browning was a consultant
with McKinsey & Company, an international management consulting firm. Mr.
Browning joined McKinsey & Company in June 1990 after obtaining an Masters of
Business Administration degree from Harvard University Graduate School of
Business. While with McKinsey, he led technology and consumer clients on major
marketing and sales initiatives focused on driving growth and significant profit
improvement. He earned his Bachelor of Business Administration degree in
Marketing from the University of Georgia.
Donald Kark, 35, was elected to his position as Vice President, Engineering
and Technology in May 1997. Prior to joining InfoNow in December 1996, Mr. Kark
was with Welkin Associates, Ltd., from June 1995 to December 1996, where he was
a consultant and advisor to high technology clients on advanced technology
information systems. From June 1985 to June 1995, Mr. Kark worked with TRW,
Inc., as a chief engineer, project manager, hardware engineer and software
developer. He holds a B.S.C.E.E. from Purdue University and has won numerous
awards for his professional accomplishments, including TRW's most prestigious
engineering award, the TRW Chairman's Award for Innovation.
All executive officers are appointed by the Board of Directors and serve at
the Board's discretion.
7
<PAGE>
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the cash compensation
earned for the fiscal years ended December 31, 1998, 1997, and 1996 by the
Company's Chief Executive Officer and by the highest compensated executive
officers who were serving as executive officers at the end of the 1998 fiscal
year whose individual total cash compensation for the 1998 fiscal year exceeded
$100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Name and Principal Options/ All Other
Position Year Salary Bonus SARS (#s) Compensation
-------- ---- ------ ----- --------- ------------
<S> <C> <C> <C> <C> <C>
Michael W. Johnson 1998 110,000 - 106,774 -
Chief Executive Officer, 1997 110,000 - 325,250 -
President, Chairman of 1996 101,778(1) - 105,705 -
The Board
W. Brad Browning 1998 110,000 7,500 70,000 -
Vice President, General 1997 110,000 1,500 95,000 -
Manager 1996 103,918 - 85,000 15,000(4)
Kevin D. Andrew 1998 88,000 17,500 - -
- -
CFO/Vice President 1997 88,000 1,500 82,000 -
Secretary and Treasurer 1996 83,480(2) - 41,724 -
Donald Kark(3) 1998 91,667 30,000 - -
- -
Vice President 1997 87,321 1,500 96,000 -
Engineering/Technology 1996 3,750 - 75,000 -
Michael D. Basch(5) 1998 38,000 - 195,000 17,648(6)
Vice President, Marketing and Sales
</TABLE>
- --------------------
(1) The Company accrued and deferred $72,611 of Mr. Johnson's 1996 salary, of
which $58,000 was satisfied by way of issuance on September 13, 1996 of
51,555 shares of Common Stock at a price of $1.125 per share.
(2) Compensation in 1996 includes $10,690 for consulting services prior to Mr.
Andrew joining the Company in March 1996. The Company accrued and deferred
$40,290 of Mr. Andrew's 1996 salary of which $20,000 was satisfied by way
of issuance on September 13, 1996 of 17,778 shares of Common Stock at a
price of $1.125 per share, the balance of which was repaid in full in 1997.
(3) Mr. Kark joined the Company in December 1996.
(4) Represents reimbursement of relocation expenses.
(5) Mr. Basch joined the Company in October 1998.
(6) Represents $8,648 reimbursement of relocation expenses and $9,000 in
accrued directors fees.
8
<PAGE>
The following table presents information concerning individual grants of
options to purchase Common Stock made during the fiscal year ended December 31,
1998, to each of the Named Executive Officers. No options/SARs were issued to
Mr. Andrew or Mr. Kark during the year ended December 31, 1998.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Number of Percent of Total
Securities Options/SARs Exercise
Underlying Granted to or
Options/SARs Employees Base Price
Name Granted (#) in Fiscal Year ($/Sh.) Expiration Date
- ---- ----------- -------------- ------- ---------------
<S> <C> <C> <C> <C>
Michael W. Johnson 4,012(1) 0.5% 1.45 4/9/08
29,373(1) 3.6% 1.45 5/22/08
73,389(1) 9.0% 1.45 6/5/08
W. Brad Browning 70,000 (2) 8.5% 1.51 3/15/08
Michael D. Basch 20,000(3) 2.4% 0.55 2/19/08
175,000(4) 21.4% 1.40 9/25/08
</TABLE>
- --------------------
(1) Immediately exercisable in full.
(2) Vests over twenty-four months from the grant date of March 15, 1998, with
1/24 vesting each month after the grant.
(3) Vests over twenty-four months from the grant date of February 19, 1998,
with 1/24 vesting each month after the grant.
(4) Vests over thirty-six months from the grant date of September 25, 1998,
with 1/36 vesting each month after the grant.
The following table sets forth the fiscal year-end value of unexercised
options to purchase Common Stock for each Named Executive Officer. No options or
SARs were exercised by the Named Executive Officers during the fiscal year ended
December 31, 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at FY-End (#) at FY-End ($)(1)
-------------------------- ----------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C>
Michael W. Johnson 106,774 - $108,909 -
W. Brad Browning 26,250 43,750 25,200 42,000
Michael D. Basch 22,916 172,084 31,603 194,047
</TABLE>
- -------------------
(1) Based upon the difference between the exercise price and the fair market
value of the Common Stock for those options which at December 31, 1998 had
an exercise price less than the fair market value of the Common Stock on
such date. The fair market value of Company Common Stock at December 31,
1998, measured as the mean of the closing bid and asked prices of the
Common Stock on such date, was $2.47 per share.
Director Compensation
Directors who are employees of the Company receive no additional
compensation for service on the Board of Directors. Each director who is not a
full-time employee of the Company is reimbursed expenses for attendance at Board
and Committee meetings. From July 2, 1997 through December 31, 1998, a retainer
fee of $1,000 per month was also paid to each non-employee director. This
9
<PAGE>
monthly retainer has been voluntarily deferred by the current directors. As of
December 31, 1998, the Company had accrued $65,000 for this obligation.
Effective January 22, 1999, the directors agreed to eliminate retainer fees for
further Board meetings. Each non-employee director is awarded an option to
purchase 20,000 shares of the Company's common stock on a bi-annual basis. The
options are exercisable at the fair market value of the Company's common stock
on the date of issuance and are exercisable over a 24 month period. Options
expire ten (10) years from date of issuance. The options are forfeited upon
resignation from the Board of Directors.
The Company issued options to non-employee directors to purchase an
aggregate of 40,000 shares of the Company's common stock for their services
during 1998 at exercise prices ranging from $0.55 to $1.195.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
On January 1, 1998, the Company entered into a eighteen month employment
agreement with Michael W. Johnson, Chief Executive Officer and President of the
Company. The agreement provides for an annual base salary of $110,000 and cash
performance bonuses of up to $130,000 based on defined financial performance
targets. The agreement provides for the acceleration of the vesting of all
options awarded to him in the event that there is a change in control of the
Company. If Mr. Johnson is terminated without cause, he is entitled to a 90 day
advance notice and a severance payment equal to 75% of his annual base salary
then in effect. In addition, the Company will accelerate vesting of 50% of all
unvested options held by him at the date of his termination.
On October 23, 1997, the Company entered into an agreement with Michael
Johnson which expires on April 23, 1999, and provides compensation to Mr.
Johnson in the event the Company is sold while he is President of the Company or
within 120 days after Mr. Johnson ceases to be President. The compensation to be
paid is based on a varying percentage of the transaction value ranging from 4%
to 12% of the transaction value. No compensation will be paid for transactions
valued less than $7.5 million.
A provision in the option agreement between the Company and Mr. Johnson
provides for dilution protection. The agreement provides that additional options
to purchase common shares shall be issued to Mr. Johnson equal to 10.7% of
options exercised that were outstanding as of October 23, 1997. On October 23,
1997, there were 962,000 shares subject to unexercised options.
On March 15, 1998, the Company entered into a two-year employment agreement
with W. Brad Browning, Vice President and General Manager of the Company. The
agreement provides for an annual base salary of $110,000. The agreement also
provides for the issuance of an option to purchase 70,000 shares of the
Company's common stock exercisable at $1.51 per share. The option vests over a
24 month period. All options vest immediately upon a change of control of the
Company. If Mr. Browning is terminated without cause, he is entitled to a
severance payment equal to three months salary, and the Company will accelerate
vesting of 25% of all unvested options held at the date of termination.
On January 1, 1998, the Company entered into an eighteen month employment
agreement with Kevin D. Andrew, Chief Financial Officer and Vice President of
the Company. The contract automatically renews for successive twelve month terms
unless the Company provides written notice sixty days prior to the expiration of
the agreement terms. The agreement provides for an annual salary of $88,000. Mr.
Andrew is eligible for an annual performance bonus up to a maximum of 35% of
base annual salary. Mr. Andrew is eligible to receive options to purchase common
stock of the Company as authorized from time to time by the Board. All options
vest immediately upon a change of control of the Company. If Mr. Andrew is
terminated without cause, he is entitled to a severance payment equal to three
months salary, and the Company will accelerate vesting of 25% of all unvested
options held at the date of termination.
On February 16, 1998, the Company entered into an eighteen month employment
agreement with Donald Kark, Vice President of Engineering and Technology. The
agreement provides for an annual salary of $92,000. Mr. Kark is eligible for an
annual performance bonus up to a maximum of 50% of base annual salary. Mr. Kark
is eligible to receive options to purchase common stock of the Company as
10
<PAGE>
authorized from time to time by the Board. All options vest immediately upon a
change of control of the Company. If the agreement is not renewed by the Company
Mr. Kark will receive a one-time severance payment equal to 25% of annual base
salary. If Mr. Kark is terminated without cause, he is entitled to a severance
payment equal to three months salary, and the Company will accelerate vesting of
25% of all unvested options held at the date of termination.
On September 21, 1998, the Company entered into an agreement with Michael Basch,
Vice President of Marketing and Sales. The agreement provides for an annual
salary of $110,000, and an additional $3,500 per month for the first three
months. Mr. Basch is eligible for an annual bonus of up to $150,000 based on
achievement of sales targets. The agreement also provides for up to $10,000
reimbursement for moving expenses which were fully paid as of December 31, 1998.
Mr. Basch is eligible to receive options to purchase common stock of the Company
as authorized from time to time by the Board. All options vest immediately upon
a change of control of the Company. If Mr. Basch is terminated without cause, he
is entitled to a severance payment equal to 25% of his base salary.
Certain Relationships and Related Transactions
On December 11, 1997, the Company sold all the assets of its wholly-owned
subsidiary, Cimarron International, Inc. ("Cimarron"), to Cimarron Dog and Pony,
Inc. ("Dog and Pony"). Dog and Pony is owned by Donald Cohen, a director of the
Company and the former owner of Cimarron prior to its acquisition by the Company
in 1995.
The total estimated value of the sale transaction (the "Transaction") was
$321,000, including $100,000 of contingent consideration. The Transaction
included assets of approximately $63,000 consisting of specialized computer
equipment and software, of which the Company recognized a book gain of
approximately $24,000. Also included in the Transaction were approximately
$58,500 of accounts receivable which were transferred at full value as recorded
on Cimarron's books with no offset for bad debt. Approximately $66,000 of
intangible assets related to the business tradename, customer lists, in-process
contracts and related unbilled revenues were also included in the Transaction.
Dog and Pony also assumed all recorded liabilities of Cimarron which amounted to
approximately $51,000, consisting of approximately $13,000 of accounts payable
and $37,000 of other accrued liabilities. Mr. Cohen also agreed to terminate his
own employment agreement with the Company. As part of the Transaction, the
Company executed an earnout agreement which provides that Dog and Pony shall pay
25% of all quarterly gross profits in excess of $116,500 to the Company until
the earlier of: (i) March 31, 2001, or (ii) until payments total $100,000.
In connection with the Transaction, the Company executed a cost sharing
agreement with Dog and Pony for the provision of certain administrative services
for $12,000 per month which were provided until July 31, 1998.
The total consideration paid including contingent consideration equals 5.2
times 1997 cash flow of approximately $62,400 and represents 3.5 times 1997 cash
flow if contingent consideration is excluded. The Board of Directors determined
that this valuation was consistent with a business in a mature or declining
market such as Cimarron. Revenues from Cimarron have been declining over the
last three years due to a shift away from 35mm slides to electronic
presentations and a trend towards in-house production of many types of business
presentations.
PROPOSAL 2 - APPOINTMENT OF AUDITORS
The Board has appointed the firm of Hein + Associates LLP ("Hein"),
independent public accountants, as the auditors of the Company for the fiscal
year ending December 31, 1999, subject to the approval of such appointment by
Stockholders at the Annual Meeting. Hein has audited the Company's financial
statements since the Company's 1996 fiscal year.
The ratification of the appointment of Hein will be determined by the vote
of the holders of a majority of the shares present in person or represented by
proxy at the Annual Meeting.
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If the foregoing appointment of Hein is not ratified by Stockholders, the
Board may appoint other independent accountants whose appointment for any period
subsequent to the 1999 Annual Meeting of Stockholders will be subject to the
approval of Stockholders at that meeting. A representative of Hein is expected
to be present at the Annual Meeting and will have an opportunity to make a
statement should he so desire and to respond to appropriate questions.
On January 27, 1997, the Company engaged the accounting firm of Hein as its
principal independent accountants to audit the Company's financial statements
for its fiscal year ending December 31, 1996. The appointment of new independent
accountants was approved by the Audit Committee and the Board. The Company
dismissed its former independent accountants, Arthur Andersen, LLP, effective
with the appointment of Hein.
Prior to the appointment of Hein, management of the Company had not
consulted with Hein except that, at the Company's request, Hein reviewed the
Company's reports filed on Form 10-Q for the quarterly periods ending June 30,
1996 and September 30, 1996.
During the fiscal years ended December 31, 1995 and 1994, and the interim
period subsequent to December 31, 1995, there were no disagreements with the
former accountants on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which would have
caused the former accountants to make reference in their report to such
disagreements if not resolved to their satisfaction.
Arthur Andersen's reports on the financial statements for the past two
years have contained no adverse opinion or disclaimer of opinion and were not
modified as to audit scope or accounting principles except for an explanatory
paragraph regarding the Company's ability to continue as a going concern
contained in the financial statements for the years ended December 31, 1995 and
1994.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE TO RATIFY THE
APPOINTMENT OF THE FIRM OF HEIN + ASSOCIATES LLP.
STOCKHOLDER PROPOSALS
Any proposals from Stockholders to be presented for consideration for
inclusion in the proxy material in connection with the 2000 Annual Meeting of
Stockholders of the Company must be submitted in accordance with the rules of
the Securities and Exchange Commission and received by the Secretary of the
Company at the Company's principal executive offices no later than the close of
business on November 19, 1999.
Under the rules promulgated by the Securities and Exchange Commission,
stockholder proposals not included in the Company's proxy materials for its 2000
Annual Meeting of Stockholders in accordance with Rule 14a-8 of the Exchange Act
of 1934, as amended, will be considered untimely if notice thereof is received
by the Company after February 7, 2000. Management proxies will be authorized to
exercise discretionary voting authority with respect to any stockholder proposal
not included in the Company's proxy materials for the 2000 Annual Meeting unless
the Company receives notice thereof by February 7, 2000 and the conditions set
forth in Rule 14a-4(c)(2)(I)-(iii) under the Exchange Act of 1934, as amended
are met.
OTHER MATTERS
All information contained in this Proxy Statement relating to the
occupations, affiliations and securities holdings of directors and officers of
the Company and their relationship and transactions with the Company is based
upon information received from the individual directors and officers. All
information relating to any beneficial owner of more than 5% of the Company's
Common Stock is based upon information contained in reports filed by such owner
with the Securities and Exchange Commission.
The Company's independent public accountants for the fiscal year 1998 are
Hein + Associates LLP. Representatives of such firm are expected to be present
at the annual meeting, will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
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The Annual Report to Stockholders of the Company for the fiscal year ended
December 31, 1998, which includes financial statements and accompanies this
Proxy Statement, does not form any part of the material for the solicitation of
proxies.
The Company will furnish without charge a copy of its Annual Report on Form
10-KSB, including the financial statements, for the fiscal year ended December
31, 1998, filed with the Securities and Exchange Commission pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 to any Stockholder (including
any beneficial owner) upon written request to Kevin D. Andrew, Chief Financial
Officer, 1875 Lawrence Street, Suite 1100, Denver, Colorado 80202. A copy of the
exhibits to such report will be furnished to any Stockholder upon written
request and payment of a nominal fee.
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INFONOW CORPORATION PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD APRIL 23, 1999
The undersigned hereby constitutes, appoints, and authorizes Kevin A. Andrew as
the true and lawful attorney and Proxy of the undersigned, with full power of
substitution and appointment, for and in the name, place and stead of the
undersigned to act for and vote as designated below, all of the undersigned's
shares of the no par value common stock of InfoNow Corporation, a Delaware
corporation, at the Annual Meeting of the Stockholders to be held April 23,
1999, at InfoNow's corporate offices at 1875 Lawrence Street, Suite 1100,
Denver, Colorado, at 3:00 p.m. M.D.T., and at any and all adjournments thereof,
with respect to the matters set forth below and described in the Notice of
Annual Meeting dated March 22, 1999 receipt of which is hereby acknowledged.
1. Approval of the election of each of the five nominees named herein for the
office of director to serve until the next Annual Meeting of Stockholders
or until their respective successors are elected and qualified.
[ ] FOR ALL NOMINEES LISTED BELOW (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL LISTED BELOW
(INSTRUCTION: To withhold authority to vote for any individual nominee strike
a line through the nominee's name in the list below.)
Michael W. Johnson, Donald E. Cohen, Duane Wentworth,
Michael Basch, Stuart Fullinwider
2. To consider and vote upon a proposal to ratify the appointment of Hein +
Associates LLP as independent auditors of the Company for the fiscal year
ended December 31, 1999.
[ ] FOR
[ ] AGAINST
3. The Proxy is authorized to vote upon any other business as may properly
come before the Annual Meeting or any adjournments thereof.
The undersigned hereby revokes any Proxies as to said shares heretofore given by
the undersigned, and ratifies and confirms all that said attorney and Proxy may
lawfully do by virtue hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2. THIS PROXY CONFERS DISCRETIONARY AUTHORITY IN
RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.
DATED: ________________________, 1999
-------------------------------
Signature(s) of Shareholder(s
-------------------------------
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s) shown hereon. Executors,
administrators, trustees, guardians and attorneys should indicate their capacity
when signing. Attorneys should submit powers of attorney. When shares are held
by joint tenants, both should sign. 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.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF INFONOW CORPORATION
PLEASE SIGN AND RETURN THIS PROXY USING THE ENCLOSED PRE-PAID ENVELOPE.
THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE
IN PERSON IF YOU ATTEND THE MEETING.
