U.S. WIRELESS DATA, INC.
5700 Flatiron Parkway
Boulder, Colorado 80301
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on November 15, 1996
To Our Shareholders:
The Annual Meeting of Shareholders of U.S. Wireless Data, Inc., a
Colorado corporation ("Company"), will be held at the Courtyard by Marriott,
4710 Pearl East Circle, Boulder, Colorado, on Friday, November 15, 1996, at
10:00 a.m., Mountain Standard Time, for the following purpose:
(1) The election of five directors to serve on the Board of Directors;
(2) Such other matters as may properly come before the meeting or any
adjournment thereof.
Commencing ten (10) days prior to the Meeting date, the minutes of the
last annual shareholders' meeting and the shareholders' list of their share
eligibility to vote at the 1996 Annual Meeting will be open to inspection by the
shareholders of record at the corporate office, 5700 Flatiron Parkway, Boulder,
CO 80301. Only shareholders of record at the close of business on October 10,
1996 are entitled to notice of and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ROD L. STAMBAUGH
Corporate Secretary
Boulder, Colorado
October 15, 1996
- --------------------------------------------------------------------------------
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE
MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED, POSTAGE PREPAID, ADDRESSED ENVELOPE. NO ADDITIONAL POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. THE GIVING OF A PROXY WILL NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
U.S. WIRELESS DATA, INC.
5700 Flatiron Parkway
Boulder, Colorado 80301
--------------------------
PROXY STATEMENT
OF THE BOARD OF DIRECTORS OF
U.S. WIRELESS DATA, INC.
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on November 15, 1996
--------------------------------
SOLICITATION, EXERCISE AND REVOCABILITY OF PROXY
The enclosed Proxy is solicited by and on behalf of the Board of
Directors (the "Board") of U.S. Wireless Data, Inc. (the "Company") to holders
of the outstanding shares of the Company's Common Stock for use at the Company's
Annual Meeting of Shareholders ("Meeting") to be held at 10:00 a.m., Mountain
Standard Time, at the Courtyard by Marriott, 4710 Pearl East Circle, Boulder,
Colorado, on Friday, November 15, 1996, and at any adjournment thereof. This
statement and the enclosed proxy card are first being mailed to shareholders on
or about October 17, 1996. The Company's principal executive offices are located
at 5700 Flatiron Parkway, Boulder, Colorado 80301, and its telephone number at
those offices is (303) 440-5464.
Any person signing and mailing the enclosed Proxy may revoke it at any
time before it is voted (i) by giving written notice of the revocation to the
Company's corporate secretary; (ii) by voting in person at the Meeting; or (iii)
by voting again by submitting a new proxy card. Only the latest dated proxy
card, including one on which you may vote in person at the Meeting, will count.
VOTING
All voting rights are vested exclusively in the holders of the
Company's no par value common stock ("Common Stock") with each share entitled to
one vote. Cumulative voting in the election of directors is not permitted, which
means that the holders of more than half the shares voting for the election of
the directors can elect all the directors if they choose to do so. Only
shareholders of record at the close of business on October 10, 1996 are entitled
to notice of, and to vote at the meeting or any adjournments thereof. On
September 30, 1996, the Company had 4,665,877 shares of Common Stock issued and
outstanding. On all matters, a favorable vote consists of a simple majority of
the votes represented and entitled to vote at a meeting at which a quorum is
present.
2
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock, as of September 30, 1996, by
(i) each person who is known to the Company to own beneficially more than 5% of
the Company's voting securities, (ii) each director and director nominee, (iii)
each Named Executive Officer (as hereinafter defined), and (iv) all executive
officers and directors as a group. A person is deemed to be a beneficial owner
of Common Stock if that Common Stock can be acquired by such person within 60
days after September 30, 1996, upon the exercise of warrants or options.
The Board of Directors knows of no shareholder owning more than five
percent (5%) of the outstanding voting securities of the Company, except for
those listed in the table set forth below.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership (1) Percent of Class
- ---------------- ------------------------ ----------------
<S> <C> <C>
Donald L. Walford 418,060 Shares (2) 9.0%
1035 Pearl Street, Suite 400
Boulder, Colorado 80302
Walford & Company, Incorporated 418,060 Shares (2) 9.0%
1035 Pearl Street, Suite 400
Boulder, Colorado 80302
Richard P. Draper 397,684 Shares (3) 8.5%
2515 4th Avenue #2501
Seattle, Washington 98121
Rod L. Stambaugh 386,900 Shares (4) 8.1%
5700 Flatiron Parkway
Boulder, Colorado 80301
Cardservice International, Inc. 242,544 Shares 5.2%
26775 Malibu Hills Road
Agoura Hills, CA 91301
Michael J. Brisnehan 138,450 Shares (5) 2.9%
5700 Flatiron Parkway
Boulder, Colorado 80301
Chester N. Winter 55,281 Shares (6) 1.2%
885 Arapahoe Avenue
Boulder, Colorado 80302
<PAGE>
Alan B. Roberts 33,808 Shares (7) *
1181 Pintail Circle
Boulder, Colorado 80301
Caesar Berger 5,000 Shares *
26775 Malibu Hills Road
Agoura Hills, California 91301
All Executive Officers and Directors 619,439 Shares (8) 12.4%
as a group (five persons)
<FN>
* Less than one percent (1%).
(1) Beneficial owners listed have sole voting and investment power with
respect to the shares owned unless otherwise indicated.
(2) These shares are the same shares and are listed twice because Mr.
Walford is the sole shareholder of Walford Holdings, Inc., which is the
sole shareholder of Walford & Company, Incorporated. On the record
date, neither Donald L. Walford nor any Walford company, including
Walford Holdings, Inc. or Walford & Company, Incorporated was the
record owner of any Company stock. Mr. Walford has stated in Schedule
13D filed with the Securities and Exchange Commission that Walford
Holdings, Inc. owns beneficially 418,060 shares of the Company's Common
Stock. The Company has no stockholder record of this information.
(3) Pursuant to an agreement dated October 5, 1995 between Mr. Draper and
the Company, the Company has the right to vote Mr. Draper's shares. See
"Certain Transactions".
(4) Includes presently exercisable options to purchase 109,400 shares
of Common Stock at $.13 per share granted under the Company's Amended
1992 Stock Option Plan.
(5) Includes presently exercisable options to purchase 132,450 shares
of Common Stock at $.13 per share granted under the Company's Amended
1992 Stock Option Plan.
(6) Includes presently exercisable options to purchase 42,781 shares
of Common Stock at $.13 per share granted under the Company's Amended
1992 Stock Option Plan.
(7) Includes a presently exercisable warrant to purchase 2,631 shares of
Common Stock at $2.625 per share and presently exercisable options to
purchase 25,068 shares of the Company's Common Stock at $.13 per share
granted under the Company's Amended 1992 Stock Option Plan.
(8) Total includes 312,330 shares underlying presently exercisable options
granted under the Company's Amended 1992 Stock Option Plan, and shares
underlying presently exercisable warrants. 307,109 of the shares listed
(6.6% of the total issued and outstanding common stock) are currently
issued and outstanding.
</FN>
</TABLE>
4
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and greater than ten percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports and amendments thereto furnished to the Company and written
representations that no other reports were required, the Company believes that
during the Company's fiscal year ended June 30, 1996, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were complied with except that Form 4's were not filed by
Messrs. Stambaugh and Berger, and the Form 5's required to be filed by each of
them (which included the unreported Form 4 transactions) were also not timely
filed.
ACTIONS TO BE TAKEN AT MEETING
The Meeting is called by the Board of Directors to consider and act
upon the following matters:
(1) The election of five directors of the Company;
(2) Such other matters as may properly come before the meeting or
any adjournment thereof.
The holders of a majority of the outstanding shares of the Company,
present at the Meeting in person or represented by proxy, shall constitute a
quorum. Abstentions and broker non-votes will be counted as present for purposes
of establishing a quorum. There are no dissenters' rights applicable to election
of directors.
5
<PAGE>
PROPOSAL NUMBER ONE
Election of Directors
---------------------
The Company's Articles of Incorporation provide that the number of
directors serving on the Board of Directors at any one time shall not be less
than three nor more than nine with the exact number to be fixed by the Company's
Bylaws. The Bylaws provide that the number of directors shall be between three
and nine, and authorizes the directors to fix the specific number by resolution.
At the present time, the Board has determined by resolution that there shall be
five directors. The persons named on the enclosed form of Proxy will vote the
shares represented by such Proxy for the election of the five nominees for
director named below. The nominees have been nominated by the Company's Board of
Directors. All nominees have informed the Company that they are willing to
serve, if elected, and management has no reason to believe that any nominee will
be unavailable. The directors each intend to vote for the nominees listed. If,
at the time of the meeting, any of these nominees has become unavailable for any
reason, which event is not expected to occur, the person entitled to vote the
Proxy will vote for such substitute nominee or nominees, as may be recommended
and nominated by the Board for the office of director, if any, as they determine
in their discretion. If elected, the nominees for director will hold office
until the next annual meeting of shareholders or until their successors are
elected and qualified.
<TABLE>
<CAPTION>
The Company's nominees for director are as follows:
Director Principal Occupation
Name of Nominee Since Age for Last Five Years
- --------------- ----- --- -------------------
<S> <C> <C> <C>
Michael J. Brisnehan 7/95 48 President, Chief Executive Officer, Chief Financial Officer,
Treasurer and Director of the Company since July, 1995. Mr.
Brisnehan has served as the Chief Financial Officer,
Secretary and Treasurer since joining the Company in October
1993, but resigned as Secretary on September 14, 1995. From
1992 to 1993, he was Vice President, Chief Financial
Officer, Secretary and Treasurer of SCC Communications
Corp., an emergency 911 and public safety software company.
From 1989 to 1992, he served as President and a director of
Reference Technology, Inc., a software services company in
the CD-ROM industry. Prior to that, he had served as Chief
Financial Officer of Reference Technology since joining that
company in 1983. Mr. Brisnehan received a B.S. degree in
mathematics (1970) and an MBA degree in finance (1983) from
Regis University, Denver, Colorado.
<PAGE>
Rod L. Stambaugh 1/95 36 Vice President of the Company since 1991. Mr. Stambaugh is
also the Corporate Secretary (since September 1995) and
Chairman of the Board (since July 1995) of the Company. Mr.
Stambaugh is one of the founders of the Company and has
devoted his full business time to the Company since August
1991. He co-founded U.S. Wireless, Inc., a nonaffiliated
retail cellular phone center, at which he worked full time
from January 1990 through July 1991. Mr. Stambaugh
graduated from Baker University in 1982 with a B.S. degree
in psychology, and a minor in business administration. Mr.
Stambaugh also served on the Company's Board of Directors
during the period from July 1991 through October 1994.
Chester N. Winter 2/94 65 Mr. Winter is a general partner of Colorado Incubator Fund,
L.P., a venture capital fund, and also works as a business
consultant at Paradigm Partners, L.L.C. From 1989 to 1992,
he was Chairman and Chief Executive Officer of Clinical
Diagnostics, Inc., a home health care product distributor.
Also from 1989 to 1992, he was Senior Vice President of
Sinco International Investments, Inc., a real estate
investment and development company. He received a Masters
degree from the University of Colorado.
Alan B. Roberts 10/94 50 Mr. Roberts is the Director of Product Development and Vice
President of U.S. Operations for International Verifact,
Inc. He was President and Chief Executive Officer of the
Company from October 1, 1994, until July 10, 1995, and Vice
President of Operations for Direct Data, Inc. (the Company's
wholly-owned subsidiary that was dissolved in October of
1995) from February 1994 until September 1994. Prior to
that time, Mr. Roberts was Director of Product Marketing for
Verifone, Inc., the industry leader in point-of-sale
terminal products. While at Verifone from 1986 to 1994, he
also held various other management positions, including
Director of Product Management. Mr. Roberts graduated from
the University of Texas in 1967 with a bachelors degree in
Mathematics and in 1969 with a masters degree in Computer
Sciences.
<PAGE>
Caesar Berger 12/95 49 Mr. Berger is a senior Vice President of Cardservice
International, Inc. responsible for the Technology Group.
Mr. Berger joined Cardservice International in August of
1994. Prior to that, Mr. Berger served for more than ten
years as President, and was the founder of Computer Based
Controls, Inc. a wholly-owned subsidiary of Electronic
Clearing House Inc. Mr. Berger was a principal on the
American Express Money Order project which has resulted in
the deployment of over 17,000 of the Money Order dispensers
operating today in over 10,000 retail locations nationwide.
Mr. Berger graduated in 1970 from Lvov Polytech Institute
with the equivalent of an M.S. degree in Electronics and
Computer Science.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF ELECTION OF THE
FIVE (5) NOMINEES LISTED ABOVE.
No director of the Company is a director of any other company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or subject to the requirements of Section 15(d) of such Act or of
any company registered as an investment company under the Investment Company Act
of 1940.
The Company's Board of Directors held nine (9) meetings during the
fiscal year ended June 30, 1996, five (5) of which consisted of consent
directors minutes signed by all directors and four (4) of which were actual
meetings (held in person or by telephone) at which all directors were present at
each meeting, except Messrs.
Winter, Berger and Stambaugh were each absent from one (1) of the meetings.
In December 1995, the Board of Directors designated an audit committee
consisting of Chester N. Winter and Alan B. Roberts which did not meet during
fiscal year 1996. The functions of the audit committee are to review financial
statements, meet with the Company's independent auditors and address accounting
matters or questions raised by the auditors. The company currently does not have
a nominating committee.
Also in December 1995, the Board of Directors designated a compensation
committee consisting of Caesar Berger, Alan B. Roberts and Chester N. Winter.
The committee met once during fiscal year 1996. The functions of the
compensation committee are to review compensation of officers.
Significant Employees
The Company expects the following individuals to make a significant
contribution to the business of the Company.
8
<PAGE>
Aaron Danis, 42. Mr. Danis has been employed as Director of Engineering since
April 1993. He designed the proprietary electronic circuits which integrate the
various components of the POS-50(R) while working as a consultant to the
Company. Mr. Danis was employed for nineteen years through March 1993 by Digital
Equipment Corporation. His duties included test strategy and test equipment
design. Mr. Danis was part of the disk-drive engineering team (Product
Development) with design responsibilities including main components of Digital's
Servowriter, Read/Write testers, and disk-drive test systems. Mr. Danis supplied
the electrical engineering requirements of the Mechanical Engineering Design
Team, involving numerous Electro-Mechanical designs/systems used to verify the
integrity of disk-drive mechanics and has developed software using Assembly,
Basic and C languages. His design experience includes analog as well as digital
circuits, combined with various microprocessors. Mr. Danis attended Springfield
Tech. Community College, Pikes Peak Community College, University of Colorado,
Colorado Springs, and has taken classes from Boston University through programs
at Digital Equipment Corporation in the electronics and computer industries.
EXECUTIVE OFFICERS
The executive officers of the Company are elected annually at the first
meeting of the Company's Board of Directors held after each Annual Meeting of
Shareholders. Each executive officer holds office until his successor is duly
elected and qualified or until his resignation or until he is removed in the
manner provided by the Company's Bylaws. There are no family relationships among
the executive officers and directors. Michael J. Brisnehan and Rod L. Stambaugh,
who are listed above, are currently the only executive officers of the Company.
There was no arrangement or understanding between any executive officer
and any other person pursuant to which any person was selected as an executive
officer.
EXECUTIVE COMPENSATION
Summary Compensation Table
The Summary Compensation Table shows certain compensation information
for services rendered in all capacities during each of the last three fiscal
years ending June 30, 1994, 1995, and 1996 by the following individuals who
served as, or in the capacity of, the President and Chief Executive Officer of
the Company during fiscal year 1996: Alan B. Roberts and Michael J. Brisnehan
(collectively, the "Named Executive Officers"). No executive officer had salary
and bonus which in the fiscal year ended June 30, 1996 exceeded $100,000 except
as indicated in the table below. This information includes the dollar value of
base salaries, bonus awards, the number of stock options granted and certain
other compensation, if any, whether paid or deferred.
9
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------------------------
Other Annual Securities
Name and Salary Bonus Compensation Underlying All Other
Principal Position Year ($) ($) ($) (1) Options (#) Compensation ($)
- ------------------ ---- --- --- ------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brisnehan (2) 1996 108,833 -0- -- 90,000 -0-
President and Chief 1995 90,000 -0- -- -0- -0-
Executive Officer 1994 63,750 -0- -- 125,000 (3) -0-
-0-
Alan B. Roberts (4) 1996 4,327 -0- -- -0- -0-
President and Chief 1995 114,548 -0- -- 95,000 (5) 15,106 (6)
Executive Officer 1994 -0- -0- -- -0- -0-
<FN>
(1) No amounts have been shown as Other Annual Compensation because the
aggregate incremental cost to the Company of personal benefits provided
to these executive officers did not exceed the lesser of $50,000 or 10%
of their annual salary and bonus in any given year.
(2) Mr. Brisnehan has served as the Company's President and Chief Executive
Officer since July 10, 1995. Prior to that time, he served as the Chief
Financial Officer since joining the Company in October 1993.
(3) Option granted in October 1993 was re-priced (from $4.00 per share to
$.13 per share) during fiscal year 1996.
(4) Mr. Roberts served as the Company's President and Chief Executive
Officer from October 1, 1994 through July 10, 1995.
(5) Option granted in October 1994 under the Company's 1992 Stock Option
Plan. This option expired before it became exercisable.
(6) Represents relocation expenses paid by the Company. In addition, Mr.
Roberts submitted an expense report to the Company in the amount of
$30,000 to cover relocation expenses allowable under Mr. Robert's
employment agreement with the Company. To date, the Company had not
paid any of this additional amount.
</FN>
</TABLE>
Employment Agreements
During fiscal year 1996, the Company had an employment agreement with one
of its Named Executive Officers: Alan B. Roberts. Mr. Robert's employment
agreement with the Company became effective on October 1, 1994, and provided for
a one year term. Mr. Robert's base salary was $150,000 per year and he was
granted an option for the purchase of 95,000 shares of the Company's stock
pursuant to the Amended 1992 Stock Option Plan.
10
<PAGE>
This agreement also required that Mr. Roberts maintain the confidences of the
Company and contained a twelve-month covenant not to compete with the Company
after termination. Mr. Roberts resigned as an employee of the Company on July
10, 1995 and, as a result, his employment agreement terminated.
The Named Executive Officers were entitled to receive any incidental
benefits provided by the Company to other employees.
Stock Option Grants
The following table shows the stock options granted to the Named
Executive Officers during fiscal year 1996. The options described in this table
have exercise prices equal to the fair market value of a share of Common Stock
on the date they were granted.
<TABLE>
<CAPTION>
Option Shares Granted in Fiscal 1996
Individual Grants
-------------------------------------------------------------------------------
% of Total Option
Shares Granted to
Number of Option Employees in Exercise Price
Name Shares Granted Fiscal Year Per Share Expiration Date
- ---- -------------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
Michael J. Brisnehan 125,000 (a) 15% $.13 10/18/2003
90,000 (b) 11% $.13 12/5/2005
Alan B. Roberts 15,068 (c) 2% $.13 12/5/2005
20,000 (d) 2% $.13 12/5/2005
<FN>
(a) The option was granted on October 18, 1993 and vests over 48 months
beginning November 1, 1993 in equal installments. The Company repriced
this Option on December 5, 1995.
(b) The option was granted on December 5, 1995, with 10% vesting on
grant date and an additional 3% per month thereafter.
(c) The option was granted on December 5, 1995 and became 100% vested at
grant date.
(d) This option was granted on December 5, 1995 with 25% vesting every six
months.
</FN>
</TABLE>
11
<PAGE>
Stock Option Exercises and Option Values
Set forth below is information with respect to the unexercised options
to purchase the Company's Common Stock granted under the Company's Amended 1992
Option Plan and held by the Named Executive Officers at June 30, 1996. No
options were exercised during fiscal year 1996.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Fiscal 1996 and Fiscal Year End Option Values
Number of Securities Underlying Unexercised Value of Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)
--------------------- ---------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael J. Brisnehan 105,929 109,071 $15,889 $16,361
Alan B. Roberts 20,068 15,000 $3,010 $2,250
</TABLE>
Compensation of Directors
The Company uses a non-discretionary grant of 20,000 stock options per
year at current fair market value to non-employee directors under the Amended
1992 Stock Option Plan as a way of compensating non-employee directors for their
services.
CERTAIN TRANSACTIONS
The Company acquired its wholly-owned subsidiary, Direct Data, Inc., by
merger in September 1994. A portion of the merger consideration was 700,000
shares of Company Common Stock. Because Richard P. Draper was a significant
shareholder of Direct Data, he received 397,684 shares of the Company's Common
Stock (the "Draper Shares") in this transaction. Also, as part of this
transaction, the Company agreed to assume Mr. Draper's personal guaranty of the
$1.3 million secured debt owed by Direct Data to its lender, however, the
Company was never able to fulfill this obligation to Mr. Draper. This loan
became due on September 15, 1995, and the lender would not agree to further
extend the payment date. To prevent foreclosure of his guaranty, Mr. Draper paid
the outstanding $1.3 million to the lender in early October 1995 and, pursuant
to his guaranty arrangement with the lender, became the holder of a security
12
<PAGE>
interest in all of the assets of Direct Data. Rather than foreclose on the
assets, Mr. Draper contacted Direct Data and the Company, as the sole
shareholder of Direct Data, to negotiate an arrangement whereby Mr. Draper would
be transferred all of the assets of Direct Data in which he had a foreclosable
security interest. To prevent the negative effects of a foreclosure proceeding
(including the likelihood of substantial legal fees and associated expenses),
Direct Data agreed to surrender the assets to Mr. Draper. Separately, the
Company, as Direct Data's shareholder, also approved the surrender of assets in
order to avoid the foreclosure proceeding and the above-discussed negative
effects. In consideration for that approval, Mr. Draper released the Company
from its obligation to remove him from his $1.3 million personal guaranty on the
bank loan and agreed that the Company would have the option to purchase the
Draper Shares for a period of three years, at a price of $.25 per share (the
fair market value of the Company's stock at the time the transaction was
negotiated). Additionally, Mr. Draper granted the Company the right to vote the
Draper Shares (which constitute approximately 9% of the Company's outstanding
Common Stock) during the three-year option period. The above-described
transactions were consummated on October 5, 1995. In addition to being an
officer and director of Direct Data until its dissolution in October 1995. Mr.
Draper was also a director of the Company until April 1995.
Pursuant to the provisions of the Company's Bylaws, certain persons may
be entitled to indemnification by the Company where they have been made a party
to a suit or proceeding by reason of the fact that such person is or was a
director, officer, employee, fiduciary or agent of the Company. The Company, Rod
L. Stambaugh, Chairman of the Board, and certain former directors are defendants
in three lawsuits brought by shareholders of the Company. The Company has
indemnified these individuals for the costs and expenses in defending the claims
brought by these actions. The aggregate amount paid in fiscal year ending June
30, 1996 to indemnify these individuals and to defend the Company in these
lawsuits was approximately $100,000. The Company is uncertain of the amount it
may continue to spend on such expenses, however, it does expect these expenses
to continue into the current fiscal year.
ACCOUNTANTS
No accountant has been selected or recommended for the current fiscal
year. The independent certified accountants for fiscal year 1996 were Price
Waterhouse, L.L.P. A representative from Price Waterhouse will be present at the
annual shareholder meeting and will be available to answer any questions.
SOLICITATION OF PROXIES
The costs of soliciting proxies, including the cost of preparing,
assembling and mailing this proxy material to shareholders, will be borne by the
Company. Solicitations will be made by use of the mail, telephone or telegraph,
including facsimile, and in person. Solicitations may be made by persons who are
both officers and directors of the Company. Brokerage house, custodians,
nominees and fiduciaries will be requested to forward the proxy soliciting
material to the beneficial owners of the Company's shares held of record by such
persons and the Company may reimburse them for their charges and expenses in
this connection.
13
<PAGE>
1996 ANNUAL REPORT ON FORM 10-KSB
SHAREHOLDERS WHO WISH TO OBTAIN, WITHOUT CHARGE, COPIES OF THE
COMPANY'S 1996 ANNUAL REPORT ON FORM 10-KSB (WITHOUT EXHIBITS) AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION SHOULD ADDRESS A WRITTEN REQUEST TO ROD L.
STAMBAUGH, THE COMPANY'S VICE PRESIDENT AND SECRETARY, AT THE COMPANY'S ADDRESS
SHOWN AT THE BEGINNING OF THIS PROXY STATEMENT.
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the 1997 annual
meeting must be forwarded in writing and received at the principal executive
offices of the Company no later than June 18, 1997, directed to the attention of
the Secretary, for consideration for inclusion in the Company's proxy statement
for the annual meeting of shareholders to be held in November 1997. Any such
proposals must comply in all respects with the rules and regulations of the
Securities and Exchange Commission.
OTHER BUSINESS
The Company's Board of Directors does not know of any matters to be
presented at the meeting other than the matters set forth herein. If any other
business should come before the meeting, the persons named in the enclosed form
of Proxy will vote such Proxy according to their judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
ROD L. STAMBAUGH
Corporate Secretary
Boulder, Colorado
October 15, 1996
