-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GtI3WY6WvkmtF2EjIEtqUZxfPkxQ37fXsAxcvggRfu/Zcs8ydqgDIXKN2Q42I16E n+gqY9vQzkDT9IfkKv7yTA== 0000927797-97-000120.txt : 19971014 0000927797-97-000120.hdr.sgml : 19971014 ACCESSION NUMBER: 0000927797-97-000120 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19971010 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S WIRELESS DATA INC CENTRAL INDEX KEY: 0000895716 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 841178691 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-22848 FILM NUMBER: 97694063 BUSINESS ADDRESS: STREET 1: 4851 INDEPENDENCE STREET STREET 2: SUITE 189 CITY: WHEAT RIDGE STATE: CO ZIP: 80033 BUSINESS PHONE: 3034316858 MAIL ADDRESS: STREET 1: 4851 INDEPENDENCE STREET STREET 2: SUITE 189 CITY: WHEAT RIDGE STATE: CO ZIP: 80033 DEF 14A 1 DEFINITIVE PROXY STATEMENT 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. 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 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.
Name and Address of Amount and Nature of Beneficial Owner Beneficial Ownership (1) Percent of Class - ---------------- ------------------------ ---------------- 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 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) * 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.
4 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 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.
The Company's nominees for director are as follows: Director Principal Occupation Name of Nominee Since Age for Last Five Years - --------------- ----- --- ------------------- 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. 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. 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.
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 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 $100,000 except as indicated in the table below. This information includes the dollar value of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred. 9
SUMMARY COMPENSATION TABLE Annual Compensation ------------------------------------- Other Annual Securities Name and Salary Bonus Compensation Underlying All Other Principal Position Year ($) ($) ($) (1) Options (#) Compensation ($) - ------------------ ---- --- --- ------- ----------- ---------------- 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- (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.
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 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.
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 - ---- -------------- ----------- --------- --------------- 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% $.13 12/5/2005 (a) The option was granted on October 18, 1993 and vests over 48 months beginning November 1, 1993 in equal installments. The Company repriced this Option on December 5, 1995. (b) The option was granted on December 5, 1995, with 10% vesting on grant date and an additional 3% per month thereafter. (c) The option was granted on December 5, 1995 and became 100% vested at grant date. (d) This option was granted on December 5, 1995 with 25% vesting every six months.
11 Stock Option Exercises and Option Values Set forth below is information with respect to the unexercised options to purchase the Company's Common Stock granted under the Company's Amended 1992 Option Plan and held by the Named Executive Officers at June 30, 1996. No options were exercised during fiscal year 1996.
Aggregated Option Exercises in Fiscal 1996 and Fiscal Year End Option Values Number of Securities Underlying Unexercised Value of Unexercised In-the-Money Options at FY-End (#) Options at FY-End ($) --------------------- --------------------- Name Exercisable Unexercisable Exercisable Unexercisable - ---- ----------- ------------- ----------- ------------- Michael J. Brisnehan 105,929 109,071 $15,889 $16,361 Alan B. Roberts 20,068 15,000 $3,010 $2,250
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 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 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 -----END PRIVACY-ENHANCED MESSAGE-----