SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
INFORMATION ANALYSIS INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing:
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No:
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INFORMATION ANALYSIS INCORPORATED
11240 Waples Mill Road, Suite 400
Fairfax, Virginia 22030
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Information
Analysis Incorporated, a Virginia corporation (the "Company"), will be held on
Tuesday, December 14, 1999, at 10:00 a.m., local time, at the offices of
Information Analysis Incorporated, 11240 Waples Mill Road, Suite 400, Fairfax,
Virginia 22030, for the following purposes:
1. To elect four (4) directors to serve for the ensuing year;
2. To ratify the selection of independent auditors for fiscal 1999;
3. To consider and act upon any matter incidental to the foregoing
and any other matters which may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
The Board of Directors has fixed the close of business on November 8, 1999 as
the record date for determination of stockholders entitled to notice of and vote
at the meeting and at any adjournment thereof.
All stockholders are cordially invited to attend the meeting. However, to assure
that a quorum is present at the meeting on December 14, 1999, please mark, sign,
date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose whether or not you expect to
attend the meeting. Any stockholder attending the meeting may vote in person
even if such stockholder has returned a proxy.
By Order of the Board of Directors,
Richard S. DeRose
Secretary
11240 Waples Mill Road, Suite 400
Fairfax, Virginia 22030
November 12, 1999
INFORMATION ANALYSIS INCORPORATED
11240 Waples Mill Road, Suite 400
Fairfax, Virginia 22030
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PROXY STATEMENT
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NOVEMBER 12, 1999
The enclosed Proxy is solicited by the Board of Directors of INFORMATION
ANALYSIS INCORPORATED, a Virginia corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held at the offices of the Company, 11240
Waples Mill Road, Suite 400; Fairfax, Virginia 22030 at 10:00 a.m. on Tuesday,
December 14, 1999 and at any adjournment or adjournments thereof.
On November 1, 1999, there were 6,918,673 shares of Common Stock (the "Common
Stock") outstanding. Stockholders of record at the close of business on November
8, 1999 will be entitled to vote at the meeting or any adjournment thereof.
The Company has no other voting securities.
Each share of Common Stock entitles the holder to one vote with respect to all
matters submitted to stockholders at the meeting. A quorum for the meeting is a
majority of the shares outstanding. The proposals to be voted upon by the
stockholders of the Company require the votes of a majority of the voting
securities present at the meeting for approval. Abstentions and broker non-votes
(which result when a broker holding shares for a beneficial holder in "street
name" has not received timely voting instructions on certain matters from such
beneficial holder and the broker does not have discretionary voting power on
such matters) are counted for purposes of determining the presence or absence of
a quorum at the meeting. Abstentions are counted in tabulation of the votes cast
on proposals presented to stockholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
THE DIRECTORS AND OFFICERS OF THE COMPANY AS A GROUP OWN APPROXIMATELY 31.0% OF
THE OUTSTANDING VOTING SECURITIES OF THE COMPANY. EACH OF THE DIRECTORS AND
OFFICERS HAS INDICATED HIS INTENT TO VOTE ALL SHARES OF COMMON STOCK OWNED OR
CONTROLLED BY HIM IN FAVOR OF EACH ITEM SET FORTH HEREIN.
Execution of a Proxy will not in any way affect a stockholder's right to attend
the meeting and vote in person. The Proxy may be revoked at any time before it
is exercised by written notice to the Secretary prior to the Annual Meeting or
by giving to the Secretary a duly executed Proxy bearing a later date than the
Proxy being revoked at any time before such Proxy is voted, or by appearing at
the Annual Meeting and voting in person. The shares represented by all properly
executed Proxies received in time for the meeting will be voted as specified
therein. In the absence of a special choice, shares will be voted in favor all
items set forth herein.
The Board of Directors knows of no other matter to be presented at the meeting.
If any other matter should be presented at the meeting upon which a vote may be
taken, such shares represented by all Proxies received by the Board of Directors
will be voted with respect thereto in accordance with the judgment of the person
named in the Proxies. The Board of Directors knows of no matter to be acted upon
at the meeting that would give rise to appraisal rights for dissenting
stockholders.
This Proxy Statement and the accompanying Proxy were first mailed to
stockholders on or about November 12, 1999.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Directors of the Company are elected annually and hold office until the next
annual meeting of stockholders and until their successors have been elected and
qualified. A board of four (4) directors is to be elected at the meeting. Shares
represented by all proxies received and not so marked as to withhold authority
to vote for any individual Director or for all Directors will be voted (unless
one or more nominees are unable or unwilling to serve) for the election of the
nominees named below.
The Board of Directors of the Company currently consists of one member who is
the Chief Executive Officer of the Company (Sandor Rosenberg), and four
non-employee members (Brendan J. Dawson, Charles A. May, Jr., Bonnie K. Wachtel,
and James D. Wester).
During the period commencing January 1, 1998 and ending December 31, 1998
("fiscal 1998"), there were six (6) meetings of the Board of Directors of the
Company.
Messrs. Wester (Chairman) and May and Ms. Wachtel served as members of the Audit
Committee of the Board of Directors of the Company. The Audit Committee held two
(2) meetings during fiscal 1998. The Audit Committee is responsible for
recommending and selecting the appointment of outside auditors, reviewing
financial reports of the Company and performing such other functions as directed
from time to time by the Board.
Messrs. Dawson (Chairman) and Rosenberg and Ms. Wachtel served as members of the
Compensation Committee of the Company. The Compensation Committee held one (1)
meeting during fiscal 1998. The Compensation Committee is responsible for
considering compensation of officers of the Company.
The Board of Directors currently does not have a standing nominating committee
or a committee performing similar functions. The Board will, as a matter of
policy, give consideration to nominees recommended by stockholders. A
stockholder who wishes to recommend a future nominee should direct his or her
recommendation in writing to the Company's Board of Directors.
The terms of all current directors of the Company will expire at the time of the
1999 Annual Meeting. The Company proposes for re-election as directors of the
Company each of Messrs. Rosenberg, May, and Wester, and Ms. Wachtel for a term
ending at the 1999 Annual Meeting. If you do not wish your shares to be voted
for any particular nominee, please identify the exceptions in the appropriate
space provided on the proxy card.
If at the time of the meeting, one or more of the nominees have become
unavailable to serve, shares represented by proxies will be voted for the
remaining nominees and for any substitute nominee or nominees designated by the
Board of Directors or, if none, the size of the Board will be reduced. The Board
of Directors knows of no reason why any of the nominees will be unavailable or
unable to serve.
All nominees are currently Directors of the Company and have served continuously
since the date of their election shown below. The following table sets forth,
for each nominee, the nominee's age and the date such nominee became a director
of the Company. Following the table is a brief description of each nominee's
principal occupation for at least the past five years.
NAME OF NOMINEE AGE DIRECTOR SINCE
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Sandor Rosenberg 52 1979
James C. Wester 61 1985
Bonnie K. Wachtel 43 1992
Charles A. May, Jr. 61 1997
SANDOR ROSENBERG, 52, has been President and Chairman of the Board
since 1979. Mr. Rosenberg holds a B.S. degree in Aerospace Engineering from
Rensselear Polytechnic Institute, and has done graduate studies in Operations
Research at George Washington University.
JAMES D. WESTER, 61, has been a Director since 1985. He has been a
computer services marketing consultant for more than 15 years. Since 1984, he
has been president of Results, Inc. Mr. Wester obtained a B.M.E. degree from
Auburn University and an M.B.A. from George Washington University.
BONNIE K. WACHTEL, 43, has been a Director since 1992. Since 1984, she
has served as vice president and general counsel of Wachtel & Co., Inc.,
investment bankers in Washington, D.C. Ms. Wachtel holds BA and MBA degrees from
the University of Chicago and a JD from the University of Virginia. She is a
director of Integral Systems, Inc., a provider of computer systems and software
for the satellite communications market; and VSE Corporation, a provider of
technical services to the federal government.
CHARLES A. MAY, JR., 61, is a consultant focusing on national security
and defense conversion issues. In 1992, he retired as a Lt. General from the Air
Force where he last served as Assistant Vice Chief of Staff, Headquarters US Air
Force, Washington, D.C. He is a graduate of the U.S. Air Force Academy, where he
once served as an Associate Professor of Political Science. General May has also
graduated from the NATO Defense College and has completed the University of
Pittsburgh's Management Program for Executives.
DIRECTOR COMPENSATION
Directors of the Company who are not executive officers of the Company receive a
stipend of $500 per quarter plus reimbursement of reasonable expenses incurred
in attending meetings. In addition to the foregoing, all Directors except Mr.
Rosenberg receive stock option grants. The granting of options to Directors is
not currently executed according to a formal Directors Stock Option Plan or
agreement. No options grants were made to Directors in the fiscal year ended
December 31, 1998.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
Each stockholder of the Company will have one vote for each share of Common
Stock such stockholder holds in the Company. Votes withheld will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business at the meeting, but have no other legal effect upon election of
directors under Virginia law.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
NOMINEES SET FORTH HEREIN.
EXECUTIVE OFFICERS
The current executive officers of the Company are Sandor Rosenberg, Chairman and
Chief Executive Officer; Stanley A. Reese, Senior Vice President and Chief
Operating Officer; and Richard S. DeRose, Executive Vice President, Chief
Financial Officer, Treasurer, and Secretary.
There are no family relationships among any of the executive officers,
directors, or persons nominated to become directors of the Company. The
executive officers are chosen annually at the first meeting of the Board of
Directors following the annual meeting of stockholders and serve for one year
and until their successors are chosen and qualify.
The previous identification of directors sets forth the age, business
experience, and certain other information regarding Mr. Rosenberg.
RICHARD S. DEROSE, 61, joined the Company in 1991 upon the acquisition
of DHD, Inc., a company founded by Mr. DeRose and of which he was President and
Chief Executive Officer. Prior to DHD, Mr. DeRose held several management
positions in the information technology and telecommunication industries at RCA,
Burroughs, and MCI. Mr. DeRose holds a BS degree in Science from the US Naval
Academy and an MS degree in Computer Systems Management from the US Naval Post
Graduate School.
STANLEY A. REESE, 43, joined the Company in 1993. Mr. Reese has been
Senior Vice President since 1997 and Chief Operating Officer since March 1999.
From 1992 to 1993, he served as Vice President, Technical Services at Tomco
Systems, Inc. Prior to Tomco Systems, he served as Senior Program manager at ICF
Information Technology, Inc. Mr. Reese has over 17 years experience managing and
marketing large scale mainframes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT
The following table sets forth, as of November 1, 1999, the number of shares and
percentage of the Company's Common Stock owned by all persons known by the
Company to own beneficially more than 5% of the Company's Common Stock, by each
director, by each executive officer named in the Summary Compensation Table, and
by all directors and executive officers as a group. This information has been
obtained in part from such persons and in part from the Company's records. Each
person has sole voting and investment power with respect to the shares indicated
except for shares which may be acquired upon exercise of options and as
otherwise noted.
NAME AND ADDRESS OF SHARES BENEFICIALLY
BENEFICIAL OWNER (1) OWNED (2) % OF CLASS
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Sandor Rosenberg, Chairman, CEO, and Director 1,902,800 27.5%
Richard S. DeRose, Executive Vice President 165,900 (3) 2.4%
James D. Wester, Director 383,500 (4) 5.3%
Stanley A. Reese, Chief Operating Officer 134,750 (5) 1.9%
Bonnie K. Wachtel, Director 112,800 (6) 1.6%
Brendan J. Dawson, Director 13,000 (7) *
Charles A. May, Jr., Director 16,000 (8) *
Kenneth Parsons 717,000 (9) 9.4%
All directors and executive officers as a group 2,728,750 (10) 37.0%
*LESS THAN 1%
(1) The address of all beneficial holders is care of the Company, except
Ms. Wachtel, whose address of record is 1101 14th St. NW, Washington,
DC 20001.
(2) All shares are held outright by the individuals listed. References to
options and warrants include all options and warrants exercisable
within 60 days of November 1, 1999.
(3) Includes options on 117,900 shares which are exercisable.
(4) Includes warrants exercisable for 108,000 shares, and options on
190,000 shares, all of which are exercisable.
(5) Includes options on 128,750 shares which are exercisable.
(6) Includes options on 13,000 shares which are exercisable.
(7) Includes options on 13,000 shares which are exercisable.
(8) Includes options on 16,000 shares which are exercisable.
(9) Includes options on 712,500 shares which are exercisable
(10) Includes options on 463,650 shares and warrants exercisable for
108,000 shares.
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth individual compensation
information for the Chief Executive Officer and the other executive officers
serving as executive officers as of December 31, 1998 and one additional
individual for whom disclosure would have been provided had he been serving as
an executive officer as of December 31, 1998 (collectively "Named Executive
Officers") who earned total compensation in excess of $100,000 during 1998:
SUMMARY COMPENSATION TABLE
Name and Principal Annual Compensation
------------------- Securities Underlying
Position Year Salary Bonus Options (#)
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Sandor Rosenberg 1998 $102,083 -- --
Chairman of the Board and 1997 $100,375 -- --
Chief Executive Officer 1996 $100,000 $15,000 --
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Richard S. DeRose 1998 $150,010 -- --
Executive Vice President 1997 $110,835 -- 5,000
Chief Financial Officer 1996 $110,730 $27,500 90,000
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Brendan Dawson(1) 1998 $41,965 $106,500 --
President and 1997 $95,202 -- 108,000
Chief Operating Officer 1996 -- -- --
(1) Mr. Dawson's employment commenced on July 1, 1997 and he resigned on
February 28, 1998.
No Named Executive Officer has received any perquisite or benefit, securities,
or property that exceeded the lesser of $50,000 or 10% of the total annual
salary and bonus reported for such executive officer.
OPTION GRANTS IN LAST FISCAL YEAR
No option grants were made in 1998 to any Named Executive Officer.
The following table depicts option exercise activity in the last fiscal year and
fiscal year-end option values with respect to each of the Named Executive
Officers. The value of unexercised in-the-money options at December 31, 1998
equals the market value of the underlying common stock at December 31, 1998
minus the option exercise price. The fair market value of the Company's common
stock at December 31, 1998 was $1.50.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at 12/31/98 12/31/98
Acquired on Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
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Richard S. DeRose -- 97,900 $97,900 --
Brendan Dawson -- 8,000 -- --
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) ("Section 16(a)") of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires executive officers and Directors and
persons who beneficially own more than ten percent (10%) of the Company's Common
Stock to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission (the "Commission") and any national
securities exchange on which the Company's securities are registered. Executive
officers, Directors and greater than ten percent (10%) beneficial owners are
required by the Commission's regulations to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the Company
and written representations from the executive officers and Directors, the
Company believes that all Section 16(a) filing requirements applicable to its
executive officers, Directors and greater than ten percent (10%) beneficial
owners were satisfied, with the exception of Mr. Dawson's Form 5 for 1998 was
not filed within 45 days of the end of the fiscal year.
PROPOSAL TWO
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, on the recommendation of its Audit Committee, has
selected the firm of Rubino & McGeehin, Chtd. ("Rubino & McGeehin"), independent
auditors, as auditors of the Company for the fiscal year ending December 31,
1998.
On January 11, 1999, the Company dismissed Ernst & Young, LLP ("Ernst & Young")
as its independent accountant. The Company's determination to change accountants
was approved by its Audit Committee. Effective January 11, 1999, the Company
engaged Rubino & McGeehin as its new independent accountant to audit the
Company's financial statement, commencing with the fiscal year
ended December 31, 1998. During the period that Ernst & Young served as the
Company's independent accountant, including all interim periods within 1998, the
Company (or someone on its behalf) never consulted Rubino & McGeehin regarding
any matter. Rubino & McGeehin did serve as the Company's independent accountant
prior to the Company's engagement of Ernst & Young.
A representative of Rubino & McGeehin will not be present at the Annual Meeting
and will not make a statement or be available to answer questions from
stockholders. A representative of Ernst & Young will not be present at the
Annual Meeting and will not make a statement or be available to answer questions
from stockholders.
Although stockholder approval of the Board of Directors' selection of Rubino &
McGeehin is not required by law, the Board of Directors believes that it is
advisable to give stockholders an opportunity to ratify this selection.
If this proposal is not approved at the Meeting, the Board of Directors will
reconsider its selection of Rubino & McGeehin.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" SO AS TO RATIFY THE SELECTION OF
RUBINO & MCGEEHIN AS THE COMPANY'S NEW INDEPENDENT ACCOUNTANTS.
OTHER MATTERS TO COME BEFORE THE MEETING
In addition to the matters described above, there will be an address by the
Chief Executive Officer and a general discussion period during which
stockholders will have an opportunity to ask questions about the business of the
Company.
If any matter not described in this proxy statement should come before the
meeting, it is the intention of the persons named in the enclosed proxy to vote
the shares they represent as the Board of Directors may recommend. At the time
this proxy statement went to press, the Board of Directors knew of no other
matters which might be presented for stockholder action at the meeting.
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals intended for inclusion in next year's proxy statement should be sent
to the Corporate Secretary of the Company at 11240 Waples Mill Rd. - Suite 400,
Fairfax, VA 22030, and must be received by December 31, 1999.
SOLICITATION OF PROXIES
The cost of soliciting proxies in the accompanying form will be borne by the
Company. In addition to solicitations by mail, directors, officers, and regular
employees of the Company may solicit proxies in person or by telephone. No
additional compensation will be paid to directors, officers, or regular
employees for such services. Arrangements will be made with banks, brokerage
houses, and other custodians, nominees, and fiduciaries to forward solicitation
material to the beneficial owners of stock held of record by such persons or
firms, and the Company will reimburse such persons of firms for reasonable
out-of-pocket expenses incurred by them in so doing. The Company also has
retained Beacon Hill Partners to aid in the solicitation of proxies, at an
estimated cost of $3,750 plus reimbursement of reasonable out-of-pocket
expenses.
REVOCATION OF PROXY
Subject to the terms and conditions set forth herein, all Proxies received by
the Company will be effective, notwithstanding any transfer of the shares to
which such Proxies relate, unless prior to the meeting the Company receives a
written notice of revocation signed by the person who, as of the record date,
was the registered holder of such shares. The Notice of Revocation must indicate
the certificate number or numbers of the shares to which such revocation relates
and the aggregate number of shares represented by such certificate(s).
ANNUAL REPORT
THE COMPANY IS PROVIDING TO EACH STOCKHOLDER, WITHOUT CHARGE, A COPY OF THE
COMPANY'S ANNUAL REPORT, INCLUDING THE FINANCIAL STATEMENTS FOR THE COMPANY'S
MOST RECENT FISCAL YEAR ENDED DECEMBER 31, 1998.
MISCELLANEOUS
The management does not know of any other matters which may come before the
meeting. However, if any other matters are properly presented to the meeting, it
is the intention of the person named in the accompanying Proxy to vote, or
otherwise act, in accordance with his judgment on such matters.
By Order of the Board of Directors
Richard S. DeRose, Secretary
Dated: November 12, 1999
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INFORMATION ANALYSIS INCORPORATED
PROXY
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INFORMATION
ANALYSIS INCORPORATED
The undersigned hereby appoints Richard S. DeRose with the power to
appoint his substitute, and hereby authorizes him to represent and to vote, as
designated below, all the shares of common stock of Information Analysis
Incorporated held on record by the undersigned on November 8, 1999, at the
annual meeting of the stockholders to be held on December 14, 1999 or any
adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to the
contrary below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
Sandor Rosenberg
Charles A. May, Jr.
Bonnie K. Wachtel
James D. Wester
2. RATIFICATION OF INDEPENDENT AUDITORS
[ ] FOR the ratification of Rubino & McGeehin as the independent
auditors.
[ ] AGAINST the ratification of Rubino & McGeehin as the
independent auditors.
[ ] ABSTAIN the ratification of Rubino & McGeehin as the
independent auditors.
3. In his discretion, the proxy is authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
IN FAVOR OF THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR AND FOR THE
SELECTION OF Rubino & McGeehin AS INDEPENDENT AUDITORS.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporation name by the President or other authorized officer. If a
partnership, please sign in partnership name by authorized person. PLEASE MARK,
SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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Signature
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Signature, if held jointly
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Title (If Applicable)