SCHEDULE 14A
(RULE 14A-101)
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:
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only (as permitted by Rule
14a-6(a)(2))
[ ] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant toss.240.14a-11(c) orss.240.14a-12
UNIVERSAL MONEY CENTERS, INC.
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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)(1)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.
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[ ] 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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3) Filing party:
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4) Date filed:
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1
[NAME AND LOGO] PRELIMINARY COPY
6800 Squibb Road
Mission, Kansas 66202
(913) 831-2055
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________________, 2003
The annual meeting of the shareholders of Universal Money Centers, Inc.,
a Missouri corporation (the "Annual Meeting"), will be held at the offices of
Stinson Morrison Hecker LLP, 2600 Grand Blvd, 12th Floor, Kansas City,
Missouri 64108, on ________, 2003 at 10:00 a.m., Central time, for the
following purposes:
1. To consider and act upon a proposal to amend the corporation's
Articles of Incorporation to effect a 1-for-250 reverse stock split
followed immediately by a 250-for-1 forward stock split of the
corporation's outstanding common stock (the "Transaction"). As a result
of the Transaction, (a) each share of the corporation's common stock
held by a shareholder owning fewer than 250 shares immediately before
the effective time of the reverse stock split will be converted into the
right to receive from the corporation Ten Cents ($0.10) in cash, without
interest, and (b) each share of common stock held by a shareholder
owning 250 or more shares will continue to represent one share of the
corporation's common stock after completion of the Transaction. A copy
of the proposed amendment to the corporation's Articles of Incorporation
is attached as Appendix A to the accompanying Proxy Statement.
2. To consider and act upon a proposal to elect three directors of the
corporation as set forth in the accompanying Proxy Statement.
3. To consider and transact such other business as may properly come
before the Annual Meeting.
Shareholders of record at the close of business on August 22, 2003
are entitled to vote at the Annual Meeting.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE TRANSACTION, PASSED UPON THE
MERITS OR FAIRNESS OF THE TRANSACTION, OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THE DISCLOSURES CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
TO INSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE URGED TO
DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE AS SOON
AS POSSIBLE. Sending in your Proxy now will not interfere with your rights
to attend the Annual Meeting or to vote your shares personally at the Annual
Meeting if you wish to do so.
You are cordially invited to attend the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
David S. Bonsal
Chairman of the Board
and Chief Executive Officer
DATE: _____________, 2003
Mission, Kansas
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PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY CARD. THE ENCLOSED
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. PLEASE DO NOT
RETURN ANY STOCK CERTIFICATES AT THIS TIME. AFTER THE EFFECTIVE DATE OF THE
TRANSACTION YOU WILL RECEIVE INSTRUCTIONS FOR EXCHANGING YOUR CERTIFICATES.
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TABLE OF CONTENTS
PROXY STATEMENT...................................................1
VOTING AND PROXIES................................................1
SUMMARY TERM SHEET................................................2
The Transaction.................................................2
Reasons for the Transaction.....................................3
Fairness of the Transaction.....................................3
Effects of the Transaction......................................3
U.S. Federal Income Tax Consequences............................4
Conduct of Business After the Transaction.......................4
Costs and Financing of the Transaction..........................4
No Appraisal Rights.............................................5
Escheat Laws....................................................5
Board Discretion................................................5
Vote Required...................................................5
Recommendation of the Board of Directors........................5
PROPOSAL 1........................................................5
General.........................................................5
SPECIAL FACTORS...................................................6
Background of the Transaction...................................6
Purpose and Reasons for the Transaction.........................6
Fairness of the Transaction.....................................8
Effects of the Transaction.....................................11
Material U.S. Federal Income Tax Consequences..................13
Conduct of Business After the Transaction......................14
Appraisal Rights...............................................15
Exchange of Fractional Share Certificates for Cash...............15
Escheat Laws.....................................................16
Costs and Financing of the Transaction...........................16
FINANCIAL INFORMATION............................................17
BOARD OF DIRECTORS DISCRETION....................................17
MARKET FOR COMMON STOCK, DIVIDENDS AND STOCK PURCHASES...........18
VOTE REQUIRED....................................................18
RECOMMENDATION OF THE BOARD OF DIRECTORS.........................18
Cautionary Statement Concerning Forward-Looking Statements.......18
PROPOSAL 2.......................................................20
ELECTION OF DIRECTORS............................................20
Nominees for Election as Directors.............................20
Meetings of the Board of Directors and Committees..............20
Section 16(a) Beneficial Ownership Reporting Compliance........21
INDEPENDENT AUDITORS.............................................21
Audit Fees.....................................................21
All Other Fees.................................................21
AUDIT COMMITTEE REPORT...........................................22
EXECUTIVE OFFICERS OF THE COMPANY................................22
EXECUTIVE COMPENSATION...........................................23
Officer Compensation...........................................23
Director Compensation..........................................23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................24
Universal Funding Corporation..................................24
Loan Commitment................................................26
FUTURE SHAREHOLDER PROPOSALS.....................................26
GENERAL..........................................................26
Other Matters..................................................26
Solicitation of Proxies........................................27
ADDITIONAL INFORMATION...........................................27
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................27
ANNEXES..........................................................28
APPENDIX A.......................................................29
i
UNIVERSAL MONEY CENTERS, INC.
6800 Squibb Road,
Mission, Kansas 66202
(913) 831-2055
___________, 2003
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Universal Money Centers, Inc. ("UMC",
"we", "us", "our"), for the annual meeting of shareholders to be held on
___________, 2003 at 10:00 a.m. Central time, at the offices of Stinson
Morrison Hecker LLP, 2600 Grand Blvd., 12th Floor, Kansas City, Missouri
64108, or any postponements or adjournments thereof (the "Annual Meeting").
These proxy solicitation materials were mailed on or about ___________, 2003
to all shareholders entitled to vote at the Annual Meeting.
Copies of our annual report to shareholders for the fiscal year ended
January 31, 2003 ("Annual Report") and our Quarterly Report on Form 10-QSB
for the fiscal quarter ended April 30, 2003 ("Quarterly Report") are enclosed
herewith. Such reports are not incorporated in this Proxy Statement and are
not to be deemed a part of the proxy soliciting material, except as expressly
provided herein.
VOTING AND PROXIES
Only shareholders of record at the close of business on ________, 2003
are entitled to receive notice of and to vote at the Annual Meeting. The
outstanding voting securities of UMC as of such date consisted of 4,157,378
shares of common stock, $.01 par value ("Common Stock"). The principal
executive offices of UMC are located at 6800 Squibb Road, Mission, Kansas
66202.
If the accompanying Proxy is signed and returned, the shares represented
by the Proxy will be voted in accordance with the specifications thereon. If
the manner of voting such shares is not indicated on the Proxy, they will be
voted for (a) approval of the amendment of UMC's Articles of Incorporation to
effect a 1-for-250 reverse stock split followed immediately by a 250-for-1
forward stock split of UMC's outstanding Common Stock; and (b) the nominees
for directors named herein.
Shareholders are entitled to one vote per share on all matters, except
the election of directors, as to which cumulative voting applies. Under
cumulative voting, each shareholder is entitled to cast as many votes as
shall equal the number of shares held by the shareholder multiplied by the
number of directors to be elected, and such votes may all be cast for a
single director or may be distributed among the directors to be elected as
the shareholder wishes. If a shareholder desires to cumulate his or her
votes, the accompanying Proxy should be marked to indicate clearly that the
shareholder desires to exercise the right to cumulate votes and to specify
how the votes are to be allocated among the nominees for directors. For
example, a shareholder may write "cumulate" on the Proxy and write below the
name of the nominee or nominees for whom the shareholder desires to cast
votes the number of votes to be cast for such nominee or nominees.
Alternatively, without exercising his or her right to vote cumulatively, a
shareholder may instruct the proxy holders not to vote for one or more of the
nominees by lining through the name(s) of such nominee or nominees on the
Proxy. If the Proxy is not marked with respect to the election of directors,
authority will be granted to the persons named in the Proxy to cumulate votes
if they so choose and to allocate votes among the nominees in such a manner
as they determine is necessary in order to elect all or as many of the
nominees as possible.
A shareholder may revoke his or her Proxy at any time before it is voted
by giving to our Secretary written notice of revocation bearing a later date
than the Proxy, by submission of a later-dated Proxy, or by revoking the
Proxy and voting in person at the Annual Meeting. Attendance at the Annual
Meeting will not in and of itself constitute a revocation of a Proxy. Any
written notice revoking a Proxy
1
should be sent to Ms. Pamela A. Glenn, Corporate Secretary, Universal Money
Centers, Inc., 6800 Squibb Road, Mission, Kansas 66202.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock will constitute a quorum for the
transaction of business at the Annual Meeting. Abstentions and broker
non-votes are counted for purposes of determining the presence or absence of
a quorum for the transaction of business. A broker non-vote occurs when a
shareholder fails to provide voting instructions to the shareholder's broker
for shares held in "street name." Under those circumstances, the broker may
be authorized to vote the shares on some routine items but is prohibited from
voting on other items. Those items for which a shareholder's broker cannot
vote result in broker non-votes.
In tabulating the votes cast on proposals other than the election of
directors, abstentions are counted and broker non-votes are not counted for
purposes of determining whether a proposal has been approved. Approval of the
amendment to the Articles of Incorporation requires the affirmative vote of a
majority of the shares of Common Stock outstanding and entitled to vote
thereon. If a shareholder votes to "abstain" on this proposal, it will have
the same effect as if the shareholder voted against the proposal. Brokers are
prohibited from voting shares held in street name on behalf of a shareholder
on this proposal absent voting instructions from the shareholder.
Consequently, if a shareholder fails to provide voting instructions to the
shareholder's broker to vote shares held in street name in favor of the
proposal, it will have the same effect as if the shareholder voted against
the proposal. In tabulating the votes cast on the election of directors,
votes withheld and broker non-votes are not counted for purposes of
determining the directors who have been elected.
SUMMARY TERM SHEET
This summary term sheet highlights selected information from the Proxy
Statement about the proposed Transaction. This summary term sheet may not
contain all of the information that is important to you. For a more complete
description of the Transaction, you should carefully read this Proxy
Statement (including Appendix A) and all of its annexes before you vote. For
your convenience, we have directed your attention in parentheses to the
location in this Proxy Statement where you can find a more complete
discussion of each item listed below.
As used in this Proxy Statement, "Transaction" refers to the reverse
stock split and forward stock split, together with the related cash payments
to shareholders holding fewer than 250 shares. The term "affiliated
shareholder" means any shareholder who is a director or executive officer of
UMC. The term "unaffiliated shareholder" means any shareholder other than an
affiliated shareholder.
The Transaction (Page 5). If the Transaction is approved and completed:
o UMC will file a Certificate of Amendment to its Articles of
Incorporation with the Missouri Secretary of State providing for a 1
for 250 reverse stock split of the Common Stock of UMC followed by a
250 for 1 forward stock split of the Common Stock of UMC;
o UMC shareholders holding fewer than 250 shares of UMC Common Stock
immediately prior to the reverse stock split ("fractional holders")
will receive a cash payment from UMC of Ten Cents ($0.10) per share,
without interest, for each share of Common Stock held immediately
prior to the reverse stock split, and will no longer be shareholders
of UMC;
o UMC shareholders holding 250 or more shares immediately prior to the
effective time of the reverse stock split will continue to hold the
same number of shares of UMC Common Stock after completion of the
Transaction and will not receive any cash payment.
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For a description of the provisions regarding the treatment of shares
held in street name, please see "Exchange of Fractional Share Certificates
for Cash" on page 15 of this Proxy Statement.
Reasons for the Transaction
(Page 6). The board of directors has determined that, for the reasons
discussed in detail in the Proxy Statement, the Transaction is in the best
interests of UMC and its shareholders. UMC believes the Transaction would:
o relieve UMC of the administrative burden and cost associated with
filing reports and otherwise complying with the requirements of
registration under the Securities Exchange Act of 1934 (the "Exchange
Act"), by reducing the number of shareholders from approximately 1430
to approximately 240 and de-registering our Common Stock under the
Exchange Act;
o eliminate the expense and burden of dealing with a large number of
shareholders holding small positions in UMC's stock; and
o give shareholders who own fewer than 250 shares of UMC immediately
prior to the reverse stock split the opportunity to liquidate their
shares of Common Stock at a fair price.
Fairness of the Transaction (Page 8).
o The board of directors of UMC believes that the Transaction, including
the price per share of Common Stock to be paid to fractional holders,
is fair to UMC and its shareholders, including unaffiliated
shareholders.
o The board of directors considered a number of factors in determining
the fairness of the Transaction.
o The transaction was unanimously approved by the board of directors of
UMC, including the directors who are not employees of UMC.
o UMC did not
o obtain an independent fairness opinion in connection with the
proposed Transaction,
o structure the Transaction to require the approval of at least a
majority of the shares held by unaffiliated shareholders, or
o establish a committee of independent directors to represent the
interests of unaffiliated shareholders.
Effects of the Transaction (Page 11). We believe that the Transaction will
have the following effects:
o the number of our shareholders of record will be reduced from
approximately 1430 to approximately 240, and the number of outstanding
shares of UMC Common Stock will decrease by approximately 1.2% from
4,157,378 shares to approximately 4,100,000 shares at a cost to us
(including expenses) of approximately $70,800;
o UMC will no longer be required to comply with the public company
reporting requirements of the Exchange Act, and certain provisions of
the Exchange Act will no longer apply to executive officers and
directors of UMC;
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o the Common Stock will no longer be eligible to be traded on the OTC
Bulletin Board and any trading in our Common Stock after the
Transaction will be limited to the "pink sheets" or privately
negotiated sales;
o shareholders who own fewer than 250 shares immediately prior to the
effective time of the reverse stock split will no longer have an
interest in or be shareholders of UMC and will not be able to
participate in any future earnings or growth of UMC;
o UMC estimates that it will save approximately $73,000 per year in
legal, accounting and other expenses, in addition to management time
and attention, as a result of no longer being subject to the public
company reporting requirements of the Exchange Act;
o less information regarding UMC will be publicly available because UMC
will no longer be subject to the public company reporting requirements
of the Exchange Act;
o the percentage of ownership of UMC Common Stock beneficially owned by
the current executive officers and directors of UMC as a group will
increase from approximately 55.0% to approximately 56.0%.
U.S. Federal Income Tax Consequences (Page 13). The following discussion
summarizing certain federal income tax consequences is based on current law and
is included for general information only. Tax matters are very complicated, and
the tax consequences to you of the Transaction will depend on your own
situation. Shareholders should consult their own tax advisors as to the federal,
state, local and foreign tax effects of the Transaction in light of their
individual circumstances.
We believe that the Transaction will have the following federal income tax
consequences:
o The Transaction should result in no material federal income tax
consequences to UMC.
o The receipt of cash in the Transaction by fractional holders will be
taxable for Federal income tax purposes.
o Shareholders who own 250 or more shares of our Common Stock
immediately prior to the reverse stock split will not recognize any
gain or loss in connection with the Transaction.
Conduct of Business After the Transaction. (Page 14). We expect our
business and operations to continue as they are currently being conducted and
the Transaction is not anticipated to have any effect upon the conduct of such
business.
Costs and Financing of the Transaction (Page 16). We estimate that the
total funds required to complete the Transaction will be approximately $70,800,
including the funds needed to:
o pay the fractional holders; and
o pay fees and expenses relating to the Transaction.
The consideration to shareholders and the fees and expenses incurred in
connection with the Transaction will be paid from UMC's working capital.
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No Appraisal Rights (Page 15). Under Missouri law, you are not entitled
to dissent from the Transaction and receive the "fair value" of your shares.
Escheat Laws (Page 16). Under state escheat laws, any cash for fractional
interests not claimed by the fractional holder entitled to it may escheat to,
and be claimed by, various states.
Board Discretion (Page 17). We reserve the right to abandon the Transaction
without further action by our shareholders at any time before the effectiveness
of the Transaction, even if the Transaction has been authorized by our
shareholders at the Annual Meeting.
Vote Required (Page 18). Approval of the Transaction requires the approval
of the holders of at least a majority of the outstanding shares of UMC Common
Stock entitled to vote on the proposed Transaction at the Annual Meeting.
As of the record date, the executive officers and directors of UMC
beneficially owned a total of approximately 55% of the outstanding Common
Stock entitled to vote at the Annual Meeting. Each executive officer and
director of UMC has advised UMC that he or she intends to vote his or her
shares in favor of the Transaction.
Recommendation of the Board of Directors (Page 18). The board of directors
unanimously recommends that shareholders of UMC vote "FOR" the approval of the
Transaction.
PROPOSAL 1
AMENDMENT TO OUR ARTICLES OF INCORPORATION
TO EFFECT A 1 FOR 250 REVERSE STOCK SPLIT AND A 250 FOR 1
FORWARD STOCK SPLIT OF OUR COMMON STOCK
General
Our board of directors has unanimously adopted and directed to be submitted
to a vote of the shareholders a proposal to amend Article III of UMC's Articles
of Incorporation to effect a 1 for 250 reverse stock split of our outstanding
Common Stock, to be followed by a 250-for-1 forward stock split of our
outstanding Common Stock held by holders of record of 250 or more shares of our
Common Stock immediately prior to the reverse stock split.
The proposed amendment will not change the number of authorized shares of
Common Stock or the par value of the shares of Common Stock. The proposed
amendment to Article III of the Articles of Incorporation to effect the reverse
stock split and the forward stock split is set forth in Appendix A to this Proxy
Statement and is incorporated herein by reference.
No fractions of shares will be issued to fractional holders in connection
with the Transaction and, after the Transaction, no fractional holder will have
any further interest as a shareholder of UMC. Fractional holders shall be
entitled to receive Ten Cents ($0.10) per share of Common Stock held immediately
prior to the reverse stock split.
If approved by the shareholders, the Transaction will be accomplished by
the filing of a Certificate of Amendment to UMC's Articles of Incorporation with
the Missouri Secretary of State. We plan to file the Certificate of Amendment as
soon as practicable after the proposed amendment is approved by shareholders at
the Annual Meeting. Under the Missouri General and Business Corporation Law, the
amendment to the Articles of Incorporation will become effective on the date of
filing, unless we specify otherwise. The board of directors reserves the right
not to file the Certificate of Amendment until such time as the board of
directors determines that filing is in the best interests of UMC and the
shareholders. Our board of directors also reserves the right to abandon the
Transaction before or after the
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Annual Meeting and prior to the effectiveness of the Transaction if for any
reason the board of directors deems it advisable to do so.
Any fractional holder who desires to retain an equity interest in UMC
after the Transaction may do so by purchasing, prior to the effective time of
the reverse stock split, a sufficient number of shares of Common Stock so
that the shareholder holds 250 or more shares of our Common Stock. Due to the
limited trading market for our Common Stock, it may be difficult for a
fractional holder to purchase enough shares to retain an equity interest in
UMC.
SPECIAL FACTORS
Background of the Transaction
From time to time since 2001, members of management and the board of
directors have informally discussed the relative costs and benefits of
remaining a public company. UMC has historically been a very small company,
with a relatively large number of small stockholders and very infrequent
trading in its Common Stock. In recent years, UMC's costs relating to its
public company status have increased, as a result of the requirement that
UMC's quarterly financial statements be reviewed by UMC's independent
auditors and as a result of the enactment of the Sarbanes-Oxley Act of 2002.
In addition, UMC has suffered losses in recent years. As a result of these
developments, the board of directors formally considered various alternatives
to reduce UMC's expenses at a meeting held on July 23, 2003.
At its July 23, 2003 meeting, the board of directors determined that it
was in the best interests of UMC and its shareholders to reduce the number of
shareholders of record of UMC and terminate UMC's status as a reporting
company under the Exchange Act. After consideration of the alternatives
described below (see "--Fairness of the Transaction"), the board of directors
decided to accomplish the Transaction through:
o a 1 for 250 reverse stock split, followed by a 250 for 1 forward stock
split for shareholders holding 250 or more shares of Common Stock
immediately prior to the reverse stock split, and
o a cash payment to each shareholder holding fewer than 250 shares of
Common Stock immediately prior to the reverse stock split in exchange
for their fractional shares.
After further consideration at the meeting, the board of directors determined
that the amount of the cash payment to each fractional holder would be Ten
Cents ($0.10) per share of Common Stock held immediately prior to the reverse
stock split. The board then adopted the proposed amendment to the Articles of
Incorporation to effect the Transaction and directed that the proposed
amendment be submitted to the shareholders for approval at the Annual
Meeting.
Purpose and Reasons for the Transaction
The board of directors decided to propose the Transaction in order to
(a) reduce administrative costs incurred by UMC in connection with the
continued registration of UMC's Common Stock under the Exchange Act, (b)
reduce administrative costs incurred by UMC in connection with the
maintenance of small shareholder accounts and (c) allow small shareholders to
liquidate their shares easily. UMC is undertaking the Transaction at this
time in order to obtain the benefits of the Transaction at the earliest
possible date and to avoid potential increased costs in complying with new
federal securities regulations adopted under the Sarbanes-Oxley Act of 2002.
Exchange Act Reporting. As a public company, UMC is required to prepare
and file with the SEC, among other items, the following Exchange Act reports:
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o Quarterly Reports on Form 10-QSB;
o Annual Reports on Form 10-KSB;
o Proxy statements and annual reports to shareholders as required under
the Exchange Act; and
o Current Reports on Form 8-K.
The legal and accounting costs associated with these reports and other
filing obligations comprise a significant overhead expense. These costs
include professional fees for our auditors and corporate counsel, printing
and mailing costs, internal compliance costs, and transfer agent costs. These
Exchange Act reports and related costs and expenses have been increasing over
the years. We believe that they will continue to increase, particularly as a
result of the additional reporting and disclosure obligations imposed on
public companies by the recently enacted Sarbanes-Oxley Act of 2002.
In addition to out-of-pocket costs, UMC also incurs indirect costs
associated with its public company status, including executive time spent to
prepare and review SEC filings. Because UMC has relatively few executive
personnel, these indirect costs can be substantial. The savings in
out-of-pocket costs that would result from the Transaction are estimated to
be as follows:
Approximate
Item Amount
---- -----------
Independent Auditors Fees $32,500
SEC Counsel Fees $32,500
Printing and Mailing Costs $ 6,500
Newswire Expense $ 1,300
Proxy Forwarding Expenses $ 200
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TOTAL $73,000
Administrative Expenses to Maintain Small Shareholder Accounts. As of
the date of the Proxy Statement, UMC had approximately 1,430 shareholders of
record. On that date, approximately 1,190 shareholders of record owned fewer
than 250 shares each. Although holders of fewer than 250 shares constitute
83% of the shareholders of record of UMC, such shareholders own only 1.2% of
the outstanding shares of Common Stock. As of the date of this Proxy
Statement, approximately 528 shareholders of record owned ten or fewer shares
each. The cost of administering each registered shareholder's account is the
same regardless of the number of shares held in that account. Therefore, our
costs to maintain such small accounts are disproportionately high when
compared to the total number of shares involved.
Liquidity for Small Shareholders. We believe that holders of fewer than
250 shares may be deterred from selling their shares because of the lack of
an active trading market and because of disproportionately high brokerage
costs. Because of UMC's small size and lack of significant public float, our
Common Stock has not been listed on a national stock exchange or traded on
the Nasdaq stock market for many years. The trading volume in our stock has
been, and continues to be, very limited. UMC is not aware of any trades of
Common Stock on the OTC Bulletin Board between January 1, 2002 and July 23,
2003. The Pink Sheets, LLC reported to UMC that there had been no trades in
the "pink sheets" in the first six months of 2003 and one trade in 2002.
As described below, the board of directors believes that the value per
share of Common Stock is Ten Cents ($0.10). Based upon this valuation, each
holder of fewer than 250 shares of Common Stock owns stock valued in the
aggregate at less than $25.00, and each holder of ten or fewer shares owns
stock valued in the aggregate at $1.00 or less. 528 shareholders of UMC own
of record ten or fewer shares. The
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board of directors believes that the Transaction will give fractional holders
an opportunity to receive cash for their shares without having to pay
disproportionately high brokerage commissions.
Fairness of the Transaction
The board of directors believes that the transaction is fair to, and in
the best interests of, UMC and its shareholders, including unaffiliated
shareholders. The board of directors believes that the process by which the
Transaction is to be approved is fair to UMC and its shareholders, including
unaffiliated shareholders. In deciding upon the fairness of the Transaction,
the board of directors gave consideration to numerous factors, including
those described below and the reasons for the Transaction set forth in
"Purpose and Reasons for the Transaction" above. In reaching its conclusion,
the board did not assign any relative or specific weights to the various
factors considered, except as specifically described below. Individual
directors may have given differing weights to different factors.
Factors Considered in Determining Whether to Terminate Registration as a
Reporting Company. At its meeting on July 23, 2003, the board first
considered whether it was in the best interests of UMC and its shareholders
to engage in a transaction to reduce the number of shareholders in order to
terminate UMC's status as a reporting company under the Exchange Act. The
board considered the following positive factors in determining that it was in
the best interests of UMC and its stockholders to engage in a transaction:
o UMC and its shareholders receive little benefit from UMC being a
public company because of UMC's very small size, the lack of analyst
coverage and the very limited trading in UMC's stock.
o Terminating UMC's registration under the Exchange Act and reducing the
number of shareholders would reduce UMC's annual out-of-pocket
expenses by approximately $73,000 and save management considerable
time and effort that is currently being expended to comply with
Exchange Act provisions.
o The costs of remaining a public company appear to be increasing as a
result of the enactment of the Sarbanes-Oxley Act of 2002.
o Small shareholders would receive cash for their interests in any such
transaction without payment of disproportionately high brokerage
costs.
The board considered the following negative factors in determining whether it
was in the best interests of UMC and its shareholders to terminate the
registration of UMC's Common Stock under the Exchange Act:
o Information regarding UMC that would be available to its shareholders
would be reduced as a result of the termination.
o The ability of shareholders of UMC to engage in transactions in UMC
stock in public markets may be reduced.
o Shareholders would lose certain protections currently provided under
the Exchange Act, such as limitations on short-swing transactions by
executive officers and directors under Section 16 of the Exchange Act.
o UMC would incur costs in engaging in any such transaction.
After consideration of these factors, the board of directors determined
that the benefits of terminating UMC's registration under the Exchange Act
outweighed the detriments to UMC and its shareholders, including unaffiliated
shareholders.
-8-
Factors Considered in Determining Form of Transaction. After considering
several different forms of transactions at its meeting on July 23, 2003, the
board determined to conduct a reverse stock split followed by a forward stock
split in order to ensure that the UMC would have fewer than 500 shareholders
of record, which is necessary to terminate the registration UMC's Common
Stock under the Exchange Act, and to minimize the disruption to shareholders
not being cashed out. The board considered the fact that small shareholders
would not have a choice as to whether to sell their shares in this form of
transaction, but also took into account that the economic interests
represented by their shares were very small and that the such holders could
remain shareholders if they so desired by increasing their share ownership to
250 shares.
The board selected 250 shares as the ownership minimum because it would
ensure that, after completion of the Transaction, the number of record
shareholders would be fewer than the 500 shareholder threshold necessary to
terminate registration with the SEC, it would substantially reduce the number
of shareholders of record of UMC and it would require the repurchase of a
relatively small number of shares (approximately 50,000 shares, or 1.2% of
UMC's outstanding shares).
The board considered several different types of transactions to
accomplish the reduction in the number of shareholders but rejected these
alternatives. These alternative transactions were:
o Odd-lot tender offer. The board was uncertain as to whether this
alternative would result in shares being tendered by a sufficient
number of record shareholders to reduce the number of shareholders
below 500. The board found it unlikely that many holders of small
numbers of shares would make the effort to tender their shares given
the limited value of the shares.
o Tender offer to all unaffiliated shareholders. The board of directors
determined that UMC did not have the funds to effect this transaction
and would have to incur an unacceptably high amount of additional
debt, if available, in order to effect this transaction.
o Reverse stock split only. Although this alternative would accomplish
the objective of reducing the number of record shareholders below the
500 shareholder threshold, UMC would be required to cash-out
fractional share interests held by each shareholder, not just
fractional holders. The board rejected this alternative due to the
disruption caused to holders of 250 or more shares of Common Stock,
who are not being cashed out in the Transaction.
Factors Considered in Determining Cash-out Price of Fractional Shares.
In considering the price to be paid to shareholders otherwise entitled to
fractional shares of Common Stock in the Transaction, the board reviewed and
discussed with management certain of the materials which management had
prepared and previously distributed to the board regarding the valuation of
shares of Common Stock. The materials prepared by management included:
o UMC's audited financial statements for year ended January 31, 2003
("fiscal 2003"),
o UMC's quarterly report on Form 10-QSB for the first quarter of the
fiscal year ended January 31, 2004,
o a listing of bid prices for the Common Stock for calendar year 2002
and the first six months of 2003, and
o a summary of stock repurchases by UMC for the fiscal years ended
January 31, 2001, 2002 and 2003 and the first quarter of the current
fiscal year.
The board considered a number of factors in determining the cash-out
price for the fractional shares, including the net value of the assets of
UMC, the recent losses suffered by UMC and its limited liquidity. The board
noted that the book value of the assets of UMC was $0.097 per share as April
30,
-9-
2003 and had decreased since that date. The board determined that book value
per share was a fair approximation of the net value of the assets of UMC. The
board discussed that the liquidation value of UMC would probably be less than
the net value of the assets because of the costs of liquidation. The board
considered the substantial losses incurred by UMC in recent years and its
decreasing liquidity. The board also discussed the other factors below, and
determined that the cash-out price for each fractional share acquired in the
transaction would be Ten Cents ($0.10).
The board of directors believes that the cash-out price is fair relative
to the following potential measures of value:
o Current Market Prices; Recent Historical Market Prices. The board of
directors considered recent historical market prices and current
market prices of Common Stock. UMC did not locate any reported trades
of Common Stock on the OTC Bulletin Board between January 1, 2002 and
July 23, 2003. The Pink Sheets, LLC reported to UMC that there had
been no trades in the "pink sheets" in 2003 and one trade in 2002 at a
price of $.001 per share. UMC does not know how many shares were
traded in the single transaction. The board concluded that there was
not an active market for the stock, but did note that the cash-out
price substantially exceeded the only reported trade in Common Stock
since January 1, 2002 that UMC could locate.
o Prices Paid In Recent Stock Repurchases By UMC. The board considered
recent repurchases made by UMC. UMC has made only one repurchase of
stock during the past two years. In April 2002, UMC purchased 83,595
shares of Common Stock from David A. Windhorst, the former President
of UMC, in connection with the settlement of litigation with Mr.
Windhorst. The average purchase price for these shares was
approximately Sixteen Cents ($0.16) per share. However, under the
settlement agreement, 25,000 of the shares, which were previously
tendered to and not accepted by Mr. Windhorst, were assigned a value
of Forty Cents ($0.40) per share, the value assigned to the shares at
the time they were tendered to Mr. Windhorst in 2000. The remaining
58,595 shares owned by Mr. Windhorst, were purchased for approximately
Six Cents ($0.06) per share under the settlement agreement. Because
the repurchase was part of a settlement of a number of claims, the
board did not place substantial weight on the amount allocated to the
repurchase of shares in the settlement agreement.
o Net Book Value. As of April 30, 2003, the net book value per share was
$0.097. The board noted that book value is an accounting concept
rather than a true measure of value, but the board did determine that
net book value in this case was a fair approximation of net asset
value. The board took into account that net book value had further
declined since April 30, 2003. The board noted that the cash-out price
exceeded the net book value and net asset value per share of UMC.
o Going Concern Value. The board did not determine a specific going
concern value for UMC. The board did review UMC's net asset value,
recent losses and limited liquidity and concluded that its going
concern value would not exceed the cash-out price. The board reviewed
the results of operations of UMC for the previous three years and for
the first quarter of fiscal year 2004. For fiscal years 2001, 2002 and
2003, UMC reported net losses of $14,209, $1,025,855 and $271,075,
respectively. For the quarter ended April 30, 2003, UMC reported a net
loss of $231,007. At April 30, 2003, UMC had a working capital deficit
of $1,467,504 and a ratio of current assets to current liabilities of
.16.
o Liquidation Value. The board reviewed liquidation value as the price
received for all of the assets of UMC in a commercially reasonable
sale. The board concluded that liquidation value would be less than
net book value given the costs of liquidation.
-10-
After consideration of all of these factors, the board determined that
the cash-out price of Ten Cents ($0.10) per share is fair to UMC and its
shareholders, including unaffiliated shareholders.
Additional Factors Considered in Determining Fairness of Transaction.
The board of directors considered the following additional factors in
determining that the proposed Transaction is fair to UMC and its
shareholders, including unaffiliated shareholders:
o The Transaction was unanimously approved by the board of directors of
UMC, including all of the directors who are not employees of UMC.
Non-employee directors constitute a majority of the members of the
board of directors.
o The Transaction is not structured so that approval of at least a
majority of unaffiliated shareholders is required. The board
determined that any such voting requirement would usurp the power of
the holders of a majority of UMC's outstanding shares to consider and
approve the proposed amendment as provided under Missouri law and
UMC's charter documents.
o No independent committee of the board has reviewed the fairness of the
Transaction proposal. However, the independent directors of UMC voted
in favor of the Transaction.
o No unaffiliated representative acting solely on behalf of the
shareholders for the purpose of negotiating the terms of the
Transaction proposal or preparing a report covering the fairness of
the Transaction proposal was retained by UMC or by a majority of
directors who are not employees of UMC. UMC did not obtain any report,
opinion or appraisal that is materially related to the Transaction.
The board of directors did not believe that it would be cost-effective
to obtain a fairness opinion, because the aggregate value of the
fractional shares to be purchased is approximately $5,000.
o No provision was made by UMC to grant unaffiliated shareholders access
to the corporate files of UMC or to obtain counsel or appraisal
services at the expense of UMC.
Based upon all of the factors described above and the reasons for the
Transaction set forth in "Purpose and Reasons for the Transaction" above, the
board of directors believes that the transaction is fair to, and in the best
interests of, UMC and its shareholders, including unaffiliated shareholders,
and the board of directors believes that the process by which the Transaction
is to be approved is fair to UMC and its shareholders, including unaffiliated
shareholders.
Effects of the Transaction
Reduction in Number of Shareholders. UMC expects that as a result of
the Transaction, the number of shareholders of record of UMC will be reduced
from approximately 1,430 shareholders to approximately 240 shareholders,
depending upon the number of shareholders otherwise entitled to fractional
shares in the Transaction.
Termination of Exchange Act Registration and Reporting. Shares of
Common Stock are currently registered under the Exchange Act. Such
registration may be terminated upon application by UMC to the Securities and
Exchange Commission if there are fewer than 500 holders of record of our
Common Stock. The board of directors intends to terminate the registration
of the Common Stock under the Exchange Act as soon as practicable after the
Transaction is effected. Termination of registration of shares of our Common
Stock would substantially reduce the information required to be furnished by
UMC to its shareholders and to the SEC and would make certain provisions of
the Exchange Act no longer applicable to UMC. These provisions include:
o the beneficial ownership reporting and short-swing profit recovery
provisions of Section 16,
-11-
o the requirement to file and furnish proxy material in connection with
shareholders' meetings pursuant to Section 14,
o the requirement to file periodic and current reports pursuant to
Section 13, and
o the requirements of Rule 13e-3 with respect to "going private"
transactions.
Furthermore, affiliates of UMC may be deprived of the ability to dispose
of shares of Common Stock pursuant to Rule 144, as amended.
Effects on Market for Shares. Currently, there is little, if any,
public trading of UMC Common Stock. The Common Stock is currently eligible to
be traded in the over-the-counter market, both on the OTC Bulletin Board and
in the "pink sheets". We believe that the Common Stock trades publicly on a
very infrequent basis. UMC's Common Stock will cease to be traded on the OTC
Bulletin Board and any trading in our Common Stock after the Transaction may
occur only in the "pink sheets" or in privately negotiated sales. There can
be no assurance that any trading will occur after UMC terminates the
registration of our Common Stock.
Effects on UMC. UMC estimates that the Transaction will reduce the
number of shares of Common Stock of UMC by up to 50,000 shares (approximately
1.2% of outstanding shares) at a cost to UMC (including expenses) of
approximately $70,800. See "Costs and Financing of the Transaction." The
repurchased fractional shares shall be retired. The Transaction will also
reduce the number of shareholders of UMC. See "Effects of the
Transaction--Reduction in Number of Shareholders." Termination of registration
of shares of our Common Stock would substantially reduce the information
required to be furnished by UMC to its shareholders and to the SEC and would
make certain provisions of the Exchange Act no longer applicable to UMC. See
"Effects of the Transaction--Termination of Exchange Act Registration and
Reporting." The liquidity and market value of the shares of Common Stock may
be adversely affected by the Transaction and by termination of the
registration of Common Stock under the Exchange Act. See "Effects of the
Transaction--Effects on Market for Shares." UMC estimates that termination of
the registration of our Common Stock under the Exchange Act will save UMC
approximately $73,000 per year in legal, accounting and other expenses.
Effects on Holders of Fewer than 250 Shares of Common Stock. Following
the Transaction, holders of fewer than 250 shares of Common Stock will
receive payment of Ten Cents ($0.10) per share for their shares and will
cease to be shareholders. They will have no further interest in UMC with
respect to any cashed-out shares and will only have a right to receive cash
for these shares. We will send fractional holders a letter of transmittal as
soon as practicable after the Transaction with instructions on how to
surrender existing certificate(s) in exchange for cash payment.
UMC intends to permit shareholders holding Common Stock in street name
through a nominee (such as a bank or broker) to be treated in the Transaction
in the same manner as shareholders whose shares are registered in their names
and will instruct nominees to effect the Transaction for their beneficial
holders. However, nominees may have different procedures and shareholders
holding Common Stock in street name should contact their nominees. Beneficial
owners of fewer than 250 shares of Common Stock in "street name" will not be
required to cash in their shares.
Effects on Unaffiliated Shareholders. With respect to unaffiliated
shareholders who own 250 or more shares of Common Stock, termination of
registration of shares of our Common Stock would substantially reduce the
information required to be furnished by UMC to its shareholders and to the
SEC and would make certain provisions of the Exchange Act no longer
applicable to UMC, which may adversely affect unaffiliated shareholders. See
"Effects of the Transaction -- Termination of Exchange Act Registration."
The liquidity and market value of the shares of our Common Stock held by
unaffiliated shareholders may be adversely affected by the Transaction and by
termination of the registration of our Common Stock under the Exchange Act.
See "Effects of the Transaction -- Effect on Market for Shares."
-12-
Effects on Affiliated Shareholders. The Transaction will have various
effects on shareholders who are affiliates of UMC. We expect that our
executive officers and directors will continue to beneficially own the same
number of shares immediately after the Transaction and the percentage of
ownership of our Common Stock held by executive officers and directors of
UMC, as a group, will increase by less than 1% of outstanding shares. As
described under "Effects of the Transaction--Termination of Exchange Act
Registration," if the registration of the our Common Stock is terminated
under the Exchange Act:
o executive officers, directors and other affiliates would no longer be
subject to any of the reporting requirements and restrictions of the
Exchange Act, including the short-swing profit provisions of the
Section 16, and
o executive officers, directors and other affiliates of UMC may be
deprived of the ability to dispose of shares of Common Stock pursuant
to Rule 144, as amended.
Material U.S. Federal Income Tax Consequences
The following summarizes certain material federal income tax
consequences to UMC and its shareholders resulting from the Transaction. This
discussion is included for general information only. No opinion of counsel or
ruling from the Internal Revenue Service has been sought or obtained with
respect to the tax consequences of the Transaction. This summary is based on
existing U.S. federal income tax law, which may change, even retroactively.
This summary does not discuss all aspects of federal income taxation that may
be important to you in light of your individual circumstances. In addition,
this summary does not discuss any state, local, foreign, or other tax
considerations. This summary also assumes that you have held and will
continue to hold your shares as capital assets for investment purposes under
the Internal Revenue Code of 1986, as amended. Shareholders are encouraged to
consult their own tax advisor as to the particular federal, state, local,
foreign, and other tax consequences, in light of their individual
circumstances.
Federal income tax consequences to UMC. We believe that the Transaction
will be treated as a tax-free "recapitalization" for federal income tax
purposes. This should result in no material federal income tax consequences
to UMC.
Federal income tax consequences to shareholders owning 250 or more
shares. If you (1) continue to hold our Common Stock immediately after the
Transaction, and (2) you receive no cash as a result of the Transaction, you
will not recognize any gain or loss in the Transaction and you will have the
same adjusted tax basis and holding period in your Common Stock as you had in
such stock immediately prior to the Transaction.
Federal income tax consequences to fractional holders. If you receive
cash as a result of the Transaction but do not continue to hold our Common
Stock immediately after the Transaction, your tax consequences will depend on
whether, in addition to receiving cash, a person or entity related to you (as
determined by the Internal Revenue Code) continues to hold our Common Stock
immediately after the Transaction, as explained below.
If you (1) receive cash in exchange for our Common Stock as a result of
the Transaction but do not continue to hold our Common Stock immediately
after the Transaction, and (2) you are not related to any person or entity
which holds our Common Stock immediately after the Transaction, you will
recognize capital gain or loss. The amount of capital gain or loss you
recognize will equal the difference between the cash you receive for your
cashed-out stock and your aggregate adjusted tax basis in such stock.
If you are related to a person or entity who continues to hold our
Common Stock immediately after the Transaction (as determined by the Internal
Revenue Code) you will be treated as owning shares
-13-
actually or constructively owned by such individuals or entities which may
cause your receipt of cash in exchange for our Common Stock to be treated
first as ordinary dividend income to the extent of your ratable share of
UMC's undistributed earnings and profits, then as a tax-free return of capital
to the extent of your aggregate adjusted tax basis in your shares, and any
remaining amount will be treated as capital gain. If you are related to a
person or entity who continues to hold our Common Stock immediately after the
Transaction, you are urged to consult your tax advisor as to the particular
federal, state, local, foreign, and other tax consequences of the
Transaction, in light of your specific circumstances.
Capital Gain And Loss. For individuals, net capital gain (defined
generally as your total capital gains in excess of capital losses for the
year) recognized upon the sale of capital assets that have been held for more
than 12 months generally will be subject to tax at a rate not to exceed 20%.
Net capital gain recognized from the sale of capital assets that have been
held for 12 months or less will continue to be subject to tax at ordinary
income tax rates. In addition, capital gain recognized by a corporate
taxpayer will continue to be subject to tax at the ordinary income tax rates
applicable to corporations. There are limitations on the deductibility of
capital losses.
Backup Withholding. Shareholders who own fewer than 250 shares of Common
Stock will be required to provide their social security or other taxpayer
identification numbers (or, in some instances, additional information) in
connection with the Transaction to avoid backup withholding requirements that
might otherwise apply. The letter of transmittal will require each such
shareholder to deliver such information when the Common Stock certificates
are surrendered following the effective time of the Transaction. Failure to
provide such information may result in backup withholding.
Consult Tax Advisor. As explained above, the amounts paid to you as a
result of the Transaction may result in dividend income, capital gain income,
or some combination of dividend and capital gain income to you depending on
your individual circumstances. The U.S. Federal income tax discussion set
forth above is based upon present law, which is subject to change possibly
with retroactive effect. You should consult your tax advisor as to the
particular federal, state, local, foreign, and other tax consequences of the
Transaction, in light of your specific circumstances.
Conduct of Business After the Transaction
We expect our business and operations to continue as they are currently
being conducted and the Transaction is not anticipated to have any effect
upon the conduct of such business. Upon termination of the registration of
our Common Stock under the Exchange Act, we will cease the filing of periodic
reports, proxy statements and other reports and documents otherwise required
to be filed with the SEC.
Other than as described in this Proxy Statement, neither UMC nor its
management has any current plans or proposals to effect any extraordinary
corporate Transaction, such as a merger, reorganization or liquidation; to
sell or transfer any material amount of its assets; to change its board of
directors or management; to materially change its dividend policy or
indebtedness or capitalization; or otherwise to effect any material change in
its corporate structure or business.
UMC has engaged in preliminary discussions with representatives of
Global Axcess Corp. concerning a possible business combination between the
two companies. Global Axcess Corp. is a small public company which operates
an ATM network. The two companies have exchanged some financial and business
information. The companies have not engaged in any negotiations regarding the
price and other terms of a possible transaction, and the companies have no
plans to enter into such negotiations at the present time.
-14-
Appraisal Rights
No appraisal rights are available under the Missouri General and
Business Corporation Law to any shareholder who dissents from the proposal to
approve the Transaction.
EXCHANGE OF FRACTIONAL SHARE CERTIFICATES FOR CASH
Promptly after the Transaction, UMC will mail to each holder of a
certificate or certificates which immediately prior to the effective time of
the Transaction evidenced outstanding shares that appear, based on
information available to UMC, to have been converted into the right to
receive a cash payment ("Certificates"), a letter of transmittal. The letter
of transmittal will:
o contain a certification for the fractional holder to sign stating the
number of shares held by the fractional holder;
o request any other information we need;
o specify that the risk of loss and title to the Certificates shall pass
to UMC only when the Certificate is delivered to UMC; and
o provide instructions to the fractional holder as to how to surrender
the Certificates in exchange for the cash payment payable with respect
to such Certificates.
Upon surrender of a Certificate for cancellation to UMC, together with a
fully completed and signed letter of transmittal containing the certification
that the fractional holder holds fewer than 250 shares of our Common Stock
and any other customary documents required pursuant to such instructions, the
fractional holder will be entitled to receive a cash payment payable with
respect to the shares formerly represented by the surrendered Certificate or
Certificates. When a Certificate is surrendered, we will cancel it.
UMC intends to permit shareholders holding Common Stock in street name
through a nominee (such as a bank or broker) to be treated in the Transaction
in the same manner as shareholders whose shares are registered in their names
and will instruct nominees to effect the Transaction for their beneficial
holders. However, nominees may have different procedures and shareholders
holding Common Stock in street name should contact their nominees. Beneficial
owners of fewer than 250 shares of Common Stock in "street name" will not be
required to cash in their shares.
UMC (along with any other person or entity to which it may delegate or
assign any responsibility or task with respect thereto) shall have full
discretion and exclusive authority (subject to its right and power to so
delegate or assign such authority) to:
o make inquiries of any shareholder or other person as it may deem
appropriate for purposes of effecting the Transaction; and
o resolve and determine, in its sole discretion, all ambiguities,
questions of fact and interpretation and other matters relating to the
Transaction or any letter of transmittal, including, without
limitation, any questions as to the number of shares held by any
holder immediately prior to the effective time of the reverse stock
split. All such determinations by UMC shall be final and binding on
all parties.
For purposes of effecting the Transaction, UMC may in its sole
discretion, but shall not have any obligation to do so,
o presume that any shares of Common Stock held in a discrete account
(whether record or beneficial) are held by a person distinct from any
other person, notwithstanding that the
-15-
registered or beneficial holder of a separate discrete account has
the same or a similar name as the holder of a separate discrete
account; and
o aggregate the shares held (whether of record or beneficially) by any
person or persons that UMC determines to constitute a single holder
for purposes of determining the number of shares held by such holder.
You should not send your stock certificates now. You should send them
only after you receive a letter of transmittal from UMC. Letters of
transmittal will be mailed soon after the Transaction is completed.
ESCHEAT LAWS
The unclaimed property and escheat laws of each state provide that under
circumstances defined in that state's statutes, holders of unclaimed or
abandoned property must surrender that property to the state. Fractional
holders whose shares are eliminated and whose addresses are unknown to UMC,
or who do not return their stock certificates and request payment, generally
will have a limited period of time after the Transaction in which to claim
the cash payment.
For example, with respect to fractional holders whose last known
addresses are in Kansas, as shown by our records, the period is three (3)
years. Following the expiration of that three-year period, the Uniform
Disposition of Unclaimed Property Act of Kansas would likely cause the cash
payments to escheat to the State of Kansas. For shareholders that reside in
Missouri, as shown by our records, the period is five (5) years. Following
the expiration of that five-year period, the Uniform Disposition of Unclaimed
Property Act of Missouri would likely cause the cash payments to escheat to
the State of Missouri.
For shareholders who reside in other states or whose last known
addresses, as shown by our records, are in states other than Kansas or
Missouri, such states may have abandoned property laws which call for such
state to obtain either (i) custodial possession of property that has been
unclaimed until the owner reclaims it; or (ii) escheat of such property to
the state. Under the laws of such other jurisdictions, the "holding period"
or the time period which must elapse before the property is deemed to be
abandoned may be shorter or longer than as set forth under Missouri or Kansas
law.
COSTS AND FINANCING OF THE TRANSACTION
The costs to UMC related to this Transaction are estimated to be as
follows:
Approximate
Item Amount
---- -----------
Legal Fees $25,000
Independent Auditors Fees 4,500
Transfer Agent Fees 25,000
Printing and Mailing Costs 8,000
Proxy Forwarding Expenses 3,000
Newswire Expense 300
Cash-Out of Fractional Shares 5,000
-------
TOTAL $70,800
In connection with our Annual Meeting, some of these fees and expenses
would have been incurred regardless of the Transaction. However, we estimate
that the Transaction resulted in additional
-16-
costs of approximately $55,000. The consideration to shareholders and the
fees and expenses incurred in connection with the Transaction will be paid
from UMC's working capital.
FINANCIAL INFORMATION
UMC hereby incorporates by reference (a) the financial statements and
the notes thereto contained on pages 20 through 36 of UMC's Annual Report
included as an Annex to this Proxy Statement, (b) the report of independent
certified public accountants thereon contained on page 21 of the Annual
Report, (c) Management's Discussion and Analysis or Plan of Operation
contained on pages 10 through 19 of the Annual Report, (d) the Financial
Statements and notes thereto contained on pages 3 through 8 of UMC's
Quarterly Report included as an Annex to this Proxy Statement and (e)
Management's Discussion and Analysis or Plan of Operation contained on pages
8 through 16 of the Quarterly Report.
In addition, the following sets forth certain financial information for
UMC and its subsidiaries for and as of the following periods and dates:
- ----------------------------------------------------------------------
Three Months Ended Year Ended
- ----------------------------------------------------------------------
April 30, April 30, January 31, January 31,
2003 2002 2003 2002
- ----------------------------------------------------------------------
Ratio of
Earnings to (12.90) (3.87) (1.82) (5.33)
Fixed Charges
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
April 30, 2003 January 31, 2003
- ----------------------------------------------------------------------
Book Value Per $0.0975 $0.15
Share
- ----------------------------------------------------------------------
BOARD OF DIRECTORS DISCRETION
Although the board requests shareholder approval of proposed amendment
to Article III of UMC's Articles of Incorporation, the board reserves the
authority to decide, in its discretion, to withdraw the proposed amendment
from the agenda of the Annual Meeting prior to any shareholder vote thereon
or to abandon the Transaction after such vote and before the effectiveness of
the Transaction. Although the board presently believes that the proposed
amendment is in the best interests of UMC and its shareholders, and thus has
recommended a vote for the proposed amendment, the board nonetheless believes
that it is prudent to recognize that, between the date of this Proxy
Statement and the effective time of the Transaction, factual circumstances
could possibly change such that it might not be appropriate or desirable to
effect the Transaction at this time. If the board decides to withdraw the
proposed amendment from the agenda of the Annual Meeting, the board will
notify the shareholders of such decision by announcement at the meeting. If
the board decides to abandon the Transaction after the meeting but before the
effective time of the Transaction, the board will promptly publicly announce
such decision.
-17-
MARKET FOR COMMON STOCK, DIVIDENDS AND STOCK PURCHASES
Market for Common Stock
Currently, there is little, if any, public trading of our Common Stock.
UMC believes that the Common Stock is currently eligible to be traded in the
over- the- counter market, both on the OTC Bulletin Board and in the "pink
sheets". UMC believes that the Common Stock trades publicly on a very
infrequent basis.
Dividends
No cash dividends were declared during fiscal years 2002 and 2003 or
during the first quarter of fiscal year 2004. UMC does not currently expect
to pay cash dividends in the immediate future.
Stock Repurchases by UMC
In April 2002, we purchased 83,595 shares of Common Stock from David A.
Windhorst, our former President, in connection with the settlement of
litigation matters with Mr. Windhorst. The average purchase price for these
shares was $0.16075 per share. However, under the settlement agreement,
25,000 of the shares, which were previously tendered to and not accepted by
Mr. Windhorst, were assigned a value of Forty Cents ($0.40) per share, the
value assigned to the shares at the time they were tendered to Mr. Windhorst
in 2000. The remaining 58,595 shares owned by Mr. Windhorst were purchased
for approximately Six Cents ($0.06) per share under the settlement agreement.
VOTE REQUIRED
The proposed Transaction must be approved by the holders of a majority
of the outstanding shares of our Common Stock entitled to vote thereon. Any
abstention or broker non-vote will have the effect of a vote against the
proposed Transaction.
As of the record date, the executive officers and directors of UMC
beneficially owned a total of approximately 55% of the outstanding Common
Stock entitled to vote at the Annual Meeting. Each executive officer and
director of UMC has advised UMC that he or she intends to vote his or her
shares in favor of the Transaction.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" PROPOSAL 1 CONCERNING AMENDMENT TO OUR ARTICLES OF INCORPORATION TO
EFFECT A 1-FOR-250 REVERSE STOCK SPLIT AND A 250-FOR-1 FORWARD STOCK SPLIT OF
OUR COMMON STOCK.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Proxy Statement that are not
statements of historical fact may constitute "forward-looking statements"
within the meaning of Section 21E of the Exchange Act. These statements are
subject to risks and uncertainties, as described below.
Examples of forward-looking statements include, but are not limited to:
(i) projections of revenues, income or loss, earnings or loss per share,
capital expenditures, the payment or non-payment of dividends, capital
structure and other financial items, (ii) statements of plans and objectives
of our management or board, including plans or objectives relating to our
products or services, (iii) statements of future economic performance, and
(iv) statements of assumptions underlying the statements described in (i),
(ii) and (iii). Forward-looking statements can often be identified by the
use of forward-looking
-18-
terminology, such as "believes," "expects," "may," "will," "should," "could,"
"intends," "plans," "estimates" or "anticipates," variations thereof or
similar expressions.
Forward-looking statements are not guarantees of future performance or
results. They involve risks, uncertainties and assumptions. Our future
results of operations, financial condition and business operations may differ
materially from those expressed in these forward-looking statements.
Investors are cautioned not to put undue reliance on any forward-looking
statement.
There are a number of factors that could cause actual results to differ
materially from those discussed in the forward-looking statements, including
those factors described below. Other factors not identified herein could
also have such an effect. Among the factors that could cause actual results
to differ materially from those discussed in the forward-looking statements
are the following:
o changes in laws or card association rules affecting our ability to
impose surcharge fees, and continued customer willingness to pay
surcharge fees;
o our ability to form new strategic relationships and maintain existing
relationships with issuers of credit cards and national and regional
card organizations;
o our ability to expand our ATM base and transaction processing
business;
o the availability of financing at reasonable rates for vault cash and
for other corporate purposes, including funding our expansion plans;
o our ability to maintain our existing relationships with an operator of
combination convenience stores and gas stations at which we maintain
101 ATMs as of January 31, 2003;
o our ability to maintain our existing relationship with an operator of
retail stores at which we maintain 387 ATMs as of January 31, 2003;
o our ability to keep our ATMs at other existing locations at reasonable
rental rates and to place additional ATMs in preferred locations at
reasonable rental rates;
o the extent and nature of competition from financial institutions,
credit card processors and third party operators, many of whom have
substantially greater resources;
o our ability to maintain our ATMs and information systems technology
without significant system failures or breakdowns;
o our ability to comply with regulatory requirements of Federal Deposit
Insurance Corporation, the Office of the Comptroller of the Currency
and the Federal Reserve Board;
o the extent of vault cash losses from certain ATMs funded by Universal
Funding Corporation, for which we do not maintain insurance;
o our ability to develop new products and enhance existing products to
be offered through ATMs, and our ability to successfully market these
products;
o our ability to identify suitable acquisition candidates, to finance
and complete acquisitions and to successfully integrate acquired
assets and businesses into existing operations;
o our ability to retain senior management and other key personnel;
o changes in general economic conditions.
Any forward-looking statement contained herein is made as of the date of
this document. We do not undertake to publicly update or correct any of
these forward-looking statements in the future.
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PROPOSAL 2
ELECTION OF DIRECTORS
The board presently consists of three directors, whose terms of office
will expire upon the election of their successors at the Annual Meeting. The
board has nominated each of the current directors of UMC for re-election at
the Annual Meeting. The shareholders will be asked to elect each of the
nominees listed below as a director for a term of one year and until his
successor is elected and qualified, or until his earlier resignation or
removal. Management expects all of such nominees to be available for
election, but in the event that any of them should become unavailable, the
persons named in the accompanying Proxy Statement will vote for a substitute
nominee or nominees if so designated by the board. The three nominees
receiving the greatest number of votes will be elected directors at the
Annual Meeting.
Nominees for Election as Directors
A Director
Name Age of UMC Since Principal Occupation
David S. Bonsal 63 1987 Chairman of the Board and
Chief Executive Officer of
UMC
Jeffrey M. Sperry 59 1982 President, CB Richard
101 Euclid Avenue Ellis, Albany, New York,
Albany, NY 12203 real estate company
Arthur M. Moglowsky 66 1981 Attorney and Shareholder,
9120 N. Port Washington Rd. Bass & Moglowsky, S.C.,
Milwaukee, WI 53217 Milwaukee, Wisconsin
______________
Unless otherwise indicated, each director has had the same principal
occupation during the last five years.
Mr. Bonsal is a principal shareholder of Universal Funding Corporation.
See "Certain Relationships and Related Transactions." Mr. Bonsal also serves
on the Board of Directors and the Audit Committee of The Ferrite Company, Inc.
Prior to 1999, Mr. Sperry served as Executive Vice President of Robert
Cohn Associates, Inc., Albany, New York, a real estate company.
Meetings of the Board of Directors and Committees
There were five meetings of the board during the last fiscal year. The
board has established an Audit Committee. The committee members are Jeffrey
M. Sperry and Arthur M. Moglowsky. See "--Nominees for Election as
Directors." The Audit Committee assists the board in satisfying the
accounting and financial reporting responsibilities of UMC, reviewing and
implementing internal controls and reviewing and assessing the scope and
expense of the annual audit and related services provided by UMC's
independent accountants. The Audit Committee met three times during the last
fiscal year. Each director attended all meetings of the board and of any
committee of which the director was a member during the last fiscal year.
UMC does not have standing compensation or nominating committees, or
committees performing similar functions.
-20-
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires UMC's directors, executive
officers and persons who beneficially own more than ten percent of our Common
Stock to file reports of beneficial ownership and reports of changes in
beneficial ownership with the SEC and to provide us copies. Based solely
upon a review of the copies of such reports provided to us and written
representations from directors and executive officers, we believe that all
applicable Section 16(a) filing requirements for the fiscal year ended
January 31, 2003 have been met.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR EACH OF THE NOMINEES FOR
DIRECTOR PRESENTED IN PROPOSAL 2.
INDEPENDENT AUDITORS
On August 21, 2003, BKD LLP informed us that it would not stand for
re-election as independent auditor to audit the financial statements of UMC
for the current fiscal year. The board has not selected the independent
auditors to audit our financial statements for the current fiscal year.
BKD LLP reviewed our Quarterly Report on Form 10-QSB for the fiscal
quarter ended April 30, 2003 and has agreed to review our Quarterly Report on
Form 10-QSB for the fiscal quarter ended July 31, 2003.
BKD LLP's reports on our financial statements for the last two years did
not contain an adverse opinion or disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting
principles. In connection with its audit of UMC's financial statements
contained in the Annual Report, BKD LLP did raise concerns about UMC's
ability to continue as a going concern. In response, UMC provided the
disclosure set forth in Note 2 to the Consolidated Financial Statements in
the Annual Report and on May 16, 2003, the principal shareholder of UMC
committed to provide UMC a $300,000 line of credit. The commitment contains
provisions that the maximum availability on the line of credit will be
reduced during the year by the amount of equity infusions or certain
long-term debt. The commitment also provides that the line will be reduced
quarterly as long as the company maintains positive year to date cash flows,
as defined in the commitment. As a result of these actions, BKD LLP's most
recent report, contained in the Annual Report, does not contain a paragraph
discussing going concern uncertainty.
During our two most recent fiscal years and the interim period prior to
the decision of BKD LLP not to stand for re-election, there were not any
disagreements with BKD LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of BKD LLP, would
have caused it to make reference to the subject matter of the disagreement in
connection with its report. None of the events described in Item
304(a)(1)(iv)(B) of Regulation S-B has occurred within our two most recent
fiscal years and the interim period prior to the decision of BKD LLP not to
stand for re-election.
Representatives of BKD LLP are expected to be present at the Annual
Meeting to make any statement they may desire and to respond to appropriate
questions concerning the audit report.
Audit Fees
The aggregate fees billed by BKD LLP for professional services rendered
for the audit of our annual financial statements for the fiscal year ended
January 31, 2003 and for reviews of the financial statements included in our
Quarterly Reports on Form 10-QSB for that fiscal year were $69,703.
All Other Fees
The aggregate fees billed by BKD LLP for services rendered to us other
than the services described above under "Audit Fees" for the fiscal year
ended January 31, 2003 were $17,384, which included expenses related to the
review and tax work for Universal Funding Corporation, preparation of
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tax returns for the fiscal year ended January 31, 2003, attendance at the
August, 2002 annual meeting and miscellaneous clerical expenses. There were
no fees incurred for financial information systems design and implementation.
The audit committee has considered whether the provision of non-audit
services is compatible with maintaining the independence of BKD LLP. See
"AUDIT COMMITTEE REPORT".
AUDIT COMMITTEE REPORT
The audit committee operates under a written charter approved by the
committee and adopted by the board. All of the members of the committee are
independent as defined under in Sections 303.01(B)(2)(a) and (3) of the New
York Stock Exchange's listing standards.
In fulfilling its responsibilities, the committee reviewed and discussed
UMC's audited financial statements for the fiscal year ended January 31, 2003
with our management and independent auditors. The committee also discussed
with BKD LLP, our independent auditors, the matters required to be discussed
by Statement on Auditing Standards No. 61, "Communication with Audit
Committees." In addition, the committee received the written disclosures and
the letter from the independent auditors required by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees," and
discussed with the independent auditors their independence in relation to us
and our management. The committee also considered the non-audit services
provided to us by the independent auditors and concluded that such services
were compatible with maintaining their independence.
Based upon the reviews and discussions referred to above, the committee
has recommended to the Board that the audited financial statements be
included in our Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2003 filed with the SEC.
Submitted by the Audit Committee
Arthur M. Moglowsky
Jeffrey M. Sperry
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of UMC are as follows:
Name Age Position
---- --- --------
David S. Bonsal 63 Chairman of the
Board of Directors
and Chief Executive
Officer
Pamela A. Glenn 41 Senior Vice President and
Corporate Secretary
Executive officers serve at the pleasure of the board. Unless otherwise
indicated, each executive officer has had the same principal occupation
during the last five years. The business address and phone number of each
Executive Officer is Universal Money Centers, Inc., 6800 Squibb, Mission,
Kansas 66202, and the telephone number is (913) 831-2055.
David S. Bonsal has served as the Chairman and Chief Executive Officer
of UMC since 1988. Mr. Bonsal is also a principal shareholder of Universal
Funding Corporation. See "Certain Relationships and Related Transactions."
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Pamela A. Glenn has served as Senior Vice President since April 2002 and
Corporate Secretary since September 1995. Ms. Glenn served as Vice President
of UMC from May 1995 to April 2002, as a Sales Representative and Account
Manager of UMC from 1991 to May 1995 and held various positions with UMC from
1982 to 1991.
EXECUTIVE COMPENSATION
Officer Compensation
The following table sets forth certain summary information concerning
the compensation paid and awarded for the years indicated to UMC's Chief
Executive Officer and to each executive officer of UMC who received
compensation in excess of $100,000 for services rendered in all capacities to
UMC and its subsidiaries during UMC's fiscal year ended January 31, 2003.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Name and Restricted
Principal Stock All Other
Position Year Salary($) Bonus($)(1) Award ($)(2) Compensation($)
- --------- ---- --------- ----------- ------------- ---------------
David S. Bonsal, 2003 97,292 4,500 0 1,875(3)
Chief Executive 2002 114,792 0 0 3,750(3)
Officer 2001 125,000 0 20,000 3,750(3)
Donald R.Peterson,2003 122,215 3,000 -- --
Former Chief
Operating Officer
________________________
(1) Includes bonuses received in the reported year. The payment of bonuses
is at the discretion of the board.
(2) The restricted stock award consisted of 50,000 shares of Common Stock
which vested in four equal installments, on March 31, June 30, September 30
and December 31, 2001. The value of the restricted shares shown is based
upon our valuation of unrestricted shares at the time of the award.
(3) The amounts shown for fiscal 2003, 2002 and 2001 consist of
contributions by us under our SIMPLE IRA Plan.
Director Compensation
UMC currently pays each non-employee director a cash fee of $750 for
each board meeting attended in person and a cash fee of $250 for each board
meeting attended by telephone. Directors are reimbursed for certain
reasonable expenses incurred in attending meetings. Officers of UMC do not
receive any additional compensation for serving as members of the board.
UMC currently pays each non-employee committee member a cash fee of $750
for each committee meeting attended in person and a cash fee of $250 for each
committee meeting attended by telephone. Committee members are reimbursed
for certain reasonable expenses incurred in attending meetings.
-23-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of July 31, 2003
with respect to the beneficial ownership of the Common Stock by (a) each
beneficial owner of more than 5% of the outstanding shares thereof, (b) each
director and each nominee to become a director, (c) each executive officer
named in the Summary Compensation Table and (d) all executive officers,
directors and nominees to become directors of UMC as a group.
Number of Percent of
Shares Beneficially Common Stock
Name of Beneficial Owner Owned Outstanding(1)
- ------------------------ ------------------- --------------
David S. Bonsal (2) 2,174,341 52.3%
Jeffrey M. Sperry 12,478 *
Arthur M. Moglowsky 29,776 *
Directors and executive officers as 2,292,095 55.1%
a group (5 persons)
* Represents beneficial ownership of less than one percent.
(1) Percentages are determined in accordance with Rule 13d-3 under the
Exchange Act.
(2) The address of Mr. Bonsal is c/o Universal Money Centers, Inc., 6800
Squibb Road, Mission, Kansas 66202.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Universal Funding Corporation
We have maintained a business relationship with Universal Funding
Corporation, a Missouri corporation ("Universal Funding"), since August
1989. The relationship began in 1989 as a result of our severe financial
problems. The operation of our ATM network generally requires that we supply
vault cash to ATMs owned by us to fund cash withdrawals. As a result of our
financial problems, lenders were generally unwilling to extend loans, partly
because of the concern that our creditors would assert claims against cash
physically located in ATMs owned by us. We did not have sufficient cash to
supply the vault cash for these ATMs. In order to resolve this problem and to
permit us to continue to operate certain ATMs, Universal Funding was formed
in 1989 by David S. Bonsal, the Chairman of the Board, John L. Settles, a
former President of ours, and William Smithson, a shareholder. In 2000, Mr.
Smithson sold his interest in Universal Funding to Mr. Bonsal and Mr.
Settles. Each of them now owns one-half of Universal Funding. Mr. Settles
was our President from April 1989 through October 1990 and then from June
1999 to November 2001.
In 1989, we sold approximately 60 ATMs to Universal Funding for which
Universal Funding had agreed to provide vault cash. Universal Funding
requested the sale of the ATMs to Universal Funding as a condition to
providing vault cash, in order to provide additional protection against
seizure of Universal Funding's vault cash by our creditors. We entered into
a Management Agreement with Universal Funding in 1989. The Management
Agreement was designed to provide us with the economic benefits of ownership
and operation of the ATMs sold to Universal Funding, while providing to
shareholders and lenders of Universal Funding the protection from our
creditors and the investment return necessary to attract their investment.
In the Management Agreement, Universal Funding agreed to enter into
contracts with site owners for the placement of the ATMs acquired from us, to
provide vault cash necessary for the operation of the
-24-
ATMs and to contract for an armored security service for deliveries of cash
to ATMs. In exchange for these services, Universal Funding received all
interchange fees for Transactions processed on the ATMs for which it provided
vault cash. Under the Management Agreement, we agreed to "drive" the ATMs
sold to Universal Funding and to provide accounting, maintenance and
communication services. In exchange for these services, Universal Funding
agreed to pay us a management fee equal to Universal Funding's "net income".
Universal Funding's "net income" is defined in the Management Agreement as
revenues from interchange fees, less armored security charges, interest
expense on funds borrowed to provide vault cash, ATM location expenses, debt
service related to the purchase of the ATMs, taxes or insurance on ATMs, and
a monthly payment to each of Universal Funding's shareholders representing a
return on their equity investment in Universal Funding. The amount of the
monthly payment to the shareholders is based upon the amount of their equity
investment in Universal Funding and is paid on the equity investment at a
rate of 18% per annum, or a total of approximately $25,000 per year. The
management fee is to be paid to us on a monthly basis after Universal Funding
has met all of its other cash expenses, including the payment of interest on
outstanding borrowings and the monthly payment to Universal Funding's
shareholders. In addition, in the Management Agreement, the shareholders of
Universal Funding grant us an option to purchase all of the outstanding stock
of Universal Funding at any time for an amount equal to 110% of the capital
contributed by the shareholders to Universal Funding plus any arrearages in
the payment of expenses due under the Management Agreement. Management
believes that the amount of the exercise price would have been approximately
$165,000 as of January 31, 2003. The Management Agreement extends for
successive twelve (12) month terms, unless either party provides written
notice of termination to the other party at least thirty (30) days prior to
the end of a twelve (12) month term.
Since 1989, the relationship between Universal Funding and us has
expanded to cover additional ATMs, as a result of the loss of other sources
of financing and in order for us to take advantage of opportunities to place
additional ATMs. Universal Funding currently supplies vault cash for
approximately one-half of the ATMs owned by us. We lease to Universal Funding
the ATMs for which Universal Funding provides vault cash for rent of $10.00
per month. Universal Funding requested the leasing arrangement for our ATMs
in order to provide protection against seizure of its vault cash. We have
replaced the ATMs originally purchased by Universal Funding, and Universal
Funding no longer owns any ATMs in our network. Universal Funding does not
provide vault cash for ATMs in our network which are owned by banks or by
third party vendors. At January 31, 2003 and 2002, Universal Funding had
vault cash of approximately $2,200,000 and $2,200,000, respectively, located
in approximately 157 and 249 ATMs, respectively, owned by us.
We paid expenses to Funding of $33,082 and $34,993 in fiscal years 2003
and 2002, respectively. Pursuant to the Management Agreement, we assume the
risk of theft or other shortages of cash from the ATMs for which Funding
supplies vault cash. We incurred losses of $50,830 and $40,419 from vault
cash shortages in fiscal 2003 and 2002, respectively.
Universal Funding borrows the funds that are used to supply vault cash
principally from (i) Electronic Funds Transfer, Inc., our wholly owned
subsidiary ("EFT"), (ii) David S. Bonsal, our Chairman and Chief Executive
Officer, and a limited partnership in which Mr. Bonsal is the general
partner, (iii) our employees and (iv) other lenders. The loans generally
have terms that range from 30 days to six months and are automatically rolled
over at maturity unless prior written notice of termination is given at least
30 days before maturity. As of January 31, 2003, Universal Funding paid
interest on loans at rates ranging from 9% to 11% per annum. At January 31,
2003, the aggregate outstanding amount of the loans was approximately
$2,234,000, of which $0 was owed to EFT, approximately $1,202,000 was owed to
Mr. Bonsal and the related limited partnership, approximately $50,000 was
owed to owed to employees of ours and approximately $982,000 was owed to
other lenders. The maximum outstanding balances of the loans made by EFT to
Universal Funding in fiscal 2003 and 2002 were $514,715 and $945,715,
respectively. The total interest earned by us on loans from EFT to Universal
Funding in fiscal 2003 and 2002 was $29,851 and $81,298, respectively.
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The interest rate on loans from David S. Bonsal and the related limited
partnership that were outstanding during fiscal 2003 and 2002 and as of
January 31, 2003 was 9-11% per annum. The total interest paid by Funding to
David S. Bonsal and the related limited partnership for loans to Funding was
approximately $126,466 in fiscal 2003 and approximately $138,482 in fiscal
2002.
As noted above, the shareholders of Funding receive a return on their
equity investment in Funding each month before Funding pays the management
fee to us. The amount of the monthly payment to the shareholders is based
upon the amount of their equity investment in Funding and is paid on the
equity investment at a rate of 18% per annum. For each of fiscal 2003 and
2002, the amount paid by Funding to the shareholders of Funding as a return
on equity investment was approximately $24,894 and $24,894, respectively.
Loan Commitment
On May 16, 2003, David S. Bonsal , Chairman of the Board and Chief
Executive Officer, committed to provide UMC a $300,000 line of credit. The
commitment contains provisions that the maximum availability on the line of
credit will be reduced during the year by the amount of equity infusions or
certain long-term debt. The commitment also provides that the line will be
reduced quarterly as long as the company maintains positive year to date cash
flows, as defined in the commitment. The line of credit will bear interest on
the daily outstanding balance at a rate to be determined by the Board of
Directors at the time of the company draws on the line of credit.
FUTURE SHAREHOLDER PROPOSALS
We currently anticipate that for our 2004 annual meeting of shareholders
("2004 Annual Meeting") will be held on November __, 2004.
Our By-laws contain advance notice provisions governing certain matters,
including shareholder proposals and shareholder nominations of candidates for
the election to the board. Under our By-laws, notice of any such proposal or
nomination must be in writing and must be delivered to our Secretary at our
principal executive offices (a) no less than sixty (60) days prior to the
scheduled date of an annual shareholders' meeting, or (b) if the notice to
shareholders or the public announcement of the scheduled date of the annual
shareholders' meeting is not given or made at least seventy (70) days prior
to the scheduled date of the meeting, not more than ten (10) days following
the day on which we mail notice or make a public announcement of the
scheduled date of the meeting. Any such shareholder proposal or nomination
for election to the board must also comply with the other applicable
provisions of the advance notice provisions in our By-laws.
Assuming that the date of the 2004 Annual Meeting is not changed, any
shareholder nomination for director to be considered at that meeting or any
proposal that a shareholder desires to have included in our proxy materials
for the 2004 Annual Meeting must be received by our Secretary at our
principal executive offices no later than __________, 2004, in order to be
considered for possible inclusion in the proxy materials and in order to be
timely under the advanced notice provisions of our By-laws. Any such
proposal must comply with the applicable rules of the SEC.
No shareholder proposal or nomination will be considered at the 2004
Annual Meeting of Shareholders unless it is presented in accordance with the
foregoing requirements. A copy of our By-laws containing the advance notice
provisions can be obtained by any shareholder by written request to our
Secretary at our principal executive offices.
GENERAL
Other Matters
As described above under "Future Shareholder Proposals," the By-laws of
UMC require that prior written notice of any business to be brought before an
annual shareholders' meeting be given to UMC a
-26-
specified period of time prior to the meeting. Because no such notice has
been received in a timely manner, the only business that may be properly
brought before the Annual Meeting are the matters set forth herein or those
brought before the Annual Meeting by or at the direction of the board. The
board does not intend to present any matter for action at the Annual Meeting
other than the matters described herein. If any other matters do properly
come before the meeting, proxies in the accompanying form confer upon the
persons named in such proxies discretionary authority to vote upon such
matters, to the extent permitted under the applicable rules of the SEC.
Solicitation of Proxies
In addition to the solicitation of proxies from shareholders by use of
the mails, it is expected that a limited number of employees of UMC, without
additional compensation, may solicit proxies from shareholders by telephone,
telegraph and personal visits. It is expected that banks, brokerage houses
and others will be requested to forward the soliciting material to their
principals and obtain authorization for the execution of proxies. All costs
of solicitation, including the costs of preparing, assembling and mailing
this Proxy Statement and all papers which now accompany or may hereafter
supplement the same, as well as the reasonable out-of-pocket expenses
incurred by the above-mentioned banks, brokerage houses and others, will be
borne by UMC.
ADDITIONAL INFORMATION
UMC is subject to the informational requirements of the Exchange Act and
in accordance therewith files reports and other information with the SEC.
UMC has filed a Schedule 13E-3 with the SEC in connection with the proposed
Transaction. As permitted by the rules and regulations of the SEC, this
Proxy Statement does not contain all of the information set forth in the
Schedule 13E-3. The Schedule 13E-3, including exhibits and other filings
made by UMC as described above, may be inspected without charge, and copies
may be obtained at prescribed rates, at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the regional offices of the SEC located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and at the regional offices of the SEC located at 233 Broadway, New York, New
York 10279. Copies of such materials can also be obtained upon payment of
the SEC's prescribed rates from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on
the operation of the SEC's public reference rooms by calling the SEC at
1-800-SEC-0330. The SEC maintains a web site, which contains reports, proxy
and information statements and other information regarding registrants that,
like UMC, file electronically with the SEC, at the following address:
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superceded
for purposes of this Proxy Statement to the extent that a statement contained
in this Proxy Statement or in any subsequently filed document that also is
deemed to be incorporated by reference herein modifies or supercedes such
statement. Any such statement so modified or superceded shall not be deemed,
except as so modified or superceded, to constitute a part of this Proxy
Statement.
The following documents filed with the SEC by UMC are incorporated into
this Proxy Statement by reference:
UMC hereby incorporates by reference (a) the financial statements and
the notes thereto contained on pages 20 through 36 of UMC's Annual Report
included as an Annex to this Proxy Statement, (b) the report of independent
certified public accountants thereon contained on page 21 of the Annual
Report, (c) Management's Discussion and Analysis or Plan of Operation
contained on pages 10 through 19 of the Annual Report, (d) the Financial
Statements and notes thereto contained on pages 3
-27-
through 8 of UMC's Quarterly Report included as an Annex to this Proxy
Statement and (e) Management's Discussion and Analysis or Plan of Operation
contained on pages 8 through 16 of the Quarterly Report.
ANNEXES
The following documents are being delivered to UMC's shareholders
together with this Proxy Statement.
Annual Report to Shareholders for the fiscal year ended January 31, 2003.
Quarterly Report on Form 10-QSB for the quarter ended April 30, 2003.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ David S. Bonsal
David S. Bonsal
Chairman of the Board
and Chief Executive Officer
DATE: August 22, 2003
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APPENDIX A
PROPOSED AMENDMENT TO ARTICLE III OF
THE COMPANY'S ARTICLES OF INCORPORATION
TO EFFECT THE PROPOSED REVERSE STOCK SPLIT
AND FORWARD STOCK SPLIT
RESOLVED, that Article III of the Company's Articles of Incorporation is
hereby amended by adding at the end of Article III the following provisions:
Reverse Stock Split
and Forward Stock Split
At 8:00 p.m. (Central time) on the effective date of the amendment
adding these paragraphs to Article III ("Effective Date"), each share of the
Corporation's Common Stock, $.01 par value ("Common Stock"), held of record
as of 8:00 p.m. (Central time) on the Effective Date shall be and hereby is
automatically reclassified and converted, without further action, into
one-two hundred fiftieth (1/250) of a share of the Corporation's Common
Stock. No fractions of shares shall be issued to any Fractional Holder (as
defined below), and from and after 8:00 p.m. (Central time) on the Effective
Date, each Fractional Holder shall have no further interest as a shareholder
in respect of such fractions of shares, and in lieu of receiving such
fractions of shares shall be entitled to receive, upon surrender of the
certificate or certificates representing shares of Common Stock held of
record by such Fractional Holder, an amount equal to the fair value of such
fractional share as determined by the Board of Directors of the Corporation.
A "Fractional Holder" is defined as a holder of record of fewer than 250
shares of Common Stock as of 8:00 p.m. (Central time) on the Effective Date,
who would be entitled to less than one whole share of Common Stock in respect
of such shares as a result of such reclassification and conversion.
At 9:00 p.m. (Central time) on the Effective Date, each share of the
Corporation's Common Stock and any fraction thereof held by a holder of
record of one or more shares of Common Stock as of 9:00 p.m. (Central time)
on the Effective Date shall be and hereby is automatically reclassified and
converted, without further action, into the Corporation's Common Stock, on
the basis of two hundred fifty (250) new shares of Common Stock for each
whole share of Common Stock.
-29-
Please Complete, Sign, Date and Return this Proxy in the Enclosed Envelope.
PROXY
Universal Money Centers, Inc.
6800 Squibb Road
Mission, Kansas 66202
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints David S. Bonsal and Pamela A. Glenn, and
each of them, jointly and severally, with full power of substitution, as
proxies for the undersigned at the Annual Meeting of Shareholders of
Universal Money Centers, Inc., to be held at the offices of Stinson Morrison
Hecker LLP, 2600 Grand Avenue, Kansas City, Missouri 64108, on
___________________, 2003, at 10:00 a.m. Central time, and at any
adjournment, to vote the shares of common stock the undersigned would be
entitled to vote, if personally present, upon the election of directors, the
proposal stated on this Proxy and any other matter properly brought before
the meeting, all as set forth in the _____________________, 2003 Proxy
Statement.
Unless otherwise marked, this Proxy will be deemed marked "For" on
Proposal 1 and marked "Granted" on Proposal 2, and voted accordingly.
_____ _____
[Place shareholder label here]
_____ _____
________________________________________________________________________________
Please mark your
|X| votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" ON PROPOSAL 1 AND "GRANTED" ON PROPOSAL 2
FOR AGAINST ABSTAIN
1. Approval of the proposed amendment to the |_| |_| |_|
Articles of Incorporation to effect a
1-for-250 reverse stock split of the
outstanding common stock followed by a
250-for-1 forward stock split.
2. Authority granted to or withheld from the Authority Authority
proxies to vote for the following
nominees as Directors (or substitute GRANTED to vote WITHHELD to
nominee(s) designated by the Board of for all nominees Vote for all
Directors if any of them becomes nominees
unavailable): David S. Bonsal,
Jeffrey M. Sperry and Arthur M. Moglowsky. |_| |_|
(INSTRUCTIONS: To withhold authority to
vote for any individual nominee, line
through that nominee's name in the list
above.)
This Proxy confers discretionary authority to vote upon certain matters, as
described in the accompanying Proxy Statement.
SIGNATURE __________ DATE:_______, 2003 SIGNATURE __________ DATE: _______, 2003
(Note: Please sign exactly as name appears on this Proxy. Executors,
administrators, trustees, etc., should so indicate when signing, giving
their full title as such. If a signer is a corporation or other entity,
execute in full corporation or entity name by authorized officer. If
shares are held in the name of two or more persons, all should sign.)