UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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PURE CYCLE CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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PURE CYCLE CORPORATION
8451 Delaware Street
Thornton, Colorado 80260
(303) 292-3456
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on April 18, 2005
TO OUR STOCKHOLDERS:
You are cordially invited to attend an Annual Meeting of the
Stockholders' of PURE CYCLE CORPORATION. The Meeting will be
held at 1550 Seventeenth Street, Suite 500, Denver, Colorado
80202, at the offices of Davis, Graham & Stubbs, on April 18,
2005 at 2:00 p.m. Mountain Time for the following purposes:
1. To elect a board of six directors to serve until the next
Annual Meeting of Stockholders', or until their successors
are elected and have qualified.
2. To ratify the appointment of Anton Collins Mitchell LLP as
the independent registered public accounting firm for the
2005 fiscal year.
3. To transact such other business as may properly come before
the Meeting or any adjournment(s) thereof.
Only stockholders of record as of 5:00 p.m. Mountain Time on
March 1, 2005 will be entitled to notice of or to vote at this
Meeting or any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING MAY
REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY SO DESIRE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Scott E. Lehman
Scott E. Lehman, Secretary
March 11, 2005
PURE CYCLE CORPORATION
8451 Delaware Street
Thornton, Colorado 80260
(303) 292-3456
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To be held on April 18, 2005
ABOUT THE MEETING
This proxy statement is furnished to stockholders in connection
with the solicitation of proxies by the Board of Directors of
PURE CYCLE CORPORATION (the "Company") for use at the Annual
Meeting of stockholders of the Company (the "Meeting") to be
held at 1550 Seventeenth Street, Suite 500, Denver, Colorado
80202, at the offices of Davis, Graham & Stubbs on April 18,
2005 at 2:00 p.m. Mountain Time or at any adjournment thereof.
Proxies for use at the Meeting are being solicited by the Board
of Directors of the Company. Proxies were mailed to
stockholders on or about March 11, 2005 and will be solicited
chiefly by mail. The cost of soliciting proxies is being paid by
the Company. In addition to the mailings, the Company's
officers, directors and other regular employees may, without
additional compensation, solicit proxies personally or by other
appropriate means.
Discretionary authority is provided in the proxy as to matters
not specifically referred to therein. The board of directors is
not aware of any other matters which are likely to be brought
before the Meeting. However, if any such matters properly come
before the Meeting, it is understood that the proxy holder or
holders are fully authorized to vote in accordance with the
proxy holder or holders' judgment and discretion.
Stockholders entitled to vote at the meeting
Stockholders of record as of 5:00 p.m. Mountain Time on March 1,
2005, will be entitled to vote on matters presented at the
Meeting. Each outstanding share of the Company's 1/3 of $.01 par
value common stock ("common stock") is entitled to one vote on
each matter acted upon. On February 28, 2005, there were
13,703,635 outstanding shares of common stock. There is no
cumulative voting.
A quorum
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of common stock is necessary
to constitute a quorum at the Meeting for the election of
directors and for the other proposals. Abstentions and broker
"non-votes" are counted as present and entitled to vote for
purposes of determining whether a quorum exists. A broker
"non-vote" occurs when a nominee holding shares for a beneficial
owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that
item and has not received voting instructions from the
beneficial owner. Abstentions and broker non-votes are not
counted as votes cast in the election of directors and the other
proposals. Accordingly, an abstention on any matter will have
the effect of a negative vote on that matter. The affirmative
vote of the majority of the shares of common stock represented
and voted at the Meeting, assuming a quorum is present, is
necessary for the approval of proposal 2. The election of
directors requires the affirmative vote of a plurality of the
votes cast by shares represented in person or by proxy and
entitled to vote for the election of directors.
Voting procedures
If the enclosed proxy is properly executed and returned, the
shares represented thereby will be voted in the manner
specified. If no specification is made by the proxy, then the
shares will be voted "FOR" the Directors nominated by the Board
of Directors and "FOR" Proposal 2 and otherwise, in accordance
with the recommendations of the Board of Directors.
Revoking a vote
A proxy may be revoked by a stockholder at any time prior to the
exercise thereof by written notice to the Secretary of the
Company, by submission of another proxy bearing a later date or
by attending the Meeting and voting in person.
Multiple stockholders sharing the same address
The Company has adopted a procedure approved by the Securities
and Exchange Commission (the "SEC"), called "householding,"
which reduces printing costs and postage fees. Under this
procedure, stockholders of record who have the same address and
last name will receive only one copy of the annual report and
proxy statement unless one or more of these stockholders notify
the Company that they wish to continue receiving individual
copies. Stockholders who participate in householding will
continue to receive separate proxy cards.
If a stockholder of record residing at such an address wishes to
receive a separate document in the future, he or she may contact
our transfer agent at Computershare Investor Services,
350 Indiana St., Suite #800, Golden, CO 80401, telephone
(303) 262-0600, or write to the Company's Secretary at the
Company's address set forth above. Eligible stockholders of
record receiving multiple copies of the annual report and proxy
statement can request householding by contacting the Company in
the same manner. If shares are owned through a bank, broker or
other nominee, the holder can request householding by contacting
the nominee.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of February 28, 2005, the
beneficial ownership of the Company's issued and outstanding
common stock by (i) each person who owns of record (or is known
by the Company to own beneficially) 5% or more of the common
stock, (ii) each director of the Company and each nominee for
director, (iii) each executive officer and (iv) all directors
and executive officers as a group. Except as otherwise
indicated, the Company believes that each of the beneficial
owners of the stock listed has sole investment and voting power
with respect to such shares, based on information filed by such
person with the Securities and Exchange Commission or based on
information provided by such stockholders to the Company.
Common Stock
Percentage
Number Of
Name and Address of Of Common
Beneficial Owner Shares Stock
Thomas P. Clark
8451 Delaware St.
Thornton, CO 80260 2,310,205 16.9%
Mark W. Harding
8451 Delaware St.
Thornton, CO 80260 887,500 6.5%
Harrison H. Augur
P.O. Box 4389
Aspen, CO 81611 83,611 0.6% (2)
Richard L. Guido
121 Antebellum Drive
Meridianville, AL 35759 2,500 *
Peter C. Howell
15289 Russell Road
Chagrin Falls, OH 44022 - -
George M. Middlemas
225 W. Washington, #1500 35,833 0.3% (4)
Chicago, IL 60606 971,076 7.1% (6)
All Officers and Directors
as a group (6 persons) 4,290,725 31.3% (5)
Apex Investment
Fund II, L.P. ("Apex")
225 W. Washington, #1450
Chicago, IL 60606 971,076 7.1% (6)
Par Capital Management, Inc.
One International Place,
Suite 2401
Boston, MA 02110 803,200 5.9%
* Less than 1%
1) Consists of 887,500 shares purchasable by Mr. Harding under
currently exercisable options.
2) Includes 2,500 shares purchasable by Mr. Augur under currently
exercisable options. Includes 10,000 shares of common stock held
by Patience Partners, L.P., a limited partnership in which a
foundation controlled by Mr. Augur is a 60% limited partner and
Patience Partners, LLC is a 40% general partner. Patience
Partners LLC is a limited liability company in which Mr. Augur
owns a 50% membership interest.
3) Includes 2,500 shares purchasable by Mr. Guido under currently
exercisable options.
4) Includes 2,500 shares purchasable by Mr. Middlemas under
currently exercisable options. By virtue of his position with
Apex, Mr. Middlemas is deemed to be the indirect beneficial
owner of 971,076 shares owned by Apex. Mr. Middlemas disclaims
beneficial ownership of these shares.
5) Includes 895,000, shares purchasable by directors and officers
under currently exercisable options, and 2,500 shares of common
stock held by Patience Partners, L.P., a limited partnership in
which a foundation controlled by Mr. Augur is a 60% limited
partner and Patience Partners, L.P. is a 40% general partner.
6) Apex Investment Fund II LP is controlled through one or more
partnerships. The persons who have or share control of Apex
after looking through one or more intermediate partnerships are
referred to herein as "ultimate general partners." The ultimate
general partners of Apex are: First Analysis Corporation, a
Delaware corporation ("FAC"), Stellar Investment Co.
("Stellar"), a corporation controlled by James A. Johnson
("Johnson"); George M. Middlemas ("Middlemas"); and Chartwell
Holdings Inc. ("Chartwell"), a corporation controlled by Paul J.
Renze ("Renze").
The business address of FAC, Stellar, Johnson, Middlemas, and
Maxwell is 225 W. Washington Street, Suite 1550, Chicago,
Illinois 60606. The business address of Renze and Chartwell is
20 N Wacker Dr., Suite 2200, Chicago, IL 60606.
In addition to being a general partner or ultimate general
partner of Apex, FAC is also a general partner or ultimate
partner of Environmental Private Equity Fund II, L.P. ("EPEF"),
Environmental Venture Fund L.P. ("EVF") and the Productivity
Fund II LP ("PF II"), all of whom own the Company's common stock
but are now less than 5% owners (with Apex this group is
collectively referred to as the Apex Partnerships). Due to
these relationships, FAC may be deemed to be the indirect
beneficial owner of 2,111,003 shares of common stock, or 15.4%
of the Company's outstanding shares. By reason of his status as
the majority stockholder of FAC, F. Oliver Nicklin, Jr. may also
be deemed to be the indirect beneficial owner of such shares.
By reason of their status as ultimate general partners of Apex,
Stellar (and through Stellar, Johnson), Middlemas and Chartwell
(and through Chartwell, Renze) may be deemed to be the indirect
beneficial owners of 971,076 shares of common stock, or 7.1% of
the Company's outstanding stock. When these shares are combined
with his personal holdings of 35,833 (including 2,500 shares
purchasable under currently exercisable options) shares of
common stock, Middlemas may be deemed to be the beneficial owner
(directly with respect to his shares and indirectly as to the
balance) of 1,006,909 shares of common stock, or 7.3% of the
total outstanding stock.
By reason of his status as ultimate general partner of EPEF and
liquidating trustee of PF II, Maxwell may be deemed to be the
indirect beneficial owner of 766,734 shares of common stock, or
5.6% of such shares.
Each of the Apex Partnerships disclaims beneficial ownership of
all shares of common stock described herein except those shares
that are owned by that entity directly. The Company understands
that each of the other persons named as an officer, director,
partner or other affiliate of any Apex Partnership herein
disclaims beneficial ownership of all the shares of common stock
described herein .
Each of the Apex Partnerships disclaims the existence of a
"group" among any or all of them and further disclaims the
existence of a "group" among any or all of them and any or all
of the other persons named as an officer, director, partner or
those affiliate of any of them, in each case within the meaning
of Section 13(d) (3) of the 1934 Act.
DIRECTORS AND EXECUTIVE OFFICERS
Directors and Executive Officers
The following table sets forth the names, ages and titles of the
persons who are currently directors and executive officers of
the Company, along with other positions they hold with the
Company.
Name Age Position
Mark W. Harding 41 Director, President
and Chief Financial Officer
Harrison H. Augur 63 Chairman of the Board (1) (2)
Thomas P. Clark 68 Director
Richard L. Guido 60 Director (1) (2)
Peter C. Howell 55 Director
George M. Middlemas 58 Director (1) (2)
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Audit committee
The board has determined that the audit committee members meet
the independence standards of NASDAQ. In addition, the board
has determined that at least one member of the audit committee
is a financial expert. That person, Mr. Augur, meets the SEC
criteria of audit committee financial expert by reason of his
education and his 20 plus years of experience in investment
management and venture capital investment.
The functions to be performed by the audit committee include the
appointment, retention, compensation and oversight of the
Company's independent auditors, including pre-approval of all
audit and non-audit services to be performed by such auditors.
The Company has an Audit Committee Charter. The audit committee
met two times during the fiscal year ended August 31, 2004. See
the Report of the Audit Committee. All audit committee members
were present at each meeting.
Compensation Committee
The functions to be performed by the compensation committee
include establishing the compensation of officers and directors,
and administering management incentive compensation plans. The
compensation committee met one time during the fiscal year ended
August 31, 2004. All compensation committee members were
present at the meeting.
Nominating Committee
The Company does not have a nominating committee because of the
small size of its board and the relative infrequency of
meetings. Nominees for director will be selected or recommended
by a majority of the Company's directors who meet the NASDAQ
independence standards. In selecting nominees for the board,
the Company is seeking a board with a variety of experiences and
expertise, and in selecting nominees will consider business
experience in the industry in which the Company operates,
financial expertise, independence from transactions with the
Company, experience with publicly traded companies, experience
with relevant regulatory matters in which the Company is
involved, and reputation for integrity and professionalism. The
independent directors will consider nominations for director
made by officers and directors of the Company, as well as
stockholders of record entitled to vote. In order to make a
nomination for election at the 2006 Annual Meeting, a
stockholder must provide written notice, along with supporting
information regarding such nominee, to the Company's Secretary
by November 11, 2005 but not before September 11, 2005. For
more information refer to the Company's Bylaws which were filed
as Exhibit 3.2 to the Registration Statement on Form SB-2/A
filed on June 10, 2004.
Shareholder communications
Stockholders wishing to send communications to the board may
contact Mark Harding, President of the Company, at the Company's
principal place of business. All such communications shall be
shared with the members of the board, or, if applicable, a
specified committee or director.
The Company has attempted to minimize the costs associated with
the Meeting. If the Meeting is not scheduled on the same day as
a regular meeting of the board, only directors who are resident
in Colorado are expected to attend the Meeting. If the Meeting
is scheduled on the same day as a regular meeting of the board,
all directors are expected to attend the Meeting. All board
members attended the 2004 Annual Meeting.
Board meetings held
During the fiscal year ended August 31, 2004, the Board of
Directors held seven meetings. All board members were present
at each of the meetings with the exception of one board member
who was absent from one meeting.
Relationship of Directors and Officers
None of the current directors or officers, or nominees for
director, is related to any other officer or director of the
Company or to any nominee for director.
Terms of Directors and Officers
All directors are elected for one-year terms which expire at the
Meeting of stockholders or until their successors are elected
and qualified. The Company's officers are elected annually by
the board of directors and hold office until their successors
are elected and qualified.
Compensation of Directors and Officers
The following table sets forth information concerning the
compensation received by or awarded to the Company's former
Chief Executive Officer and the Company's President and Chief
Financial Officer for the fiscal years ended August 31, 2004,
2003 and 2002:
Annual Compensation
Other
Annual
Name and Fiscal Salary Bonus Compen-
Principal Position Year ($) ($) sation
2004 80,000 120,000 -
Mark W. Harding 2003 80,000 - -
President, CFO 2002 80,000 - -
Thomas P. Clark
Former CEO 2004 60,000 50,000 -
(Resigned as CEO 2003 60,000 - -
in November 2004) 2002 60,000 - -
Executive bonuses, which were determined by the Compensation
Committee, were based on the performance of Mr. Harding and Mr.
Clark in managing the completion of the equity offering in June
of 2004, and the signing of the Sky Ranch Water Service
Agreements.
Until February 13, 2004, directors did not receive any
compensation for serving on the board. Effective February 13,
2004, the board approved the following compensation arrangement
for non-employee directors: Each non-employee director will
receive a payment of $10,000 for each full year in which he or
she serves as a director, with an additional payment of $1,000
for each committee on which he or she serves, and $1,000 for
serving as chairman of the board. An additional $500 will be
paid to each director for attendance at each board meeting and,
if committee meetings are held separate from board meetings,
$500 will be paid for attendance at such committee meetings.
In addition to cash compensation, as part of the 2004 Equity
Incentive Plan approved by stockholders at the 2004 Annual
Meeting, each non-employee director receives an option to
purchase 5,000 shares of common stock upon election to the board
(which vest one half at each of the first and second anniversary
dates of the grant), and an option to purchase 2,500 shares for
each subsequent full year in which he or she serves as a
director, which options vest one year from the date of grant.
Section 16 (a) beneficial ownership reporting compliance
Our directors and executive officers and persons who are
beneficial owners of more than 10% of our common stock are
required to file reports of their holdings and transactions in
common stock with the Securities and Exchange Commission and
furnish us with such reports. Based solely upon the review of
the copies we have received or upon written representations from
these persons, we believe that, during the fiscal year ended
August 31, 2004 all of our directors, executive officers, and
10% beneficial owners had complied with the applicable Section
16 (a) filing requirements, except that Mr. Clark had one late
filing with respect to one transaction.
Code of Ethics
The Company has a code of ethics for its directors, officers and
employees, which can be viewed on our website at
www.purecyclewater.com.
Certain relationships and related transactions
Borrowings from Thomas P. Clark
From time to time since December 6, 1987, Thomas P. Clark, a
director and former Chief Executive Officer of the Company,
loaned funds to the Company to cover operating expenses. These
funds have been treated by the Company as unsecured debt, and
promissory notes have been issued to Mr. Clark. The notes bear
interest at rates ranging from 8.36% to 9.01% per annum, and
mature on October 1, 2007. To date, Mr. Clark has loaned the
Company $310,720, of which $43,350 has been repaid, leaving a
balance of $267,370. As of November 30, 2004, the outstanding
balance, including principal and accrued interest, on the Notes
totaled $294,812. All loans were made on terms determined by
the board members (Mr. Clark abstaining) to be at market rates.
Borrowings from LCH, Inc.
LCH, Inc., a Delaware corporation which owns 20% of LC Holdings,
Inc., which is 80% owned by Mr. Clark, loaned the Company a
total of $950,000 between November, 1988 and February, 1989.
These obligations were represented by two demand promissory
notes (the "Notes") which bear interest at a rate equal to the
rate announced from time to time by Mellon Bank, Pittsburgh,
Pennsylvania as its "prime rate" plus 300 basis points from the
date of the first advance thereunder until maturity, payable
quarterly beginning on the first day of April, 1989 and
continuing thereafter on the first day of each subsequent
calendar quarter. The Notes were secured by a pledge of Company
common stock owned by Mr. Clark. During the fiscal year ended
August 31, 1998, the Company reached an agreement with LCH, Inc.
to defer payment of principal and interest on the Notes until
October 1, 2007.
Effective August 31, 2004, LCH, Inc. retired $2,506,514 in debt
(consisting of principal and interest) and terminated its right
to receive $4,000,000 from the sale of Export Water in exchange
for payment from the Company of $950,000 in cash and the
surrender by Mr. Clark of 306,279 shares of the Company's common
stock that he had pledged to LCH to secure payment of the
Company's obligations. In response to a claim by Mr. Clark, on
January 13, 2005, the Company paid Mr. Clark $50,555 in cash and
issued Mr. Clark 300,000 shares of restricted common stock.
Office Lease
The Company leases office space from Mr. Clark. Prior to
September 1, 2004, the Company was not required to pay rent.
Effective September 1, 2004 the Company executed a lease
agreement whereby the Company leases the office space on a
month-to-month basis for $1,000 per month, a rate that
approximates market value.
Comprehensive Amendment Agreement
Mr. Augur and Mr. Middlemas (by reason of his status as ultimate
general partner of Apex) are a party to the Comprehensive
Amendment Agreement ("CAA") with the Company. Under the CAA the
Company is required to distribute to numerous parties, at
varying levels of priority, $23,608,399 of future proceeds
received from the sale of Export Water (as defined therein).
Mr. Augur is a partner, with his wife, in a partnership that is
entitled to receive a total of $150,000 thereunder. Apex and
therefore by reason of his status as ultimate general partner of
Apex, Mr. Middlemas, is entitled to receive a total of
$7,163,264 thereunder.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is comprised of
directors who meet the NASDAQ standards for independence. The
Audit Committee operates under a written charter adopted by the
Board of Directors on February 13, 2004, which was filed with
the Proxy Statement used in connection with the 2004 annual
shareholders meeting.
On the recommendation of the Audit Committee, the Board of
Directors appointed Anton Collins Mitchell LLP ("ACM") to serve
as the Company's independent auditors beginning with the fiscal
year ending August 31, 2005. ACM replaces KPMG LLP as the
Company's independent auditors. KPMG LLP served as the
independent auditors for the fiscal year ended August 31, 2004.
Management has primary responsibility for the Company's
financial statements and the overall reporting process,
including the Company's system of internal controls. KPMG LLP
audited the annual financial statements prepared by management
for the year ended August 31, 2004, expressed an opinion as to
whether those financial statements present fairly the financial
position, results of operations and cash flows of the Company in
conformity with accounting principles generally accepted in the
United States of America and discussed with the Audit Committee
any issues they believed should be raised.
The Audit Committee reviewed with management and KPMG LLP the
Company's audited financial statements and met separately with
both management and KPMG LLP to discuss and review those
financial statements and reports prior to issuance. Management
has represented, and KPMG LLP has confirmed, to the Audit
Committee, that the financial statements were prepared in
accordance with accounting principles generally accepted in the
United States of America.
The Audit Committee received from and discussed with KPMG LLP
the written disclosure and the letter required by Independence
Standards Audit Committee Standard No. 1 (Independence
Discussions with Audit Committees). These items relate to that
firm's independence from the Company. The Audit Committee also
discussed with KPMG LLP matters required to be discussed by the
Statement on Auditing Standards No. 61 (Communication with Audit
Committees) of the Auditing Standards Audit Committee of the
American Institute of Certified Public Accountants to the extent
applicable. The Audit Committee implemented a procedure to
monitor auditor independence, reviewed audit services performed
by KPMG LLP and discussed with the auditors their independence.
In reliance on these reviews and discussions referred to above,
the Audit Committee has recommended to the Board of Directors
that the Company's audited financial statements be included in
the Company's Annual Report on Form 10-KSB for the fiscal year
ended August 31, 2004.
/s/ Harrison H. Augur
/s/ Richard L. Guido
/s/ George M. Middlemas
ELECTION OF DIRECTORS
(Proposal No. 1)
The current number of members of the Board of Directors is fixed
at six. The Board of Directors nominates the following
six persons currently serving on the board for reelection to the
board: Harrison H. Augur, Thomas P. Clark, Richard L. Guido,
Mark W. Harding, Peter C. Howell and George M. Middlemas.
Biographical information regarding the directors and nominees
follows:
MARK W. HARDING. Mark W. Harding joined the Company in April
1990 as Corporate Secretary and Chief Financial Officer. He was
appointed President of the Company in April 2001 and joined the
Board in 2004. He brings a background in public finance and
management consulting. From 1988 to 1990, Mr. Harding worked
for Price Waterhouse, where he provided public finance and other
investment banking related services. Mr. Harding is the
President and serves on the board of the Rangeview Metropolitan
District. Mr. Harding has a B.S. Degree in Computer Science and
a Masters in Business Administration in Finance from the
University of Denver.
HARRISON H. AUGUR. Mr. Augur joined the Board and was elected
Chairman in April 2001. For more than 20 years, Mr. Augur has
been involved with investment management and venture capital
investment groups. Mr. Augur has been a General Partner of CA
Partners since 1987, and General Partner of Patience Partners
LLC since 1999. Mr. Augur received a Bachelor of Arts degree
from Yale University, an LLB degree from Columbia University
School of Law, and an LLM degree from New York University School
of Law.
THOMAS P. CLARK. Thomas P. Clark joined the Board in 1987. Mr.
Clark was the Chief Executive Officer of the Company from April
2001 until his resignation in November 2004. Prior to his
appointment as Chief Executive Officer, Mr. Clark served as
President and Treasurer of the Company from 1987 to April 2001.
His other business activities include: President, LC Holdings,
Inc. (business development), 1983 to present, and Partner
(through a wholly owned corporation) of Resource Technology
Associates (development of mineral and energy technologies),
1982 to present. Mr. Clark serves on the board of the Rangeview
Metropolitan District. Mr. Clark received his Bachelor of
Science degree in Geology and Physics from Brigham Young
University.
PETER C. HOWELL. Peter C. Howell was appointed to fill a vacancy
on the Board on February 3, 2005. From 1997 to present, Mr.
Howell has served as an advisor to various business enterprises
in the area of acquisitions, marketing and financial reporting.
From August 1994 to August 1997, Mr. Howell served as the
Chairman and Chief Executive Officer of Signature Brands USA,
Inc. (formerly known as Health O'Meter) and from 1989 to 1994
Mr. Howell served as Chief Executive Officer and a director of
Mr. Coffee, Inc. Mr. Howell is a member of the board of
directors of Libbey, Inc., Global Lite Array and Great Lakes
Cheese Company.
RICHARD L. GUIDO. Mr. Guido served as a member of the Company's
board from July 1996 through August 31, 2003, and rejoined the
Board in 2004. Mr. Guido was an employee of INCO Securities
Corporation from 1980 through August 2003, and previously served
on the Company's board pursuant to a voting agreement between
INCO and the Company. That agreement is no longer in effect.
Mr. Guido was Associate General Counsel of Inco Limited and
President, Chief Legal Officer and Secretary of Inco United
States, Inc. Mr. Guido received a Bachelor of Science degree
from the United States Air Force Academy, a Master of Arts
degree from Georgetown University, and a Juris Doctor degree
from the Catholic University of America.
GEORGE M. MIDDLEMAS. George M. Middlemas has been a Director of
the Company since April 1993. Mr. Middlemas has been a general
partner with Apex Investment Partners, a diversified venture
capital management group, since 1991. From 1985 to 1991,
Mr. Middlemas was Senior Vice President of Inco Venture Capital
Management, primarily involved in venture capital investments
for INCO Securities Corporation. From 1979 to 1985,
Mr. Middlemas was a Vice President and a member of the
Investment Committee of Citicorp Venture Capital Ltd., where he
sourced, evaluated and completed investments for Citicorp.
Mr. Middlemas is a director of Tut Systems and Pennsylvania
State University - Library Development Board. Mr. Middlemas
received a Bachelors degree in History and Political Science
from Pennsylvania State University, a Masters degree in
Political Science from the University of Pittsburgh and a Master
of Business Administration from Harvard Business School.
The Proxy cannot be voted for more than the six nominees named.
Directors are elected for one-year terms or until the next
Annual Meeting of the Stockholders and until their successors
are elected and qualified. All of the nominees have expressed
their willingness to serve, but if because of circumstances not
contemplated, one or more nominees is not available for
election, the Proxy holders named in the enclosed Proxy intend
to vote for such other person or persons as management may
nominate.
Mr. Middlemas was designated as a nominee to the board of
directors pursuant to the EPFund Voting Agreement, which
agreement obligates Mr. Clark, Ms. Hansson, a former director of
the Company, the Apex Partnerships and Fletcher Byrom, a former
director of the Company, to vote for the designee of the EPFund.
This agreement will terminate at such time as EPFund no longer
owns shares of common stock of the Company. As of February 28,
2005, EP Fund owns 478,351 shares of common stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ELECTION AS DIRECTORS OF THE SIX PERSONS NOMINATED.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No. 2)
Action is to be taken by the stockholders at the Meeting with
respect to the ratification and approval of the selection by the
Audit Committee of the Company's Board of Directors of Anton
Collins Mitchell LLP ("ACM") to be the independent auditors of
the Company for the fiscal year ending August 31, 2005. ACM
replaces KPMG LLP ("KPMG") as the Company's independent auditors
beginning with the first quarter fiscal 2005 review. As
recommended by the Audit Committee, the Board of Directors on
December 15, 2004, dismissed the Company's independent auditors,
KPMG, and engaged ACM as its independent auditors to audit the
Company's financial statements for the fiscal year ending August
31, 2005. Neither KPMG nor ACM has and have not had at any time
any direct or indirect financial interest in the Company and do
not have and have not had at any time any connection with the
Company in the capacity of promoter, underwriter, voting
trustee, director, officer or employee. Neither the Company,
nor any officer, director or associate of the Company has any
interest in KPMG or ACM.
KPMG's reports on the financial statements of the Company for
the two most recent fiscal years ended August 31, 2004 and 2003,
did not contain an adverse opinion or a disclaimer of opinion,
nor was either qualified or modified as to uncertainty, audit
scope or accounting principles.
During the two most recent fiscal years ended August 31, 2004
and 2003, and the subsequent interim period through December 15,
2004 (the date KPMG was dismissed by the Company), there were
(i) no disagreements with KPMG on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedures which, if not resolved to KPMG's
satisfaction, would have caused KPMG to make reference to the
subject matter of such disagreement in connection with its
reports on the financial statements of the Company, and (ii) no
reportable events as listed in Item 304(a)(1)(v) of
Regulation S-K.
During the two most recent fiscal years ended August 31, 2004
and 2003, respectively, and the subsequent interim period
through December 15, 2004, neither the Company nor anyone on its
behalf has consulted ACM regarding either (i) the application of
accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might
be rendered on the Company's financial statements, and neither a
written report nor oral advice was provided to the Company that
ACM concluded was an important factor considered by the Company
in reaching a decision as to any accounting, auditing or
financial reporting issue; or (ii) any matter that was either
the subject of a disagreement (as defined in
Item 304(a)(1)(iv) of Regulation S-K and the related
instructions to Item 304(a) of Regulation S-K), or a reportable
event (as described in Item 304(a)(1)(v) of Regulation S-K).
Representatives from ACM will be present at the Meeting and will
have the opportunity to make a statement if (s)he so desires and
will be available to respond to appropriate questions.
Audit Fees
Commencing in 2004, the Audit Committee implemented policies for
review and approval of all services to be provided by its
independent auditors before the firm is retained for such
services, which policies are included in the Audit Committee
Charter. In 2004 all services were approved by the Audit
committee.
The following table summarizes fees billed to the Company by
KPMG during the fiscal years ended August 31, 2004 and 2003 for
(i) audit of financial statements and review of securities
filings; (ii) services reasonably related to performance or
review of financial statements, (iii) tax compliance, tax advice
and tax planning, and (iv) other products and services:
2004 2003
Audit fees $ 52,500 $29,800
Audit-related fees 61,700 -
Tax fees - -
Other fees - -
Total fees $114,200 $29,800
Audit fees related entirely to the audits of the Company's
annual financial statements and the review of the Company's
interim financial statements. Audit related fees related to the
review of the Registration Statement used in the equity offering
completed in June of 2004.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF ANTON COLLINS MITCHELL LLP AS INDEPENDENT AUDITORS.
ACTION TO BE TAKEN UNDER THE PROXY
The accompanying Proxy will be voted "FOR" approval of proposal
2 and "FOR" the directors nominated by the Board, unless the
Proxy is marked in such a manner as to withhold authority to so
vote. The accompanying Proxy will also be voted in connection
with the transaction of such other business as may properly come
before the Meeting or any adjournment or adjournments thereof.
Management knows of no other matters, other than the matters set
forth above, to be considered at the Meeting. If, however, any
other matters properly come before the Meeting or any
adjournment thereof, the persons named in the accompanying Proxy
will vote such Proxy in accordance with their best judgment on
any such matter. The persons named in the accompanying Proxy
will also, if in their judgment it is deemed to be advisable,
vote to adjourn the Meeting from time to time.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the Proxy Statement for
the 2006 Annual Meeting of Stockholders must be received at the
principal executive offices of the Company by November 11, 2005
but not before September 2, 2005. For more information refer to
the Company's Bylaws which were filed as Exhibit 3.2 to the
Registration Statement on Form SB-2/A filed on June 10, 2004.
The Company is not required to include proposals received
outside of these dates in the proxy materials for the 2006
Annual Meeting of Stockholders.
THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, WHICH WAS MAILED TO
STOCKHOLDERS ON OR AROUND DECEMBER 17, 2004, WILL BE SENT
WITHOUT CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM:
PURE CYCLE CORPORATION, ATTENTION MARK W. HARDING, 8451 DELAWARE
STREET, THORNTON, CO 80260 OR BY SENDING AN EMAIL TO
[email protected]. ADDITIONALLY, A COPY CAN BE FOUND ON
THE COMPANY'S WEBSITE AT WWW. PURECYCLEWATER.COM.