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GUNTHER INTERNATIONAL, LTD.
ONE WINNENDEN ROAD
NORWICH, CONNECTICUT 06360
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 6, 2001
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Notice is hereby given that the 2001 Annual Meeting of Stockholders of
Gunther International, Ltd. will be held at XXXX, XXXX, Norwich, Connecticut, on
Thursday, September 6, 2001 at 10:30 a.m., local time, for the following
purposes:
(1) To elect a Board of seven directors to serve until the next Annual
Meeting of Stockholders or until their respective successors shall be
elected and qualified;
(2) To approve an amendment to the Company's Restated Certificate of
Incorporation by amending Article III to increase the authorized
capitalization of the Company; and
(3) To act upon such other matters as may properly come before the meeting
or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on July 16, 2001 as
the record date for the determination of the stockholders entitled to notice of
and to vote at the Annual Meeting. For ten days prior to the Annual Meeting, a
complete list of stockholders entitled to vote at the Annual Meeting will be
available for examination by any stockholder for any purpose germane to the
Annual Meeting during ordinary business hours at the Company's principal
executive offices located at One Winnenden Road, Norwich, Connecticut 06360. All
stockholders are invited to attend the Annual Meeting in person.
By order of the Board of Directors,
Michael M. Vehlies
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
July 30, 2001
Norwich, Connecticut
YOUR VOTE IS IMPORTANT!
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE MARK, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE SO
THAT YOUR STOCK MAY BE REPRESENTED AT THE ANNUAL MEETING.
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GUNTHER INTERNATIONAL, LTD.
ONE WINNENDEN ROAD
NORWICH, CONNECTICUT 06360
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors and management of Gunther International, Ltd., a Delaware
corporation (the "Company"), of proxies for use at the 2001 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at XXXX, XXXX,
Norwich, Connecticut, on Thursday, September 6, 2001 at 10:30 a.m., local time,
and at any and all postponements or adjournments thereof, for the purposes set
forth in the accompanying Notice of Meeting.
This Proxy Statement, Notice of Meeting and accompanying proxy card are
first being mailed to stockholders on or about July 30, 2001.
GENERAL
Only holders of record of the Company's common stock, par value $.001 per
share ("Common Stock"), issued and outstanding at the close of business on July
16, 2001 (the "Record Date") are entitled to notice of and to vote at the Annual
Meeting. On the Record Date, 4,291,769 shares of Common Stock were issued and
outstanding. Each holder of shares of Common Stock is entitled to one vote for
each share of Common Stock held as of the Record Date.
The presence, either in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
at the Annual Meeting shall constitute a quorum for the transaction of business.
In the event that there are not sufficient votes for a quorum, the Annual
Meeting may be adjourned from time to time until a quorum is obtained.
Assuming the presence of a quorum, the individuals nominated for election
to the Board of Directors, as described in Item 1 below, will be elected by the
affirmative vote of a plurality of the votes cast at the Annual Meeting. This
means that the candidates receiving the highest number of affirmative votes of
the shares entitled to be voted for them, up to the number of directors to be
elected by those shares, will be elected. The proposal to amend the Company's
Restated Certificate of Incorporation (see Item 2 below) will be approved if a
majority of the shares of the Company's outstanding common stock is voted in
favor of the proposal. Any other matters presented for consideration at the
Annual Meeting each must be approved by the affirmative vote of a majority of
the shares present, either in person or by properly executed proxy, and entitled
to vote thereon, unless a higher vote is required under the applicable
provisions of the Company's Restated Certificate of Incorporation, its bylaws,
the laws of the State of Delaware, under whose laws the Company is incorporated,
or other applicable law.
For purposes of determining the number of affirmative votes cast with
respect to a particular matter, only those votes cast "FOR" the matter are
counted. Abstentions will be treated as shares present and entitled to vote for
purposes of determining the presence of a quorum, but will be counted separately
(as neither a vote for nor a vote against) in the tabulation of the votes cast
on proposals presented to stockholders. If a broker or other record holder or
nominee indicates on a proxy that it does not have authority as to certain
shares to vote on a particular matter, those shares will not be considered as
present and entitled to vote with respect to that matter. As a result, these
so-called "broker non-votes" will have no effect on the outcome of the voting
with respect to any of the proposals described in the proxy statement.
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the proxy card will vote FOR the slate of
nominees proposed by the Board of Directors, FOR approval of the proposed
amendments to the Company's Restated Certificate of Incorporation and as
recommended by the Board of Directors with regard to all other matters or, if no
such recommendation is given, in their own discretion. Each stockholder may
revoke a previously granted proxy at any time before it is exercised by filing
with the Secretary of the Company a revoking instrument or a duly executed proxy
bearing a later date. The powers of the proxy holders will be suspended if the
person executing the proxy attends the Annual Meeting in person and so requests.
Attendance at the Annual Meeting will not, in itself, constitute the revocation
of a previously granted proxy.
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ITEM 1.
ELECTION OF DIRECTORS
Seven directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting to hold office until the next Annual Meeting of
Stockholders or until their respective successors have been elected and
qualified. The Board of Directors' nominees are the seven individuals named
below. It is the intention of the persons named in the enclosed proxy to vote
the shares covered by each proxy for the election of all persons nominated for
election by the holders of shares of Common Stock. Although the Board of
Directors does not anticipate that such nominees will be unavailable for
election, in the event of such occurrence the proxies will be voted for such
substitute, if any, as the Board of Directors may designate.
As discussed in more detail below, the Company consummated a $5.7 million
comprehensive financing transaction on October 2, 1998. See "Certain
Relationships and Related Transactions." In connection with this financing
transaction, the Company and certain stockholders entered into a separate voting
agreement (the "Voting Agreement"), pursuant to which the stockholders agreed to
vote all shares of Common Stock held by them in favor of one or more persons
nominated by the parties to the Voting Agreement. The parties to the Voting
Agreement have advised the Company that they intend to vote all shares of Common
Stock held by them in favor of (i) Messrs. Cotter, Perkins, Spiegel, and
Steinberg, who are the nominees of Gunther Partners, LLC, (ii) Mr. Newman, who
is the nominee of Park Investment Partners, Inc., and (iii) Mr. Kirkpatrick, who
is the nominee of the Estate of Harold S. Geneen. Mr. Hickman is an independent
director, who is not the nominee or representative of any party to the Voting
Agreement. As of June 30, 2001, the Company believes that the original parties
to the Voting Agreement, together with any subsequent transferees (who are also
subject to the Voting Agreement), held approximately 2,255,704 shares or Common
Stock, or approximately 52.6% of the issued and outstanding shares of Common
Stock (excluding any shares of Common Stock issuable upon the exercise of
outstanding options, warrants or other similar rights). Pursuant to the terms of
the recapitalization agreement entered into by the Company on June 25, 2001, the
Voting Agreement will terminate upon the conclusion of the Company's Rights
Offering and the related repurchase transactions described below in "Item
2 -- Rights Offering."
The following table sets forth certain information with respect to all
nominees for election as directors of the Company, including those persons who
currently serve in such capacity:
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ---- --- -------------------- --------
J. Kenneth Hickman............ 73 Independent Business and Financial 1994
Consultant
Steven S. Kirkpatrick......... 46 Vice President United States Trust Company 1999
of New York
Gerald H. Newman.............. 60 Private Investor 1993
Marc I. Perkins............... 56 Vice Chairman and Chief Executive Officer of 1998
the Company
Robert Spiegel................ 65 Private Investor 1998
James A. Cotter, Jr........... 61 Managing Member in a Broker/Dealer 2001
Thomas M. Steinberg........... 45 President Tisch Family Interests 1998
J. KENNETH HICKMAN. Mr. Hickman is a certified public accountant. He has
been an independent business consultant since January 1991. For twenty-seven
years prior to that, he was a partner of Arthur Andersen LLP and its
predecessors, with various responsibilities including managing partner of the
firm's New Jersey office and director of its international business practice
program. He is a trustee of Fordham University and has served as a director and
officer of a number of not-for-profit organizations, primarily those concerned
with international trade and foreign affairs.
STEVEN S. KIRKPATRICK. Mr. Kirkpatrick is a Vice President of the United
States Trust Company of New York, where he is the manager of the Real Estate,
Closely Held Business and Oil & Gas Departments. He joined the United States
Trust Company of New York in 1986. Prior to that, he was a financial analyst for
Schupak & Company, a merchant banking firm specializing in private placements of
debt and equity securities
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for the leisure and hospitality industries. Mr. Kirkpatrick is a member of the
American Society of Appraisers in the discipline of Business Valuation.
GERALD H. NEWMAN. Mr. Newman has been a private investor and consultant to
various high technology companies since 1971. Following the death of Harold S.
Geneen in November of 1997, he served as Chairman of the Board of Directors of
the Company until Mr. Steinberg was elected to that position on October 2, 1998.
MARC I. PERKINS. Mr. Perkins has been the Chief Executive Officer of the
Company since October 2, 1998 and has been the President of the Company since
April 12, 1999. He was Vice Chairman of the Company from October 2, 1998 until
April 12, 1999. Since 1995, he has also served as a registered principal of PMK
Securities and Research, Inc., a securities broker-dealer and a member of the
National Association of Securities Dealers Inc. He served as the Chairman and
Chief Executive Officer of Perkins Capital Advisers, Inc., a registered
investment adviser, from 1992 to 1998, and the President of Crown Financial
Associates, Inc., a securities broker-dealer, from 1992 to 1995. From 1987-1992,
he was a Vice President and shareholder of Private Capital Management, Inc., a
registered investment adviser. He also serves as a director of HealthPlan
Services, Inc., a third-party administrator of health care plans, the shares of
which are listed on the New York Stock Exchange.
ROBERT SPIEGEL. Mr. Spiegel has been a private investor since May 1995.
Prior to that, he was the Chairman and President of RJR Drug Distributors, a
pharmaceutical distribution company, from May 1985 to May 1995. He also serves
as a director of Hoenig Group, Inc., a NASDAQ-listed company whose subsidiaries
engage in asset management and brokerage activities.
JAMES COTTER, JR. Mr. Cotter has been a managing member of Capital Market
Investment LLC, a broker/dealer, since June 1999. Prior to that he was a vice
president of H.C. Wainwright & Co., a broker/dealer, from January 1994 until
June 1999.
THOMAS M. STEINBERG. Mr. Steinberg is the President of Tisch Family
Interests, a position he has held since 1997. In this capacity, he manages and
supervises investments for members of the Laurence A. Tisch and Preston R. Tisch
families. From 1991 to 1997, he was the Managing Director of Tisch Family
Interests. He is also a director of Catellus Development Corporation, a Delaware
corporation engaged in investment activities which is listed on the New York
Stock Exchange. Mr. Steinberg has been Chairman of the Board of the Company
since October 1998.
DIRECTORS' REMUNERATION; ATTENDANCE
The Company maintains a policy of reimbursing all directors for any
reasonable travel expenses incurred in connection with their attendance at
meetings.
The Company also maintains the Gunther International, Ltd. Directors'
Equity Plan (the "Director's Equity Plan"), pursuant to which each participating
director receives shares of Common Stock of the Company as compensation for each
quarter in which the director serves on the Board. The number of shares issued
for each quarter has a value equal to $2,500, calculated based on the fair
market value of the Company's Common Stock at the end of such quarter. All
non-employee directors are eligible to participate in the Directors' Equity
Plan. An eligible director may make an irrevocable election not to participate
in the Directors' Equity Plan in any year and instead receive quarterly cash
retainers (currently set at $1,250). The aggregate number of shares of Common
Stock available for awards under the Directors' Equity Plan is 100,000, subject
to specified adjustments in the event of changes in the number of outstanding
shares of Common Stock.
As of the date of this Proxy Statement, Mr. Kirkpatrick has elected not to
participate in the Directors' Equity Plan, and he has also waived his right to
receive the quarterly cash retainer.
The Board of Directors met six times during the fiscal year ended March 31,
2001 and acted by the unanimous written consent of its members on one occasion.
No director attended fewer than 75% of the total number of meetings of the Board
and the Committees on which such director served.
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COMMITTEES OF THE BOARD
The standing committees of the Board of Directors are the Executive
Committee, the Audit Committee and the Executive Compensation/Stock Option
Committee.
During fiscal 2001, the Executive Committee consisted of Messrs. Perkins,
Spiegel and Steinberg. Mr. Steinberg served as Chairman of the Executive
Committee. The Executive Committee is vested with all powers and authorities of
the full Board of Directors, except to the extent that the Delaware General
Corporation Law prohibits such powers and authorities from being delegated to,
or exercised by, a committee of the full Board. The Executive Committee is
authorized to act for the full Board in the management of the business and
affairs of the Company. The Executive Committee did not conduct any meetings
during the fiscal year ended March 31, 2001.
During fiscal 2001, the Audit Committee consisted of Messrs. Hickman,
Kirkpatrick, and Steinberg. George Snelling was a member and the Chairman of the
Audit Committee until his resignation from the Board of Directors in February
2001. The current committee members are Messrs. Cotter, Hickman, Kirkpatrick and
Steinberg, with Mr. Hickman serving as the Chairman. The function of the Audit
Committee is to review and report to the Board of Directors with respect to the
selection and the terms of engagement of the Company's independent public
accountants, and to maintain communications among the Board of Directors, such
independent public accountants, and the Company's internal accounting staff with
respect to accounting and audit procedures, the implementation of
recommendations by such independent public accountants, the adequacy of the
Company's internal controls and related matters. The Audit Committee also
reviews certain related-party transactions and any potential
conflict-of-interest situations involving officers, directors or stockholders
beneficially owning more than 10% of any class of equity security of the
Company. During the fiscal year ended March 31, 2001, the Audit Committee met
five times and acted by unanimous written consent of its members on one
occasion.
During fiscal 2001, the Executive Compensation/Stock Option Committee
consisted of Messrs. Kirkpatrick, Newman, Spiegel and Steinberg. Mr. Spiegel
served as Chairman of the Executive Compensation/Stock Option Committee. The
function of the Executive Compensation/Stock Option Committee is to review the
performance of and to fix and determine the compensation of all officers of the
Company and all other employees of the Company whose annual salary level is
$100,000. During the fiscal year ended March 31, 2001, the Executive
Compensation/Stock Option Committee met two times and acted by the unanimous
written consent of its members on one occasion.
AUDIT COMMITTEE REPORT
The role of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibility relating to the Company's financial
statements and the financial reporting process, the systems of internal
accounting and financial controls, and the annual independent audit of the
Company's financial statements. Management has the primary responsibility for
the financial statement and the reporting process, and the Company's outside
auditors are responsible for auditing the Company's financial statements and
expressing an opinion on the conformity of its audited financial statements to
generally accepted accounting principles.
On July 17, 2000, the Board of Directors adopted a formal, written charter
for the Audit Committee of the Company. Each member of the Audit Committee is an
"independent director" for purposes of NASD Marketplace Rule 4200(a)(14).
In connection with the preparation and filing of the Company's audited
financial statements for the fiscal year ended March 31, 2001 (the "audited
financial statements"), the Audit Committee performed the following functions:
- The Audit Committee reviewed and discussed the audited financial
statements with senior management and Ernst & Young LLP, the Company's
outside auditors;
- The Audit Committee also discussed with Ernst & Young LLP the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees);
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- The Audit Committee received the written disclosures and the letter from
Ernst & Young LLP required by Independence Standards Board Standard No. 1
(Independence Discussions With Audit Committees), and discussed with
Ernst & Young LLP its independence from the Company; and
- The Audit Committee reviewed and considered whether Ernst & Young LLP's
provision of information-technology and other non-audit services to the
Company is compatible with the auditors' independence.
Based upon the functions performed, the Audit Committee recommended to the
Board of Directors, and the Board approved, that the audited financial
statements be included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 2001, for filing with the U.S. Securities and
Exchange Commission.
AUDIT COMMITTEE
Chairman, J. Kenneth Hickman
James A. Cotter, Jr.
Steven S. Kirkpatrick
Thomas M. Steinberg
EXECUTIVE OFFICERS
The current executive officers of the Company are as follows:
NAME AGE POSITIONS WITH THE COMPANY
- ---- --- --------------------------
Marc I. Perkins........................... 56 President and Chief Executive Officer
Michael M. Vehlies........................ 40 Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
A. Evan Haag.............................. 52 Senior Vice President, Operations
Theodore J. Langevin...................... 46 Senior Vice President, Design &
Manufacturing
Jeremy H. Greshin......................... 42 Vice President -- Sales and Marketing
Per J. Hellsund........................... 37 President -- Inc.jet, Inc.
For the biography of Mr. Perkins, see the previous section entitled
"Election of Directors."
MICHAEL M. VEHLIES. Mr. Vehlies has held the positions of Senior Vice
President, Chief Financial Officer, Treasurer and Secretary since he rejoined
the Company in October 1998. Prior to that, he was the Controller of SS&C
Technologies, Inc., a computer software company, from June 1995 to October 1998.
He was the Controller of Digital Graphix, Inc. from February 1995 to June 1995.
He was previously a Vice President and the Chief Financial Officer of the
Company from September 1992 to February 1995. He is a Certified Public
Accountant and was employed by Arthur Andersen & Co. from 1988 to 1992.
A. EVAN HAAG. Mr. Haag has held the position of Senior Vice President of
Operations since he joined the Company in February 2000. Prior to that, he was
Director, Strategic Supply Management of Moore Corporation (formerly) from
October 1998 to February 2000 and Operations Manager of Moore Corporation's
Systems Fabrication Moore Business Forms Research Venture from May 1996 to
September 1998. From 1989 to 1995, he was Operations Vice President for Metscan,
Incorporated, a manufacturer of remote data acquisition equipment for the
natural gas industry.
THEODORE J. LANGEVIN. Mr. Langevin has held the position of Senior Vice
President -- Design and Manufacturing since May 2001. Prior to that, he had been
Director of Engineering from July 1999 until May 2001 and an electrical engineer
from May 1999 until July 1999. Prior to joining the Company, Mr. Langevin was
the manager of software engineering at Roll Systems Inc., a manufacturer of pre-
and post-processing systems for commercial laser printers, from January 1994
until May 1999.
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JEREMY H. GRESHIN. Mr. Greshin has held the position of Vice
President -- Sales and Marketing of the Company since February 2001. Prior to
that, he had been the Director of European Sales for John Frieda Professional
Hair Care from March 1999 until March 2001. He had been President of Greshin
International Trade, a trade consulting firm specializing in Latin America.
PER J. HELLSUND. Mr. Hellsund has held the positions of Vice
President -- Operations of the Company since September 1999. Prior to that, he
had been the Director of Engineering of the Company from 1993 to 1999.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities to the Company or subsidiaries of
the Company for the periods indicated of (i) each person who served as the chief
executive officer of the Company during the fiscal year ended March 31, 2001,
and (ii) the other most highly compensated executive officers of the Company
whose total salary and bonus for the fiscal year ended March 31, 2001 exceeded
$100,000, for services in all capacities to the Company during such fiscal year
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
-----------------------
ANNUAL COMPENSATION(1) RESTRICTED OPTIONS/ ALL OTHER
--------------------------- STOCK SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) (#) ($)
- --------------------------- ---- --------- -------- ------------ -------- ------------
Marc I. Perkins,............... 2001 $172,000 0 0 0 0
President and Chief 2000 $167,000 0 0 30,000 0
Executive Officer(2) 1999 $ 72,000 0 0 150,000 0
Michael M. Vehlies,............ 2001 $110,000 0 0 0 0
Senior Vice President, 2000 $105,962 0 0 0 0
Chief Financial Officer, 1999 $ 39,231 0 0 35,000 0
Treasurer and Secretary(2)
A. Evan Haag,.................. 2001 $110,000 0 0 0 0
Senior Vice President, 2000 $ 14,808 0 0 10,000 0
Operations(3)
Daniel J. Chevalier,........... 2001 $122,283 0 0 0 0
Vice President, 2000 $122,025 0 0 7,500 0
Sales and Marketing(4) 1999 $130,223 0 0 20,000 0
- ---------------
(1) Perquisites and other personal benefits are not included because they do not
exceed the lesser of $50,000 or 10% of the total of base salary and annual
bonus for each of the Named Executive Officers.
(2) Mr. Perkins and Mr. Vehlies joined the Company in October 1998.
(3) Mr. Haag joined the Company in February 2000.
(4) Mr. Chevalier terminated employment in December 2000. Salary includes
severance of $6,538.
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Option Exercises and Fiscal Year-End Values. The following table sets
forth certain information with respect to option exercises in fiscal year 2001
by the individuals listed and unexercised options to purchase the Company's
Common Stock held by the individuals listed.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS
SHARES OPTIONS/SAR AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
Marc I. Perkins................ 0 0 150,000 30,000 0 0
Michael M. Vehlies............. 0 0 11,667 23,333 0 0
A. Evan Haag................... 0 0 2,000 8,000 0 0
Daniel J. Chevalier............ 0 0 0 0 0 0
- ---------------
(1) Represents the difference between the fair market value of the Common Stock
on March 31, 2001 and the exercise price.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Vehlies,
pursuant to which he is employed as the Chief Financial Officer of the Company
at an initial base salary of $102,000 per annum. The employment agreement may be
terminated by either party, with or without cause, on ninety days' prior written
notice. The employment agreement may be terminated immediately by the Company
for "cause" and by Mr. Vehlies for "good reason," as those terms are defined in
the employment agreement. In the event that the employment agreement is
terminated by the Company for "cause," Mr. Vehlies will not be entitled to any
additional compensation. In the event that the employment agreement is
terminated by Mr. Vehlies for "good reason," the Company generally must pay Mr.
Vehlies his base salary for the remainder of the calendar month during which the
termination is effective and for six consecutive calendar months thereafter.
STOCK OPTION PLAN
In December 1993, the Company adopted the Gunther International, Ltd. 1993
Stock Option Plan (the "Stock Option Plan"), which authorizes the Executive
Compensation/Stock Option Committee of the Board of Directors to grant to key
employees and directors of the Company and subsidiaries of the Company incentive
or non-qualified stock options. The Stock Option Plan also authorized the grant
of non-qualified stock options to certain then-current key employees of the
Company who were designated as "founders" of the Company. These options expired
unexercised in December 1999. Currently, options to purchase up to 310,000
shares of Common Stock may be granted under the Stock Option Plan. The Executive
Compensation/Stock Option Committee determines the prices and terms at which
options may be granted. Options may be exercisable in installments over the
option period, but no options may be exercised before six months or after ten
years from the date of grant.
The purpose of the Stock Option Plan is to encourage stock ownership by
persons instrumental to the success of the Company, in order to give them a
greater personal interest in the Company's business. The exercise price of any
incentive stock option granted to an eligible employee may not be less than 100%
of the fair market value of the shares underlying such option on the date of
grant, unless such employee owns more than 10% of the outstanding Common Stock
or stock of any subsidiary or parent of the Company, in which case the exercise
price of any incentive stock option may not be less than 110% of such fair
market value. No option may be exercisable more than ten years after the date of
grant and, in the case of an incentive stock option granted to an eligible
employee owning more than 10% of the Common Stock or stock of any subsidiary or
parent of the Company, no more than five years from its date of grant. Payment
for shares purchased upon exercise of any option may be in cash or in shares of
the Company's Common Stock. Options are not transferable, except upon the death
of the optionee. In general, upon termination of employment of an
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optionee, all options granted to such person which are not exercisable on the
date of such termination immediately expire, and any options that are
exercisable expire 30 days following termination of employment, if such
termination is not the result of death or retirement, and one year following
such termination if such termination was because of death or retirement under
the provisions of any retirement plan that may be established by the Company, or
with the consent of the Company. As of March 31, 2001, options covering an
aggregate of 137,500 shares of Common Stock were outstanding under the Stock
Option Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of beneficial ownership and
reports of changes in beneficial ownership with the Securities and Exchange
Commission (the "SEC"). Such persons are required by the SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by such
persons. Based solely on its copies of forms received by it, or written
representations from certain reporting persons that no Form 5 were required for
those persons, the Company believes that during the fiscal year ended March 31,
2001, its executive officers, directors, and greater than 10% beneficial owners
complied with all applicable filing requirements, except that Forms 5 were not
timely filed for Messrs. Hickman, Steinberg, Spiegel and Newman with regard to
the Directors' Equity Plan. These forms were filed on July , 2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 2, 1998, the Company entered into a $5.7 million comprehensive
financing transaction with the Bank of Boston Connecticut, N.A. (the "Bank"),
the Estate of Harold S. Geneen (the "Estate") and Gunther Partners, LLC
("Gunther Partners"), the proceeds of which were utilized to restructure and
replace the Company's then-existing revolving credit facility with the Bank (the
"Revolving Credit Facility"), fund a full settlement with the Company's
then-existing third-party service provider and provide additional working
capital to fund the Company's ongoing business operations. At the time of his
death on November 21, 1997, Mr. Geneen was Chairman of the Board of Directors
and a significant stockholder of the Company. Gunther Partners is a Delaware
limited liability company, the members of which include Robert Spiegel, Thomas
M. Steinberg and a partnership controlled by certain members of the Tisch
family. See "Item 1 -- Election of Directors" and "Stock Ownership of Certain
Beneficial Owners and Management."
Under the terms of the transaction, Gunther Partners loaned the Company an
aggregate of $4.0 million. At the same time, the Bank reached an agreement with
the Estate, pursuant to which the Estate consented to the liquidation of
approximately $1.7 million of collateral which had been pledged by Mr. Geneen to
secure the Company's obligations under the Revolving Credit Facility and the
application of the proceeds of such collateral to satisfy and repay in full a
like amount of indebtedness outstanding under the Revolving Credit Facility. The
balance of the indebtedness outstanding under the Revolving Credit Facility,
approximately $350,000, was repaid in full from the proceeds of the new
financing. The Company executed a new promissory note in favor of the Estate
evidencing the Company's obligation to repay the amount of collateral that was
liquidated by the Bank. The Company's obligations to the Estate are subordinate
to the Company's obligations to Gunther Partners.
The $4 million term note (the "Term Note") issued to Gunther Partners
originally provided that the principal was to be repaid commencing as of
November 1, 1998 through the payment of (i) eleven monthly installments of
$100,000 from November 1, 1998 and continuing to and including September 1,
1999, (ii) a single installment of $400,000 due on October 1, 1999, and (iii) a
single installment of $2,500,000 due on October 1, 2003. Interest was to be paid
quarterly, at the rate of 8% per annum, beginning January 1, 1999 and was to
continue until all principal and interest was paid in full. In September 1999,
the Company and Gunther Partners agreed to modify the repayment provisions of
the Term Note in light of the Company's then-current and projected cash flows.
To induce Gunther Partners to enter into the financing transaction, the
Company granted Gunther Partners a stock purchase warrant entitling Gunther
Partners, at any time during the period commencing on
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January 1, 1999 and ending on the fifth anniversary of the transaction, to
purchase up to 35% of the pro forma, fully diluted number of shares of the
Common Stock of the Company, determined as of the date of exercise. The exercise
price of the warrant is $1.50 per share. On or about November 17, 1998, Gunther
Partners distributed all of its rights under the warrant to its members in
proportion to their ownership interests in Gunther Partners. Thus, the warrants
are now held by the members of Gunther Partners (and their transferees) in
proportion to their ownership interests in Gunther Partners. As of June 30,
2001, the Company believes the warrants are exercisable for an aggregate of
2,583,361 shares of Common Stock.
In addition, the Company, Gunther Partners, the Estate and certain
shareholders (Park Investment Partners, Gerald H. Newman, Four Partners and
Robert Spiegel) entered into a Voting Agreement, pursuant to which they agreed
to vote all shares of Common Stock held by them in favor of (i) that number of
persons nominated by Gunther Partners constituting a majority of the Board of
Directors, (ii) one person nominated by the Estate and (iii) one person
nominated by Park Investment Partners. As of June 30, 2001, the Company believes
that the original parties to the Voting Agreement, together with any subsequent
transferees (who are also subject to the Voting Agreement), hold an aggregate of
approximately 2,255,704 shares, or approximately 52.6% of the outstanding
shares, of Common Stock (excluding any shares of Common Stock issuable upon the
exercise of options, warrants or other similar rights). The Voting Agreement
will terminate upon the consummation of the Company's Rights Offering and the
related repurchase transactions described below in "Item 2 -- Rights Offering."
The promissory note in favor of the Estate for approximately $1.7 million
is to be repaid at the earlier of one year after the Company's obligations to
Gunther Partners are paid in full or on October 2, 2004. Interest, at 5.44% per
annum, shall accrue on principal and unpaid interest, which is added to the
outstanding balance and is due at the time of principal payments. The
indebtedness is secured by a second priority interest in all tangible and
intangible personal property of the Company (excluding patents and trademarks)
and a third priority interest in patents and trademarks. Another entity,
Connecticut Innovations, Inc. ("CII"), has a first priority security interest in
certain specified patents and trademarks of the Company dating back to an
earlier financing transaction. The security interests of both Gunther Partners
and the Estate in the Company's patents and trademarks are subordinate to the
security interest of CII in this specified collateral. The security interest of
the Estate is subordinate to all rights of Gunther Partners.
Through June 30, 1999, the Company had made principal payments under the
Term Note aggregating $800,000 and had paid all interest when it was due and
payable (taking into account any applicable grace periods). In September 1999,
the Company and Gunther Partners agreed to modify the Term Note to defer payment
of the $700,000 in principal otherwise due and payable from July 1999 through
October 1999 and to relend the Company the $800,000 in principal that was
previously repaid, thereby restoring the aggregate principal amount of the Term
Note to the original principal amount of $4.0 million. As amended, the $4
million principal amount of the Term Note is to be repaid in nine payments as
follows: (a) $200,000 shall be paid on the first day of each calendar month
commencing as of October 1, 2001 and continuing through April 1, 2002; (b)
$100,000 shall be paid on May 1, 2002; and (c) the balance of $2,500,000 shall
be paid on October 1, 2003.
On December 16, 1999, the Company borrowed an additional $200,000 from
Robert Spiegel, a director of the Company and a member of Gunther Partners, to
alleviate a short-term cash-flow deficiency which the Company was experiencing.
The loan was unsecured and earned interest at the rate of 8% per annum. All
principal and accrued interest was repaid prior to December 31, 1999.
On April 21, 2000, the Company borrowed an additional $150,000 from Mr.
Spiegel to alleviate a subsequent cash-flow deficiency. This amount, together
with interest at the rate of 8% per annum, was repaid in full on April 28, 2000.
On April 4, 2000, the Company borrowed an additional $500,000 from Gunther
Partners on an unsecured basis. The promissory note evidencing this indebtedness
originally provided that the note was to be due and payable, together with
interest at the rate of 8% per annum, on demand at any time after May 4, 2000.
Subsequent to the execution and delivery of the original promissory note,
however, Gunther Partners delivered a letter to the Company evidencing its
agreement, in the event that the Company were to be unable to meet
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the payment obligation upon demand, to extend the payment date until such time
as the Company's cash flows will permit payment, but no later than April 1,
2001. In addition, Gunther Partners agreed to lend the Company an additional
$500,000 in the event the Company's cash flows, in the opinion of management and
Gunther Partners, required such additional amount. On November 30, 2000, the
Company borrowed $500,000 from a director, the proceeds of which were used to
pay in full the Company's then-existing revolving loan agreement with a bank.
The director acted on behalf of Gunther Partners to fulfill its prior commitment
for additional funding, which expired on April 1, 2001.
Prior to his death, Mr. Geneen loaned the Company $150,000 for working
capital purposes. The loan is an unsecured demand loan. As of the date of this
Proxy Statement, no portion of the loan has been repaid.
On June 25, 2001, the Company entered into a recapitalization agreement
with and among the Estate, Gunther Partners, Park Investment Partners, Inc. and
two other stockholders. Messrs. Thomas Steinberg and Robert Spiegel, two of the
Company's directors, are members of Gunther Partners. See the description of the
Recapitalization Agreement below at "Item 2 -- Rights Offering."
STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of June 30, 2001, with the exception of the persons listed below and the
persons listed under "Stock Ownership of Directors and Executive Officers"
below, no person was known by the Company to own more than 5% of the outstanding
Common Stock.
NUMBER OF PERCENT
SHARES(1)(2)(3) OF CLASS
--------------- --------
Gunther Partners, LLC(4).................................... 1,801,916 42.0%
c/o Thomas J. Tisch
667 Madison Avenue
New York, NY 10021
Executors of the Estate of Harold S. Geneen(5).............. 1,613,313 37.6%
c/o United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Four-Fourteen Partners, LLC(6).............................. 2,593,169 40.6%
c/o Thomas J. Tisch
667 Madison Avenue
New York, NY 10021
Park Investment Partners, Inc.(7)........................... 1,387,489 32.3%
c/o Gerald H. Newman
17161 Coral Cove Way
Boca Raton, FL 33496
- ---------------
(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock owned by them.
(2) Assumes that shares which the named person or group has a contractual right
to acquire within 60 days have been acquired and are outstanding.
(3) The shares shown in the table exclude certain shares which are governed by
the recapitalization agreement dated as of June 25, 2001 among the Company,
Gunther Partners, the Estate of Harold S. Geneen, Park Investment Partners,
Inc. and other stockholders see "Item 2 -- Rights Offering." Under the
recapitalization agreement, the Estate agreed to sell 919,568.5 shares to
the Company. Gunther Partners effected this purchase on the Company's behalf
on July , 2001 and has agreed to resell the shares to the Company within
30 days after the closing of the Rights Offering on the same terms and
conditions that were applicable to the Estate's sale of such shares to
Gunther Partners.
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(4) Based on information set forth in Amendment No. 6 to Schedule 13D, filed on
December 10, 1998 ("Amendment No. 6") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), by Gunther Partners, Four Partners,
Robert Spiegel, the Richard Spiegel 1987 Trust and Thomas M. Steinberg. The
shares shown in the table represent the number of shares which the filing
persons believed were held by persons other than the filing persons and were
covered by the Voting Agreement as of the date of filing (including 105,734
shares of Common Stock issuable upon the exercise of outstanding stock
purchase warrants). As noted above, the Company believes that, as of June
30, 2001, the parties to the Voting Agreement, including such filing
persons, beneficially owned an aggregate of 2,255,704 shares, or 52.6% of
the outstanding shares, of Common Stock. See "Certain Relationships and
Related Transactions."
(5) Based on information set forth in Amendment No. 1 to Schedule 13D, filed on
January 20, 1999 under the Exchange Act by June H. Geneen, Phil E. Gilbert,
Jr., Thomas W. Keesee, Jr. and the United States Trust Company of New York,
as co-executors of the Estate of Harold S. Geneen, the former Chairman and a
significant stockholder of the Company. The shares shown in the table
include 1,387,489 shares of Common Stock held by Park Investment Partners,
Inc., a Delaware corporation which is 50% owned by the Estate. The shares
shown in the table exclude the shares of Common Stock beneficially owned by
other parties to the Voting Agreement. See note 4 above and "Certain
Relationships and Related Transactions."
(6) Based on information set forth in Amendment No. 6, updated to reflect the
Company's belief that the stock purchase warrants issued in connection with
the October 2, 1998 financing transactions described above are currently
exercisable for an aggregate of 2,583,361 shares of Common Stock. See
"Certain Relationships and Related Transactions." Accordingly, the shares
shown in the table include an aggregate of 2,098,980 shares of Common Stock
that may be acquired upon the exercise of the stock purchase warrants which
have been distributed to Four-Fourteen Partners, LLC. The shares shown in
the table exclude the shares of Common Stock beneficially owned by Gunther
Partners and the shares of Common Stock beneficially owned by other parties
to the Voting Agreement. See note 4 above and "Certain Relationships and
Related Transactions."
(7) Based on information set forth in the Schedule 13D, filed on January 6, 1999
under the Exchange Act by Park Investment Partners, Inc. and Gerald H.
Newman. The shares shown in the table exclude the shares of Common Stock
beneficially owned by the other parties to the Voting Agreement. See note 4
above and "Certain Relationships and Related Transactions."
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STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table reflects shares of Common Stock beneficially owned (or
deemed to be beneficially owned pursuant to the rules of the Securities and
Exchange Commission) as of June 30, 2001 by each director of the Company, each
of the Named Executive Officers and the current directors and executive officers
of the Company as a group.
AMOUNT OF
BENEFICIAL PERCENTAGE OF
NAME(1) OWNERSHIP(2)(3) SHARES
- ------- --------------- -------------
James A. Cotter, Jr.(8)..................................... 25,660 *
J. Kenneth Hickman(4)....................................... 26,413 *
Steven S. Kirkpatrick(5).................................... 0 *
Gerald H. Newman(6)......................................... 1,476,604 34.3%
Marc I. Perkins(7).......................................... 170,000 3.8%
Robert Spiegel(9)........................................... 520,918 11.1%
Thomas M. Steinberg(10)..................................... 48,705 *
Michael M. Vehlies(7)....................................... 23,333 *
A. Evan Haag(7)............................................. 2,000 *
Daniel J. Chevalier......................................... 0 0
All Directors and Executive Officers as a group(11)......... 2,299,534 46.3%
- ---------------
* Less than 1%.
(1) The address of each of the directors and executive officers of the Company
is c/o Gunther International, Ltd., One Winnenden Road, Norwich,
Connecticut 06360.
(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock owned by them.
(3) Assumes that shares which the named person or group has a contractual right
to acquire within 60 days have been acquired and are outstanding.
(4) Includes 16,413 shares credited to the account of Mr. Hickman under the
Directors' Equity Plan.
(5) Mr. Kirkpatrick is a Vice President of the United States Trust Company of
New York, which is the beneficial owner of 1,613,313 shares of Common
Stock. See "Stock Ownership of Certain Beneficial Owners."
(6) Based on information set forth in the Schedule 13D, filed on January 6,
1999 under the Exchange Act by Park Investment Partners, Inc. and Gerald H.
Newman. The shares shown in the table include 1,387,489 shares beneficially
owned by Park Investment Partners, Inc., a Delaware corporation which is
50% owned by Mr. Newman. See "Stock Ownership of Certain Beneficial
Owners." Includes 16,413 shares credited to the account of Mr. Newman under
the Directors' Equity Plan. The shares shown in the table exclude the
shares of Common Stock beneficially owned by the other parties to the
Voting Agreement. See note 3 to the preceding table and "Certain
Relationships and Related Transactions."
(7) Includes the exercisable portion of stock options exercisable within 60
days of June 30, 2001.
(8) Includes 2,660 shares credited to the account of Mr. Cotter under the
Directors' Equity Plan.
(9) Based on information set forth in Amendment No. 5 to Schedule 13D, dated
October 7, 1998 ("Amendment No. 5"), filed under the Exchange Act by
Gunther Partners, Four Partners, Robert Spiegel, the Richard Spiegel 1987
Trust and Thomas M. Steinberg, updated to reflect the Company's belief that
the stock purchase warrants issued in connection with the November 2, 1998
financing transactions described above are currently exercisable for an
aggregate of 2,583,361 shares of Common Stock. See "Certain Relationships
and Related Transactions." Accordingly, the shares shown as beneficially
owned by Mr. Spiegel include 387,504 shares of Common Stock that may be
acquired pursuant to the exercise of the stock purchase warrants which have
been distributed to Mr. Spiegel. The shares shown in the table also include
the following: (i) 40,000 shares of Common Stock held by
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Mr. Spiegel's wife; (ii) 1,500 shares of Common Stock held in an IRA
account maintained for the benefit of Mr. Spiegel's wife; and (iii) 15,000
shares of Common Stock and warrants to purchase 64,584 shares of Common
Stock held by a trust of which Mr. Spiegel is a trustee. Mr. Spiegel
disclaims beneficial ownership as to each of the shares and warrants
described in (i) through (iii) in the preceding sentence. The shares shown
in the table also include 16,413 shares credited to the account of Mr.
Spiegel under the Directors' Equity Plan. The shares shown in the table
exclude the shares of Common Stock beneficially owned by Gunther Partners
and the shares of Common Stock beneficially owned by the other parties to
the Voting Agreement. See note 3 to the preceding table and "Certain
Relationships and Related Transactions."
(10) Based on information set forth in Amendment No. 5, updated to reflect the
Company's belief that the stock purchase warrants issued in connection with
the October 2, 1998 financing transactions described above are currently
exercisable for an aggregate of 2,583,361 shares of Common Stock.
Accordingly, the shares shown as beneficially owned by Mr. Steinberg
represent the 32,292 shares of Common Stock that may be acquired by him
pursuant to the exercise of the stock purchase warrants which have been
distributed to him. The shares shown in the table also include 16,413
shares credited to the account of Mr. Steinberg under the Directors' Equity
Plan.
(11) Includes an aggregate of 678,843 shares issuable upon the exercise of
outstanding options, warrants or other similar rights exercisable within 60
days of June 30, 2001 and excludes any shares of Common Stock beneficially
owned by the other parties to the Voting Agreement. If the shares held by
other parties to the Voting Agreement are included in the calculation, the
directors and executive officers of the Company would be deemed to
beneficially own an aggregate of 3,019,547 shares, or approximately 60.8%
of the outstanding shares, of Common Stock.
ITEM 2.
AMENDMENTS TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION
GENERAL
In connection with the planned rights offering to the Company's
stockholders described below, the Board of Directors has resolved, subject to
the approval by the Company's shareholders at the Annual Meeting, to amend the
Restated Certificate of Incorporation to (1) increase the number of authorized
shares of Common Stock from 16,000,000 to 32,000,000, an increase of 100% (the
"Authorized Share Amendment") and (2) to eliminate the authorization of two
classes of capital stock that are no longer outstanding or necessary for the
Company's future capital requirements (the "Capital Stock Amendment").
The proposed Authorized Share Amendment and the Capital Stock Amendment are
sometimes hereafter collectively referred to as the "Certificate Amendments."
The Board believes that the proposed Certificate Amendments are advisable and in
the best interests of the Company and its shareholders in order to increase the
number of shares available for issuance by the Company and to simplify the
Company's capital structure.
TEXT OF THE PROPOSED CERTIFICATE AMENDMENTS
The proposed Certificate Amendments will be effected by adoption of the
stockholders' resolutions attached hereto as Appendix A. If the proposed
Certificate Amendments are approved by the stockholders, the Company will
prepare and file with the Secretary of State of Delaware a certificate of
amendment to its Restated Certificate of Incorporation in order to effect each
of the Certificate Amendments.
PURPOSE OF THE PROPOSED AUTHORIZED SHARE AMENDMENT
The adoption of the Authorized Share Amendment will permit the Company to
proceed with its proposed Rights Offering, described below, in which the Company
plans to issue up to approximately 16 million
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additional shares of Common Stock and raise up to approximately $8 million of
new equity capital for the Company.
At the present time, the Company's Restated Certificate of Incorporation
authorizes 16,000,000 shares of Common Stock. As of July 16, 2001, 4,291,769
shares of Common Stock were issued and outstanding, and an additional 3,089,261
shares were reserved for issuance under previously granted stock options and
stock purchase warrants. Accordingly, the Company currently has available for
issuance only approximately 8.6 million shares which are not outstanding or
subject to issuance with respect to the exercise of authorized options and
warrants.
Because of the current limitation, there is an insufficient number of
shares of Common Stock available to enable the Company to proceed with the
Rights Offering. Although the Company has considered, and continues to consider
from time to time, other opportunities that may involve the issuance of Common
Stock, there currently are no plans, arrangements, agreements or understandings
for the issuance or use of the additional shares of authorized Common Stock,
other than the proposed Rights Offering.
EFFECTS OF THE PROPOSED AUTHORIZED SHARE AMENDMENT
If the proposed Authorized Share Amendment is implemented, the additional
authorized shares of Common Stock would be available for issuance from time to
time upon such terms and for such purposes as the Board may deem advisable,
generally without further action by the stockholders of the Company. Except in
connection with the proposed Rights Offering, stockholders would not have any
preemptive or similar rights to subscribe for or purchase any additional shares
of Common Stock that may be issued in the future. Any future issuance of Common
Stock may, depending upon the circumstances, dilute the earnings per share,
liquidation value, voting power and other rights and interests of the existing
stockholders.
The proposed Authorized Share Amendment would not effect any changes to the
Company's currently outstanding Common Stock. When issued by the Company, the
additional authorized shares of Common Stock will have the same rights and
privileges as the shares of Common Stock presently outstanding. Under the
Company's Restated Certificate of Incorporation, each share of Common Stock is
entitled to one vote. Holders of Common Stock are also entitled to receive
dividends as declared by the Board of Directors. All shares of Common Stock are
fully paid and non-assessable.
The Board of Directors presently intends to issue the additional shares of
Common Stock solely in connection with the planned Rights Offering. If, however,
the Company elects not to consummate the Rights Offering, such additional shares
could be used by the Board of Directors to dilute the stock ownership of persons
seeking to obtain control of the Company, thereby possibly discouraging or
deterring a non-negotiated attempt to obtain control of the Company and making
removal of incumbent management more difficult. The Authorized Share Amendment
is not a result of, nor does the Board of Directors have knowledge of, any
effort to accumulate capital stock of the Company or to obtain control of the
Company by means of a merger, tender offer, solicitation in opposition to the
Board of Directors or otherwise, and the Authorized Share Amendment is not being
presented with the intent that it be utilized as a type of anti-takeover device.
RIGHTS OFFERING
In June 2001, the Company entered into a recapitalization agreement (the
"Recapitalization Agreement") with the Estate, Gunther Partners, Park Investment
Partners, Inc., Mr. Robert Spiegel, a director of the Company, and certain other
stockholders.
The Recapitalization Agreement provides that the Company will effectuate a
registered public offering ("Rights Offering") of up to 16,000,000 shares of its
Common Stock (the "Offered Shares") to its stockholders by subscription right on
a pro-rata basis at a subscription price of $0.50 per share. The Company filed a
registration statement with the U. S. Securities and Exchange Commission
covering the sale of the Company's Common Stock pursuant to the Rights Offering
on July , 2001. Subject to the effectiveness of the registration statement and
approval of the proposed Authorized Share Amendment by the stockholders at
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the Annual Meeting, the Company anticipates that the Rights Offering will be
consummated as soon as practicable following the Annual Meeting.
It is presently anticipated that the rights to subscribe to the Offered
Shares will be granted at a ratio of 3.728-for-1. In addition, it is anticipated
that the Company's stockholders will be granted the right to "oversubscribe" for
additional shares not purchased by other stockholders, up to the total amount of
the Offered Shares. In the event that the Company's stockholders other than
Gunther Partners do not subscribe for and purchase all of the Offered Shares,
Gunther Partners has agreed to exercise its Oversubscription Rights to subscribe
for and purchase from the Company in the Rights Offering a number of shares
equal to 16,000,000 less the number of shares subscribed for stockholders other
than Gunther Partners, up to a maximum of 14,000,000 shares. The net proceeds of
the Rights Offering (a minimum of $7 million less offering expenses), will be
used to (i) pay in full the notes payable to Gunther Partners ($4.5 million);
(ii) to pay certain additional notes payable to a stockholder and director
($500,000); (iii) to purchase all notes payable to the Estate for a total
purchase price of $500,000; and (iv) to purchase 919,568 shares of the Company's
Common Stock held by the Estate for $137,935 (or $0.15 per share).
The balance of the net proceeds from the Rights Offering will be used for
general working capital purposes.
In order to facilitate the timely purchase of the debt and equity held by
the Estate, Gunther Partners effected the purchase for the benefit of the
Company on July , 2001. Following the consummation of the Rights Offering,
Gunther Partners will resell the debt and equity to the Company on the same
terms and conditions that were applicable to the sale from the Estate to Gunther
Partners.
The Board reserves the right to modify, postpone or to cancel the Rights
Offering at any time prior to the consummation of the sale of the shares upon
the exercise of the Rights if it determines that such modification, postponement
or cancellation is in the best interests of the Company and its stockholders.
Based on the $.50 per share subscription price, if the Rights Offering is fully
subscribed, the Company would raise proceeds of approximately $8 million, before
deducting the costs of the Rights Offering. The effectiveness of the Rights
Offering is subject to stockholder approval of the proposed Authorized Share
Amendment and the effectiveness of the Company's registration statement covering
the Company's sale of approximately 16 million shares of Common Stock issuable
upon the exercise of the Rights by stockholders.
Upon consummation of the Rights Offering, the Company's balance sheet will
be improved by eliminating approximately $6.7 million of debt as set forth on
the audited balance sheet filed on June 29, 2001 with the Company's Form 10-KSB
for the fiscal year ended March 31, 2001. Failure to successfully implement the
Rights Offering and raise the proceeds contemplated thereby could leave the
Company with significant liquidity problems which could materially impair the
Company's business and operations.
PURPOSE AND EFFECT OF THE PROPOSED CAPITAL STOCK AMENDMENT
The Board has determined to eliminate from the Company's Restated
Certificate of Incorporation any references to the class of Series B Common
Stock and the class of Series B Preferred Stock. There are currently no shares
of either class of stock issued and outstanding. The Board of Directors has no
plans to issue any such shares in the future. For these reasons, the Board has
resolved, subject to the approval by the Company's shareholders at the Annual
Meeting, to eliminate these classes of stock from the Restated Certificate of
Incorporation.
VOTE REQUIRED FOR APPROVAL
The proposed Certificate Amendments will be adopted if a majority of the
outstanding common stock is voted in favor of the proposal. Abstentions and
broker "non-votes" will have the effect of a vote against the proposed
Certificate Amendments.
THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY COMMON STOCK. ANY OFFER SHALL BE MADE ONLY THROUGH A SEPARATE
PROSPECTUS. THE BOARD OF DIRECTORS MAKES NO RECOM-
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MENDATION AS TO WHETHER STOCKHOLDERS SHOULD EXERCISE ANY SUBSCRIPTION RIGHTS
THAT MAY BE OFFERED TO THEM.
WHILE STOCKHOLDERS OF THE COMPANY ARE NOT BEING ASKED TO VOTE ON THE RIGHTS
OFFERING; THE COMPANY'S ABILITY TO CONSUMMATE THE RIGHTS OFFERING IS DEPENDENT
UPON STOCKHOLDER APPROVAL OF THE PROPOSED AUTHORIZED SHARE AMENDMENT.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" ITEM 2.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
On November 15, 1999, the Company dismissed Arthur Andersen LLP as the
Company's independent public accountants. Prior to November 15, 1999, Arthur
Andersen LLP had served as the Company's independent public accountants for nine
years. The reports of Arthur Andersen LLP on the financial statements of the
Company for the past two fiscal years contained no adverse opinion or disclaimer
of opinion and were not modified as to uncertainty, audit scope, or accounting
principles. The Audit Committee of the Board of Directors approved the decision
to change the independent accountants of the Company. In connection with its
audits for the two most recent fiscal years, there have been no disagreements
with Arthur Andersen 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 Arthur Andersen LLP would
12 15 have caused them to make reference thereto in their reports on the
financial statements of the Company for such years.
The Company previously requested that Arthur Andersen LLP furnish it with a
letter addressed to the SEC stating whether or not it agrees with the statements
contained above. A copy of the letter, dated November 15, 1999, indicating that
Arthur Andersen LLP is in agreement with such statements, was previously filed
as Exhibit 16.1 to the Company's Form 8-K filed on November 15, 1999.
The Company engaged Ernst & Young LLP as its new independent accountants as
of November 15, 1999. During the two most recent fiscal years, the Company has
not consulted with Ernst & Young LLP, regarding either (i) the application of
accounting principles to a specified completed or contemplated transaction, or
the type of audit opinion that might be rendered on the Company's financial
statements and no written or oral advise was provided that 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 the subject
of a disagreement or event identified in response to Item 304(a)(1)(iv) of
Regulation S-B.
Upon the recommendation of the Audit Committee, the Board of Directors
intends to reappoint Ernst & Young LLP as the Company's independent public
accountants for the fiscal year ended March 31, 2002. The Board of Directors in
its discretion may direct the appointment of a different independent public
accounting firm at any time during the year if the Board determines that such a
change would be in the best interests of the Company and its stockholders.
A representative of Ernst & Young LLP will be present at the Annual Meeting
to respond to appropriate questions and to make such statements as such
representatives may desire.
AUDIT FEES
The aggregate fees billed by Ernst & Young LLP for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended March 31, 2001, and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year were $77,500.
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FINANCIAL INFORMATION SYSTEM DESIGN AND IMPLEMENTATION FEES
The aggregate fees billed by Ernst & Young LLP for professional services
rendered for information technology services relating to financial information
systems design and implementation for the fiscal year ended March 31, 2001, were
$0.
ALL OTHER FEES
The aggregate fees billed by Ernst & Young LLP for services rendered to the
Company, other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees", for the fiscal
year ended March 31, 2001, were $ .
ITEM 3.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than the
items referred to above. Proxies in the enclosed form will be voted in respect
of any other business that is properly brought before the Annual Meeting in
accordance with the judgment of the person or persons voting the proxies.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
The Company currently expects to convene the 2002 Annual Meeting of
Stockholders during August or September of 2002 (the "2002 Annual Meeting"),
after the announcement of the financial results for the fiscal year ended March
31, 2002. Any proposal of a stockholder intended to be presented at the 2002
Annual Meeting must be received by the Secretary of the Company, for inclusion
in the Company's proxy, notice of meeting and proxy statement relating to the
2002 Annual Meeting, on or before April 1, 2002. For any proposal that is not
submitted for inclusion in next year's proxy statement, but is instead sought to
be presented directly at the 2002 Annual Meeting of Stockholders, SEC rules
permit management to vote proxies in its discretion if the Company: (1) receives
notice of the proposal before the close of business on June 15, 2002, and
advises share owners in the 2002 proxy statement about the nature of the matter
and how management intends to vote on such matter; or (2) does not receive
notice of the proposal prior to the close of business on June 15, 2002. Notices
of intention to present proposals at the 2002 Annual Meeting of Stockholders
should be addressed to Michael M. Vehlies, Secretary, Gunther International,
Ltd., One Winnenden Road, Norwich, Connecticut 06360.
THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED MARCH
31, 2001, FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE COMPANY'S OFFICES, ONE WINNENDEN ROAD,
NORWICH, CONNECTICUT 06360; ATTENTION: MICHAEL M. VEHLIES.
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ADDITIONAL INFORMATION
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Officers and regular employees of the Company may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex or facsimile. The
Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial owners
of stock.
By order of the Board of Directors,
Michael M. Vehlies
Senior Vice President, Chief Financial
Officer,
Treasurer and Secretary
July 30, 2001
Norwich, Connecticut
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APPENDIX A
TEXT OF PROPOSED CERTIFICATE AMENDMENTS
The proposed Certificate Amendments will be effected by adoption of the
following stockholders' resolutions which, if approved, will amend Article III
of the Company's Restated Certificate of Incorporation to read as follows:
RESOLVED: That the Company is authorized to increase the authorized
common stock of the Company, par value $.001 per share, from 16,000,000
shares to 32,000,000 shares and to eliminate the authorization of the
Series B common stock and the Class B Senior Non-Convertible Preferred
Stock from the Restated Certificate of Incorporation of the Company; and
RESOLVED: That the Company's Restated Certificate of Incorporation be
amended so that, as amended, Article III shall read in its entirety as
follows:
ARTICLE III
CAPITAL STOCK
(a) The total number of shares of all classes of stock which the
Corporation has authority to issue is Thirty-Two Million Five Hundred
Thousand (32,500,000), consisting of Thirty-Two Million (32,000,000) shares
of Common Stock, par value $.001 per share (the "Common Stock"), and Five
Hundred Thousand (500,000) shares of Preferred Stock, par value $.001 per
share (the "Preferred Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series, and the Board of Directors of the corporation is hereby
authorized, subject to the limitations provided by law, to establish and
designate one or more series of Preferred Stock, to fix the number of
shares constituting each series, and to fix the designation, powers,
preferences and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof, of each series and
the variations and the relative rights, preferences and limitations as
between series, and to increase and to decrease the number of shares
constituting each series. The authority of the Board of Directors of the
Corporation with respect to each series shall include, but shall not be
limited to, the authority to determine the following:
(i) The designation of such series, which may be by distinguishing
number or letter.
(ii) The number of shares initially constituting such series.
(iii) The increase, and the decrease to a number not less than the
number of the then outstanding shares of such series, of the number of
shares constituting such series theretofore fixed.
(iv) The rate or rates, and the conditions upon and the times at
which dividends on the shares of such series shall be paid, the
preference or relation which such dividends shall bear to the dividends
payable on any other class or classes or on any other series of stock of
the Corporation, and whether or not such dividends shall be cumulative,
and, if such dividends shall be cumulative, the date or dates from and
after which they shall accumulate.
(v) Whether or not the shares of such series shall be redeemable
and, if such shares shall be redeemable, the terms and conditions of
such redemption, including, but not limited to, the date or dates upon
or after which such shares shall be redeemable and the amount per share
which shall be payable upon such redemption, which amount may vary under
different conditions and at difference redemption dates.
(vi) The rights to which the holders of the shares of such series
shall be entitled upon the voluntary or involuntary liquidation,
dissolution or winding up of, or upon any distribution of the assets of,
the Corporation, which rights may be different in the case of a
voluntary liquidation, dissolution or winding up than in the case or
such an involuntary event.
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PROXY CARD (FRONT AND BACK)
GUNTHER INTERNATIONAL, LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of common stock, par value $.001 per share
("Common Stock"), of GUNTHER INTERNATIONAL, LTD., a Delaware corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
MARC I. PERKINS and MICHAEL M. VEHLIES, or either of them, as proxies, with full
power to act without the other and with full power of substitution, to represent
the undersigned at the Annual Meeting of Stockholders of the Company to be held
on September 6, 2001, at 10:30 a.m., local time, at ___________________,
_____________, Norwich, Connecticut 06360, and at any adjournments or
postponements thereof, and to vote all shares of Common Stock of the Company
which the undersigned is entitled to vote on all matters coming before said
meeting. The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and the Proxy Statement, dated July 30, 2001, and instructs its
attorneys and proxies to vote as set forth on this Proxy.
(To be Signed on Reverse Side)
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PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
GUNTHER INTERNATIONAL, LTD.
SEPTEMBER 6, 2001
| Please Detach and Mail in the Envelope Provided |
/X/ Please mark your votes as in this example
1. ELECTION OF DIRECTORS Nominees: J. Kenneth Hickman
Steven S. Kirkpatrick
Gerald H. Newman
Marc I. Perkins
Robert Spiegel
James A. Cotter, Jr.
Thomas M. Steinberg
FOR WITHHELD
/ / / /
For, except vote withheld from
the following nominee(s):____________________________________________
2.
FOR AGAINST ABSTAIN Amendment to the Company's and
Restated Certificate of
/ / / / / / Incorporation to (1) increase
the authorized number of shares
of common stock from 16,000,000
to 32,000,000 and (2) to delete
authorization for the Company's
Class B Common Stock and Series
B Preferred Stock.
3. To vote with discretionary authority upon any other business which
may properly come before the meeting or any adjournment thereof.
The shares represented by this Proxy will be voted as specified. IF NO CHOICE IS
SPECIFIED, THE PROXY WILL BE VOTED IN FAVOR OF THE SPECIFIED NOMINEES, IN FAVOR
OF THE PROPOSED AMENDMENTS TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION AND THE PROXIES ARE GIVEN DISCRETIONARY AUTHORITY TO VOTE ON ANY
OTHER MATTERS UPON WHICH THE UNDERSIGNED IS ENTITLED TO VOTE AND WHICH MAY
PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF. THIS PROXY CARD MUST BE PROPERLY COMPLETED, SIGNED, DATED AND RETURNED
IN ORDER TO HAVE YOUR SHARES VOTED.
SIGNATURE(S) DATE
---------------------------- -------------------------------
IMPORTANT: Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee, etc.
indicate title. If the signer is a corporation, sign in corporate name by a duly
authorized officer.