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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
(Rule 14d-101)
Solicitation/Recommendation Statement Under
Section 14(d)(4) of the Securities Exchange Act of 1934
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IMTEC INC.
(Name of Subject Company)
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IMTEC INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
452909 10 4
(CUSIP Number of Class of Securities)
STEVEN D. ANTON
President
IMTEC Inc.
One Imtec Lane
Bellows Falls, Vermont 05101
(802) 463-9502
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications on Behalf
of the Person Filing Statement)
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With a copy to:
IRA ROXLAND, ESQ.
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
(212) 688-7000
Fax: (212) 755-2839
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ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company is IMTEC Inc., a Delaware corporation (the
"Company"). The address and telephone number of the principal executive offices
of the Company are One Imtec Lane, Bellows Falls, Vermont 05101; telephone (802)
463-9502. The title of the class of equity securities to which this Statement
relates is the shares of common stock, par value $.01 per share, of the Company
(the "Shares"). As of February 11, 2000, there were 1,635,313 Shares
outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
The name, address and telephone number of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
This Statement relates to a tender offer by IMTC Acquisition Corp., a
Delaware corporation ("Purchaser") and an indirect, wholly owned subsidiary of
Brady Corporation, a Wisconsin corporation ("Parent"), disclosed in a Tender
Offer Statement on Schedule TO (the "Schedule TO") dated February 22, 2000 to
purchase all outstanding Shares at a price of $12.00 per Share, net to the
seller in cash, without interest thereon upon the terms and subject to the
conditions set forth in the Offer to Purchase dated February 22, 2000 (the
"Offer to Purchase") and the related Letter of Transmittal (which together
constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of February 11, 2000, among the Company, Parent
and Purchaser, pursuant to which, after the completion of the Offer and the
satisfaction or waiver of certain conditions, Purchaser will be merged with and
into the Company and the Company will be the surviving corporation (the
"Merger"). On the effective date of the Merger, each outstanding Share (other
than Shares owned by Parent, Purchaser or any subsidiary of Parent, Purchaser or
the Company or held in the treasury of the Company or held by shareholders who
properly exercise dissenters' rights, if any), will by virtue of the Merger and
without action by the holder thereof be canceled and converted into the right to
receive an amount in cash equal to the per Share price paid pursuant to the
Offer payable to the holder thereof, without interest thereon, upon the
surrender of the certificate formerly respecting such Share.
In order to induce Parent to enter into negotiations with the Company
concerning the Merger and as a pre-condition to making a public announcement
regarding the possible acquisition of the Company by Parent, on December 9,
1999, certain shareholders of the Company, including all of the Company's
directors, and all but one holder of greater than five percent (5%) of the
Shares (the "Group Shareholders"), who, in the aggregate, own 875,326 Shares,
including certain options to purchase Shares (the "Group Shares"), entered into
a Shareholder Option Agreement ("Shareholder Option Agreement #1") with Parent.
In addition, on December 9, 1999, Parent entered into a second Shareholder
Option Agreement ("Shareholder Option Agreement #2" and together with
Shareholder Option Agreement #1, the "Shareholder Option Agreements"), with the
remaining holder of greater than 5% of the Shares (the "Individual Shareholder"
and together with Group Shareholders, the "Shareholders") with respect to
109,377 Shares (the "Individual Shares" and together with the Group Shares, the
"Option Shares"), which constitute a portion of the Shares owned by the
Individual Shareholder.
Pursuant to the Shareholder Option Agreements, each Shareholder agreed,
among other things, (a) to grant Parent an irrevocable option to purchase the
Option Shares held by such Shareholder at $12.00 per Share (subject to
adjustment in certain circumstances), (b) to tender, in accordance with the
terms of the Offer, all of the Option Shares (including any subsequently
acquired Shares with respect to the Group Shareholders) owned by such
Shareholder and (c) to vote all of the Option Shares (including any subsequently
acquired Shares with respect to the Group Shareholders) owned by such
Shareholder in favor of the Merger and against certain other extraordinary
transactions. The Option Shares represent approximately 57.9% of the Shares
computed in accordance with Rule 13d-3(d)(1)(i) under the Exchange Act (53.4% of
the Shares outstanding on a fully diluted basis).
According to the Offer to Purchase, the principal executive offices of
Purchaser and Parent are located at 6555 W. Good Hope Road, Milwaukee, Wisconsin
53223.
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ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
Except as set forth in this Item 3, to the knowledge of the Company, as of
the date hereof, there are no material contracts, agreements or arrangements or
understandings or actual or potential conflicts of interest between the Company,
its executive officers, directors or affiliates and (i) the Company, its
executive officers, directors or affiliates or (ii) Parent, its executive
officers, directors or affiliates.
Each material contract, agreement, arrangement or understanding between the
Company or its affiliates and its executive officers, directors or affiliates is
set forth below.
THE MERGER AGREEMENT
A summary of the Merger Agreement is contained in Section 10 ("Background
of the Offer; Contacts with the Company; the Merger Agreement; Shareholder
Option Agreements") of the Offer to Purchase and is incorporated herein by
reference. A copy of the Merger Agreement is filed as Exhibit (c)(1) hereto and
is hereby incorporated by reference.
SHAREHOLDER OPTION AGREEMENTS
A summary of the Shareholder Option Agreements is contained in Section 10
("Background of the Offer; Contacts with the Company; the Merger Agreement;
Shareholder Option Agreements") of the Offer to Purchase and is incorporated
herein by reference. Copies of the Shareholder Option Agreements are filed as
Exhibits (c)(2)(i) and (c)(2)(ii) hereto and are hereby incorporated by
reference.
CONFIDENTIALITY AGREEMENT
A summary of the Confidentiality Agreement between the Company and Parent
is contained in Section 10 ("Background of the Offer; Contacts with the Company;
the Merger Agreement; Shareholder Option Agreements") of the Offer to Purchase
and is incorporated herein by reference. A copy of the Confidentiality Agreement
is filed as Exhibit (c)(3) hereto and is hereby incorporated by reference.
TRANSACTIONS BETWEEN THE COMPANY AND PARENT
During Parent's fiscal years ended July 31, 1999 and 1998, Parent, through
one of its subsidiaries, purchased approximately $537,000 and $729,000 of
preprinted labels from the Company. These purchases have continued in the
present fiscal year. All such purchases were at then-current market prices.
OPTION GRANTS
The Company granted options to the following executive officers of the
Company upon the commencement of their respective employment relationships with
the Company.
NUMBER DATE
OF OF
NAME POSITION OPTIONS GRANT
---- -------- ------- -----
Steven D. Anton..................... Company President 50,000 4/5/99
James L. Searcy..................... Company Chief Financial Officer 25,000 10/22/99
CHANGE IN CONTROL AGREEMENTS
In November 1999, the Company entered into a change of control agreement
with Mr. Anton, providing for a payment, upon termination for any reason
following a change in control of the Company, of a lump sum equal to one year's
compensation computed in accordance with Section 280G of the Internal Revenue
Code of 1986, as amended. For purposes of this agreement, "change of control" is
defined as set forth in the Information Statement, attached hereto as Annex A,
under the heading "Change of Control Agreements".
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In October 1999, the Company tendered an offer of employment to Mr. Searcy
which, among other terms, provided for a payment, upon termination for any
reason following a change in control of the Company, of six months of base
salary.
In February 2000, the Company accorded George S. Norfleet III, the
Company's Secretary, the right to receive six months of base salary upon
termination of his employment, either by elimination or reduction of his
position or without cause, following a change of control of the Company.
Completion of the Offer will constitute a change of control under the
respective agreements or arrangements with each of Messrs. Anton, Searcy and
Norfleet, described above.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
RECOMMENDATION OF THE BOARD OF DIRECTORS
At a special meeting held on February 10, 2000, the Board of Directors of
the Company (the "Board") unanimously approved the Merger Agreement, approved
the Offer and the Merger (each as defined in the Merger Agreement), determined
that the Offer and the Merger are in the best interests of the holders of Shares
and unanimously recommended that shareholders accept the Offer and tender their
Shares pursuant to the Offer. A copy of a letter to the Company's shareholders
communicating such approval and recommendation is filed as Exhibit (a)(3) to
this Statement and is incorporated herein by reference.
REASONS FOR THE RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
In light of the Board's review of the Company's competitive and financial
position, recent operating results and prospects, the Board determined that the
Offer and the Merger are fair to, and in the best interests of, the Company and
its shareholders. In making such recommendation and in approving the Merger
Agreement and the transactions contemplated thereby, the Board considered a
number of factors, including, but not limited to, the following:
(i) the terms and conditions of the Offer and the Merger Agreement;
(ii) the financial condition, results of operations, business and
prospects of the Company, including the prospects of the
Company if the Company were to remain independent;
(iii) the fact that the $12.00 per Share to be paid in the Offer and
the Merger represents a premium of approximately 118.2% over
the $5.50 closing sale price for the Shares on December 9,
1999, the last trading day prior to the public announcement of
the Offer, and a premium of approximately 89.2% over the $6.34
average closing sale price for the Shares for the three month
period ended December 8, 1999;
(iv) the views expressed by management and the Board's conclusion
that it was not likely that any other party would enter into a
transaction that was more favorable to the Company and its
shareholders;
(v) the fact that the Merger Agreement, while prohibiting the
Company from actively soliciting a competitive proposal, permits
the Company upon receipt of a Superior Proposal (as defined in
the Merger Agreement), subject to compliance with the terms and
conditions of the Merger Agreement and if and to the extent
required by the fiduciary duties of the Board, to furnish
information to or enter into discussions or negotiations with
such person who has made the Superior Proposal;
(vi) the fact that the Merger Agreement permits the Board, in the
exercise of its fiduciary duties, to terminate the Merger
Agreement in favor of a Superior Proposal, subject to the
Company's compliance with the terms and conditions of the
Merger Agreement; upon such termination, the Company shall
reimburse Parent for out-of-pocket fees and expenses of Parent
and Purchaser related to the Offer and the Merger Agreement and
pay Parent a termination fee of $25,000;
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(vii) the fact that certain significant shareholders of the Company,
including all of the directors of the Company, had previously
entered into option agreements with Purchaser pursuant to
which, among other things, such shareholders have agreed to
validly tender an aggregate of approximately 57.9% of the
outstanding Shares; and
(viii) the fact that the transactions contemplated by the Merger
Agreement provide for an all cash payment to shareholders, with
no financing condition.
The Board did not assign relative weights to the above factors or determine
that any factor was of particular importance. Rather, the Board viewed its
position and recommendation as being based on the totality of the information
presented to and considered by it. In addition, individual members of the Board
may have given different weight to different factors.
The Board recognized that, while the consummation of the Offer gives the
Company's shareholders the opportunity to realize a significant premium over the
price at which the Shares were traded prior to the public announcement of the
Offer, tendering in the Offer would eliminate the opportunity for the Company's
shareholders to participate in the future growth and profits of the Company. The
Board believes that the loss of the opportunity to participate in the growth and
profits of the Surviving Corporation was reflected in the Offer price of $12.00
per Share.
It is expected that, if the Shares are not purchased by Parent in
accordance with the terms of the Offer or if the Merger is not consummated, the
Company's current management, under the general direction of the Board, will
continue to manage the Company as an ongoing business.
Based on the foregoing factors, the Board determined to recommend that
shareholders accept the Offer and tender their shares pursuant to the Offer.
To the best of the Company's knowledge, except for Shares the sale of which
may trigger liability for the holder(s) under Section 16(b) of the Exchange Act,
all executive officers and directors of the Company intend to tender to
Purchaser all Shares held by such persons. In addition, as of the date hereof,
seven (7) of the Company's shareholders, inclusive of one officer and all of the
directors of the Company, have entered into Shareholder Option Agreements with
Purchaser pursuant to which such shareholders have agreed, among other things,
to validly tender (and not withdraw) an aggregate of 984,703 Shares,
representing approximately 57.9% of the outstanding Shares in the Offer, to vote
the Shares owned by such shareholders in favor of the Merger and against certain
other extraordinary transactions and to grant an option to Purchaser to purchase
the Shares held by such shareholders at $12.00 per Share (subject to adjustment
in certain circumstances). This summary is qualified in its entirety by
reference to the Shareholder Option Agreements, copies of which are attached
hereto as Exhibits (c)(2)(i) and (c)(2)(ii) and are incorporated herein by
reference.
ITEM 5. PERSON/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED
Neither the Company nor any person acting on its behalf has employed,
retained or agreed to compensate any person to express any opinion as to the
fairness of the Offer, from a financial point of view, to the shareholders of
the Company or to make solicitations or recommendations to the shareholders
concerning the Offer.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
No transactions in the Shares have been effected during the past 60 days by
the Company or, to the best of the Company's knowledge, by any executive
officer, director or affiliate of the Company.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
(a) Except as set forth above, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) any
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company; or (ii) any purchase, sale or transfer of a material
amount of assets of the
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Company; or (iii) any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company.
(b) Except as described in Items 3(b) and 4 above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached hereto as Annex A is being furnished in
connection with the contemplated designation by Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than at
a meeting of the Company's shareholders following the purchase by Purchaser of
the number of Shares pursuant to the Offer necessary to satisfy the Minimum
Condition (as defined in the Merger Agreement).
DELAWARE BUSINESS COMBINATION LAW
A summary of selected provisions of the Delaware Business Combination Law
is contained in Section 15 ("Certain Regulatory and Legal Matters") under the
caption "Delaware Business Combination Law" of the Offer to Purchase and is
incorporated herein by reference.
ANTITRUST
A summary of antitrust concerns related to the Offer is contained in
Section 15 ("Certain Regulatory and Legal Matters") under the caption "Antitrust
Compliance" of the Offer to Purchase and is incorporated herein by reference.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
EXHIBIT
NUMBER EXHIBIT NAME
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(a)(1) Offer to Purchase, dated February 22, 2000 (Incorporated
herein by reference to Exhibit (a)(1) of Schedule TO filed
with the Commission by Brady Corporation and IMTC
Acquisition Corp. on February 22, 2000.)
(a)(2) Form of Letter of Transmittal (Incorporated herein by
reference to Exhibit (a)(2) of Schedule TO filed with the
Commission by Brady Corporation and IMTC Acquisition Corp.
on February 22, 2000.)
(a)(3) Letter to Shareholders of Imtec Inc., dated February 22,
2000.
(a)(4) Text of press release issued by Parent and the Company on
February 11, 2000 (Incorporated herein by reference to
Exhibit (a)(1) of Schedule TO filed with the Commission by
Brady Corporation and IMTC Acquisition Corp. on February 11,
2000.)
(c)(1) Agreement and Plan of Merger, dated as of February 11, 2000,
among Parent, Purchaser and the Company (Incorporated herein
by reference to Exhibit (d)(1) of Schedule TO filed with the
Commission by Brady Corporation and IMTC Acquisition Corp.
on February 22, 2000.)
(c)(2)(i) Shareholder Option Agreement, dated December 9, 1999, among
Purchaser and certain shareholders of the Company named
therein (Incorporated herein by reference to Exhibit 1 of
Schedule 13D filed with the Commission by Brady Corporation
on December 20, 1999.)
(c)(2)(ii) Shareholder Option Agreement, dated December 9, 1999,
between Purchaser and Laifer Capital Management, Inc.
(Incorporated herein by reference to Exhibit 2 of Schedule
13D filed with the Commission by Brady Corporation on
December 20, 1999.)
(c)(3) Confidentiality Agreement, dated November 2, 1999, between
the Company and Parent (Incorporated herein by reference to
Exhibit (d)(4) of Schedule TO filed with the Commission by
Brady Corporation and IMTC Acquisition Corp. on February 22,
2000.)
(c)(4) "Change of Control" Agreement between the Company and Mr.
Steven D. Anton, dated as of November 15 1999.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
IMTEC Inc.
By: /s/ STEVEN D. ANTON
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Name: Steven D. Anton
Title: President
Dated: February 22, 2000
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ANNEX A
IMTEC INC.
ONE IMTEC LANE
BELLOWS FALLS, VERMONT 05101
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INFORMATION STATEMENT PURSUANT
TO SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
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NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED NOT
TO SEND THE COMPANY A PROXY.
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This Information Statement, which is being mailed on or about February 22,
2000 to the holders of shares of common stock, par value $.01 per share
(collectively "Shares" or "Common Shares") of Imtec Inc., a Delaware corporation
(the "Company"), is being furnished in connection with the possible designation
by Purchaser of persons to the Board of Directors of the Company (the "Board").
Such designation is to be made pursuant to an Agreement and Plan of Merger dated
as of February 11, 2000 (the "Merger Agreement") among the Company, Parent and
the Purchaser.
The terms of the Merger Agreement, a summary of the events leading up to
the Offer and the execution of the Merger Agreement and other information
concerning the Offer and the Merger are contained in the Offer to Purchase and
in the Solicitation/Recommendation Statement on Schedule 14D-9 of the Company
(the "Schedule 14D-9") with respect to the Offer, copies of which are being
delivered to shareholders of the Company contemporaneously herewith. Certain
other documents (including the Merger Agreement) were filed with the Securities
and Exchange Commission (the "SEC") as exhibits to the Schedule 14D-9 and as
exhibits to the Tender Offer Statement on Schedule TO of the Purchaser and
Parent (the "Schedule TO"). The exhibits to the Schedule 14D-9 and the Schedule
TO may be examined at, and copies thereof may be obtained from, the regional
offices of and public reference facilities maintained by the SEC (except that
the exhibits thereto cannot be obtained from the regional offices of the SEC) in
the manner set forth in Section 7 of the Offer to Purchase.
No action is required by the shareholders of the Company in connection with
the election or appointment of the Purchaser Designees (as defined below) to the
Board. However, Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires the mailing to the Company's shareholders of the
information set forth in this Information Statement prior to a change in a
majority of the Company's directors otherwise than at a meeting of the Company's
shareholders.
The information contained in this Information Statement concerning the
Parent, the Purchaser and the Purchaser Designees has been furnished to the
Company by such persons, and the Company assumes no responsibility for the
accuracy or completeness of such information. The Schedule TO indicates that the
principal executive office of the Parent and Purchaser is located at 6555 W.
Good Hope Road, Milwaukee, Wisconsin 53223.
GENERAL
The Common Shares are the only class of voting securities of the Company
entitled to vote for the election of directors. Each Share is entitled to one
vote. As of February 11, 2000, there were 1,635,313 Shares outstanding. The
Board of Directors of the Company currently consists of four members. Each
director holds office until his successor is elected and qualified or until his
earlier death, resignation or removal.
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THE BOARD OF DIRECTORS
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
The Merger Agreement provides that, if requested by the Purchaser, the
Company will, promptly following the purchase by Purchaser of at least 75% of
the outstanding Shares of the Company pursuant to the Offer, take all necessary
action to cause a number of persons designated by the Purchaser (the "Purchaser
Designees") rounded up to the next whole number, to constitute a percentage of
the members of the Board of Directors equal to the percentage of Shares
outstanding owned by Purchaser and its affiliates, including by accepting
resignations of those incumbent directors designated by the Company or
increasing the size of the Board and causing the Purchaser designees to be
elected.
Purchaser has informed the Company that each of the Purchaser Designees
listed below has consented to act as a director. To the best knowledge of the
Company, none of the Purchaser Designees owns any equity securities of the
Company. It is expected that the Purchaser Designees may assume office at any
time following the purchase by Purchaser of such number of Common Shares that
satisfies the Minimum Condition, which purchase cannot be earlier than March 21,
2000, and that, upon assuming office, the Purchaser Designees will thereafter
constitute at least three-fourths of the Board.
Biographical information concerning each of the Purchaser Designees and the
current directors and executive officers of the Company is presented below.
PURCHASER DESIGNEES
With respect to the Purchaser Designees, the following table, prepared from
information furnished to the Company by Purchaser, sets forth the name, age,
present principal occupation or employment and five-year employment history for
each of the persons who may be designated by Purchaser as Purchaser Designees.
If necessary, Purchaser may choose additional or other Purchaser Designees,
subject to the requirements of Rule 14f-1. The business address of each person
is c/o Brady Corporation, 6555 W. Good Hope Road, Milwaukee, Wisconsin 53223.
Except for Mr. Jaehnert, who is a citizen of Germany, each such person is a
citizen of the United States.
PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
MATERIAL POSITIONS HELD
NAME AGE DURING THE PAST FIVE YEARS
---- --- --------------------------
Katherine M. Hudson... 53 President and Chief Executive Officer of Parent since 1994
Frank M. Jaehnert..... 42 Vice President and Chief Financial Officer of Parent since
1996; Finance Director of Parent's Identification Solutions
and Specialty Tapes Group prior to 1996
Conrad G. Goodkind.... 55 Secretary of Parent since 1999 and Partner of Quarles &
Brady LLP, general counsel to Parent
David W. Schroeder.... 44 Vice President of Parent's Identification Solutions and
Specialty Tapes Group since 1995; General Manager of
Parent's Industrial Products Division prior to 1995
Purchaser has advised the Company that to the best knowledge of Purchaser,
none of the Purchaser Designees currently is a director of, or holds any
position with, the Company, and except as disclosed in the Offer to Purchase,
none of the Purchaser Designees beneficially owns any securities (or rights to
acquire any securities) of the Company or has been involved in any transactions
with the Company or any or its directors, executive officers or affiliates that
are required to be disclosed pursuant to the rules of the SEC, except as may be
disclosed in the Offer to Purchase. To the knowledge of Parent and Purchaser,
none of the Purchaser Designees has any family relationship with any current
director or executive officer of the Company.
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Purchaser has advised the Company that each of the persons listed in the
table above has consented to act as a director, and that none of such persons
has during the last five years been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was, or is, subject to a judgement, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws or is
involved in any other legal proceeding which is required to be disclosed under
Item 401(f) of Regulation S-K promulgated by the SEC.
It is expected that the Purchaser Designees may assume office promptly upon
the purchase by Purchaser of Shares pursuant to the Offer, which cannot be
earlier than March 21, 2000.
CURRENT DIRECTORS OF THE COMPANY
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
Ralph E. Crump..... 76 Co-founder and currently a director of Osmonics, Inc. 1983
(New York Stock Exchange), Chairman of Structural
Instrumentation, Inc. (Nasdaq SmallCap Market), a
director of Mitylite Inc. (Nasdaq National Market) and a
director of Stratesys Corp. (Nasdaq SmallCap Market).
Between November 1981 and October 1986, Mr. Crump was
Chairman of Med-Chem Products, Inc. Prior to November
1986, Mr. Crump was Chairman, President and a director
of Frigitronics, Inc., a manufacturer of eye care
products, which he co-founded in 1962. Frigitronics'
Common Stock was listed on the New York Stock Exchange
until its acquisition by Revlon in November 1986.
David Sturdevant... 50 Founder and since October 1981 a principal of AVI 1990
Management Partners, the general partner of three
venture capital partnerships whose collective assets
aggregate approximately $18 million dollars with an
investment concentration in early stage, high-
technology companies. He is a co-founder and, since
September 1994, a principal of Managed Investments,
Inc., a NASD registered broker dealer and investment
advisor.
Robert W. Ham...... 64 Management consultant specializing in sales 1993
organization, sales management and customer focus
strategies since 1992. Between 1964 and 1992, Mr. Ham
held various sales management positions with Dennison
Manufacturing Corp., a Fortune 500 company, leading to
Division Vice President of Dennison. During his tenure
at Dennison, he led a sales organization with sales of
$90MM, he chaired task teams to merge divisions,
achieving reorganization with minimal disruption to
customers' and organizations' morale. In addition, he
had total profit and loss responsibility for two foreign
subsidiary companies and supported customers and company
operations in the United States, Mexico, Canada, and
Hong Kong.
Doug Granat........ 30 Founder and President of Trigran Investments, Inc., a 1997
position he has held since August 1991. Trigran
Investments, Inc. is the general partner and manager of
Trigran Investments, L.P. and manages several other
private partnerships. These entities make investments in
publicly traded and privately held businesses. Trigran
Investments, L.P.'s main focus is investment in publicly
traded companies with market capitalization's under $150
million.
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INFORMATION CONCERNING THE BOARD
The Board held five meetings during the fiscal year ended June 30, 1999,
with no director attending fewer than 80% of such meetings.
The audit committee of the Board reviews the activities of the Company's
independent auditors (including fees, services and scope of the audit). The
Audit Committee is presently composed of Messrs. Crump and Sturdevant. The Audit
Committee held one meeting during the fiscal year ended June 30, 1999 at which
all members were present.
The Company has no standing nominating or compensation committees of its
Board of Directors, nor any committees performing similar functions. The Board
as a whole searches for potential nominees for Board positions and periodically
reviews the compensation of the Company's officers and employees and, makes
appropriate adjustments.
DIRECTORS' COMPENSATION
All directors of the Company receive $6,000 per annum for their services in
such capacities, as well as reimbursement for direct expenses incurred in
attending meetings of the Board of Directors.
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EXECUTIVE COMPENSATION AND
CERTAIN TRANSACTIONS WITH MANAGEMENT
SUMMARY COMPENSATION
Set forth below is a table summarizing the compensation of the Company's
Chief Executive Officer and its former Chief Executive Officer for each of the
three preceding fiscal years. No other executive officer received salary and
bonus in excess of $100,000 during the year ended June 30, 1999. Although the
Company maintains certain stock option plans, it has no other long-term
incentive plan. The Company has not issued, and there are not currently
outstanding, any restricted stock awards or stock appreciation rights.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
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ANNUAL COMPENSATION SECURITIES
-------------------------------------------------- UNDERLYING
NAME AND OTHER OPTIONS/
PRINCIPAL ANNUAL SAR (NO. ALL OTHER
POSITION YEAR SALARY BONUS($)(1)(3) COMPENSATION OF SHARES) COMPENSATION($)
--------- ---- ------ -------------- ------------ ---------- ---------------
Steven D. Anton........ 1999 $ 37,500 -- $1,800 50,000 --
President and Chief
Executive Officer
Richard L. Kalich...... 1999 $110,000 $50,000 $5,400 -- --
Former President 1998 $114,066 $18,334 $7,200 -- --
and Chief Executive 1997 $113,516 -- $7,200 -- --
Officer(1)
- -------------------------
(1) Mr. Kalich left the Company on April 2, 1999 and will be compensated at the
rate of $100,000 per year through March 31, 2000.
CHANGE OF CONTROL AGREEMENTS
In November 1999, Mr. Anton entered into a change in control agreement with
the Company pursuant to which the Company has agreed to pay Mr. Anton a lump sum
equal to one year's compensation computed in accordance with Section 280G of the
Internal Revenue Code of 1986, as amended, upon a change of control. This
agreement also provides for reimbursement of relocation expenses, accelerated
vesting of options and continuation of health benefits currently received by Mr.
Anton. In addition, the Company entered into arrangements with two other
officers, in October 1999 and February 2000, respectively, pursuant to which the
Company has agreed to make certain payments upon a change in control. For
purposes herein, generally, a "change in control" is: (i) a sale of over 50% of
the voting stock of the Company; or (ii) the sale by the Company of over 50% of
its assets; or (iii) a merger or consolidation of the Company with or into any
other corporation or corporations such that the shareholders of the Company
prior to the merger or consolidation do not own at least 50% of the surviving
entity measured in terms of voting power; or (iv) the acquisition by any means
of more than 20% of the voting power or Common Stock of the Company by any
person or group of persons; or (v) the election of directors constituting a
majority of the Company's board of directors pursuant to a proxy solicitation
not recommended by the Company's Board.
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14
OPTIONS GRANTS IN LAST FISCAL YEAR
Set forth below is information with respect to grants of stock options
during the fiscal year ended June 30, 1999 by the Company to each of the
executive officers named in the Summary Compensation table:
PERCENT OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED
UNDERLYING TO EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE PER EXPIRATION PRESENT
NAME GRANTED YEAR SHARE DATE VALUE(1)
---- ---------- ------------- --------- ---------- --------
Steven D. Anton............................ 50,000 58.7% $6.00 4/05/09 $5.29
Richard L. Kalich.......................... -- --% $ -- -- --
- -------------------------
(1) Computed in accordance with the Black-Scholes option pricing model utilizing
the following assumptions: volatility of 39.9%, risk free interest rate of
6.0%, no dividend yield and an expected life of six years.
AGGREGATED OPTION AND WARRANT EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION AND WARRANT VALUES
Set forth below is information with respect to options and warrants
exercised during the fiscal year ended June 30, 1999 and options and warrants
held at June 30, 1999 by the executive officers named in the Summary
Compensation table:
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE MONEY OPTIONS
NUMBER OF OPTIONS AND WARRANTS AT AND WARRANTS AT
SHARES JUNE 30, 1999 JUNE 30, 1999
ACQUIRED ON VALUE ---------------------------- -------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Steven D. Anton......... -- $-- -- 50,000 $ -- $50,000
Richard L. Kalich....... -- $-- 37,500 -- $159,375 $ --
STOCK OPTION PLANS
The Company's stock option plans provide for the granting of options which
are intended to qualify as incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended. Options to purchase shares
may be granted under the plans to persons who are executive officers or other
employees of the Company.
The exercise price of all options granted under the plans must be at least
equal to the fair market value of shares on the date of the grant or, in the
case of options granted to the holder of ten percent or more of the Company's
Common Stock, at least 110% of the fair market value of shares on the date of
the grant. The maximum term for which the options may be granted is ten years
from the date of grant. The aggregate fair market value (determined at the date
of the option grant) of shares with respect to which options are exercisable for
the first time by the holder of the option during any calendar year shall not
exceed $100,000.
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15
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 22, 2000, information
regarding the Company's Common Stock beneficially owned (i) by each person who
is known by the Company to own beneficially, or who exercises voting or
dispositive control, over more than five (5%) percent of the Company's Common
Stock, and (ii) by all directors and executive officers as a group:
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OWNED(1) CLASS(1)
---------------- ---------------- -------------
Ralph E. Crump........................................... 299,431(2) 18.31%(2)
28 Twisted Oak Circle
Trumbull, CT 06611
Marjorie L. Crump........................................ 299,431(3) 18.31%(3)
28 Twisted Oak Circle
Trumbull, CT 06611
Richard L. Kalich........................................ 138,600(4) 8.29%(4)
16 North Shore Road
Spofford, NH 03462
Trigran Investments, L.P................................. 273,120(5) 16.70%
155 Pfingsten Road
Suite 360
Deerfield, IL 60015
Laifer Capital Management, Inc........................... 331,400(5) 20.27%
Hilltop Partners, L.P.
45 West 45th Street
New York, NY 10036
All directors and executive officers as a group (7
persons)............................................... 689,731(2)-(4)(6) 41.73%(2)-(4)(6)
- -------------------------
(1) Includes all shares issuable pursuant to presently exercisable options and
warrants and all options and warrants that will become exercisable within
sixty (60) days of February 22, 2000.
(2) Includes 147,965 shares owned of record by Mr. Crump's spouse, as to which
shares he disclaims beneficial ownership.
(3) Includes 151,466 shares owned of record by Mrs. Crump's spouse, as to which
shares she disclaims beneficial ownership.
(4) Includes 28,700 shares owned of record by Mr. Kalich's spouse, as to which
shares he disclaims beneficial ownership.
(5) Based on the most recent Schedule 13D filed with the Securities and Exchange
Commission.
(6) Includes shares owned by Trigran Investments, L.P. of which Mr. Granat is
founder and president.
The above beneficial ownership information is based upon information
furnished by the specified persons and determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended, as required for purposes
of this filing, which is not necessarily the same as beneficial ownership for
other purposes, and includes shares as to which beneficial ownership may be
disclaimed.
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