SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION
14(A) OF THE SECURITIES EXCHANGE
ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6 (e) 92))
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Industrial Rubber Products, Inc.
------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
<PAGE>
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------
(2) Form, schedule or registration statement no.:
----------------------------------------------
(3) Filing party:
----------------------------------------------
(4) Date filed:
----------------------------------------------
<PAGE>
INDUSTRIAL RUBBER PRODUCTS, INC.
3804 EAST 13TH STREET
HIBBING, MINNESOTA 55746
APRIL 3, 2000
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
For the Annual Meeting of Stockholders of
Industrial Rubber Products, Inc.
To Be Held on May 23, 2000
<PAGE>
NOTICE OF ANNUAL MEETING
to be held Tuesday, May 23, 2000
To the Stockholders:
The Annual Meeting of the Stockholders of Industrial Rubber Products,
Inc., a Minnesota Corporation will be held on Tuesday, May 23, 2000 at 10:00
a.m., Central Time, at the Hibbing Park Hotel, Hibbing, MN for the following
purposes:
(1) To elect five directors of the Company to serve for the ensuing year,
and
(2) To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors recommends a vote IN FAVOR of each of the
director nominees.
The Board of Directors set March 31, 2000 as the record date for the
determination of stockholders entitled to vote at the Annual Meeting of
Stockholders. Only Stockholders of record at the close of business on that date
will be entitled to receive notice of and to vote at the meeting.
All stockholders are cordially invited and encouraged to attend the
meeting in person. Even if you expect to attend the meeting, you are requested
to sign the enclosed proxy and return it promptly in the accompanying envelope.
Stockholders who execute proxies retain the right to revoke them at any time
before they are voted.
The Company's Annual Report for 1999 is being mailed to the
stockholders with this Notice.
By Order of the Board of Directors
John M. Kokotovich
Secretary
Hibbing, Minnesota
April 3, 2000
<PAGE>
INDUSTRIAL RUBBER PRODUCTS, INC.
3804 East 13th Street
Hibbing, MN 55746
PROXY STATEMENT
GENERAL
The Annual Meeting of Stockholders of Industrial Rubber Products, Inc.
("Company") will be held on May 23, 2000 at 10:00 a.m. Central Time at the
Hibbing Park Hotel, Hibbing, Minnesota for the purposes set out in the Notice of
Annual Meeting of Shareholders.
This Proxy Statement, form of Proxy and Annual Report are first being
mailed to stockholders on or about April 7, 2000. The only business that the
Board of Directors intends to present or knows will be presented is the election
of directors. The proxy also confers discretionary authority upon the persons
named therein, or their substitutes, to vote on any other business that may
properly come before the meeting.
OUTSTANDING SHARES AND VOTING RIGHTS
The enclosed proxy is solicited by the Board of Directors of the
Company and will be voted at the Annual Meeting and any adjournment of the
meeting. The enclosed proxy when properly signed, dated and returned to the
Company, will be voted by the proxies at the annual meeting as directed. Proxy
cards returned without direction about business to be transacted at the meeting
will be voted in favor of the election of Daniel O. Burkes, Paul A. Friesen,
Christopher M. Liesmaki, James D. Mackay and John R. Ryan, Jr. Unless contrary
instructions are indicated on the proxy, all shares represented by valid proxies
will be voted "FOR" the election of all nominees for director named herein.
Each shareholder will be entitled to cast one vote in person or by
proxy for each share of Common Stock held by the shareholder. Only shareholders
of record at the close of business on March 31, 2000, the record date, will be
entitled to vote at the meeting. Common Stock, $0.001 par value per share, of
which there were 4,187,205 shares outstanding on the record date, is the only
class of outstanding voting securities issued by the Company. Each share is
entitled to cast one vote on each proposal before the meeting. There is no right
of cumulative voting.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the election inspectors appointed for the meeting and will
determine whether or not a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as unvoted for purposes of determining
the approval of any particular matter submitted to the shareholders for a vote.
If a broker indicates on the form of proxy that the broker does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will be considered to be present for the purpose of determining
whether a quorum is present, but will not be considered as present and entitled
to vote with respect to that particular matter.
REVOCABILITY OF PROXY
The proxy may be revoked at any time before it is exercised by
delivering a written revocation to the Secretary of the Company. Execution of
the enclosed form of proxy will not affect a stockholder's right to attend the
meeting and vote in person. Any stockholder giving a proxy may also revoke it at
any time before it is exercised by attending the meeting and voting in person.
Stockholders may vote all their eligible shares if they are personally present
at the meeting. When a stockholder votes at the meeting, his or her vote will
revoke any proxy previously granted by the stockholder.
EXPENSE AND MANNER OF SOLICITATION
The cost of preparing and mailing this proxy statement and the
solicitation of proxies will be paid by the Company. Solicitations will be made
by mail but in some cases may also be made by telephone or personal call of
officers, directors or regular employees of the Company who will not be
specially compensated for such solicitation. The Company will also pay the cost
of supplying necessary additional copies of the solicitation material and the
Company's Annual Report for 1999 to the beneficial owners of shares of stock
held of record by brokers, dealers, banks and voting trustees, and their
nominees. Upon request, the Company will also pay reasonable expenses of record
holders for mailing such materials to the beneficial owner.
<PAGE>
OWNERSHIP OF THE COMPANY'S COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding ownership of the
Company's Common Stock as of March 31, 2000 by each director and nominee for
director; by each of the named Executive Officers; by directors, nominees and
Executive Officers as a group; and by other persons who, to the knowledge of the
Company, own of record or beneficially more than 5% of the outstanding Common
Stock of the Company.
<TABLE>
<CAPTION>
NAME and ADDRESSES OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER OR GROUP BENEFICIAL OWNERSHIP CLASS
<S> <C> <C> <C>
Directors
(other than Executive Officers)
Paul A. Friesen 1,250(1) *
Route 1 Box 436A
Detroit Lakes, MN 56501
James D. Mackay 1,250(1) *
2000 Highway 88
Globe, AZ 85501
John R. Ryan, Jr. 6,250(1) *
302 E. Howard St.
Hibbing, MN 55746
Executive Officers
Daniel O. Burkes 2,944,600(3)(4)(5) 70.32%
3804 East 13th St.
Hibbing, MN 55746
Christopher M. Liesmaki 10,800(2) *
3804 East 13th St.
Hibbing, MN 55746
John M. Kokotovich 10,800(2) *
3804 East 13th St.
Hibbing, MN 55746
Directors and all Executive
Officers, as a Group (7 persons) 2,974,950(1) 71.04%
Five Percent and Greater Shareholders
Nancy J. Burkes 2,944,600(6) 70.32%
3804 East 13th St.
Hibbing, MN 55746
Trustees of the Daniel O. Burkes
1999 Irrevocable Stock Trust
fbo Nicole C. Burkes 700,000 16.71%
3804 East 13th St.
Hibbing, MN 55746
fbo Rian J. Burkes 700,000 16.71%
3804 East 13th St.
Hibbing, Mn 55746
</TABLE>
* Less than 1%
<PAGE>
(1) Includes the following options exercisable within 60 days to acquire
shares of common stock: Mr. Friesen 1,250; Mr. Mackay 1,250; Mr. Ryan 1,250; and
all directors and executive officers as a group 3,750.
(2) Includes 8,800 shares granted to each of Mr. Liesmaki and Mr.
Kokotovich on December 30, 1999 under the Company's 1999 Stock Bonus Plan and
issued on February 17, 2000.
(3) Includes 1,400,000 shares held by the trustees of the Daniel O. Burkes
1999 Irrevocable Stock Trust as to which Mr. and Mrs. Burkes disclaim beneficial
ownership.
(4) Includes 600 shares owned by Nicole C. Burkes, Mr. and Mrs. Burkes'
daughter, as to which they disclaim beneficial ownership.
(5) Includes 10,000 shares owned by Nelson Roofing, Inc., a Minnesota
Corporation wholly owned by Mr. Burkes, and as to which Mr. Burkes has voting
and investment power.
(6) Comprised of shares owned directly and indirectly by Daniel O. Burkes,
Mrs. Burkes' husband.
Because of his holdings individually, and through Nelson Roofing, Inc., Daniel
O. Burkes is deemed to be a "controlling" person of the Company within the
meaning of Securities Act of 1933, as amended.
ELECTION OF DIRECTORS
Five directors of the Company are to be elected at the Annual Meeting
to hold office until the next annual meeting, until their successors are duly
elected and qualified, or until their earlier resignation or removal. Unless
otherwise directed, proxies will be voted at the meeting for the election of the
persons listed below or, in event of an unforeseen contingency, for different
persons as substitutes. The Board of Directors is recommending this slate of
nominees. Set forth below are the name, age, principal occupation and other
information concerning each nominee. Nominees may be contacted through the
headquarters of the Company.
DANIEL O. BURKES, Director since 1986, Age 48
Mr. Burkes has been the President, Chief Executive Officer, and a Director
of the Company since he founded it in 1986. Prior to founding the Company, Mr.
Burkes was the Sales and Marketing Director of Irathane Systems Incorporated, a
subsidiary of Illinois Tool Works, Inc. Mr. Burkes serves on the Compensation
Committee of the Board.
PAUL A. FRIESEN, Director since 1998, Age 59
Mr. Friesen is the retired owner of Friesen's Inc. which manufactures,
markets and services speciality equipment for mining and other heavy industries.
Mr. Friesen serves on the Audit and Compensation Committees of the Board.
CHRISTOPHER M. LIESMAKI, Director since 1998, Age 42
Mr. Liesmaki has been with the Company since 1989 and is presently the Vice
President and Chief Operating Officer. He has previously held the positions of
Sales Engineer, Quality Assurance Coordinator, Sales and Marketing Manager and
General Manager. Mr. Liesmaki is married to a sister-in-law of Daniel O. Burkes.
JAMES D. MACKAY, Director since 1998, Age 52
Mr. Mackay is the President of Copper State Specialties, Inc. a mining
industry manufacturing and distribution firm located in Globe, Arizona that he
founded over 12 years ago. Besides distributing mining supplies, Copper State
Specialities manufactures high pressure cleaning equipment. Mr. Mackay serves on
the Audit Committee of the Board.
JOHN R. RYAN, Jr., Director since 1998, Age 49.
Mr. Ryan is a Partner and Chartered Financial Consultant with
Ryan-Kasner-Ryan Financial Services, Inc., a financial services and retirement
planning firm in Hibbing, Minnesota. Ryan- Kasner-Ryan is an affiliate of CIGNA
Financial Advisors, Inc. a broker/dealer and registered investment advisors. Mr.
Ryan serves on the Board of Directors of Security Financial Services, Inc. and
its wholly owned subsidiary, the Security State Bank of Hibbing. Mr. Ryan serves
on the Audit and Compensation Committees of the Board.
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met four times during 1999. Each
director attended all of the meetings of the Board during 1999.
The Board has established two committees, an Audit Committee consisting
of Messrs Friesen, Mackay and Ryan and a Compensation Committee consisting of
Messrs Burke, Friesen and Ryan.
The Audit Committee represents the Board in discharging its
responsibilities relating to the accounting, reporting and financial control
practices of the Company. The Committee has general responsibility for review
with management of the financial controls, accounting, audit, and reporting
activities of the Company. The Committee annually reviews the qualifications and
objectivity of the Company's independent auditors, makes recommendations to the
Board as to their selection, reviews the scope, fees, and results of their
audit, and reviews their management comment letters. The Audit Committee met
once during 1999.
The Compensation Committee is responsible for administrating the
Company's compensation plans and approving compensation levels for executive
officers and directors. This committee met twice during 1999.
DIRECTORS' COMPENSATION
Compensation for Non-employee Directors has two components, the first
being paid in cash, and the second being tied to the Company's Common Stock.
Each Non-employee Director receives a fee of $400.00 per day for each
Board of Directors' meeting and committee meeting attended.
In addition, the Non-employee Directors' compensation is linked
directly with the interests of the stockholders through periodic awards of
options to purchase Common Stock.
The Non-employee Directors' options are issued pursuant to the January
30, 1998 Stock Option Plan. The plan provides for the automatic grant of a
non-qualified option to purchase 10,000 shares of common stock, which vests over
five years, to each Non-employee Director at the time of the Director's initial
election to the Board of Directors, and an automatic grant of a non-qualified
option to purchase 2,500 shares of Common Stock at the end of each year during
which such non- employee serves as a Director of the Company. The plan
authorizes the Board of Directors to increase or decrease the 10,000 share and
2,500 share amounts. All such options are to be granted at an exercise price
equal to the fair market value of the Common Stock on the date of the grant.
On November 18, 1998, the three Non-employee Directors were granted the
1998 Stock Options for 10,000 shares. By Board action taken on March 25, 1999,
the share amounts of the options for the year ending December 31, 1998 were set
at 1,250 and options were issued on October 12, 1999. On December 30, 1999, the
Board of Directors repriced the 1998 Stock Options. The repricing became
effective on February 1, 2000. The repricing was accomplished by the
cancellation of the 1998 Stock Options and the issuance of new options with a
new vesting schedule and expiration date. As of the date of the mailing of this
Proxy Statement, the Compensation Committee of the Board has not acted on the
issue of options for the Non-employee Directors for service on the Board during
1999.
EXECUTIVE COMPENSATION Compensation Committee. The purpose of the
Compensation Committee of the Board of Directors is to oversee compensation of
directors, officers, and key employees of the Company. The Committee's policy is
to insure that compensation programs contribute directly to the success of the
Company, including enhanced share value. The Company's Compensation Committee is
comprised of two outside directors and Mr. Burkes. Mr. Burkes did not
participate in those portions of the Committee's meetings involving his
compensation.
Executive Compensation Policies and Programs. The Company's non-union
compensation programs are designed to attract and retain qualified employees and
to motivate them to maximize shareholder value by achieving the Company's
strategic goals. There are three basic components to the Company's non-union
compensation program: base pay, annual incentive bonus, and long-term,
equity-based incentive compensation in the form of stock options and stock
bonuses. Each component is established in light of Company and individual
performance, compensation levels at comparable companies, equity among
employees, and cost effectiveness. In addition, employees are eligible to
participate in the Company's 401(k) plan and certain insurance plans.
<PAGE>
Base Pay. Base pay is designed to be competitive as compared to salary
levels for equivalent positions at comparable companies. Actual salary within
this competitive framework will depend on the individual's performance,
responsibilities, experience, leadership, and potential future contribution.
Base pay is administered to remain competitive with the market, yet allow for
significant emphasis on incentive bonus compensation in proportion to total
annual cash compensation.
Annual Incentive Bonus. In addition to base pay, certain non-union
employees are eligible to receive an annual cash bonus based on a mix of the
Company's and the individual's performance. Performance targets are intended to
motivate the Company's employees by providing bonus payments for the achievement
of specific financial goals within the Company's business plan. No bonuses were
paid to any executive officers with respect to fiscal 1999 performance.
Long-Term, Equity-Based Incentive Compensation. The long-term,
equity-based compensation program is tied directly to shareholder return.
Long-term incentive compensation consists of a Stock Bonus Plan adopted in 1999
and stock options issued under the 1998 Stock Option Plan.
Stock Option Plan. The stock options generally do not fully vest until
after five years and are exercisable only if an employee is then an employee of
the Company. Stock options are awarded with an exercise price equal to the fair
market value of the Common Stock on the date of the grant. Accordingly, an
option holder is rewarded only if Company shareholders receive the benefit of
appreciation in the price of the Common Stock.
Stock Option Repricing. At its December 30, 1999 meeting, the Board of
Directors determined to reprice the stock options issued in 1998 under the
Company's Stock Option Plan. The original options had been issued on January 30,
1998 at an option price of $4.50 a share in anticipation of the Company's
initial public offering. After the Company's initial public offering at $5.00 a
share on April 24, 1998, the Company's stock had fallen so that its range during
1999 was a high of 21/8 to a low of 1/4. During the fourth quarter of 1999 the
trading range was 13/8 to 1/4. The Compensation Committee concluded that the
1998 stock options no longer provided an adequate incentive to the employees
because of the depressed stock price. Accordingly, it determined to reprice all
options to a price of $2.00 a share. This repricing applied to all stock options
issued in 1998 including options granted to non- executive employees. The
repricing became effective on February 1, 2000.
Stock Bonus Plan. On October 12, 1999, the Company adopted a Stock Bonus
Plan. A total of 43,205 shares of restricted stock were granted under the Plan
on December 30, 1999, to a total of 26 employees. Executive officers were
granted 17,600 shares of stock under the 1999 Stock Bonus Plan.
Savings and Investment Plan; Benefits. The Company maintains various
pension plans for its employees. The executive officers are included in a 401(k)
Plan that covers certain Company non- union employees in Minnesota. The 401(k)
Plan has minimum eligibility requirements and provides for discretionary
contributions by the Company which are distributed based on the Plan's formula.
In addition, the Company provides medical and other miscellaneous benefits to
its employees, including annual physicals for the executive officers.
Annual Reviews. Each year the Compensation Committee reviews its
executive compensation policies and programs and determines what changes, if
any, are appropriate for the following year. In addition, the Committee reviews
the performance of the Chief Executive Officer. With the assistance of the Chief
Executive Officer, the Committee reviews the individual performance of the other
executive officers. The Committee makes recommendations to the Board of
Directors for final approval of all material compensation matters.
Chief Executive Officer. Mr. Burkes received a base salary of $235,586 in
fiscal 1998, and of $274,846 in fiscal 1999. Mr. Burkes was awarded no bonus in
either 1998 or 1999. On January 30, 2000, the Company renewed its employment
agreement with Mr. Burkes and set his base salary for the next twelve months at
$125,000. The new base salary was determined at the time of entering into the
renewal employment agreement with Mr. Burkes when the Committee considered
compensation programs of comparable companies, Mr. Burkes' individual
performance and salary history, and the Company's historical and planned
performance. Mr. Burkes' renewed agreement provides for the opportunity to earn
up to $156,500 in bonuses, subject to the Company achieving certain quarterly
and annual financial (operating income) goals. With respect to stock options and
stock bonuses, Mr. Burkes is not compensated with stock. Mr. Burkes is required
by his employment agreement to maintain confidentiality of all Company trade
secrets and upon termination of employment will be prohibited from participating
in a competing venture for a period of two years. The renewed agreement ends on
January 30, 2002 unless sooner terminated in accordance with the provisions of
the agreement.
<PAGE>
Tax Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code of 1986, as amended, should not affect the deductibility
of compensation paid to the Company's executive officers for the foreseeable
future.
The table below summarizes the compensation of the Chief Executive
Officer and the other two Executive Officers of the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
Annual Compensation Long-Term Compensation
Payouts Awards
Name Other Securities
and Restricted Annual Underlying
Principal Salary (1) Bonus (1) Stock Comp.(2)(5) Options
Position Year ($) ($) Awards ($) (#)
Daniel O. Burkes 1997 255,216 None None 10,726 None
Chairman and Chief 1998 235,586 None None 5,232 None
Executive Officer 1999 274,846 None None 5,700 None
Christopher Liesmaki 1997 70,122 78,000 None 8,343 None
Vice-President and 1998 94,019 None None 2,460 30,000(3)
Chief Operating 1999 103,869 None 8,800(4) 2,809 None
Officer
John Kokotovich 1997 N/A N/A None N/A N/A
Chief Financial 1998 50,396 None None 1,732 30,000(3)
Officer 1999 103,869 None 8,800(4) 2,923 None
</TABLE>
(1) Actual salary and bonus earned
(2) Perquisites and other personal benefits, securities or property do not in
the aggregate exceed the threshold reporting level of the lesser of either
$60,000 or 10% of total salary and bonus reported for the named Executive
Officer.
(3) The amount shown represents shares granted on January 30, 1998 pursuant to
the January 30, 1998 Stock Option Plan for Mr. Liesmaki and on June 12, 1998 for
Mr. Kokotovich. These options were repriced on February 1, 2000 pursuant to
Board action taken on December 30, 1999.
(4) Shares granted on December 30, 1999 and issued on February 17, 2000 pursuant
to the 1999 Stock Bonus Plan
(5) The Company has a salary savings plan and trust (401(K) Plan) which covers
the named Executives and certain other employees of the Company. The amounts
shown in 1997, 1998 and 1999 for additional compensation include the following
Company contributions to the 401K Plan for the named Executive Officers: Daniel
O. Burkes $9,513, 1997; $3,944, 1998; $4,322, 1999; Christopher M. Liesmaki
$8,273, 1997; $2,386, 1998; $2,727, 1999; John Kokotovich $1,664, 1998; $2,847,
1999.
<PAGE>
The table below sets forth information as to options granted to the
Executive Officers listed in the Summary Compensation Table. The options below
were all granted during the year 1998. On December 30, 1999, the Board of
Directors repriced the 1998 options which repricing became effective on February
1, 2000.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1999
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED EXERCISE
UNDERLYING TO OR BASE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(1) IN 1999 ($/SH) DATE
- ---------- -------------- --------------- -------- ---------------
Daniel O. Burkes 0 N/A N/A N/A
Christopher M. Liesmaki 30,000 21.92% $2.00 2/1/2005
John M. Kokotovich 30,000 21.92% $2.00 2/1/2005
</TABLE>
(1) These grants become exercisable as to 25% of the shares underlying the
options on each of the four anniversaries of the grant. Subject only to
exceptions upon death, disability, or retirement, no option may be exercised
unless the option holder is at the time of exercise an employee of the Company.
Upon disability or retirement, an option holder is given 90 days in which to
exercise any options exercisable on the date employment terminated. Upon death,
an option holder's successor is given one year to exercise any options
exercisable on the date of death.
The table below sets forth information as to number and unexercised
options as of December 31, 1999, for the Executive Officers listed in the
Summary Compensation Table. Based on the closing price of 13/16 for the
Company's Common Stock on December 31, 1999 the exercise price of all options
that have been granted to Executive Officers was in excess of the market price
of the underlying stock.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1999
<S> <C> <C> <C> <C> <C> <C>
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options at Options at
Share Year End Year End
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable (#) Unexercisable ($)
Daniel O. Burkes N/A N/A N/A N/A
Christopher M. Liesmaki -0- -0- -0- / 30,000 N/A
John M. Kokotovich -0- -0- -0- / 30,000 N/A
</TABLE>
<PAGE>
As described above, the Board of Directors on October 12, 1999 adopted
a Stock Bonus Plan for certain employees. The following table summarizes grants
under the Stock Bonus Plan granted to the Executive Officers in 1999.
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<S> <C> <C> <C> <C> <C> <C>
Name Number of Shares Performance or other period until
maturation or payout
Daniel O. Burkes -0- N/A
Christopher M. Liesmaki 8,800 N/A
John M. Kokotovich 8,800 N/A
</TABLE>
Under the terms of the Company's Stock Bonus Plan, Mr. Liesmaki and Mr.
Kokotovich were each issued 8,800 shares of restricted stock in the Company that
generally will not become tradable until at least 12 months after issuance.
These shares were issued on February 17, 2000 pursuant to Board of Directors
action taken on December 30, 1999. The most important factor in determining
awards under the Plan, other than factors which require the disclosure of
confidential business information, was reductions in the base pay during 1999.
As described above, the Board of Directors on December 30, 1999
determined to reprice the Stock Options granted during 1998. Options for a total
of 166,800 shares were repriced. Of those repriced options, options for 30,000
shares had been issued to Non-employee Directors and the balance, 136,800,
represented options for shares issued to employees. The repricing became
effective on February 1, 2000. The following table summarizes the repricing of
those options for the Executive Officers:
<TABLE>
<CAPTION>
TEN-YEAR OPTION REPRICING
<S> <C> <C> <C> <C> <C> <C>
Length of
Number of original
securities option term
underlying Market price Exercise remaining at
options of stock at price at time New date of
repriced or time of of repricing Exercise repricing or
Name Date amended repricing ($) ($) Price ($) amendment
- ---------- ---------------- ------------- ------------- ----------------- ------------- ----------------
Daniel O. N/A N/A N/A N/A N/A N/A
Burkes
Christopher February 1, 2000 30,000 1.05 4.50 2.00 3 years
Liesmaki
John M February 1, 2000 30,000 1.05 4.50 2.00 3 years
Kokotovich 4 months
</TABLE>
CERTAIN TRANSACTIONS
Since August 1992, the Company has had an ongoing business relationship
with Nelson Roofing, Inc. a corporation owned by Daniel O. Burkes. The Company
had a payable of $106,825 to Nelson Roofing, Inc. as of December 31, 1997. The
Company had a receivable of $6,986 as of December 31, 1998, from Nelson Roofing,
Inc. The Company had a payable of $25,000 and a receivable of $86,140 from
Nelson Roofing, Inc. as of December 31, 1999.
Under the terms of its agreement with Nelson Roofing, Inc. the Company
provides management and administrative services based upon actual employee cost
plus overhead and receives a management fee for such services. Management fees
received from Nelson Roofing, Inc. amounted to approximately $102,000 in 1997,
$90,400 in 1998, and $134,000 in 1999.
<PAGE>
The Company paid $9,243 in 1997, $7,874 in 1998 and $7,611 in 1999,
respectively, to Nelson Roofing, Inc. for construction services.
The Company rented a house in Utah owned by Daniel O. Burkes on a
month-to-month basis. Total rent paid to the majority stockholder amounted to
$61,100 in 1997, $50,760 in 1998, and $33,840 in 1999.
The Company rents warehouse space from Capio Management Group, Inc., a
corporation owned by Daniel O. Burkes which amounted to $6,700 for both 1997 and
1998 and $5,500 in 1999.
The Company employs James A. Perry, who is married to a sister-in-law of
Daniel O. Burkes as a Sales Manager Hibbing Division. Mr. Perry's compensation
for the year of 1999 was $61,652. The Company employs Richard H. Glad, a nephew
of Daniel O. Burkes as its Operations Manager Western Division. Mr. Glad's
compensation for the year of 1999 was $45,100.
The Company has for a number of years used the services and products
provided by insurance companies that Ryan-Kasner-Ryan Financial Services
represent. Mr. John R. Ryan, Jr., a Director, is a partner with Ryan-Kasner-Ryan
Financial Services.
On March 25, 1999 the Board of Directors approved the Company entering
into a Marketing Assistance and Consulting Agreement with Copper States
Specialities, Inc. and James D. Mackay. Mr. Mackay is a Director of the Company
and is the sole owner of Copper States Specialities which is a mining industry
supply company located in Globe Arizona. The Company established rubber lining
in Casa Grande, Arizona. Mr. Mackay and his company have agreed to supply
ongoing marketing assistance and consulting to the Company for the sale of
mining supply products in Arizona and other western states in which Copper
States Specialities does business. The agreement includes making provisions for
joint sales calls on customers and potential customers, as well as providing
information regarding the special needs of individual mining industry customers.
The agreement provided for an initial payment of $25,000 and three annual
payments of $10,000 each. The annual payments will cease if the Company closes
its Arizona satellite location prior to February 12, 2002, the termination date
of the agreement. Given the Company's recent closing of the Arizona rubber
lining facility and the related establishment of an Arizona sales office, the
Company is reevaluating this Agreement.
Effective January 1, 2000, the Company, through its wholly owned
subsidiary, Irathane Systems, Inc. entered into a lease with Daniel O. Burkes
for the lease of the building then occupied by Irathane Systems, Inc. and
formerly owned by Mesaba Realty Company, Inc. The terms of the Lease between
Burkes and Irathane Systems, Inc. are identical to the previous lease with the
following modifications: the amount of space in the building leased was
increased from approximately 70% to approximately 75%, the rent was changed from
$9,062 a month to $9,090 a month and Irathane Systems was given an option to
purchase the building at any time during the three year term for $650,000, the
price that Mr. Burkes had paid for the building. The previous lease had no
purchase option.
Management believes that all of these transactions and relationships
during 1999 were on terms that were reasonable and competitive. Additional
transactions and relationships of this nature may be expected to take place in
the ordinary course of business in the future.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 (a) of the Securities Exchange Act of 1934, as amended,
requires that the Company's Executive Officers, Directors and Beneficial Owners
of 10% or more of the Company's Common Stock file initial reports of ownership
and of changes in ownership with the Securities and Exchange Commission.
Executive Officers and Directors and 10% Beneficial Owners are required by
securities regulations to furnish the Company with copies of all Section 16 (a)
forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's Executive Officers and
Directors, the Company believes that all filing requirements were met by the
Company's Executive Officers, 10% Beneficial Owners, and Directors during 1999.
Based on the Company's review of the forms, all transactions involving the
Executive Officers, 10% Beneficial Owners and Directors have been reported on a
timely basis.
<PAGE>
STOCKHOLDER PROPOSALS AND NOMINATIONS
Any shareholder proposal intended to be considered for including in the
Proxy Statement for presentation at the Annual Meeting to be held in 2001 must
be received by the Company by December 18, 2000. The proposal must be in
accordance with the provisions of Rule 14a-8 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934. It is suggested
the proposal be submitted by certified mail, return receipt requested.
Shareholders who intend to present a proposal at the Annual Meeting to be held
in 2001 without including such proposal in the Company's proxy statement must
provide the Company notice of such proposal no later than February 21, 2001. The
Company reserves the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not comply with these
and other applicable requirements.
INDEPENDENT PUBLIC ACCOUNTANTS
McGladrey & Pullen, LLP has been the Company's independent public
accounting firm since 1989. During 1999 the Company engaged McGladrey & Pullen,
LLP to examine and report on the Company's annual financial statements, and
related matters. The Board of Directors has engaged McGladrey & Pullen, LLP to
act in similar capacities for 2000. A representative of McGladrey & Pullen, LLP
is not expected to be present at the Annual Meeting either to respond to
questions or to make any comments.
By Order of the Board of
Directors
John M. Kokotovich
Secretary
Hibbing, Minnesota
March 24, 2000
IN THE INTEREST OF DISCLOSURE AND EFFICIENCY THE COMPANY HAS FURNISHED
WITH ITS 1999 ANNUAL REPORT, WHICH IS BEING PROVIDED WITHOUT CHARGE TO EACH
PERSON WHOSE PROXY IS SOLICITED AND TO EACH PERSON REPRESENTING THAT AS OF THE
RECORD DATE FOR THE MEETING HE OR SHE WAS A BENEFICIAL OWNER OF THE SHARES
ENTITLED TO BE VOTED AT THE MEETING, A COPY OF THE COMPANY'S 1999 ANNUAL REPORT
(FORM 10-KSB) TO THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE SCHEDULES
THERETO. ANY REQUEST FOR ADDITIONAL COPIES OF THE FORM 10-KSB SHOULD BE DIRECTED
TO JOHN M. KOKOTOVICH, SECRETARY, AT THE ADDRESS SET FORTH ON THE FIRST PAGE OF
THIS PROXY STATEMENT.
<PAGE>
INDUSTRIAL RUBBER PRODUCTS, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 23, 2000
10:00 a.m.
Hibbing Park Hotel
1402 East Howard Street
Hibbing, MN 55746
- --------------------------------------------------------------------------------
Industrial Rubber Products, Inc.
3804 East 19th Street, Hibbing, Minnesota 55746
proxy
- --------------------------------------------------------------------------------
This proxy is solicited on behalf of the Board of Directors.
The undersigned stockholder of Industrial Rubber Products, Inc. hereby
appoints John R. Ryan, Jr. and John M. Kokotovich, or any of them with full
power of substitution to act as proxies at the Annual Meeting of Stockholders of
the Company to be held at Hibbing, Minnesota on May 23, 2000 with authority to
vote as directed by this Proxy at the meeting, and any adjournments of the
meeting, all shares of the common stock of the Company registered in the name of
the undersigned.
IMPORTANT - THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
See reverse for voting instructions.
W:\15785\050\SEC Proxy Statement 2.wpd
-18-
<PAGE>
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to Industrial Rubber Products, Inc. c/o
Shareowner Services, P.O. Box 64873, St. Paul, MN 55164-0873.
Please detach here
- --------------------------------------------------------------------------------
The Board of Directors recommends a Vote FOR Item
1. Election of directors
Nominees:
01 Daniel O. Burkes 04 James D. Mackay [ ]Vote FOR [ ]Vote WITHHELD
02 Paul A. Friesen 05 John R. Ryan, Jr. all nominees from all nominees
03 Christopher M. Liesmaki
(instructions: To withhold authority to vote for any indicated nominees,
write the number(s) of the nominee(s) in the box provided to the right.) [ ]
2. In their discretion, upon such matter as may properly come before the
meeting.
THE PROXY WILL BE VOTED AS DIRECTED. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" ITEM 1, WHICH IS THE MANNER IN WHICH THIS PROXY WILL BE VOTED IF NO
DIRECTION IS MADE. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Address change? Mark Box [ ] Date , 2000
------------------------------------------
indicate changes below:
[ ]
Signature(s) in Box
Please sign exactly as your name or
names appear. If jointly held, each
owner must sign. Executor,
administrators, trustees, officers, etc.
should give full title as such.
