<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A(1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number 2-66564
SPINNAKER INDUSTRIES, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 06-0544125
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 N. PEARL ST. SUITE 2160, DALLAS, TX 75201
- ---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 214-855-0322
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock .............................no par value
Title of Class
Class A Common Stock......................no par value
Title of Class
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained to, the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. [ ]
The total aggregate market value of the 1,256,118 shares of voting stock held by
non-affiliates of the Registrant (628,059 shares of Common Stock and 628,059
shares of Class A Common Stock) was $66,260,225 (based upon the closing bid of
the Registrant's Common Stock and Class A Common Stock in the NASDAQ on March
12, 1997 of $42.50 per share of Common Stock and $63 per share of Class A Common
Stock). The term affiliates is deemed, for this purpose only, to refer only to
directors, officers and principal stockholders of the Registrant.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
The number of outstanding shares of the Registrant's Common Stock and Class A
Common Stock was 3,084,211 and 3,074,598, respectively, as of March 12, 1997,
for a total of 6,158,809.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K(A)(1) Annual
Report:
(3) Exhibits
20 Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on May 29, 1997 (filed herewith).
The Registrant will furnish copies of these Exhibits upon request and the
payment of $.20 per page. Requests should be addressed to Carol Allen, c/o
Spinnaker Industries, Inc., 600 N. Pearl Street, Suite 2160, Dallas, Texas
75201.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Spinnaker Industries, Inc.
By: /s/ Ned N. Fleming, III
---------------------------------
Ned N. Fleming, III
Title: President
Date: April 30, 1997
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SPINNAKER INDUSTRIES, INC.
600 NORTH PEARL STREET, SUITE 2160
DALLAS, TEXAS 75201
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1997
-----------------
April 28, 1997
To the Stockholders of
SPINNAKER INDUSTRIES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Spinnaker
Industries, Inc., a Delaware corporation, will be held in the Nice Room, Plaza
of the Americas, 650 North Pearl Street, Dallas, Texas 75201 on Thursday, May
29, 1997, at 9:00 a.m., local time, for the following purposes:
1. To elect seven (7) directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected.
2. To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
THE BOARD OF DIRECTORS HAS FIXED THE CLOSE OF BUSINESS ON APRIL 28, 1997,
AS THE RECORD DATE FOR THE DETERMINATION OF STOCKHOLDERS ENTITLED TO NOTICE
OF, AND TO VOTE AT, THE ANNUAL MEETING AND ANY ADJOURNMENTS THEREOF. IF YOU
DO NOT EXPECT TO BE PRESENT AT THE MEETING, BUT WISH YOUR SHARES TO BE
VOTED, PLEASE COMPLETE, DATE, AND SIGN THE ACCOMPANYING PROXY CARD AND
RETURN IT IN THE POSTAGE PAID ENCLOSED ENVELOPE IN ORDER THAT YOUR SHARES
OF CLASS A COMMON STOCK OR COMMON STOCK MAY BE REPRESENTED AT THE ANNUAL
MEETING.
By Order of the Board of Directors,
Robert A. Hurwich
Secretary
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SPINNAKER INDUSTRIES, INC.
600 NORTH PEARL STREET, SUITE 2160
DALLAS, TEXAS 75201
-----------------
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors of Spinnaker
Industries, Inc., a Delaware corporation (the "Corporation"), in connection with
the solicitation of proxies for use at the Annual Meeting of Stockholders to be
held in the Nice Room, Plaza of the Americas, 650 North Pearl Street, Dallas,
Texas 75201 on Thursday, May 29, 1997, at 9:00 a.m., local time, and at any
adjournments thereof (the "Annual Meeting"). This Proxy Statement with the
accompanying Proxy are first being mailed to stockholders on or about April 29,
1997.
The purpose and business of the meeting is:
(1) to elect seven (7) directors to serve until the next Annual Meeting;
and
(2) to transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
Only stockholders of record at the close of business on April 28, 1997,
will be entitled to vote at the Annual Meeting. As of the close of business on
such date, there were outstanding and entitled to vote 3,074,598 shares of the
Corporation's Class A Common Stock, no par value ("Class A Common Stock"), and
3,084,211 shares of the Corporation's Common Stock, no par value ("Common
Stock"). Each share of Class A Common Stock is entitled to one vote. Each
share of Common Stock is entitled to 1/10th of a vote. Where a specific
designation is given in the Proxy with respect to the vote on the directors, the
Proxy will be voted in accordance with such designation. If no such designation
is made, the Proxy will be voted FOR the nominees for directors named in this
Proxy Statement. Any stockholder giving a Proxy may revoke it at any time
before it is voted at the Annual Meeting by delivering to the Secretary of the
Corporation a written notice of revocation or duly executed Proxy bearing a
later date or by appearing at the Annual Meeting and revoking his or her Proxy
and voting in person.
ELECTION OF DIRECTORS
Seven directors are to be elected at the Annual Meeting to serve until the
next Annual Meeting of Stockholders and until their respective successors are
elected. Except where authority to vote for directors has been withheld, it is
intended that the proxies received pursuant to this solicitation will be voted
FOR the nominees named. If for any reason any such nominee is not available for
election, such proxies will be voted in favor of the remaining named nominees
and may be voted for substitute nominees in place of those who are not
candidates. Management, however, has no reason to expect that any of the
nominees will be unavailable for election.
The Bylaws of the Corporation provide that the Board of Directors shall
consist of not less than three and no more than nine members and that vacancies
on the Board of Directors and newly-created directorships may be filled by the
Board of Directors at any meeting.
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The election of directors shall be determined by the affirmative vote of a
plurality of the votes cast by stockholders of the Corporation present in person
or by proxy at the Annual Meeting and entitled to vote. An automated system
administered by the Corporation's transfer agent tabulates the votes. Pursuant
to the Delaware General Corporation Law and the Bylaws of the Corporation,
shares held by persons who abstain from voting on a proposal will be counted in
determining whether a quorum is present, but will not be counted as voting
either for or against such proposal. If a broker indicates on the proxy that it
does not have discretionary 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. Lynch Manufacturing Corporation ("LMC"), a
wholly-owned subsidiary of Lynch Corporation ("Lynch"), is the holder of 73.5%
of the Class A Common Stock outstanding and 72.8% of the Common Stock
outstanding; therefore, Lynch has the ability to elect each of the nominees set
forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES
NAMED IN THIS PROXY STATEMENT.
The following information has been furnished to the Corporation by the
nominees for director:
RICHARD J. BOYLE
Mr. Boyle, age 62, has been a director and Chairman and Chief Executive
Officer of the Corporation since June 1994. Mr. Boyle also has served as a
Managing Director of Boyle Fleming & Co., Inc. ("BF"), an investment and
management firm, since 1993. From 1990 to 1992, Mr. Boyle was President and
Chief Executive Officer of LTV Aerospace and Defense Company, a manufacturer of
aircraft, missiles, and specialty vehicles. He was Corporate Vice President,
Marketing and Business Development of Honeywell Inc., a provider of products and
systems for the industrial, building, space, and marine markets from 1987 to
1990. Mr. Boyle is a director of several privately-held companies.
NED N. FLEMING, III
Mr. Fleming, age 36, became a member of the Board of Directors and
President of the Corporation in June 1994. In addition, Mr. Fleming is a
Managing Director of BF, a position he has held since 1993. From 1988 to 1993,
Mr. Fleming was an Associate at Cardinal Investment Company, Inc., an investment
concern. Mr. Fleming serves on the boards of directors of several privately-
held companies.
PHILIP WM. COLBURN
Mr. Colburn, age 68, was elected to the Board of Directors of the Company
in March 1996, and has been the Chairman of Allen Telecom Inc. ("ATI") since
1988. From 1988 to 1992, Mr. Colburn was the Chief Executive Officer of ATI.
Mr. Colburn is a director of ATI, Superior Industries International, Earl
Scheib, Inc. and TransPro, Inc.
ROBERT E. DOLAN
Mr. Dolan, age 45, became a director of the Company in November 1995.
Since February 1992, he has been the Chief Financial Officer of Lynch, and he
has been its Controller since May 1990. From 1984 to 1989, Mr. Dolan was the
Corporate Controller of Plessy North America Corporation, which was formerly a
United States Subsidiary of a United Kingdom defense and telecommunications
company.
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FRANK E. GRZELECKI
Mr. Grzelecki, age 59, has served as a director since January 1997. He is
President and Chief Operating Officer of Handy & Harman, a New York based
diversified industrial manufacturing company. Prior to being named President
and Chief Operating Officer in 1992, Mr. Grzelecki had served as Vice Chairman
of Handy & Harman since 1989. Mr. Grzelecki currently serves on the board of
directors of Handy & Harman, The Morgan Group, Inc., Chartwell Re Corporation,
and Barnes Group, Inc.
JOSEPH P. RHEIN
Mr. Rhein, age 70, has served as a director of the Corporation since 1992
and has been a business consultant since 1989.
ANTHONIE C. VAN EKRIS
Mr.van Ekris, age 62, has been a director of the Corporation since
December 1995. Mr. van Ekris is Chairman and Chief Executive Officer of Balmac
International, Inc., a New York based importer of coffee and cocoa and exporter
of refrigeration equipment, a position he has held since 1991. He also serves
as a Director of The Gabelli US Treasury Money Market Fund, Gabelli Gold Fund,
Gabelli International Growth Fund, Inc., The Gabelli Growth Fund, The Gabelli
Asset Fund, The Gabelli Convertible Securities Fund, Inc., The Gabelli Small
Cap Growth Fund, The Gabelli Equity Income Fund, The Gabelli Global
Telecommunications Fund, The Gabelli Global Securities Fund, The Gabelli Global
Interactive Couch Potato Fund, and Gabelli Capital Asset Fund.
OTHER OFFICERS AND EXECUTIVE OFFICERS OF THE CORPORATION
K.C. CALDABAUGH
Mr. Caldabaugh, age 50, has been the Chairman, Chief Executive Officer,
and President of Brown-Bridge Industries, Inc., a wholly owned subsidiary of the
Corporation ("Brown-Bridge"), since September 1994. From 1987 to 1993, he
served in various capacities (most recently as Senior Vice President and Chief
Financial Officer) of LTV Corporation, a diversified manufacturing firm.
JOHN R. POWERS
Mr. Powers, age 64, joined Central Products Company, a wholly owned
subsidiary of the Corporation ("Central Products"), in 1979 and has been its
President since 1981. Mr. Powers currently serves on the Board of Directors of
Wisconsin Paper Group and the First National Bank of Menasha.
MARK R. MATTESON
Mr. Matteson, age 33, became Vice President, Corporate Development of the
Corporation in January 1995. During 1994, Mr. Matteson was an Associate at BF.
From 1992 to 1994, Mr. Matteson was a Managing Associate at George Group,
Incorporated, a corporate re-engineering consulting firm. From 1990 to 1992,
Mr. Matteson attended graduate business school at Georgetown University where he
earned a Masters degree in business administration.
3
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OPERATION OF BOARD OF DIRECTORS AND COMMITTEES
There were six meetings of the Board of Directors during 1996.
The Board of Directors has established two standing committees, the Audit
Committee and the Compensation Committee. The Audit Committee: (i) recommends
to the Board of Directors the appointment of independent auditors; (ii) reviews
annual financial reports to stockholders prior to their publication;
(iii) reviews the report by the independent auditors concerning management
procedures and policies; and (iv) determines whether the independent auditors
have received satisfactory access to the Corporation's financial records and
full cooperation of corporate personnel in connection with their audit of the
Corporation's records. The Audit Committee met once during 1996. The Audit
Committee consists of Messrs. Colburn and Rhein, with Mr. Rhein serving as
Chairman of the Audit Committee.
The Compensation Committee, which was created in August 1996, sets and
reviews the compensation of the executive officers of the Corporation. The
Compensation Committee did not have any meetings in 1996. The Compensation
Committee consists of Messrs. Colburn and van Ekris and, since February 28,
1997, Messrs. Dolan and Grzelecki. Mario J. Gabelli, a former director of
the Corporation, served on the Compensation Committee until December 31,
1996. Prior to the formation of the Compensation Committee, compensation
matters were determined by the Board of Directors as a whole.
The Corporation does not have a nominating committee. Nominations for
directors and officers are considered by the entire Board of Directors. The
Corporation maintains, through Lynch, an insurance policy which provides for
indemnification of each director (and officer) against certain liabilities that
each may incur in his capacity as such.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Dolan and Gabelli are executive officers of Lynch, which through
LMC owns approximately 73.5% and 72.8%, respectively, of the outstanding Class A
Common Stock and the Common Stock of the Corporation. See "Report on Executive
Compensation."
In June 1994, before Messrs. Boyle and Fleming became directors and
executive officers of the Corporation, the Corporation entered into the
Management Agreement (as defined) with BF, pursuant to which Mr. Boyle became
the Chairman of the Board and Chief Executive Officer and Mr. Fleming became the
President of the Corporation and both were elected to the Board of Directors.
See "Certain Transactions."
COMPENSATION OF DIRECTORS
Each director, who is not also an officer of the Corporation or Lynch
receives a director's fee of $1,000 per month of the director's tenure plus
$1,000 for each Board or committee meeting the director attends. In addition,
pursuant to the Spinnaker Industries, Inc. Directors Stock Option Plan, each
director also was granted options for 10,000 shares of Class A Common Stock and
10,000 shares of Common Stock (after giving effect to the stock split effected
August 16, 1996 (the "Stock Split"), whereby each share of the Corporation's
then outstanding common stock, no par value (the "Old Stock"), was designated
"Class A Common Stock" and was entitled to receive one share of Common Stock),
which vest over a period of two years. All persons becoming directors after the
Stock Split, including Mr. Grzelecki, would receive new directors options for
10,000 shares of Common Stock which vest over a period of two years. Joseph P.
Rhein, Philip Wm. Colburn, Anthonie van Ekris and Frank E. Grzelecki are the
only directors eligible to be paid director's fees. Pursuant to an agreement
with LMC, Mr. Colburn receives annual compensation from LMC equal to the
difference between $50,000 and the director's fees paid to him by the
Corporation each year for serving as a director of the
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Corporation.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth on an accrual basis for the three fiscal
years ended December 31, 1996, the compensation paid to the Chief Executive
Officer of the Company and the three other most highly compensated executive
officers who earned more than $100,000.
SUMMARY COMPENSATION TABLE (1)(2)
<TABLE>
Other Annual All other
Name and Principal Position Year Salary($) Bonus($) Compensation ($)(3) Compensation ($)
- --------------------------- ---- --------- ---------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Richard J. Boyle 1996 33,333(4) ---(4) --- ---
Chairman and Chief Executive 1995 ---(4) ---(4) --- ---
Officer (4) 1994 ---(4) ---(4) --- ---
Ned N. Fleming, III 1996 100,000(4) ---(4) 2,908 ---
President (4) 1995 ---(4) ---(4) --- ---
1994 ---(4) ---(4) --- ---
K.C. Caldabaugh 1996 270,000 100,000 17,275 311,520(5)(6)
Chairman, Chief Executive 1995 250,000 --- 3,000 169,572(7)
Officer and President of 1994 ---(8) --- --- ---
Brown-Bridge(8)
John R. Powers 1996 194,300 --- 15,192 4,750(10)
President of Central Products(9) 1995 194,300(9) 194,300(9)(11) 11,500(9) 3,000(9)
</TABLE>
- --------------------
(1) Neither the Chief Executive Officer nor any of the other three most highly
compensated executive officers was employed by the Corporation before 1994.
(2) Except as noted, the Corporation does not maintain (1) any stock option or
other similar compensation plan involving the issuance of common stock, or
(2) any other long-term or incentive compensation agreements.
(3) Includes automobile allowances and club membership dues.
(4) Mr. Boyle and Mr. Fleming were elected Chairman of the Board and Chief
Executive Officer, and President, respectively, in 1994, pursuant to the
terms of the Management Agreement and other related agreements. During the
term of the Management Agreement, they received no salary from the
Corporation, but under the Management Agreement, BF received a management
fee of $200,000 per year, plus the reimbursement of expenses. Effective
January 1996, the management fee was increased to $400,000 per year. Such
Management Agreement was terminated effective August 31, 1996. Effective
upon termination of the Management Agreement, the Corporation began paying
Messrs. Boyle and Fleming an aggregate salary of $400,000 per year as
employees of the Corporation. See "-- Certain Transactions."
(5) Includes estimated fair value of Brown-Bridge Industries, Inc. stock
options (55,000 options) exercised in 1996.
(6) Contribution to the Brown-Bridge Industries, Inc. 401(k) Plan of $4,750 in
1996.
(7) Contribution to the Brown-Bridge Industries, Inc. 401(k) Plan of $4,572 in
1995, in addition to expenses
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directly related to his relocation from Dallas, Texas to Troy, Ohio that
were paid pursuant to an employment agreement ($165,000).
(8) Mr. Caldabaugh became Chairman, Chief Executive Officer and President of
Brown-Bridge upon its acquisition by the Corporation in September 1994. As
part of Mr. Caldabaugh's employment agreement, Mr. Caldabaugh did not
commence to earn any salary until January 1995.
(9) Central Products, formerly a division of Alco Standard Corporation
("Alco"), was acquired in October 1995. Mr. Powers, who ran the division
for the seller, continued as the President of Central Products following
the Central Products Acquisition. Includes $145,725 of Salary, the
$194,300 Bonus, $9,625 in Other Annual Compensation and $3,000 in All Other
Compensation that was paid by Alco; thus 87% of the 1995 compensation was
paid by the seller. From date of the purchase through year-end, the
Corporation paid Mr. Powers $50,450 or 13% of his total 1995 compensation.
(10) Contribution to the Central Products Corporation 401(k) Plan.
(11) Reflects a bonus paid to him by Alco for services rendered during 1995.
Pursuant to the acquisition agreement, the seller assumed and paid this
bonus obligation.
EMPLOYMENT AGREEMENT AND OTHER COMPENSATION AGREEMENTS
Mr. Caldabaugh has an employment agreement with Brown-Bridge that expires
in September 1999. The agreement provides for an annual salary of $250,000, and
severance pay equal to the average annual cash compensation received by him
during the three fiscal years immediately preceding termination for any reason
other than "just cause," or his death, disability or resignation. The agreement
and a similar employment agreement with Richard T. Ray, the Executive Vice
President and Chief Financial Officer of Brown-Bridge, granted to Messrs.
Caldabaugh and Ray options to purchase up to an aggregate 71,065 shares of
Brown-Bridge's common stock at various prices per share (the "Brown-Bridge
Options"). Pursuant to an agreement with the Corporation entered into in
connection with the merger of a newly-formed wholly owned subsidiary of the
Corporation with the former Brown-Bridge entity (the "Brown-Bridge Merger"), the
Brown-Bridge Options were accelerated. Messrs. Caldabaugh and Ray exercised
their respective Brown-Bridge Options for shares of Brown-Bridge's common stock
immediately prior to the exchange of the outstanding shares of Brown-Bridge
common stock pursuant to the such merger. See "--Certain Transactions."
REPORT OF THE COMPENSATION COMMITTEE
Until August 31, 1996, compensation matters were determined by the Board as
a whole. However, in August 1996, a Compensation Committee was formed and
charged with the responsibility for developing the Corporation's executive
compensation policies.
COMPENSATION POLICY
The Compensation Committee is ultimately responsible for compensation paid
to the executive officers. As with Messrs. Boyle and Fleming, all executive
officers and their compensation levels are reviewed on an annual basis, subject
to certain employment and other agreements. In conducting evaluations and
determining executive compensation, the Corporation's objectives are to:
- Support the achievement of desired Corporation performance.
- Provide compensation and benefits that will attract and retain
superior talent and reward performance.
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- Ensure that there is appropriate linkage between executive
compensation and the enhancement of stockholder value.
Executive compensation is designed to provide an overall level of
compensation opportunity that is competitive with companies of comparable size,
capitalization, performance and complexity. Actual compensation levels,
however, may be greater or less than average competitive levels based upon
annual and long-term corporate performance and specific issues peculiar to the
Corporation or its subsidiaries, as well as individual performance. Executive
compensation is not necessarily determined by specific relationship to objective
criteria or benchmarks of corporate performance. Compensation is set for each
individual based on a subjective evaluation of the performance of the executive
officer, and amounts paid are not subject to particular objective criteria or
the attainment of specific results.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The compensation policy applied by the Corporation in establishing the
compensation for Richard J. Boyle, the Chairman of the Board and Chief Executive
Officer of the Corporation, is essentially the same as for other senior
executives of the Corporation -- to provide a competitive compensation
opportunity that rewards for corporate performance and recognizes individual
contribution. For the four months during which Mr. Boyle was an employee of the
Corporation, he received compenation of $33,333. Such amount was determined by
reference to the management fee received by BF in 1996 from the Corporation
under the Management Agreement before it was terminated and to the portion of
that fee that was allocated to Mr. Boyle.
Members of the Compensation Committee
of the Board of Directors
Philip Wm. Colburn
Robert E. Dolan
Frank E. Grzelecki
Anthonie van Ekris
CORPORATE PERFORMANCE
The following Performance Graph compares the Corporation's cumulative total
stockholder return on the Old Stock, which was split into the Class A Common
Stock and the Common Stock pursuant to the Stock Split, for a five-year period
(December 31, 1991 to December 31, 1996) with the cumulative total return of the
NASDAQ market index (which includes the Corporation) and a peer group of
companies described more fully below.
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Comparison of Five-Year Cumulative Total Return *
Among Spinnaker, NASDAQ Market Index and Peer Group * *
<TABLE>
LEGEND
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
- ------ ----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
______ * SPINNAKER INDUSTRIES INC. 100.0 88.1 93.2 355.9 2155.9 6577.9
______ * NYSE/AMEX/NASDAQ STOCK MARKET (US COMPANIES) 100.0 109.7 122.0 121.4 165.5 200.6
______ * NYSE/AMEX/NASDAQ STOCKS (SIC 2670-2679 US COMPANIES) 100.0 101.3 117.2 117.8 155.7 200.7
CONVERTED PAPER AND PAPERBOARD PRODUCTS, EXCEPT CONTAINERS.
</TABLE>
* Assumes $100 invested on December 31, 1991 in the Old Stock. NASDAQ Market
Index and both Peer Groups. Total return assumes re-investment of
dividends.
** The Peer Group index represents SIC Code 267 - Converted Paper and
Paperboard Products (which includes Brown-Bridge and Central Products).
This Peer Group consists of twenty-four companies which trade on the
NASDAQ, American Stock Exchange or New York Stock Exchange.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the close of business on April 28, 1997, the Corporation had
3,074,598 shares of Class A Common Stock, and 3,084,211 shares of Common Stock,
issued and outstanding. The following table sets forth the number of shares of
Class A Common Stock and Common Stock (which are the only classes of outstanding
voting stock of the Corporation) held by persons known to the Corporation to own
beneficially more than 5% of such classes of common stock as of April 28, 1997.
(For the purposes of reporting beneficial ownership herein, a person is
considered the beneficial owner of the shares over which such person holds or
shares voting or investment power, including the power to direct the disposition
of such shares, or over which such a person can acquire such power within 60
days by, for example, the exercise of stock options or conversion of
securities). The following information is reflected in Schedule 13D's, as
amended, that have been filed with the Securities and Exchange Commission or
that have otherwise been furnished to the Corporation.
<TABLE>
CLASS A COMMON STOCK COMMON STOCK
------------------------- ------------------------
AMOUNT OF AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL PERCENT BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS OWNERSHIP OF CLASS
- ------------------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C>
Lynch Manufacturing 2,259,063(1) 73.5% 2,237,203(1) 72.8%
Corporation (1)
100 Douglas Street
Yankton, S.D. 57078
Boyle Fleming & Co., Inc.(2) 679,045(2)(3) 19.0% 678,945(2)(3) 18.0%
600 N. Pearl Street, Suite 2160
Dallas, Texas 75201
</TABLE>
- -----------------------------
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(1) Mario J. Gabelli, of Corporate Center at Rye, Rye, New York, 10580,
Chairman of the Board and Chief Executive Officer of Lynch, may be deemed
to be a beneficial owner of the Class A Common Stock and the Common Stock
owned by Lynch, through LMC, by virtue of his and certain affiliated
parties' beneficial ownership of 23.1% of the shares of common stock of
Lynch. Mr. Gabelli, however, specifically disclaims beneficial ownership
of all shares of the capital stock of the Corporation held by Lynch and
LMC. See "Certain Transactions."
(2) Includes 491,469 shares of Class A Common Stock and Common Stock,
respectively, issuable upon exercise of the A Warrant (as defined)(as
adjusted for two 3-for-2 stock splits that occurred in December 1994 and
December 1995, respectively, and the Stock Split). BF, an investment and
management firm, is an affiliate of Richard J. Boyle and Ned N. Fleming,
III who each own 50% of the outstanding capital stock of BF. Messrs.
Boyle and Fleming may be deemed to share voting and dispositive power over
these shares; however, Mr. Fleming and Mr. Boyle specifically disclaim
beneficial ownership of such shares. See "Certain Transactions".
(3) Determined in accordance with Rule 13d-3(d)(1)(i) of the Securities
Exchange Act of 1934, as amended.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of the capital stock of the Corporation and Lynch by each director of
the Corporation, as well as by all directors and executive officers of the
Corporation as a group, as of April 28, 1997. For the purposes of reporting
beneficial ownership herein, a person is considered the beneficial owner of the
shares over which such person holds or shares voting or investment power,
including the power to direct the disposition of such shares, or over which such
a person can acquire such power within 60 days by, for example, the exercise of
stock options or the conversion of securities.
<TABLE>
Amount of Class A Common
Amount of Lynch Shares Stock Shares Beneficially Amount of Common Stock
Beneficially Owned (1)(2) Owned (1)(2) Beneficially Owned (1)(2)
------------------------- ------------------------- -------------------------
Number of Number of Number of
Name Shares Percent Shares Percent Shares Percent
---- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Boyle 1,000 * 679,045(3) 19.0% 679,417(3) 18.1%
Ned N. Fleming, III --- --- 679,045(3) 19.0% 678,945(3) 18.0%
Philip Wm. Colburn --- --- 5,000(4) * 5,000(4) *
Robert E. Dolan 235 * 1,225 * 1,225 *
Anthonie C. van Ekris --- --- 5,000(4) * 5,000(4) *
Joseph P. Rhein --- --- 7,250(4) * 7,250(4) *
Frank E. Grzelecki --- --- --- --- --- ---
All Directors and
Officers of the
Corporation as a group
(twelve persons,
including those named
above) 1,375 * 697,520(3) 18.5% 702,414(3) 18.5%
</TABLE>
- -------------------
* Less than one percent.
9
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(1) A person is considered to "beneficially own" the shares over which such
person holds or shares voting power or investment power or over which such
person can acquire such power within 60 days (for example, through the
exercise of stock options or conversion of securities).
(2) Except as otherwise noted, each director and officer has sole voting and
investment power with respect to the shares of common stock of the
Corporation and Lynch.
(3) Includes 491,469 shares of Class A Common Stock and Common Stock,
respectively, issuable upon the exercise of the A Warrant granted to BF in
June 1994 (as adjusted for two 3-for-2 stock splits that occurred in
December 1994 and December 1995, respectively, and the Stock Split). BF,
an investment and management firm, is an affiliate of Richard J. Boyle and
Ned N. Fleming, III, who each own 50% of the outstanding capital stock of
BF. Messrs. Boyle and Fleming, together with former shareholders of BF,
may be deemed to share voting and dispositive power over these shares of
Common Stock and Class A Common Stock; however, Mr. Fleming and Mr. Boyle
specifically disclaim beneficial ownership of such shares. See "Certain
Transactions."
(4) Includes 5,000 shares issuable upon exercise of vested stock options
granted pursuant to the Spinnaker Industries, Inc. Directors Stock Option
Plan.
CERTAIN TRANSACTIONS
In June 1994, the Corporation entered into a management agreement with BF
(the "Management Agreement"), whereby BF and Messrs. Boyle and Fleming agreed to
provide the Corporation with operations management, strategic planning,
acquisition analysis and implementation, investment banking, and financial
advisory services and the supervision of the Corporation's financial reporting
and regulatory obligations. Pursuant to the Management Agreement, Mr. Boyle
became the Chairman of the Board and Chief Executive Officer, Mr. Fleming became
the President, and both were elected to the Board of Directors of the
Corporation. Under the Management Agreement, BF received a management fee of
$200,000 per year (increased to $400,000 per year effective January 1, 1996),
plus reimbursement of overhead and other expenses. The Corporation has agreed
to indemnify BF and its affiliates against certain claims resulting from their
providing services to the Corporation pursuant to the Management Agreement. The
Management Agreement had an initial term of one year, and was automatically
renewed for a term of one additional year ending in June 1996, after which it
became terminable upon 90 days' prior notice by either party. Pursuant to
notice sent by the Corporation on May 24, 1996, the Management Agreement was
terminated effective August 31, 1996. At that time, Messrs. Boyle and Fleming
became employees of the Corporation and continued to serve as Chairman and Chief
Executive Officer and President, respectively, of the Corporation.
In June 1994, the Corporation and BF also entered into a warrant purchase
agreement, under which BF received a warrant (the "A Warrant") to purchase
678,945 shares of Common Stock and 678,945 shares of Class A Common Stock (as
adjusted for the 3-for-2 stock splits that occurred in December 1994 and
December 1995 and for the Stock Split) for a price of $2.67 for one share of
both Class A Common Stock and Common Stock at any time on or before June 10,
1999. The warrant purchase agreement also grants certain demand and incidental
registration rights to BF and certain repurchase rights to the Corporation. In
April 1996, in connection with the Corporation incurring indebtedness from
Bankers Trust Company (the "Alco Refinancing Debt") as part of the refinancing
of indebtedness to Alco, the former owner of Central Products, incurred in
connection with the Corporation's acquisition of Central Products, BF partially
exercised the A Warrant to the extent of 187,476 shares of Old Stock, which
were pledged to secure repayment of the Alco Refinancing Debt. In addition,
an agreement with Bankers Trust Company required BF to further exercise the
A Warrant if necessary to enable the Corporation to make its interest payments
under the Alco Refinancing Debt. BF had pledged the A Warrant and the shares
of Common Stock and Class A Common Stock issued or issuable upon exercise
thereof to secure repayment of the Alco Refinancing Debt, and all capital stock
of the Corporation owned by LMC was pledged to secure repayment of the Alco
Refinancing Debt. The Alco Refinancing Debt
10
<PAGE>
was repaid with a portion of the net proceeds from the private offering and
sale of an aggregate principal amount of $115 million of its 10 3/4% Senior
Secured Notes due 2006, Series A, which was consummated on October 23, 1996
(the "Notes Offering").
When the Corporation acquired its 80.1% interest in the former Brown-Bridge
entity, (an acquisition opportunity developed by BF before entering into the
Management Agreement), certain affiliates of BF (including Messrs. Boyle and
Fleming) and Lynch loaned the Corporation approximately $322,000 and $965,000,
respectively under subordinated notes issued by the Corporation (the "Affiliate
Notes"), at an interest rate of 18% to help provide the Corporation the capital
necessary to fund its portion of the acquisition. The Affiliate Notes were
repaid with a portion of the net proceeds of the Notes Offering.
The minority stockholders of the former Brown-Bridge entity (the "Minority
Stockholders"), which included Lynch, certain officers and employees of Brown-
Bridge (including Mr. Caldabaugh) and certain affiliates of BF (including
Messrs. Boyle and Fleming), all acquired their respective interests on the same
terms and conditions as the Corporation. Prior to the Notes Offering, the
common stock of Brown-Bridge held by the Minority Stockholders was acquired
by the Corporation for approximately $2.3 million and 9,613 shares of Common
Stock. In addition, as part of the consideration for the shares of capital
stock of the former Brown-Bridge entity that were acquired pursuant to the
Brown-Bridge Merger, the Minority Stockholders received the right to a
contingent payment, which is exercisable at any time during the period beginning
October 1, 1998 and ending September 30, 2000. The value of the contingent
payment is equal to the percentage of the capital stock of the former Brown-
Bridge entity owned by such stockholder at the time of the Brown-Bridge Merger
multiplied by 75% of the fair market value of the capital stock of Brown-Bridge,
as determined in accordance with certain economic assumptions, as of the date
such right is exercised, less the consideration already received pursuant to the
Brown-Bridge Merger. The contingent purchase price is payable through the
issuance of Common Stock of the Corporation, unless the Corporation elects to
pay the contingent price in cash. If such payments are made in cash, they could
give rise to a default under the Indenture, unless there is sufficient
availability under provisions regarding Restricted Payments contained in the
Indenture. The Minority Stockholders were granted demand and incidental
registration rights for their shares of Common Stock received in connection with
the Brown-Bridge Merger. In connection with the Brown-Bridge Merger and other
related agreements, Brown-Bridge accelerated all of the Brown-Bridge Options,
which were owned by Mr. K.C. Caldabaugh, the Chairman, Chief Executive Officer
and President of Brown-Bridge, and Mr. Richard T. Ray, the Executive Vice
President and Chief Financial Officer of Brown-Bridge. In addition, pursuant to
agreements with such officers, the Corporation loaned such officers an amount
equal to the corporate tax benefit resulting to the Corporation from the
deduction received by it (or its consolidated group) as a result of the early
vesting of such options, which is evidenced by promissory notes executed by such
officers. The promissory notes had an aggregate principal amount at closing of
the Notes Offering of approximately $225,000, bear interest at the rate of 6.02%
per annum, shall mature and be repayable on the 90th day after the contingent
payment is made, and are secured by each officer's rights to receive such
contingent payments.
The Corporation is a party to a management agreement with Lynch that
provides for Lynch to render management, financial and other services to the
Corporation in exchange for an annual payment of management fees, the amount of
which is subject to review each year. Pursuant to the foregoing management
agreement, Lynch was paid $100,000 for the year ended December 31, 1996.
In connection with the Corporation's acquisition of Central Products, Lynch
guaranteed $25 million of indebtedness of the Corporation and undertook certain
other obligations. Under the terms of agreements dated October 3, 1995, the
Corporation agreed to pay Lynch a monthly fee equal to 0.5% of the principal
amount guaranteed by Lynch. The Corporation accrued $750,000 in fees payable to
Lynch through March 31, 1996 (the termination date of the agreement), which were
paid with a portion of the proceeds of the Notes Offering.
11
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
Representatives of Ernst & Young, the Corporation's auditors for 1996, are
expected to be available at the Annual Meeting with the opportunity to make a
statement if they desire to do so and to answer appropriate questions. The
Corporation has not yet selected a principal auditor for 1997.
Ernst & Young has expressed reliance on Deloitte & Touche LLP ("Deloitte &
Touche") audits of Central Products for 1996 and 1995. Deloitte & Touche's
report on Central Products' financial statements contained no adverse opinion or
disclaimer opinion, and was not qualified or modified as to uncertainty, audit
scope or accounting principles.
STOCKHOLDER PROPOSALS
Any stockholder proposal to be presented for action at the next meeting of
stockholders pursuant to the provisions of Rule 14a-8, under the Securities
Exchange Act of 1934, must be received at the Corporation's principal executive
offices no later than January 1, 1998, for inclusion in the proxy statement and
form of proxy relating to the 1998 Annual Meeting.
MISCELLANEOUS
The Board of Directors knows of no other matters that are likely to come
before the Annual Meeting. If any other matters should properly come before the
Annual Meeting, it is the intention of the persons named in the accompanying
form of Proxy to vote on such matters in accordance with their best judgment.
The solicitation of proxies is made on behalf of the Board of Directors of
the Corporation, and the cost thereof will be borne by the Corporation. The
Corporation will also reimburse brokerage firms and nominees for their expenses
in forwarding proxy material to beneficial owners of the Class A Common Stock
and the Common Stock of the Corporation. In addition, officers and employees of
the Corporation (none of whom will receive any compensation therefor in addition
to their regular compensation) may solicit proxies. The solicitation will be
made by mail and, in addition, may be made by telegrams, personal interviews, or
telephone.
12
<PAGE>
ANNUAL REPORT
The Corporation's Annual Report to Stockholders for the fiscal year ended
December 31, 1996, is being sent to each stockholder. The Annual Report,
however, is not to be regarded as part of the proxy soliciting material.
By Order of the Board of Directors
Robert A. Hurwich
Secretary
DATED: April 28, 1997
13
<PAGE>
[LETTERHEAD]
(214) 922-4167
April 30, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Attention: 1934 Act Filing Desk
Re: Spinnaker Industries, Inc.
Amendment No. 1 to Annual Report on Form 10K
Gentlemen:
On behalf of Spinnaker Industries, Inc., a Delaware corporation (the
"Company"), enclosed for filing under the Securities Exchange Act of 1934, as
amended, is the Company's Amendment No. 1 to its Annual Report on Form 10-K;
styled Form 10-K/A(1) (the "Amendment"). The Amendment is being filed
pursuant to General Instruction G(3) to Form 10-K in order to furnish the
Company's definitive proxy statement with respect to its 1997 Annual Meeting
of Stockholders of the Company, which definitive proxy statement is
incorporated by reference in Part III. Please contact the undersigned at the
above telephone number if you have any questions.
Very truly yours,
Timothy R. Vaughan
cc: NASD
TRV:kbm
Enclosure
