<PAGE>
SPINNAKER INDUSTRIES, INC.
1700 PACIFIC, SUITE 1600
DALLAS, TEXAS 75201
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 2000
------------------------
May 1, 2000
To the Stockholders of
SPINNAKER INDUSTRIES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Spinnaker
Industries, Inc., a Delaware corporation ("Spinnaker"), will be held on Tuesday,
June 6, 2000, at 9:00 a.m., local time, at 401 Theodore Fremd Avenue, Rye,
New York, for the following purposes:
1. to elect eight (8) directors to serve until the next Annual Meeting of
Stockholders in 2001 and until their successors are duly elected and
qualified, or their earlier resignation, retirement or removal; and
2. to transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
The Board of Directors of Spinnaker has fixed the close of business on
April 28, 2000, as the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
thereof. A form of Proxy and a Proxy Statement containing more detailed
information with respect to the matters to be considered at the Annual Meeting
accompany and form a part of this notice.
Whether or not you expect to be present at the Annual Meeting, and
regardless of the number of shares you own, please complete, date, and sign the
accompanying Proxy and return it at your earliest convenience in the enclosed
self-addressed, stamped envelope. If you do attend the Annual Meeting in person,
you may withdraw your Proxy and vote your shares personally.
By Order of the Board of Directors,
Robert A. Hurwich
SECRETARY
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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<S> <C>
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)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
SPINNAKER INDUSTRIES, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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):
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(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
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/ / 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.:
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(3) Filing Party:
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(4) Date Filed:
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SPINNAKER INDUSTRIES, INC.
1700 PACIFIC, SUITE 1600
DALLAS, TEXAS 75201
------------------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, JUNE 6, 2000
9:00 A.M.
401 THEODORE FREMD AVENUE
RYE, NEW YORK
---------------------
This Proxy Statement is furnished by the Board of Directors of Spinnaker
Industries, Inc., a Delaware corporation ("Spinnaker" or the "Corporation"), in
connection with the solicitation of proxies for use at the Annual Meeting of
Stockholders to be held on Tuesday, June 6, 2000, at 9:00 a.m., local time, at
the address noted above and at any adjournments or postponements thereof (the
"Annual Meeting"). Proxies in the form enclosed will be voted at the Annual
Meeting if they are properly executed, returned to the Corporation prior to the
meeting, and not revoked. 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.
This Proxy Statement and the accompanying Proxy are first being mailed to
stockholders on or about May 1, 2000. The Corporation's Annual Report to
Stockholders for the year ended December 31, 1999, is enclosed herewith but does
not form any part of the materials for solicitation of Proxies.
QUORUM AND VOTING
RECORD DATE. The record date for the Annual Meeting (the "Record Date") is
April 28, 2000. Only stockholders of record at the close of business on the
Record Date 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
3,775,680 shares of the Corporation's Common Stock, no par value ("Common
Stock"), and 3,566,067 shares of the Corporation's Class A Common Stock, no par
value ("Class A Common Stock").
VOTING STOCK. The only shares of stock entitled to vote at the Annual
Meeting are the Common Stock and Class A Common Stock. Each share of Common
Stock is entitled to 1/10th of a vote. Each share of Class A Common Stock is
entitled to one vote.
QUORUM. In order for any business to be conducted at the Annual Meeting,
the holders of a majority of the shares of both the Common Stock and the
Class A Common Stock that are outstanding and entitled to vote must be
represented at the meeting, either in person or by properly executed Proxy. If a
quorum is not present at the scheduled time of the Annual Meeting, the
stockholders who are present may adjourn the Annual Meeting until a quorum is
present. The time and place of the adjourned meeting will be announced at the
time the adjournment is taken, and no other notice will be given. An adjournment
will have no effect on the business that may be conducted at the Annual Meeting.
VOTING BY STREET NAME HOLDERS. If a stockholder owns shares in "street
name" by a broker, the broker, as the record holder of the shares, is required
to vote those shares in accordance with your instructions. If you do not give
instructions to the broker, the broker will nevertheless be entitled to vote the
shares with respect to "discretionary" items but will not be permitted to vote
the shares with respect to "non-discretionary" items (in which case, the shares
will be treated as "broker non-votes").
<PAGE>
REQUIRED VOTE, MAJORITY STOCKHOLDER. The affirmative vote by the
stockholders having a majority of the votes present in person or by Proxy and
entitled to vote at the Annual Meeting is necessary to approve the election of
the nominees to the Board of Directors. An automated system administered by the
Corporation's transfer agent tabulates the votes. Abstentions 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 be counted for purposes of determining a
quorum, but will not be considered as present and entitled to vote with respect
to that particular matter.
Lynch Corporation, an Indiana corporation ("Lynch"), acquired approximately
82% of the outstanding common stock of Spinnaker in 1987. Lynch transferred all
of its shares of Spinnaker's common stock to its wholly owned subsidiary, Lynch
Manufacturing Corporation, a Delaware corporation ("Manufacturing") in November
1989. Just prior to September 1, 1999, Manufacturing was merged with and into
Lynch, and as a result Lynch owned 2,259,063 shares of Class A Common Stock and
2,237,203 shares of Common Stock. Lynch immediately transferred
2,259,063 shares of Class A Common Stock and 1,237,203 shares of Common Stock to
M-tron Industries, Inc., a South Dakota corporation and wholly owned subsidiary
of Lynch ("M-tron"), which is a manufacturer and importer of quartz crystal
products and clock oscillator modules, and 1,000,000 shares of Common Stock to
Brighton Communications Corporation, a Delaware corporation and wholly owned
subsidiary of Lynch ("Brighton"). Immediately thereafter, Lynch transferred all
of the capital stock of Brighton to Lynch Interactive Corporation, a Delaware
corporation and wholly owned subsidiary of Lynch ("Interactive"), which was then
spun off to the shareholders of Lynch effective as of September 1, 1999. Lynch
has the ability to elect each of the nominees set forth below because of the
shares of Common Stock and Class A Common Stock held by its wholly owned
subsidiary M-tron. See "Security Ownership of Certain Beneficial Owners".
DEFAULT VOTING. Where a specific designation is made in the Proxy with
respect to a proposal at the Annual Meeting, the Proxy will be voted in
accordance with such designation. If no such designation is made, the Proxy will
be voted as follows:
(i) "FOR" the election of each of the nominees to the Board of Directors
named in this Proxy Statement; and
(ii) at the discretion of the proxy holders as to any other matter that may
properly come before the Annual Meeting or any adjournment or
postponement thereof. The Board of Directors is not currently aware of
any such matter or business.
ELECTION OF DIRECTORS
At the Annual Meeting, holders of Common Stock and Class A Common Stock as
of the Record Date will consider and vote for the election of eight (8) members
to the Board of Directors. Each of the nominees is currently serving as a
director and, if elected, he will continue to serve until the next Annual
Meeting of Stockholders and until his successor is duly elected and qualified,
or his earlier resignation, retirement or removal. The Board of Directors has
nominated Richard J. Boyle, Ned N. Fleming, III, Joseph P. Rhein, Anthonie C.
van Ekris, E. Val Cerutti, Mario J. Gabelli, Louis A. Guzzetti, Jr., and
Ralph R. Papitto for election as directors of the Corporation. If for any reason
any of the nominees is not available for election, the proxy holders may vote
the Proxies in favor of the remaining named nominees and 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 BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES
NAMED IN THIS PROXY STATEMENT.
2
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The following is biographical information about each of the nominees for
director:
See "Executive Officers" for biographical information regarding Messrs.
Boyle and Fleming, who are employees of the Corporation.
E. VAL CERUTTI
E. Val Cerutti, age 60, has served as a director of the Corporation since
June 1999. Mr. Cerutti has been a business consultant since 1992. Prior to that
time, he served as President and Chief Operating Officer of Stella D'oro Biscuit
Co., Inc., a producer of bakery products, from 1975 to 1992. He currently serves
as Director of The Gabelli Convertible Securities Fund and The Gabelli Gold
Fund.
MARIO J. GABELLI
Mario J. Gabelli, age 57, has served as a director of the Corporation since
September 2000. Mr. Gabelli has served as Chairman of Lynch since 1986, where he
also served as Chief Executive Officer from 1986 until January 2000, when he was
replaced by Mr. Guzzetti. He has been the Chairman and Chief Executive Officer
and a director of Interactive since September 1999. Mr. Gabelli has been the
Chairman and Chief Executive Officer of Gabelli Group Capital Partners, a
private company which makes investments for its own account, since 1980 and
Chairman and Chief Executive Officer of Gabelli Asset Management Inc., a New
York Stock Exchange listed holding company for subsidiaries engaged in various
aspects of the securities business, since 1999. Mr. Gabelli also has served as
Director, Trustee and/or President of all the registered investment companies
that are managed by Gabelli Funds, LLC, since 1986. Mr. Gabelli also serves as a
Governor of the American Stock Exchange and the Overseer of Columbia University
Graduate School of Business, and he acts as Trustee of Fairfield University,
Roger Williams University, Bruce Museum, Winston Churchill Foundation and E.L.
Wigend Foundation. He is the Chairman of the Patron's Committee of Immaculate
Conception School, and is a former trustee of Fordham Preparatory School and
Dr. I. Fund Foundation.
LOUIS A. GUZZETTI, JR.
Louis A. Guzzetti, Jr., age 61, has served as a director of the Corporation
since January 2000. Mr. Guzzetti has served as the Director, President, Chief
Executive Officer of Lynch since January 2000. Mr. Guzzetti served as President
and Chief Executive Officer of Envirosource, Inc. from 1986 to 1999.
RALPH R. PAPITTO
Ralph R. Papitto, age 73, has served as a director of the Corporation since
September 1999. Mr. Papitto also serves as a director of Lynch and Interactive.
He served as the Chairman and Chief Executive Officer of AFC Cable
Systems, Inc. ("AFC"), a manufacturer and supplier of electrical distribution
products, from 1993 to 1999. Prior to taking that position, he was the Founder,
Chairman and a Director of Nortek, Inc., a manufacturer of construction
products. He currently serves as a director of AFC and Global Sports and
Gaming.com, and is the Chairman of the Board of Trustees of Roger Williams
University.
JOSEPH P. RHEIN
Mr. Rhein, age 73, has served as a director of the Corporation since 1992
and has been a business consultant since 1989. From 1992 to 1994, he was
Chairman of the Corporation when it operated under the name Safety Railway
Service Corporation.
3
<PAGE>
ANTHONIE C. VAN EKRIS
Mr. van Ekris, age 65, 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, The 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. In addition,
Mr. van Ekris is Chairman of Combaro International, Lausanne, Switzerland.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
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.
The Board of Directors has the responsibility for establishing corporate
policies and for the overall performance of the Corporation, although it is not
involved in day-to-day operations. The Board of Directors meets regularly
throughout the year to review significant developments affecting the Corporation
and to act upon matters requiring its approval. The Board of Directors holds its
annual meeting immediately after the Annual Meeting of Stockholders. It also
holds special meetings as required from time to time when important matters
arise requiring Board action between scheduled meetings. During the last fiscal
year, there were four meetings of the Board of Directors during 1999.
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 1999. The Audit
Committee consists of Messrs. Rhein and van Ekris, with Mr. Rhein serving as
Chairman of the Audit Committee.
The Compensation Committee sets and reviews the compensation of the
executive officers of the Corporation. The Compensation Committee consisted of
Messrs. van Ekris, Grzelecki and Robert E. Dolan until Messrs. Grzelecki and
Dolan resigned in June and December, 1999, respectively, from the Board of
Directors. Mr. Cerutti was appointed to the Compensation Committee in February
2000, and Mr. van Ekris continues to serve as Chairman of the Compensation
Committee. The Compensation Committee met once during 1999.
The Corporation does not have a nominating committee. Nominations for
directors and officers are considered by the entire Board of Directors.
Each of the nominees for director attended at least seventy-five percent of
the meetings of the Board of Directors or its committees that he was required to
attend during 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Corporation served as a member of the
compensation committee (or other board committee performing similar functions
or, in the absence of any such committee, the entire board of directors) of
another corporation, one of whose executive officers served on the Compensation
Committee. No executive officer of the Corporation served as a director of
another corporation, one of whose executive officers served on the Compensation
Committee. No executive officers of the Corporation
4
<PAGE>
served as a member of the compensation committee (or other board committee
performing equivalent functions or, in the absence of any such committee, the
entire board of directors) of another corporation, one of whose executive
officers served as a director of the Corporation.
EXECUTIVE OFFICERS
The following is a list of executive officers and certain key employees of
Spinnaker:
RICHARD J. BOYLE
Mr. Boyle, age 65, 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 39, became a member of the Board of Directors and President
of the Corporation in June 1994 and has been Chief Operating Officer since May
1997. 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 Internet, Inc. and several privately-held companies.
K.C. CALDABAUGH
Mr. Caldabaugh, age 53, has been the Chairman, Chief Executive Officer, and
President of Spinnaker Coating, Inc., a wholly owned subsidiary of the
Corporation ("Spinnaker Coating"), 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.
CRAIG J. JENNINGS
Mr. Jennings, age 41, became Vice President, Finance and Treasurer in
December 1997. From May 1997 to December 1997, he served as Vice President and
Controller of the Corporation. From 1992 to 1996, he served in finance and
administrative roles with companies in the manufacturing and retail distribution
industries. Mr. Jennings most recently served as Vice President, Director of
Finance for Continental Emsco Company (formerly LTV Energy Products).
EXECUTIVE COMPENSATION
COMPENSATION 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. Each director who is not also an officer of the Corporation or its
corporate affiliates receives a director's fee of $1,000 per month of the
director's tenure plus $2,000 for each Board of Directors meeting and $1,000 for
each committee meeting the director attends. In addition, the Spinnaker
Industries, Inc. Directors Stock Option Plan provides that each new director
shall be granted options for 10,000 shares of Common Stock, which vest over a
period of two years. However, as of the Record Date no options had been granted
to Messrs. Papitto or Cerutti. Messrs. Rhein, van Ekris, Papitto and Cerutti are
the only directors eligible to be paid director's fees.
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SUMMARY COMPENSATION TABLE. The following table sets forth on an accrual
basis for the three fiscal years ended December 31, 1999, the compensation paid
to the Chief Executive Officer of the Corporation and the two other most highly
compensated executive officers who earned more than $100,000. Except as noted,
the Corporation does not maintain (1) any stock option or other similar
compensation plan involving the issuance of common stock, or (2) any other
long-term or incentive compensation agreements.
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) COMPENSATION($)
- --------------------------- -------- --------- -------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Richard J. Boyle..................... 1999 135,000 75,000 5,000(2)
Office of the Chairman and Chief 1998 135,000 -- -- 5,000(2)
Executive Officer 1997 125,000 7,500 -- 5,000(2)
Ned N. Fleming, III.................. 1999 350,000 125,000 17,833 5,000(2)
President and Chief Operating 1998 350,000 -- 16,279 5,000(2)
Officer 1997 325,000 29,250 14,517 264
K.C. Caldabaugh...................... 1999 297,000 11,880 13,465 5,000(3)
Chairman, Chief Executive 1998 297,000 -- 18,644 5,000(3)
Officer and President of 1997 280,000 56,000 19,777 4,750(3)
Spinnaker Coating
</TABLE>
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(1) Includes automobile allowances and club membership dues.
(2) Contribution to the Spinnaker Industries, Inc. Affiliates 401(k) Plan.
(3) Contribution to the Spinnaker Coating, Inc. 401(k) Plan.
EMPLOYMENT AGREEMENT AND OTHER COMPENSATION AGREEMENTS. Mr. Caldabaugh had
an employment agreement with Spinnaker Coating that expired in September 1999.
The agreement provided 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 Spinnaker Coating, granted to Messrs. Caldabaugh and Ray options to
purchase up to an aggregate 71,065 shares of Spinnaker Coating's common stock at
various prices per share (the "Spinnaker Coating 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
Spinnaker Coating entity (the "Spinnaker Coating Merger"), the Spinnaker Options
were accelerated. Messrs. Caldabaugh and Ray exercised their respective
Spinnaker Coating Options for shares of Spinnaker Coating's common stock
immediately prior to the exchange of the outstanding shares of Spinnaker Coating
common stock pursuant to the such merger. See "Certain Transactions."
REPORT OF THE COMPENSATION COMMITTEE. The Compensation Committee is 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.
- Ensure that there is appropriate linkage between executive compensation
and the enhancement of stockholder value.
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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, Office of
the Chairman 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 12 months in 1999 during which Mr. Boyle was an
employee of the Corporation, he received compensation of $135,000. Such amount
was determined by the Compensation Committee and initially referenced to the
management fee received by BF in 1996 from the Corporation under the Management
Agreement before it was terminated in August 1996. Under the Management
Agreement, the Corporation paid BF an annual amount of $400,000, of which
$100,000 was allocated to Mr. Boyle.
Members of the Compensation Committee
of the Board of Directors
Anthonie van Ekris, Chairman
E. Val Cerutti
7
<PAGE>
CORPORATE PERFORMANCE
On August 16, 1996, the outstanding shares of the Corporation's then
existing common stock (the "Old Stock") were reclassified as "Class A Common
Stock," and record holders as of such date were distributed one share of Common
Stock for each share of Old Stock held by them. The following Performance Graph
compares the Corporation's cumulative total stockholder return on the Old Stock
for a five-year period (December 31, 1994 to December 31, 1999) with the
cumulative total return of the Market Index (which includes the Corporation) and
a peer group of companies described more fully below.
Comparison of Five-Year Cumulative Total Return *
Among Spinnaker, NYSE/AMEX/ Nasdaq Market Index * *
<TABLE>
<CAPTION>
12/1994 12/1995 12/1996 12/1997 12/1998 12/1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
SPINNAKER INDUSTRIES, INC.................... 100.0 605.7 1,652.7 789.6 622.4 413.5
NYSE/AMEX/Nasdaq Stock Market (US
Companies)................................. 100.0 136.3 165.3 216.4 267.2 334.3
NYSE/AMEX/NASDAQ Stocks (SIC 2670-2679 US
Companies)................................. 100.0 132.2 170.4 233.6 231.0 216.5
</TABLE>
* Assumes $100 invested on December 31, 1994 in shares of the Old Stock.
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. This Peer Group consists of twenty-seven companies which trade on
the NASDAQ, American Stock Exchange or New York Stock Exchange.
8
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the close of business on the Record Date, the Corporation had
3,775,680 shares of Common Stock, and 3,566,067 shares of Class A Common Stock
issued and outstanding. The following table sets forth the number of shares of
Common Stock and Class A 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 the Record Date.
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 13Ds and 13Gs, as
amended, that have been filed with the Securities and Exchange Commission or
that have otherwise been furnished to the Corporation.
<TABLE>
<CAPTION>
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>
M-tron Industries, Inc........................ 2,259,063(1) 63.0% 1,229,063(1) 32.4%
100 Douglas Street
Yankton, SD 57078
Brighton Communications Corporation........... -0- 1,000,000(2) 26.4%
4101 Theodore Fremd Avenue
Rye, NY 10580
Boyle Fleming & Co., Inc...................... 649,945(3) 18.1% 655,745(3) 17.3%
2521 29(th) Avenue West
Seattle, WA 98199
tesa tape, inc................................ -0- 200,000(4) 5.3%
5825 Carnegie Boulevard
Charlotte, NC 28209
</TABLE>
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(1) Lynch may be deemed to be a beneficial owner of the shares owned by M-tron
because Lynch, as the sole shareholder of M-tron, has the power to direct
the voting and disposition of such shares. Lynch, however, specifically
disclaims beneficial ownership of all shares held by M-tron. Mr. Gabelli may
be deemed to beneficially own (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) the shares owned by M-tron,
because, as the Chairman of the Board and Chief Executive Officer of Lynch,
and by virtue of his and certain affiliated parties' beneficial ownership of
28.5% of the shares of common stock of Lynch, he has the power to direct the
voting and disposition of such shares. Mr. Gabelli, however, specifically
disclaims beneficial ownership of all shares held by M-tron.
(2) Interactive may be deemed to beneficially own (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) the shares
owned by Brighton because Interactive, as the sole shareholder of Brighton,
has the power to direct the voting and disposition of such shares.
Interactive, however, specifically disclaims beneficial ownership of all
shares held by Brighton. Mr. Gabelli may be deemed to be a beneficial owner
of the shares owned by Brighton, by virtue of his and certain affiliated
parties' beneficial ownership of 23.1% of the shares of common stock of
Interactive, he has the power to direct the voting and disposition of such
shares. Mr. Gabelli, however, specifically disclaims beneficial ownership of
all shares held by Brighton. Lynch distributed all of the shares of
Interactive to Lynch's shareholders in September 1999.
(3) 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
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to share voting and dispositive power over these shares; however,
Messrs. Fleming and Boyle specifically disclaim beneficial ownership of such
shares.
(4) Represents shares acquired in connection with Spinnaker's acquisition of
tesa tape, inc.'s industrial tape business in July 1998. According to its
Schedule 13G, tesa tape, inc. disclaims the existence of two different
classes of common stock of Spinnaker for purposes of Section 13 of the
Securities and Exchange Act of 1934, as amended, and, relying on the fact
that it holds shares representing 2.7% of the votes represented by the
outstanding shares of Class A Common Stock and Common Stock combined,
specifically disclaims beneficial ownership of more than five percent of the
common stock of Spinnaker.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of the capital stock of the Corporation by each director of the
Corporation and each of the named executive officers in the compensation table
set forth above, as well as by all directors and such named executive officers
of the Corporation as a group, as of the Record Date. 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 person can acquire such power within 60 days by, for example, the
exercise of stock options or the conversion of securities.
<TABLE>
<CAPTION>
AMOUNT OF CLASS A COMMON
STOCK SHARES BENEFICIALLY AMOUNT OF COMMON STOCK
OWNED(1) BENEFICIALLY OWNED(1)
---------------------------- ----------------------------
NUMBER OF NUMBER OF
NAME SHARES PERCENT SHARES PERCENT
- ---- --------- -------- --------- --------
<S> <C> <C> <C> <C>
Richard J. Boyle.......................... 659,945(2) 18.4% 666,217(2) 17.6%
Ned N. Fleming, III....................... 649,945(2) 18.1% 655,745(2) 17.3%
Anthonie C. van Ekris..................... 10,000(3) ** 10,000(3) **
Joseph P. Rhein........................... 12,250(3) ** 12,250(3) **
E. Val Cerutti............................ -0- ** -0- **
Mario J. Gabelli.......................... 2,259,063(4) 63.0% 2,229,063(4)(5) 58.7%
Louis A. Guzzetti, Jr..................... -0- ** -0- **
Ralph R. Papitto.......................... -0- ** -0- **
All Directors and named Executive Officers
of the Corporation as a group (nine
persons, including those named above)... 2,941,258(2)(4)(5) 82.0% 2,917,530(2)(4)(5) 76.9%
</TABLE>
- ------------------------
** Less than one percent.
(1) 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.
(2) Includes 655,745 shares of Common Stock and 649,945 shares of Class A Common
Stock owned by BF. 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.
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(3) Includes 10,000 shares issuable upon exercise of vested stock options
granted pursuant to the Spinnaker Industries, Inc. Directors Stock Option
Plan.
(4) Includes 2,259,063 shares of Class A Common Stock and 1,229,063 shares of
Common Stock owned by M-tron, which Mr. Gabelli may be deemed to
beneficially own (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) because, as the Chairman of the Board and
Chief Executive Officer of Lynch (the sole shareholder of M-tron), and by
virtue of his and certain affiliated parties' beneficial ownership of 28.5%
of the shares of common stock of Lynch, he has the power to direct the
voting and disposition of such shares. Mr. Gabelli, however, specifically
disclaims beneficial ownership of all shares held by M-tron. Also includes
1,000,000 shares of Common Stock owned by Interactive, which Mr. Gabelli may
be deemed to beneficially own (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) since, by virtue of his and
certain affiliated parties' beneficial ownership of 23.1% of the shares of
common stock of Interactive, he has the power to direct the voting and
disposition of such shares. Mr. Gabelli, however, specifically disclaims
beneficial ownership of all shares held by Interactive.
(5) Includes 20,000 shares issuable upon exercise of vested stock options
granted pursuant to the Spinnaker Industries, Inc. Directors Stock Option
Plan.
CERTAIN TRANSACTIONS
On September 19, 1994, the Corporation completed its acquisition of
Spinnaker Coating, in which it, together with the Minority Stockholders (as
defined), purchased the label stock business of Kimberly-Clark Corporation
through its newly formed subsidiary, Brown-Bridge Acquisition Corp., which is
now named Spinnaker Coating, Inc. The minority stockholders of the former
Spinnaker Coating entity (the "Minority Stockholders"), which included Lynch,
certain officers and employees of Spinnaker Coating (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 October 1996, 19.9% of the common stock of the former Spinnaker Coating
entity was held by the Minority Stockholders. In October 1996, in connection
with the offering of the Corporation's 10-3/4% Senior Secured Notes due 2006,
the Corporation affected the Spinnaker Coating Merger in which the shares held
by the Minority Stockholders were acquired by Spinnaker and converted into an
aggregate of 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 Spinnaker Coating entity that were converted pursuant to the Spinnaker
Coating Merger, the Minority Stockholders received the right to a contingent
payment, which was 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 Spinnaker
Coating entity owned by such stockholder at the time of the Spinnaker Coating
Merger multiplied by 75% of the fair market value of the capital stock of
Spinnaker Coating, as determined in accordance with certain economic
assumptions, as of the date such right is exercised, less the consideration
already received pursuant to the Spinnaker Coating 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 for the Corporation's 10 3/4%
Senior Secured Notes due 2006. On December 11, 1999, one of the appointed
representatives for certain of the minority stockholders exercised the
contingent right, however, the parties are still negotiating the value of the
contingent payment. As a former minority stockholder, Lynch will receive its pro
rata portion of the contingent payment once it is made.
The Minority Stockholders were granted demand and incidental registration
rights for their shares of Common Stock received in connection with the
Spinnaker Coating Merger. In connection with the Spinnaker Coating Merger and
other related agreements, Spinnaker Coating accelerated all of the Spinnaker
Coating Options, which were owned by Mr. K.C. Caldabaugh, the Chairman, Chief
Executive
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Officer and President of Spinnaker Coating, and Mr. Richard T. Ray, the
Executive Vice President, Chief Financial Officer and Chief Operating Officer of
Spinnaker Coating. 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 $140,000, 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, 1999.
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 December 31, 2000, for inclusion in the proxy statement
relating to the 2001 Annual Meeting of Stockholders.
MISCELLANEOUS
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 Common Stock and the
Class A 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.
Representatives of Ernst & Young L.L.P., the Corporation's auditors for
1999, 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.
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