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
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
Check Technology Corporation
- -------------------------------------------------------------------------------
(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):
|_| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Items 22(a)(2) of Schedule A.
|_| $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transactions
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:
(5) Total fee paid:
|X| 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:
CHECK TECHNOLOGY CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 21, 1996
Notice is hereby given that the Annual Meeting of Shareholders of Check
Technology Corporation will be held at the offices of the Company, 12500
Whitewater Drive, Minnetonka, Minnesota 55343-9420 on Thursday, March 21,
1996 at 3:30 p.m., Central Standard Time, for the following purposes:
1. To elect five directors to hold office until the next Annual
Meeting of Shareholders or until their successors are elected.
2. To consider and act upon proposed amendment to the Company's
Articles of Incorporation to increase the total number of authorized
shares of Common Stock from 7,000,000 shares to 25,000,000 shares.
3. To ratify and approve the selection of independent public
accountants for the current fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on January 26, 1996 as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
By Order of the Board of Directors,
Thomas H. Garrett III
Secretary
St. Paul, Minnesota
January 31, 1996
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND IN
PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE
IN PERSON IF THEY SO DESIRE.
CHECK TECHNOLOGY CORPORATION
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Check Technology
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company to be voted at the Annual Meeting of
Shareholders to be held on March 21, 1996, or any adjournment or adjournments
thereof. The cost of this solicitation will be borne by the Company. In
addition to the solicitation by mail, officers, directors and employees of
the Company may solicit proxies by telephone, telegraph or in person. The
Company may also request banks and brokers to solicit their customers who
have a beneficial interest in the Company's Common Stock registered in the
name of nominees and will reimburse such banks and brokers for their
reasonable out-of-pocket expenses.
Any proxy may be revoked at any time before it is voted by receipt of a proxy
properly signed and dated subsequent to an earlier proxy, or by revocation of
a written proxy by request in person at the Annual Meeting; if not so
revoked, the shares represented by such proxy will be voted. The Company's
principal offices are located at 12500 Whitewater Drive, Minnetonka,
Minnesota 55343-9420, and its telephone number is (612) 939-9000. The mailing
of this proxy statement to shareholders of the Company commenced on or about
January 31, 1996.
The total number of shares of capital stock of the Company outstanding and
entitled to vote at the meeting as of January 26, 1996 consists of 6,140,210
shares of $.10 par value Common Stock (the "Common Stock"). Each share of
Common Stock is entitled to one vote and there is no cumulative voting. Only
shareholders of record at the close of business on January 26, 1996 will be
entitled to vote at the meeting. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at the Annual Meeting of
Shareholders constitutes a quorum for the transaction of business.
Under Minnesota law, each item of business properly presented at a meeting of
shareholders generally must be approved by the affirmative vote of the
holders of a majority of the voting power of the shares present, in person or
by proxy, and entitled to vote on that item of business. However, if the
shares present and entitled to vote on that item of business would not
constitute a quorum for the transaction of business at the meeting, then the
item must be approved by a majority of the voting power of the minimum number
of shares that would constitute such a quorum. Votes cast by proxy or in
person at the Annual Meeting of Shareholders will be tabulated at the meeting
to determine whether or not a quorum is present. Abstentions will be treated
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 the matter submitted to the shareholders for a vote. 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.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table includes information as of January 26, 1996 concerning
the beneficial ownership of the holdings of Common Stock of the Company by
(i) all persons who are known by the Company to hold five percent or more of
the Common Stock of the Company, (ii) each of the directors of the Company,
(iii) each executive officer named in the Summary Compensation Table below,
and (iv) all directors and officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
<S> <C> <C>
Perkins Capital Management, Inc. 884,000(2) 14.4%
730 East Lake Street
Wayzata, MN 55391-1769
Austin W. Marxe 628,000(3) 10.2%
AWM Investment Company, Inc.
153 East 53rd Street
New York, NY 10022
Jay A. Herman(4)(5) 171,500(6) 2.8%
Robert Reznick(4) 88,691(7) 1.4%
Thomas H. Garrett III(4) 16,666(8) *
Gary R. Holland(4) 10,000(9) *
Oscar Victor(4) 18,666(10) *
Ian Jaggard(5) 34,200(11) *
Robert L. Bridigum(5) 29,400(12) *
All officers and directors as a group (9 persons) 431,406(13) 6.8%
</TABLE>
*Less than 1%
(1) Except as otherwise indicated, all shares are beneficially owned and
the sole voting and investment power is held by the person indicated.
(2) Sole dispositive power is exercised over such shares and sole voting
power is exercised over 232,200 of the shares and no voting power is
exercised over the remaining 651,800 shares.
(3) Includes 455,000 shares held by Special Situations Fund III, L.P. and
150,000 shares held by Special Situations Cayman Fund, L.P., of which
AWM Investment Company has the right to sell 605,000 shares. The
controlling shareholder and Chief Executive Officer of AWM Investment
Company is Austin W. Marxe, who also individually owns 23,000 shares.
(4) Serves as a director of the Company and has been nominated for
reelection.
(5) Serves as an executive officer of the Company and appears in the
Summary Compensation Table below.
(6) Includes options to purchase 91,500 shares which may be purchased
within 60 days from the date hereof.
(7) Includes options to purchase 16,666 shares which may be purchased
within 60 days from the date hereof.
(8) Includes options to purchase 4,666 shares which may be purchased within
60 days from the date hereof and 6,000 shares held by Mr. Garrett's
spouse. Mr. Garrett disclaims beneficial ownership of such shares.
(9) Includes options to purchase 10,000 shares which may be purchased
within 60 days from the date hereof.
(10) Includes options to purchase 15,326 shares which may be purchased
within 60 days from the date hereof.
(11) Includes options to purchase 18,000 shares which may be purchased
within 60 days from the date hereof.
(12) Includes options to purchase 15,000 shares which may be purchased
within 60 days from the date hereof.
(13) Includes options to purchase 196,158 shares which may be purchased by
officers and directors within 60 days from the date hereof.
PROPOSAL 1
ELECTION OF DIRECTORS
The Bylaws of the Company provide that at each annual meeting the
shareholders shall determine the number of directors to serve during the
following year. The Bylaws also authorize the Board to increase the number of
directorships between annual meetings of shareholders. Management has
recommended that the number of directors to be elected this year be set at
five.
The Board of Directors recommends that the shareholders elect the nominees
named below as directors of the Company for the ensuing year. It is intended
that the persons named as proxies in the enclosed form of proxy will vote the
proxies received by them for the election as directors of the nominees named
below. Each nominee is presently a director of the Company. Unless otherwise
indicated, each nominee has held his present occupation as set forth below,
or has been an officer with the organization indicated, for more than the
past five years. Each nominee has indicated a willingness to serve, but in
case any nominee is not a candidate at the meeting, for reasons not presently
known to the Company, the proxies named in the enclosed form of proxy may
vote for a substitute nominee in their discretion.
Robert Reznick Chairman of the Board of Directors of
Director since 1986 Fidelity Bank, Edina, Minnesota
Age -- 76
Mr. Reznick served as Chairman of the Board of Craig-Hallum Corporation, a
holding company with interests in the securities and investment banking
industries, from 1969 through June 1992.
Jay A. Herman President of the Company
Director since 1989 since June 1989
Age -- 48
Mr. Herman joined the Company as Executive Vice President and Chief Financial
Officer in May 1988 and was promoted to President in June 1989. Prior to
joining the Company, Mr. Herman was Vice President and Chief Financial
Officer of Gelco Corporation's International Division. He held that post from
1986 to 1988. Between 1979 and 1986, Mr. Herman held the positions of Vice
President of Administrative Services for Gelco Corporation and Director of
Planning and Budgets for Gelco's Fleet Leasing Division. Before joining
Gelco, Mr. Herman held several positions with General Mills.
Thomas H. Garrett III Partner in the law firm of
Director since 1986 Lindquist & Vennum P.L.L.P.
Age -- 50 Minneapolis, Minnesota
Mr. Garrett has been a member of the law firm of Lindquist & Vennum P.L.L.P.
since 1970. He is also a director of St. Jude Medical, Inc., a manufacturer
of medical devices.
Gary R. Holland Managing Partner, Holland
Director since 1992 & Associates, a Minneapolis-
Age -- 53 based consulting firm
Mr. Holland previously served as President and Chief Executive Officer of
DataCard Corporation, a Minneapolis, Minnesota-based manufacturer of plastic
transaction cards, embossing and encoding equipment and transaction
terminals, from 1982 to 1992. He is also Chairman of the Board of Directors
of Datakey, Inc., a manufacturer of electronic security devices.
Oscar Victor Chief Executive Officer of VIC Research
Director since 1986 and Development Company, a research and
Age -- 76 consulting company in Minneapolis, Minnesota
Mr. Victor serves on the Board of Directors of General Securities,
Incorporated, a Minneapolis based mutual fund.
VOTE REQUIRED
The affirmative vote of a majority of the shares represented at the meeting
of the Company's Voting Stock is required for the election of the nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF THE NOMINEES.
The Board of Directors met four times during fiscal 1995. The Board of
Directors has two standing committees, the Executive Committee and the Audit
Committee. The Executive Committee is currently composed of Messrs. Reznick
and Herman. The Executive Committee met four times during fiscal 1995. The
Executive Committee has the power of the Board and also acts as an advisory
body to the Board by reviewing various matters prior to their submission to
the Board. The Audit Committee is currently comprised of Messrs. Holland and
Garrett. The Audit Committee met twice in fiscal 1995 and has met once since
September 30, 1995 to review the 1995 audit and the recommendations of the
Company's independent auditors. Among other duties, the Audit Committee
reviews and evaluates significant matters relating to the audit and internal
controls of the Company, reviews the scope and results of audits by, and the
recommendations of, the Company's independent auditors and approves
additional services to be provided by the auditors. The Committee reviews
audited financial statements of the Company. Each director attended 75% or
more of the meetings of the Board of Directors and Board Committees on which
he served.
The Company does not have a nominating committee or a compensation committee.
The Check Technology Corporation 1991 Stock Plan (the "1991 Plan") provides
for the automatic granting of a defined number of non-qualified options to
non-employee directors. The 1991 Plan provides that each non-employee
director who is first elected a director (whether by vote of shareholders or
directors) shall receive an option to purchase 10,000 shares of the Company's
Common Stock at such date. At the third anniversary date of an option grant a
non-employee director who continues to serve as a member of the Board shall
automatically be granted an option to purchase an additional 10,000 shares of
Common Stock with the option price equal to the fair market value of the
Company's Common Stock on such date. Messrs. Garrett, Reznick and Victor
received options for 10,000 shares on March 14, 1994 at $4.38 per share and
Mr. Holland received an option for 10,000 shares on December 30, 1995 at
$9.63 per share. These options have ten-year terms and will be exercisable as
to one-third of the shares subject to the option on each of the first three
anniversary dates of the option grant.
During fiscal 1995, directors were paid a fee of $1,000 for each meeting
attended of the Board of Directors and $500 for each meeting attended of any
committee on which they serve. No compensation for serving as a director was
paid to Messrs. Herman or Garrett. Lindquist & Vennum P.L.L.P., of which Mr.
Garrett is a partner, was paid for legal services rendered to the Company
during fiscal 1995. It is anticipated that Lindquist & Vennum P.L.L.P. will
continue to perform legal services for the Company.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending September 30, 1995,
1994 and 1993, the cash compensation paid by the Company, as well as certain
other compensation paid or accrued for those years, to Jay A. Herman, the
Company's President and Chief Executive Officer, and each of the other
executive officers of the Company whose total cash compensation exceeded
$100,000 during 1995 (together with Mr. Herman, the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY($) BONUS($) AWARDS OPTIONS(#) COMPENSATION($)
<S> <C> <C> <C> <C> <C> <C>
Jay A. Herman 1995 $179,500 $103,000 0(1) 0 $1,875(2)
President and 1994 171,774 145,950 0 62,500 1,875(2)
Chief Executive Officer 1993 164,015 86,429 0 0 1,875(2)
Ian Jaggard 1995 $103,466 $32,000 0(3) 0 1,293(2)
Vice President - Marketing 1994 99,275 62,550 0 0 910(2)
and Sales Development 1993 95,000 37,041 0 0 0
Robert L. Bridigum 1995 85,993 21,000 0(3) 0 1,033(2)
Vice President - 1994 82,685 31,275 0 0 1,071(2)
Engineering 1993 78,245 24,694 0 0 942(2)
</TABLE>
(1) As of September 30, 1995, Mr. Herman held a total of 6,250 shares of
restricted stock with a total dollar value of $46,485, based on the
market value of such shares on September 30, 1995. Such shares vested
on January 20, 1996.
(2) Reflects 401(k) matching contributions under the Company's Profit
Sharing Plan.
(3) As of September 30, 1995, Messrs. Jaggard and Bridigum each held a
total of 2,500 shares of restricted stock with a total dollar value of
$18,594, based on the market value of such shares on September 30,
1995. Such shares vest on December 1, 1996.
STOCK OPTIONS AND EXECUTIVE LOAN PROGRAM
The Company has two stock plans, the 1986 Stock Option Plan (the "1986 Plan")
and the 1991 Plan. Both Plans are currently administered by the Board of
Directors and each Plan authorizes the Board to appoint a committee of
disinterested directors to administer such Plan. The Company did not grant
any stock options to the Named Executives during the fiscal year ending
September 30, 1995. In March 1995 the Board reviewed the status of the
Company's outstanding stock options, noting that many of same would be
expiring in 1995 and 1996. The Board determined that it wished to see all of
the Company's executive officers exercise the maximum number of options
granted to them without the need to sell all or part of such option shares in
order to raise the cash necessary to permit the exercise and the appropriate
tax withholding. Following such review, the Board adopted the Executive
Option Exercise Loan Program, the purpose of which was to more closely align
the goals and motivation of selected executives with those of other Company
shareholders and to provide a long-term capital accumulation opportunity.
Pursuant to such Program, Mr. Herman borrowed $145,538 from the Company in
May, 1995 for the purpose of exercising 40,000 options. The rate of interest
paid under Mr. Herman's promissory note at September 30, 1995 was 5.85% and
Mr. Herman's obligation to the Company at that date was $148,962. The
promissory note is secured by the shares acquired and is with full recourse
to Mr. Herman. No other Program loans were made in fiscal 1995.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during 1995 and unexercised
options held as of September 30, 1995:
GGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES VALUE NUMBER OF UNEXERCISED IN-THE-MONEY
ACQUIRED ON REALIZED OPTIONS AT FY-END(#) OPTIONS AT FY-END($)(2)
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Jay A. Herman 40,000 175,000 91,500 50,000 $437,219 $103,125
Ian Jaggard N/A N/A 18,000 0 86,938 0
Robert L. Bridigum N/A N/A 15,000 0 74,063 0
</TABLE>
(1) Based on the difference between the exercise price and the market value
at the date of exercise.
(2) Based on a market price of $7.4375 per share for the Company's Common
Stock as of September 30, 1995.
As of September 30, 1995, there were outstanding options to purchase 337,910
shares of the Company's Common Stock at prices ranging from $1.75 to $5.375
per share at an average per share exercise price of $3.165 and the expiration
dates of said options ranged from March 16, 1996 to September 28, 2004. As of
September 30, 1995, there were 18 people participating in the 1986 and 1991
Plans. An additional 420,410 shares are reserved for future granting under
the 1986 and 1991 Plans.
EMPLOYMENT AGREEMENTS
Effective October 1, 1994, the Board approved a new Employment Agreement for
Mr. Herman with a term through September 30, 1999. Under the agreement, Mr.
Herman receives a minimum base salary of $179,500 and is eligible for fringe
benefits made available to executive officers of the Company. The agreement
also provides that, if Mr. Herman's employment is terminated (1) by the
Company for reasons other than death, retirement, disability or "Cause;" or
(ii) by Mr. Herman for "good reason," following a "change in control" as
defined in the agreement, then the Company shall pay a severance payment
equal to the greater of $538,500 or three times Mr. Herman's full
compensation (base plus incentive compensation and other items) during the
period prior to the termination. In general, a change in control would occur
when there has been a change in the controlling persons reported in the
Company's proxy statement, when 30% or more of the Company's outstanding
voting stock is acquired by any person, or when the current members of the
Board of Directors or their successors, elected or nominated by such members,
cease to be a majority of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The full Board of Directors of the Company acts as the Compensation
Committee. Jay A. Herman, the President of the Company, served on the Board
of Directors during 1995.
REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives are made by the entire
Board of Directors. The following report shall not be deemed incorporated by
reference into any filing under the Securities Exchange Act of 1933 or the
Securities Exchange Act of 1934.
The Company uses various compensation surveys and outside consultants to
develop its compensation strategy and plans. The Board also refers to such
surveys for executive compensation purposes. The Board has not used outside
consultants to prepare specific studies but the Board would be free to do so
in the exercise of its independent judgment.
There are four components to the Company's executive compensation program:
(1) base salary; (2) bonus; (3) stock option; and (4) profit
sharing/retirement. The compensation philosophy of the Company is to be
competitive with comparable and directly competitive companies to attract and
motivate highly qualified employees. To this end, the Board has adjusted the
mix of the compensation components from year to year according to survey data
and the Company's performance. While the Company's financial performance is
one of the primary factors in setting compensation, another important factor
has been the Company's development initiative with respect to the Imaggia
product line.
BASE SALARY. Executive base salaries are adjusted annually in September based
on cost of living adjustments. Historically, base compensation increases have
rarely exceeded 5%. Exceptions have been made in cases where job skills,
performance and competitive salary information justify same.
BONUS. The Board annually approves executive bonuses based upon the
achievement of predetermined earnings and development objectives the Board
believes are critical to the Company's long-term progress. Bonuses are
payable to deserving executives, managers and key employees based upon the
recommendation of the Chief Executive Officer. The full Board approves the
Chief Executive Officer's share of the bonus pool.
STOCK OPTIONS. The Company's current stock option plans include executives,
managers and key employees. Stock options have been granted periodically by
the Board of Directors. The Company's 1991 Plan allows the grant of options,
both incentive and non-qualified, as well as restricted and deferred stock
awards. Restricted stock grants have been used sparingly with the last of
such grants being made in 1992. The Company's option grants and restricted
stock awards are subject to time vesting in 20% -- 25% annual increments
commencing on the first anniversary of the date of grant. No option grants or
restricted stock awards were made in fiscal 1995. The Board adopted the
Company's Executive Option Exercise Loan Program in 1995. See, "Stock Options
and Executive Loan Program" above.
PROFIT SHARING/RETIREMENT. The Company sponsors a 401(k) Plan for U.S.
employees, including executives, under which the Company partially matches
employee contributions at a proportion set by the Company. The Board approves
the corporate matching formula for all employees.
CHIEF EXECUTIVE COMPENSATION. Mr. Herman's compensation for the period 1993
- -- 1995 is shown in the summary compensation table above. The Board of
Directors believes that Mr. Herman has managed the Company extremely well in
a difficult competitive environment and that his compensation is consistent
with this evaluation. Mr. Herman has been subject to employment agreements
with the Company since 1990. The Agreement (described in "Employment
Agreements" set forth above) provides that the Board may increase Mr.
Herman's base salary from time to time as it deems advisable.
Submitted by the Company's Board of Directors:
Robert Reznick, Chairman
Thomas H. Garrett
Jay A. Herman
Gary R. Holland
Oscar Victor.
STOCK PERFORMANCE
The graph below sets forth a comparison of the cumulative shareholder return
of the Company's Common Stock over the last five fiscal years with the
cumulative total return over the same periods for the Total Return Index for
the Nasdaq Stock Market -- U.S. Companies and a peer group made up of the
following five companies whose business is selling capital equipment to the
industrial printing industry: AM International Inc., Baldwin Technology
Company Inc., Gunther International Ltd., Publishers Equipment Corp., and
Stevens International, Inc. The graph below compares the cumulative total
return of the Company's Common Stock over the last five fiscal years assuming
a $100 investment on October 1, 1990 and assuming reinvestment of all
dividends. This graph shall not be deemed incorporated by reference into any
filing under the Securities Act of 1933 or the Securities Exchange Act of
1934.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
The Company $100 $105 $ 67 $ 98 $214 $283
NASDAQ Index 100 157 176 231 233 321
Peer Group Index 100 88 53 75 80 83
</TABLE>
PROPOSAL 2
TO APPROVE AN AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION
The Board of Directors has approved, and recommends that shareholders vote in
favor of, an amendment to the Company's Articles of Incorporation to increase
the number of authorized shares of Common Stock from 7,000,000 shares to
25,000,000 shares. At January 26, 1996, 6,140,210 shares of Common Stock were
issued and outstanding. In addition, an aggregate of 756,445 shares of Common
Stock were reserved for future grant or for issuance upon the exercise of
outstanding stock options and warrants. Therefore, 103,345 shares of Common
Stock are currently available for corporate purposes.
The Company's Articles of Incorporation also authorizes (i) 1,000,000 shares
of Series A Preferred Shares, $.10 par value per share, of which none are
issued and outstanding, (ii) 1,200,000 shares of Series B Convertible
Preferred Shares, $.10 par value per share, of which none are issued and
outstanding, and (iii) 800,000 undesignated shares. The number of authorized
shares of Series A and Series B Preferred Shares and the undesignated shares
are not being amended pursuant to this Proposal.
The Company has no present plans, understandings or agreements for the
issuance or use of the proposed additional shares of Common Stock. However,
the Board of Directors believes the Company needs additional authorized
shares to provide the Company with the flexibility, as the need arises, to
use Common Stock, or securities convertible into Common Stock, without the
expense and delay of a special shareholders' meeting, for any future equity
financings, acquisitions, stock dividends or stock splits, and for other
purposes. Such activities could require more shares of Common Stock than are
available to the Company. The newly authorized Common Stock would be
identical to the existing authorized Common Stock in all such respects.
The increase in authorized Common Stock will not have any immediate effect on
the rights of existing shareholders. To the extent that the additional
authorized shares are issued in the future in a transaction other than in a
stock split or stock dividend, the existing shareholders' percentage equity
ownership will decrease and, depending on the price at which shares are
issued, could have the effect of diluting the earnings per share and book
value per share of outstanding shares of Common Stock. The holders of Common
Stock have no preemptive rights. The increase in the authorized number of
shares of Common Stock and the subsequent issuance of such shares could have
the effect of delaying or preventing a change in control of the Company
without further action by the shareholders by diluting the stock ownership or
voting rights of a person seeking to obtain control of the Company.
Approval of the amendment requires the affirmative vote of the holders of a
majority of the shares of Common Stock entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE FOLLOWING
PROPOSED RESOLUTION:
RESOLVED, that Article 3.01 of the Articles of Incorporation of the Company
be amended to read as follows:
The total number of shares of stock which this Corporation shall have
authority to issue is 28,000,000 shares, divided into 25,000,000 shares of
Common Stock, $.10 par value per share, 1,000,000 shares of Series A
Convertible Preferred Shares, $.10 par value, 1,200,000 shares of Series B
Convertible Preferred Shares, $.10 par value, and 800,000 undesignated
shares.
PROPOSAL 3
APPROVAL OF AUDITORS
Ernst & Young LLP, independent public accountants, have been auditors for the
Company since its inception. They have been reappointed by the Board of
Directors, upon recommendation of the Audit Committee, as the Company's
auditors for the current fiscal year and shareholder approval of the
appointment is requested. In the event the appointment of Ernst & Young LLP
is not approved by the shareholders, the Board of Directors will make another
appointment to be effective at the earliest feasible time.
A representative of Ernst & Young LLP will be present at the Annual Meeting
of Shareholders, will have an opportunity to make a statement if he desires
to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF ERNST &
YOUNG LLP.
SHAREHOLDER PROPOSALS
The rules of the Securities and Exchange Commission permit shareholders of a
company, after timely notice to the company, to present proposals for
shareholder action in the company's proxy statement where such proposals are
consistent with applicable law, pertain to matters appropriate for shareholder
action and are not properly omitted by company action in accordance with the
proxy rules. The Check Technology Corporation 1997 Annual Meeting of
Shareholders is expected to be held on or about March 15, 1997 and proxy
materials in connection with that meeting are expected to be mailed on or about
January 31, 1997. Shareholder proposals prepared in accordance with the proxy
rules must be received by the Company on or before October 15, 1996.
GENERAL
The Board of Directors of the Company knows of no matters other than the
foregoing to be brought before the meeting. However, the enclosed proxy gives
discretionary authority in the event that any additional matters should be
presented.
Pursuant to Section 16(a) under the Securities Exchange Act of 1934,
executive officers, directors and 10% shareholders of the Company are
required to file reports on Forms 3, 4 and 5 of their beneficial holdings and
transactions in the Company's Common Stock. During fiscal 1995, all such
reports were filed in a timely manner.
The Annual Report of the Company for the past fiscal year is enclosed
herewith and contains the Company's financial statements for the fiscal year
ended September 30, 1995. A copy of Form 10-K, the Annual Report filed by the
Company with the Securities and Exchange Commission, will be furnished
without charge to any shareholder who requests it in writing from the
Company, at the address noted on the first page of this Proxy Statement.
By the Order of the Board of Directors
Thomas H. Garrett III
Secretary
CHECK TECHNOLOGY CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
For the Annual Meeting of Shareholders
March 21, 1996
The undersigned hereby appoints Robert Reznick and Thomas H. Garrett III, or
either of them, proxies with full power of substitution to vote all shares of
stock of Check Technology Corporation of record in the name of the undersigned
at the close of business on January 26, 1996, at the Annual Meeting of
Shareholders to be held in St. Paul, Minnesota on March 21, 1996, or at any
adjournment or adjournments thereof, hereby revoking all former proxies:
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed below
(except as indicated to the contrary)
[ ] WITHHOLD AUTHORITY
to vote for nominees listed below
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Robert Reznick, Jay A. Herman, Thomas H. Garrett III, Gary R. Holland and
Oscar Victor
2. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(to be signed and dated on other side)
(continued from other side)
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IN THEIR DISCRETION, UPON ANY OTHER MATTERS COMING BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE MATTERS SUMMARIZED
ABOVE UNLESS OTHERWISE SPECIFIED.
Dated: __________________________, 1996
_______________________________________
_______________________________________
Please sign name(s) exactly as shown at
left. When signing as executor,
administrator, trustee or guardian,
give full title as such; when shares
have been issued in names of two or
more persons, all should sign.
