<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1996
REGISTRATION NO. 333-03629
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PRINTWARE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MINNESOTA 3577 41-1522267
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
------------------------
1270 EAGAN INDUSTRIAL ROAD
ST. PAUL, MN 55121
(612) 456-1400
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
DANIEL A. BAKER, PH.D.
PRINTWARE, INC.
1270 EAGAN INDUSTRIAL ROAD
ST. PAUL, MN 55121
(612) 456-1400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPY TO:
Richard D. McNeil, Esq. Michele D. Vaillancourt, Esq.
Mary S. Giesler, Esq. Trevor V. Gunderson, Esq.
Lindquist & Vennum P.L.L.P. Winthrop & Weinstine, P.A.
4200 IDS Center 3000 Dain Bosworth Plaza
80 South 8th Street 60 South Sixth Street
Minneapolis, Minnesota 55402 Minneapolis, Minnesota 55402
(612) 371-3211 (612) 347-0700
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PRICE PER UNIT (2) OFFERING PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, no par value.............. 1,840,000 $7.00 $12,880,000 $4,441.02
</TABLE>
(1) Includes 240,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PRINTWARE, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Outside Front Cover Page; Inside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page; Additional Information;
Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Outside Front Cover Page; Prospectus Summary; Risk
Factors
4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page; Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Principal and Selling Shareholders; Outside Front
Cover Page; Inside Front Cover Page; Underwriting
8. Plan of Distribution................................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered........... Prospectus Summary; Dividend Policy; Capitalization;
Description of Capital Stock
10. Interest of Named Experts and Counsel................ Not Applicable
11. Information with Respect to the Registrant........... Outside Front Cover Page; Prospectus Summary; Risk
Factors; Capitalization; Selected Financial Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Transactions; Principal and
Selling Shareholders; Description of Capital Stock
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 27, 1996
PROSPECTUS
1,600,000 SHARES
[LOGO]
COMMON STOCK
----------------
Of the 1,600,000 shares of Common Stock offered hereby, 1,200,000 are being
sold by Printware, Inc. ("Printware" or the "Company") and 400,000 shares are
being sold by the Selling Shareholders. See "Principal and Selling
Shareholders." The Company will not receive any of the proceeds from the sale of
the shares by the Selling Shareholders.
Prior to this offering (the "Offering"), there has been no public market for
the Common Stock of the Company and no assurance can be given that a market will
develop or be maintained after the Offering. It is currently estimated that the
initial public offering price will be between $6.00 and $7.00 per share. See
"Underwriting" for the factors considered in determining the initial public
offering price. The Company has applied for listing of the Common Stock on the
Nasdaq National Market under the symbol "PRTW."
---------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE SENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
Total(3).................. $ $ $ $
</TABLE>
(1) The Company and the Selling Shareholders, on a pro rata basis, have agreed
to pay R. J. Steichen & Company, as the representative of the Underwriters
(the "Representative"), a nonaccountable expense allowance equal to 2.0% of
the total Price to Public for all shares purchased. The Company has also
agreed to sell to the Representative, for nominal consideration, a five-year
warrant (the "Representative's Warrant") to purchase up to 120,000 shares of
Common Stock exercisable at a price per share equal to 120% of the per share
Price to Public. The Company and the Selling Shareholders have agreed to
indemnify the Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting estimated offering expenses payable of $393,000, which
includes the portion of the nonaccountable expense allowance described in
Note 1 above which is being paid by the Company.
(3) The Company and the Selling Shareholders have granted the Underwriters a
30-day option to purchase up to 240,000 additional shares of Common Stock
solely to cover over-allotments, if any. To the extent that the option is
exercised, the Underwriters will offer the additional shares at the Price to
Public shown above. If the option is exercised in full, the total Price to
Public, Underwriting Discount, Proceeds to Company and Proceeds to Selling
Shareholders will be $ , $ , $ and $ , respectively.
See "Underwriting."
The shares of Common Stock are offered by the Underwriters on a "firm
commitment" basis subject to prior sale when, as and if delivered to and
accepted by the Underwriters and subject to their right to reject orders in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made on or about , 1996 in Minneapolis, Minnesota.
[R.J. STEICHEN LOGO]
The date of this Prospectus is , 1996
<PAGE>
[Inside Front Cover Graphics]
Photo: Printware's Model 3240 Platesetter
Text above photo: Printware, Inc. is a leader in Computer-to-Plate
Systems, which produce offset printing plates
faster and less expensively than traditional
methods.
Text below photo: Printware's Model 3240 Platesetter, sold under the
Mitsubishi name, produces photographic offset
printing plates directly from a computer.
PRIOR TO THIS OFFERING, THE COMPANY HAS NOT BEEN SUBJECT TO THE REPORTING
REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934. AFTER COMPLETION OF THIS
OFFERING, THE COMPANY INTENDS TO DISTRIBUTE TO ITS STOCKHOLDERS AN ANNUAL REPORT
CONTAINING AUDITED FINANCIAL STATEMENTS AND QUARTERLY REPORTS CONTAINING
UNAUDITED FINANCIAL INFORMATION FOR THE FIRST THREE QUARTERS OF EACH FISCAL
YEAR.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN
FACTORS TO BE CONSIDERED BY PROSPECTIVE INVESTORS. EXCEPT AS OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) DOES NOT INCLUDE UP TO 120,000 SHARES
OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE REPRESENTATIVE'S WARRANT, AND
(III) REFLECTS A ONE-FOR-FOUR REVERSE SPLIT OF THE COMMON STOCK EFFECTIVE APRIL
25, 1996. SEE "DESCRIPTION OF CAPITAL STOCK." THIS PROSPECTUS CONTAINS FORWARD
LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL
RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS.
THE COMPANY
Printware, Inc. ("Printware" or the "Company") designs, builds and markets
"Computer-to-Plate" systems which are used by the offset printing industry to
create printing plates directly from computer data. These systems replace the
traditional process of typesetting, paste-up, camera work and processing film to
produce a printing plate. Computer-to-Plate technology provides one-step plate
making (including text, graphics and photographic halftones) directly from
computer data, much as a laser printer makes printed pages directly from
computer data. The key benefits of Computer-to-Plate technology are lower costs,
faster turnaround times, fewer pieces of equipment and fewer environmental
limitations on disposal of by-products. The key hardware element of a
Computer-to-Plate system is called a Platesetter, which produces the printing
plate by imaging the computer data on the physical plate material. The Company
sells Platesetters, supplies for use in Platesetters and raster image processors
for connecting the Platesetter to the customer's computer network. Sales of
supplies accounted for approximately 55% of the Company's 1995 revenues.
The Company is a leader in the development and introduction of
Computer-to-Plate systems. To date the Company has sold over 300 Platesetters,
which it believes is more than any other single competitor. The Company's
marketing strategy is to offer a wide range of Computer-to-Plate products to the
broad market of "mainstream" printers who use small format (18" wide or less)
presses, typically for high-volume printing applications such as check printing,
social printing (such as wedding invitations) and envelope printing. The
Company's customers include leading printers such as Deluxe Corporation
("Deluxe"), Pitney Bowes, Thomson Publishing, Liberty Check Printers and
Northrup-Grumman.
The Company currently manufactures two lines of Platesetters in various
configurations. The end-user price ranges from $75,000 to $150,000 for the Model
1440, depending on the configuration, and from $85,000 to $100,000 for the Model
3240. The Company markets the Model 1440 through its own sales force, and the
Model 3240 is marketed by Mitsubishi Imaging (MC), Inc. ("Mitsubishi") under its
name. Both of these Platesetter lines use patented resonant galvanometer
technology which was licensed to the Company by Minnesota Mining and
Manufacturing Company ("3M") when the Company was organized in 1985. The
resonant galvanometer technology provides precise scanning of the laser beam
which writes the digital image on the blank plate. In 1993 the Company began to
focus exclusively on Computer-to-Plate products and phased out its manufacturing
of laser printers and film imagers. Phasing out of these lower-margin products
resulted in a reduction in revenue in 1993 and 1994. The focus on
Computer-to-Plate products resulted in an improvement in profitability in 1994
and 1995 due to the higher margins provided by those products and lower research
and development and sales and marketing expenditures.
The Company is incorporated in Minnesota and has its principal executive
office and manufacturing facility at 1270 Eagan Industrial Road, St. Paul,
Minnesota 55121. Its telephone number is (612) 456-1400.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
COMMON STOCK OFFERED BY THE COMPANY.......... 1,200,000 shares
COMMON STOCK OFFERED BY THE SELLING
SHAREHOLDERS................................ 400,000 shares
COMMON STOCK OUTSTANDING AFTER THE
OFFERING.................................... 4,829,713 shares(1)
USE OF PROCEEDS.............................. Product development, sales and marketing and
working capital
PROPOSED NASDAQ NATIONAL MARKET SYMBOL....... PRTW
</TABLE>
- ---------------------------
(1) Does not include, as of March 30, 1996 (i) 135,567 shares issuable upon
exercise of stock options held by executive officers and employees of the
Company, (ii) 120,000 shares issuable upon exercise of the Representative's
Warrant, and (iii) 5,000 shares issuable upon exercise of warrants held by
Deluxe.
RISK FACTORS AND DILUTION
An investment in the Common Stock involves a high degree of risk. See "Risk
Factors." Purchasers will experience immediate and substantial dilution in net
tangible book value per share. See "Dilution."
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------- YEAR ENDED DECEMBER 31,
MARCH 30, APRIL 1, -----------------------------------------
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ 1,832,013 $ 1,807,623 $ 8,388,148 $ 6,626,925 $ 7,296,484
Gross margin............................ 721,967 806,752 3,384,192 2,524,524 1,951,965
Income (loss) from operations........... 304,555 330,105 1,554,183 622,184 (1,213,897)
Net income (loss)(1).................... 330,898 326,483 1,793,425 784,029 (1,204,707)
Net income (loss) per common and common
equivalent share(1).................... $.09 $.09 $.48 $.21 $(.33)
Weighted average common and common
equivalent shares outstanding(2)....... 3,705,403 3,705,627 3,705,627 3,685,580 3,635,226
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 30, 1996
-----------------------------
ACTUAL AS ADJUSTED(3)
------------ ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................ $ 2,795,856 $ 9,695,856
Working capital.................................................................. 4,491,641 11,391,641
Total assets..................................................................... 5,396,406 12,296,406
Shareholders' equity............................................................. 4,655,666 11,555,666
</TABLE>
- ---------------------------
(1) Net income in 1994 includes an extraordinary item of $140,927, consisting of
a gain on extinguishment of debt. The income per common and common
equivalent share attributable to such extraordinary gain was $.04.
(2) See Note 1 to Financial Statements for an explanation of the determination
of weighted average common and common equivalent shares outstanding.
(3) As adjusted to reflect the sale of shares offered hereby, assuming a Price
to Public of $6.50 per share, and the application of the estimated net
proceeds therefrom of $6.9 million. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
4
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. IN EVALUATING THE COMPANY AND ITS BUSINESS, PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. ACTUAL RESULTS COULD DIFFER
SIGNIFICANTLY FROM THOSE PROJECTED IN THE FORWARD LOOKING STATEMENTS AS A
RESULT, IN PART, OF THE RISK FACTORS SET FORTH BELOW.
DEPENDENCE ON CERTAIN CUSTOMERS. The Company is heavily dependent on two
customers, Deluxe and Mitsubishi. Sales to these customers represented 41.7% and
17.5%, respectively, of 1995 revenues and 43.0% and 2.1%, respectively, of 1994
revenues. Deluxe is a provider of checks and related electronic-based financial
systems. As of March 30, 1996 Deluxe owned 51.3% of the Company's outstanding
Common Stock and two of its executive officers are members of the Company's
Board of Directors. Mitsubishi is a world wide supplier of equipment and
supplies to the printing industry and markets the Company's Model 3240
Platesetter under Mitsubishi's trade name. Loss of either of these customers or
a substantial reduction in their purchases would have a material adverse effect
on the Company. See "Business -- Overview," "Business -- Customers -- Revenues
from Deluxe" and "Certain Transactions."
DEPENDENCE ON CERTAIN SUPPLIERS. The Company is dependent on several key
single-source suppliers, including the supplier of its planned Adobe
PostScript-Registered Trademark- raster image processor, the raster image
processing software used in its ZAPrip-Registered Trademark- product and the
plate materials which the Company sells for the Model 1440. The Company has not
identified or qualified alternate suppliers for the materials now being obtained
from single sources. All of the Company's agreements with suppliers can be
canceled by either party under certain circumstances. Furthermore, there can be
no assurance that technical or other problems might not cause supply
interruptions. Such interruptions could seriously jeopardize the Company's
ability to provide products that are critical to the Company's business and
operations. See "Business--Suppliers."
DEPENDENCE ON LIMITED PRODUCT LINE. The Company's business is focused on
Computer-to-Plate products for the offset printing industry and its product line
is limited to the Model 3240 Platesetter, three variations of the Model 1440
Platesetter and Model 1440 consumable supplies. Thus the Company's ability to
generate revenue is dependent on a limited number of products in a single line
of business. A material decline in revenues from any of the Company's products
could have a material adverse effect on the Company which might not be offset by
revenues from other products. See "Business--Products."
COMPETITION. The Company faces considerable competition in its business.
Most of the Company's competitors and potential competitors are established
companies that have significantly greater financial, technical and marketing
resources than the Company. There can be no assurance that the Company's
competitors will not succeed in developing and marketing products which perform
better or are less expensive than those developed and marketed by the Company,
or that would render the Company's products and technology obsolete or
noncompetitive. There can be no assurance that competition might not adversely
affect the profitability or viability of the Company's supplies business. The
Company is highly dependent on its ability to develop new products with higher
performance and lower costs, and there can be no assurance these development
efforts will be successful. See "Business--Competition."
OPERATING RESULTS. The Company has experienced net income (loss) of
$330,898 for the three months ended March 30, 1996 and $1,793,425, $784,029,
($1,204,707), ($2,543,602) and $103,077 for the five years ended December 31,
1995, 1994, 1993, 1992 and 1991, respectively. As of March 30, 1996 the Company
had an accumulated deficit of $10,866,572. Although the Company has reported net
income in the last two years and the first quarter of 1996, no assurance can be
given that the Company's operations will continue to be profitable. See
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Financial Statements."
RAPID TECHNOLOGICAL AND MARKET CHANGES. Certain segments of the printing
industry are characterized by rapid technological change and the frequent
introduction of new products. The Company's future success
5
<PAGE>
will depend, in part, on its ability to develop and introduce new products that
take advantage of technological advances and to respond promptly to new customer
requirements. There can be no assurance that a shift to large-format presses or
higher-quality color printing might not render the Company's products and
technology obsolete. Technology such as xerographic printers, digital presses or
electronic publishing could replace offset printing, rendering the Company's
current products and technology obsolete. There can be no assurance that the
Company's resonant galvanometer technology will remain competitive with other
types of laser scanners. See "Business--Competition."
PROTECTION OF PROPRIETARY TECHNOLOGY. Printware seeks to protect its
proprietary technology by seeking patents or entering into confidentiality
agreements with employees and suppliers, depending on the circumstances. The
Company holds patents or is the licensee of patented technology covering certain
aspects of its Platesetters. There can be no assurance that such patent rights
will not be challenged, rendered unenforceable, invalidated or circumvented, or
that the rights granted thereunder or under licensing agreements will provide a
competitive advantage to the Company. Efforts to legally enforce patent rights
can involve substantial expense and may not be successful. Further, there can be
no assurance that others will not independently develop similar or superior
technologies or duplicate any technology developed by the Company, or that the
Company's technology will not infringe upon patents or other rights owned by
others. Thus the patents held by or licensed to the Company may not afford it
any meaningful competitive advantage. There can also be no assurance that the
Company's confidentiality agreements will provide meaningful protection of the
Company's proprietary information. The Company's inability to maintain its
proprietary rights could have a material adverse effect on its business,
financial condition and results of operations. See "Business--Proprietary
Rights."
DEPENDENCE ON KEY PERSONNEL; LACK OF EMPLOYMENT AGREEMENTS. The Company's
success depends in large part on its ability to attract and retain highly
qualified management, technical and marketing personnel. The Company has no
employment agreements with any of its management or other personnel and, except
for $300,000 of key person coverage on Dr. Baker, has no key person insurance
covering any such individuals. Competition for such personnel is generally
intense and there can be no assurance that the Company will be able to attract
and retain the personnel necessary for the development and operation of its
business. The loss of the services of key personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management."
CONCENTRATION OF OWNERSHIP. Following this Offering, Deluxe, the Company's
current principal shareholder, will continue to own approximately 32.9% of the
outstanding Common Stock. Two executive officers of Deluxe serve as directors of
the Company. Two of the Company's other directors, Donald Mager and Allen
Taylor, will also own after this Offering 8.1% and 7.1%, respectively, of the
outstanding Common Stock. Accordingly, Deluxe and Messrs. Mager and Taylor will
have the ability to control the election of the Company's Board of Directors and
most corporate actions. This concentration of ownership may also have the effect
of delaying or preventing a change in control of the Company. See "Principal and
Selling Shareholders."
NO PRIOR PUBLIC MARKET; POSSIBLE STOCK PRICE VOLATILITY. Prior to this
Offering, there has been no public market for the Common Stock and there can be
no assurance that an active trading market for the Common Stock will develop or
be sustained following this Offering. The initial public offering price will be
determined through negotiations between the Company and the Representative and
may bear no relationship to the price at which the Common Stock will trade
following this Offering. There can be no assurance that future market prices of
the Common Stock will not be lower than the initial offering price. In addition,
the stock market historically has experienced volatility which has affected the
market price of securities of many companies and which has sometimes been
unrelated to the operating performance of such companies. Announcements of new
products and services by the Company or its competitors, technological
innovations, developments with respect to patents or other proprietary rights,
changes in stock market analyst recommendations regarding the Company, other
technology companies or the Company's industry generally and other external
factors, as well as period-to-period fluctuations in the Company's financial
results, may have a significant effect on the market price of the Common Stock.
See "Underwriting."
6
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. Sales of Common Stock
in the public market after this Offering could adversely affect the market price
of the Common Stock. Unless purchased by an affiliate of the Company, the
1,600,000 shares of Common Stock to be sold in this Offering will be freely
transferable without restriction. Upon conclusion of this Offering, in addition
to the shares being sold hereby, 748,876 shares of Common Stock will be eligible
for sale in the public market without registration. Certain of the Company's
existing shareholders, holding 2,383,425 shares of Common Stock, have agreed
that they will not, without the consent of the Representative, sell or otherwise
dispose of any equity securities of the Company for a period of six months
following the effective date of this Offering. However, sale of substantial
amounts of shares in the public market following that period could adversely
affect the market price of the Company's Common Stock. In addition, certain
shareholders holding 109,961 shares of Common Stock have the right, subject to
certain conditions, to participate in future Company registrations and to cause
the Company to register certain Common Stock owned by them. See "Shares Eligible
For Future Sale."
POSSIBLE ISSUANCES OF PREFERRED STOCK; ANTI-TAKEOVER PROVISIONS. The Board
of Directors is authorized to issue up to 1,000,000 shares of Preferred Stock
and to fix the rights, preferences, privileges and restrictions, including
voting rights, of those shares without any further vote or action by the
Company's shareholders. The rights of the holders of the Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. Although there is no current
intention to do so, the issuance of Preferred Stock could have the effect of
delaying, deferring or preventing a change in control of the Company, which
could deprive the Company's shareholders of opportunities to sell their shares
of Common Stock at a premium. Additionally, the Company could adopt in the
future one or more additional anti-takeover measures, such as a shareholder
rights plan, without first seeking shareholder approval, which measures could
also make a change in control of the Company more difficult. The Company is also
subject to provisions of the Minnesota Business Corporation Act that make
certain business combinations or potential acquisitions of the Company more
difficult. See "Description of Capital Stock."
DILUTION. Purchasers of shares of Common Stock in this Offering will incur
immediate and substantial dilution of $4.11 per share. Investors may also
experience additional dilution as a result of the exercise of outstanding stock
options and warrants. See "Dilution" and "Shares Eligible for Future Sale."
NO DIVIDENDS. The Company has never paid any cash dividends on its Common
Stock and does not anticipate paying such dividends for the foreseeable future.
See "Dividend Policy."
7
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
1,200,000 shares of Common Stock offered by the Company hereby, after deducting
the estimated underwriting discount and offering expenses, are estimated to be
approximately $6.9 million ($8.0 million if the Underwriters' over-allotment
option is exercised in full) at an assumed offering price of $6.50 per share.
The Company will not receive any of the proceeds from the sale of Common Stock
by the Selling Shareholders. The Company intends to apply these proceeds
approximately as follows:
<TABLE>
<S> <C>
Product development..................................... $3,200,000
Sales and marketing..................................... 1,800,000
Working capital......................................... 1,900,000
---------
Total................................................. $6,900,000
---------
---------
</TABLE>
The amounts actually expended for each purpose may vary significantly
depending upon numerous factors, including the success of product development
efforts, market conditions and customer preferences. Pending application of the
net proceeds described above, the Company intends to invest the net proceeds of
this Offering in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain any future earnings for use in
developing its business and does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future.
CAPITALIZATION
The following table sets forth the Company's capitalization as of March 30,
1996, giving retroactive effect to the authorization of 1,000,000 shares of
Preferred Stock and as adjusted to give effect to the sale of the 1,200,000
shares of Common Stock being offered by the Company at an assumed offering price
of $6.50 per share and the application of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
MARCH 30, 1996
------------------------------
ACTUAL(1) AS ADJUSTED
-------------- --------------
<S> <C> <C>
Long-term debt.................................................................... $ -- $ --
Shareholders' equity:
Preferred Stock, no specified par value; 1,000,000 shares authorized; no shares
issued and outstanding......................................................... -- --
Common Stock, no par value, 15,000,000 shares authorized, 3,629,713 shares
issued and outstanding, and 4,829,713 shares issued and outstanding, as
adjusted(2).................................................................... 15,522,238 22,422,238
Accumulated deficit............................................................. (10,866,572) (10,866,572)
-------------- --------------
Total shareholders' equity.................................................... 4,655,666 11,555,666
-------------- --------------
Total capitalization........................................................ $ 4,655,666 $ 11,555,666
-------------- --------------
-------------- --------------
</TABLE>
- ---------------------------
(1) Derived from the Company's unaudited financial statements. See "Financial
Statements."
(2) Does not include, as of March 30, 1996 (i) 135,567 shares issuable upon
exercise of stock options held by executive officers and other employees of
the Company, (ii) 120,000 shares issuable upon exercise of the
Representative's Warrant, and (iii) 5,000 shares issuable upon exercise of
warrants held by Deluxe.
8
<PAGE>
DILUTION
The net tangible book value of the Company as of March 30, 1996 was
$4,622,060 or $1.27 per share. Net tangible book value per share represents the
total amount of the Company's tangible assets reduced by the amount of its total
liabilities and divided by the number of shares of Common Stock outstanding.
After giving effect to the sale by the Company of the 1,200,000 shares of Common
Stock offered hereby (after deducting the underwriting discount and estimated
offering expenses payable by the Company) at an initial public offering price of
$6.50 per share, and without taking into account any other changes in net
tangible book value after March 30, 1996, the pro forma net tangible book value
of the Company at March 30, 1996 would have been $11,522,060 or $2.39 per share.
This represents an immediate increase in net tangible book value of $1.12 per
share to the Company's existing shareholders and an immediate dilution in net
tangible book value of $4.11 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $ 6.50
Net tangible book value per share at March 30, 1996..... $ 1.27
Increase per share attributable to new investors........ 1.12
---------
Pro forma net tangible book value per share after this
Offering................................................... 2.39
---------
Dilution per share to new investors......................... $ 4.11
---------
---------
</TABLE>
The following table summarizes as of March 30, 1996, the differences in the
total consideration paid and the average price per share paid by the existing
shareholders and the new investors with respect to the 1,200,000 shares of
Common Stock to be issued by the Company. The calculations in this table with
respect to shares of Common Stock to be purchased by new investors in the
Offering reflect an assumed Price to Public of $6.50 per share (before deducting
the underwriting discount and estimated offering expenses payable by the
Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)............ 3,629,713 75.15% $ 15,522,238 66.56% $ 4.28
New investors(1).................... 1,200,000 24.85% 7,800,000 33.44% $ 6.50
---------- ----------- ------------- -----------
Total........................... 4,829,713 100.00% $ 23,322,238 100.00%
---------- ----------- ------------- -----------
---------- ----------- ------------- -----------
</TABLE>
- ---------------------------
(1) Sales by the Selling Shareholders in this Offering will reduce the number of
shares held by existing shareholders to 3,229,713 shares, or 66.9% of the
total number of shares of Common Stock to be outstanding after the Offering,
and will increase the number of shares held by new investors to 1,600,000
shares, or 33.1% of the total number of shares of Common Stock to be
outstanding after the Offering.
The computations in the tables above exclude, as of March 30, 1996, an
aggregate of 140,567 shares issuable upon exercise of outstanding stock options
and warrants at a weighted average exercise price of $3.00 per share and up to
120,000 shares of Common Stock issuable upon exercise of the Representative's
Warrant. See "Description of Capital Stock" and "Underwriting."
9
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data as of December 31 and for each of the
five years in the period ended December 31, 1995 has been derived from the
financial statements of the Company which have been audited by Deloitte & Touche
LLP, independent auditors, whose report on the financial statements as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 appears elsewhere in this Prospectus. The financial data as of
March 30, 1996 and for the three month periods ended March 30, 1996 and April 1,
1995 has been derived from the Company's unaudited financial statements. The
unaudited financial statements reflect, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of the Company's financial position as of these dates and
results of operations for such periods. The results of operations for any
interim period are not necessarily indicative of the results to be expected for
the entire year. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Financial Statements."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------- YEAR ENDED DECEMBER 31,
MARCH 30, APRIL 1, -------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from non affiliates........ $1,125,959 $1,005,934 $4,889,761 $3,775,958 $ 4,348,484 $ 8,059,260 $ 9,012,735
Revenues from affiliates(1)......... 706,054 801,689 3,498,387 2,850,967 2,948,000 2,600,734 5,272,575
---------- ---------- ---------- ---------- ----------- ----------- -----------
Total revenues...................... 1,832,013 1,807,623 8,388,148 6,626,925 7,296,484 10,659,994 14,285,310
Cost of revenues.................... 1,110,046 1,000,871 5,003,956 4,102,401 5,344,519 8,234,092 8,907,147
---------- ---------- ---------- ---------- ----------- ----------- -----------
Gross margin........................ 721,967 806,752 3,384,192 2,524,524 1,951,965 2,425,902 5,378,163
Research and development expenses... 178,941 205,778 757,131 956,807 1,314,355 1,913,431 1,829,219
Selling, general and administrative
expenses........................... 238,471 270,869 1,072,878 945,533 1,851,507 3,022,684 3,394,216
---------- ---------- ---------- ---------- ----------- ----------- -----------
Income (loss) from operations....... 304,555 330,105 1,554,183 622,184 (1,213,897) (2,510,213) 154,728
Other income (expense), net......... 32,843 8,378 261,742 22,918 10,299 (31,214) (47,651)
---------- ---------- ---------- ---------- ----------- ----------- -----------
Income (loss) before income taxes
and extraordinary income........... 337,398 338,483 1,815,925 645,102 (1,203,598) (2,541,427) 107,077
Income taxes........................ 6,500 12,000 22,500 2,000 1,109 2,175 4,000
---------- ---------- ---------- ---------- ----------- ----------- -----------
Income (loss) before extraordinary
item............................... 330,898 326,483 1,793,425 643,102 (1,204,707) (2,543,602) 103,077
Extraordinary income(2)............. -- -- -- 140,927 -- -- --
---------- ---------- ---------- ---------- ----------- ----------- -----------
Net income (loss)................... $ 330,898 $ 326,483 $1,793,425 $ 784,029 $(1,204,707) $(2,543,602) $ 103,077
---------- ---------- ---------- ---------- ----------- ----------- -----------
---------- ---------- ---------- ---------- ----------- ----------- -----------
Net income (loss) per common and
common equivalent share(3):
Income (loss) before extraordinary
item............................. $ .09 $ .09 $ .48 $ .17 $ (.33) $ (.84) $ .03
---------- ---------- ---------- ---------- ----------- ----------- -----------
---------- ---------- ---------- ---------- ----------- ----------- -----------
Net income (loss)(2).............. $ .09 $ .09 $ .48 $ .21 $ (.33) $ (.84) $ .03
---------- ---------- ---------- ---------- ----------- ----------- -----------
---------- ---------- ---------- ---------- ----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding(3)... 3,705,403 3,705,627 3,705,627 3,685,580 3,635,226 3,025,699 3,000,390
---------- ---------- ---------- ---------- ----------- ----------- -----------
---------- ---------- ---------- ---------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 30, APRIL 1, ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............. $2,795,856 $ 626,267 $2,568,852 $ 860,668 $1,288,821 $ 561,655 $ 98,551
Current assets......................... 5,232,381 3,464,348 5,087,328 3,255,959 4,371,149 4,826,294 5,620,695
Working capital........................ 4,491,641 2,643,532 4,151,595 2,292,562 1,441,554 2,544,209 2,173,719
Total assets........................... 5,396,406 3,669,342 5,252,401 3,476,928 4,633,747 5,180,631 6,097,071
Shareholders' equity................... 4,655,666 2,848,526 4,316,668 2,513,531 1,704,152 2,898,546 2,650,095
</TABLE>
- ---------------------------
(1) All but an immaterial portion of revenues from affiliates consists of
revenues from sales to Deluxe Corporation.
(2) During 1994 the Company recognized an extraordinary gain of $140,927
resulting from the extinguishment of debt. The income per common and common
equivalent share attributable to such extraordinary gain was $.04.
(3) See Note 1 to Financial Statements as to method of calculation.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Printware designs, builds and markets Computer-to-Plate systems which
provide faster, less expensive production of offset printing plates. The
Company's products, called Platesetters, make printing plates directly from
computer data, primarily for high-volume printing. In 1988 the Company began
selling its first Platesetter, the Model 1440 electrostatic Platesetter. The
Company also sold laser printers and film imagers. In 1993 Printware began to
focus exclusively on Computer-to-Plate products and phased out its manufacturing
of laser printers and film imagers. Phasing out of these lower margin products
resulted in a reduction in total revenues in 1993 and 1994. Revenues from laser
printers and film imagers declined from approximately $3.40 million in 1992 to
approximately $65,000 for 1995. The phase out of laser printers and film imagers
also resulted in an improvement in profitability in 1994 and 1995 due to the
higher margins provided by Computer-to-Plate products and lower research and
development and sales and marketing expenditures. Prototype shipments of a new
photographic Platesetter, the Model 3240, began in late 1993. First deliveries
of the production version were made in 1995.
Revenues are generated from the sale of Printware's Model 1440 and Model
3240 Platesetters, as well as from the sale of consumable supplies for the Model
1440. Sales of photographic Platesetters have increased rapidly since production
began in 1994. The Company anticipates that future sales of photographic
Platesetters will grow faster than sales of electrostatic Platesetters. There
can be no assurance, however, that this growth will continue.
Sales of supplies used in Model 1440 Platesetters comprised approximately
55% of the Company's 1995 revenues. In addition to equipment and supplies, the
Company separately charges for installation, training, service and spare parts.
Company technicians provide telephone support as well as on-site service.
Printware also trains its customers' technicians for self-sufficiency and
maintains a significant spare-parts inventory to support its installed base.
Revenues related to installation, training and support are recognized when the
services are performed. Printware has contracts with many of its Model 1440
customers to provide preventive and emergency maintenance. Such maintenance
contracts generally have a one-year term. Telephone and on-site support are
billed per incident for customers without support contracts. Printware provides
a 90-day warranty on its products, which may be extended to up to one year based
on additional customer supplies purchases.
The Company's largest customer, accounting for 41.7% and 43.0% of 1995 and
1994 revenues, is Deluxe, to whom the Company sells both equipment and supplies.
Revenues from sales to Deluxe constitute all but an immaterial portion of the
revenues from affiliates referred to in the Company's financial statements. The
breakdown of affiliate revenues in 1995 was approximately 10% from sales of
equipment, 76% from supplies and 14% from other sales (principally spares,
repairs and research and development). The breakdown of affiliate revenues in
1994 was approximately 26% from equipment, 60% from supplies and 14% from other
sales. Supplies revenues are more recurring and predictable than equipment
revenues, and the Company has entered into an agreement with Deluxe under which
Deluxe has agreed to purchase a minimum annual amount of paper printing plate
material for each of 1995, 1996 and 1997 at a fixed price. This agreement
resulted in an increase in the Company's supplies sales to Deluxe in 1995,
compared to prior years, and the Company does not anticipate any reduction in
revenues from supplies sold to Deluxe in 1996 and 1997. Revenues from equipment
sales to end-user customers tend to be more variable than revenues from
supplies. The Company has not sold any Platesetter equipment to Deluxe since
September 1995. Deluxe is under no contractual obligation to continue purchasing
equipment from the Company and the Company does not know of any plans for new
equipment orders by Deluxe. See "Certain Transactions."
Deluxe has recently announced a major consolidation program concerning its
entire operations and specifically the operations that utilize the paper
printing plate materials that it purchases from Printware. Deluxe has not
indicated to the Company that it intends to reduce the amount of printing which
uses the paper printing plate material supplied by the Company, and the Company
believes that Deluxe's consolidation program will not materially affect the
Company's revenues from paper printing plate materials to Deluxe until at least
the end of 1997. See "Business -- Customers -- Revenues from Deluxe" and
"Certain Transactions."
11
<PAGE>
Research and development efforts are focused on enhancing and improving
existing products and supplies and developing new Platesetter versions.
Management estimates that 87% of product (non-service) revenues in 1995 were
from products introduced within the prior three years. Future research and
development expenses are expected to increase as a result of the Company's
strategy to broaden its Platesetter line. There can be no assurance, however, of
attaining revenues from this effort.
Printware believes its selling expenses are relatively low compared to other
companies in similar industries. Printware's two largest customers, Deluxe and
Mitsubishi, are house accounts and no commissions are paid on those sales. Most
of Printware's selling expenses are related to the direct selling effort
associated with the Model 1440 Platesetter product line. These efforts are
currently aimed at high-volume printers in printing niches such as check
printing, social printing, technical/legal publishing, and newspapers, which the
Company has found can best utilize the product. The Company reaches these niches
with targeted marketing approaches such as trade shows, direct mailings and
sales calls. Consistent with this targeted approach, there is currently very
little advertising for the Model 1440. Sales and marketing expenses are expected
to increase considerably as the Company attempts to broaden its distribution
network.
Except for historical information, the matters discussed in this Prospectus
are forward looking statements which involve risks and uncertainties, including
but not limited to economic, competitive, and technological factors affecting
the Company's operations, markets, products, services, prices and other factors,
which may cause actual results to differ materially from the results discussed
in the forward looking statements.
RESULTS OF OPERATIONS
The following table summarizes the percentage of revenues for various items
in the Company's Statements of Operations for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------- YEAR ENDED DECEMBER 31,
MARCH 30, APRIL 1, ---------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from non affiliates........ 61.5% 55.6% 58.3% 57.0% 59.6% 75.6% 63.1%
Revenues from affiliates............ 38.5 44.4 41.7 43.0 40.4 24.4 36.9
------ ----------- ----------- ----------- ----------- ----------- -----------
Total revenues...................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues.................... 60.6 55.4 59.7 61.9 73.2 77.2 62.4
------ ----------- ----------- ----------- ----------- ----------- -----------
Gross margin........................ 39.4 44.6 40.3 38.1 26.8 22.8 37.6
Research and development expenses... 9.8 11.4 9.0 14.4 18.0 17.9 12.8
Selling, general and administrative
expenses........................... 13.0 15.0 12.8 14.3 25.4 28.4 23.8
------ ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from operations....... 16.6 18.2 18.5 9.4 (16.6) (23.5) 1.0
Other income (expense), net......... 1.8 0.5 3.1 0.3 0.1 (0.3) (0.3)
------ ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes
and extraordinary item............. 18.4 18.7 21.6 9.7 (16.5) (23.8) 0.7
Income taxes........................ 0.3 0.6 0.2 0.0 0.0 0.0 0.0
Extraordinary income................ -- -- -- 2.1 -- -- --
------ ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)................... 18.1% 18.1% 21.4% 11.8% (16.5)% (23.8)% 0.7%
------ ----------- ----------- ----------- ----------- ----------- -----------
------ ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
THREE MONTHS ENDED MARCH 30, 1996 COMPARED TO THREE MONTHS ENDED APRIL 1, 1995
REVENUES. First-quarter total revenues in 1996 were $1.83 million, an
increase of 1% over first-quarter 1995 total revenues of $1.81 million. This was
the sixth consecutive quarter in which total revenues increased from the
corresponding quarter in the previous year. Total revenues were up despite a
decrease in supplies sales. Supplies revenues declined to $900,000 in the first
quarter of 1996 from $1.06 million in the first quarter of 1995. This was due in
part to several customers who determined that they had excess supplies inventory
and cut back their purchases in the first quarter of 1996. Model 3240 revenues
for the 1996 period increased 53% compared to 1995, primarily due to an increase
in unit sales. Management expects the Model 3240 to continue to provide an
increasing portion of Printware's revenues in the long term. Model 1440 revenues
also increased in the first quarter of 1996. Revenues from non affiliates were
up $120,000 due primarily to strong Model 3240 sales. Revenues from affiliates
were down $96,000 in the first quarter of
12
<PAGE>
1996 due to unusually strong raster image processor sales in the first quarter
of 1995 which did not recur in 1996. Management expects that, because of
anticipated supplies revenues from Deluxe, anticipated total revenues from
affiliates through 1997 will remain at approximately current levels.
GROSS MARGIN. The Company's gross margin was $722,000 in the first quarter
of 1996 compared to $807,000 in the comparable 1995 period. Gross margin as a
percentage of revenues declined from 45% in the first quarter of 1995 to 39% in
the first quarter of 1996. The lower margin in 1996 was due primarily to a
change in the product mix towards the lower-margin Model 3240 Platesetter.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased to $179,000 in the first quarter of 1996 from $206,000 in the first
quarter of 1995. Although research and development labor expenses were up 10% in
1996, expenses associated with the Model 3240 declined as the product design was
completed.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased to $238,000 in the first quarter of 1996 from
$271,000 in the first quarter of 1995. Selling expenses decreased by
approximately $10,000 in the first quarter from 1995 to 1996, due primarily to
eliminating the remaining laser-printer salesperson subsequent to the first
quarter of 1995. Legal expenses in the 1996 period were approximately $15,000
less than in the 1995 period, primarily because of unusually high expenses in
the 1995 period associated with a dispute with A.B. Dick Company. The expenses
on that matter were ultimately netted against the arbitration award to the
Company, which was recognized as other income in the third quarter of 1995.
INTEREST, OTHER INCOME AND INCOME TAXES. Interest, other income and income
taxes were $26,000 in the 1996 period compared to $4,000 in 1995. The change was
primarily caused by an increase in net interest income to $33,000 from $8,000
due to higher cash balances (cash and short-term cash investments were $2.80
million at March 30, 1996, compared to $626,000 at April 1, 1995). Tax expense
decreased to $7,000 in 1996 from $12,000 in 1995. Tax expense is relatively
small because the Company has net operating loss carryforwards which are
available to offset against taxable income. The Company is subject to
alternative minimum taxes, however.
NET INCOME. Net income for the first quarter of 1996 was $331,000, or $.09
per common and common equivalent share, up from $326,000 or $.09 per share in
1995, as lower margins were more than offset by lower expenses and higher
interest income.
1995 COMPARED TO 1994
REVENUES. Total revenues were up 27% to $8.39 million in 1995 from $6.63
million in 1994. Model 3240 revenues increased 192% compared to 1994 as the
Model 3240 gained customer acceptance. Model 3240 revenues accounted for
approximately 20% of the Company's total revenue in 1995, up from 9% in 1994.
Laser printer revenues declined to $65,000 in 1995 from $491,000 in 1994 as the
Company continued to phase out that product line to focus on Computer-to-Plate
products. Non affiliate revenues increased by $1.11 million due to a sharp
increase in unit sales of the Model 3240 Platesetter line. Affiliate revenues
increased in 1995 over 1994 by $647,000 due largely to increased supplies sales.
GROSS MARGIN. The Company's gross margin increased 34% to $3.38 million in
1995 from $2.52 million in 1994, primarily as a result of increased revenues and
prices. Gross margin as a percentage of revenues improved slightly to 40% in
1995 from 38% in 1994. The basic Model 1440 list price was increased by
approximately 15% in 1995, and margins on Model 1440 supplies and service
increased slightly. The Model 1440 and supplies gross margin increases were
partially offset by a change in product mix towards the lower-margin Model 3240.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased to $757,000 in 1995 from $957,000 in 1994. Expenses associated with
the Model 3240 declined as the product design was completed. In 1995 the Company
also relied more on raster image processor software from third parties and
de-emphasized continuing development of its own raster image processor software.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 13% to $1.07 million in 1995 from $946,000 in
1994. Selling expenses decreased to $380,000 in 1995 from
13
<PAGE>
$447,000 in 1994 as the Company continued to focus on efficiently serving the
target markets for the Model 1440 Platesetter. In late 1994 the Company reduced
selling expenses by combining domestic, international and OEM sales functions.
General and administrative expenses remained at approximately 8% of revenues,
increasing to $693,000 in 1995 from $499,000 in 1994. In 1995 the Company made
investments to upgrade its computers, Internet link, information system
databases and voice mail. Employee profit-sharing also began in 1995.
INTEREST, OTHER INCOME AND INCOME TAXES. The Company had $69,000 of net
interest income in 1995, compared to $23,000 in 1994. The increase coincided
with the Company's cash position increasing significantly due to cash flow from
operations (cash and short-term cash investments increased to $2.57 million at
the end of 1995 from $861,000 at the end of 1994). Other income in 1995 was due
to a $334,000 arbitration award for A. B. Dick Company's 1994 order
cancellation. Out-of-pocket arbitration expenses of $142,000 were incurred,
resulting in a net gain of $192,000.
NET INCOME. The Company had net income of $1.79 million or $.48 per common
and common equivalent share in 1995. 1995 net income was 21% of revenue,
compared to 12% in 1994. The improvement in profitability came from significant
revenue growth in 1995 and lower operating expenses (operating expenses were 22%
of revenues in 1995 versus 29% in 1994).
For federal income tax purposes, the Company had net operating loss
carryforwards of approximately $10.5 million as of December 31, 1995. If not
used, these carryforwards will begin to expire in 2001. Under current tax law
certain changes in ownership resulting from the sale or issuance of stock may
limit the amount of net operating loss carryforwards which can be utilized on an
annual basis. Management does not believe that the Offering will result in a
change in ownership which will trigger that limitation.
1994 COMPARED TO 1993
REVENUES. Total revenues declined to $6.63 million in 1994 from $7.30
million in 1993. Non affiliate revenues declined $573,000, which was primarily
due to reduced sales of laser printers and film imagers caused by the Company's
shift to Computer-to-Plate products. The decline was partially offset by sales
of the Model 3240 Platesetter, which increased 275% from 1993 to account for
approximately 9% of 1994 revenues. Affiliate revenues declined slightly to $2.85
million in 1994 from $2.95 million in 1993 due to a decrease in supplies
revenues that was partially offset by an increase in equipment revenues.
GROSS MARGIN. Despite lower revenues, gross margin increased 30% to $2.52
million in 1994, from $1.95 million in 1993. Gross margin as a percentage of
revenues was 38% in 1994 versus 27% in 1993. The higher margin in 1994 was due
to lower costs, a deliberate move away from lower-margin laser printer and film
imager products and higher prices. Printware was able to raise the average
selling price of a basic Model 1440 Platesetter by 15% in 1994. Higher prices
were possible because models introduced in that year, such as the Model 1440
ZNX, had new features such as larger plate-size capability and digital machine
settings.
RESEARCH AND DEVELOPMENT. Research and development expenses decreased 27%
to $957,000 in 1994 from $1.31 million in 1993. This was primarily due to
completing substantial portions of the Model 3240 product development in 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by nearly 50% to $946,000 from $1.85 million.
As part of Printware's new mission to focus exclusively on Computer-to-Plate
products, direct-selling efforts were targeted at specific printing niches. As
part of that strategy, in late 1993 the Company reduced its sales force and
closed its field sales offices, centralizing its sales force in the Company's
St. Paul headquarters. These steps resulted in much lower selling expenses in
1994 than in the previous year. Selling expenses decreased 57% to $447,000 in
1994 from $1.05 million in 1993 (to 7% of revenues in 1994 from 14% in 1993).
General and administrative expenses decreased to $499,000 (8% of revenues) in
1994 from $801,000 (11% of revenues) in 1993. General and administrative
expenses were high in 1993 due to reserves recorded for legal disputes related
to events which occurred in prior years. These disputes were resolved in 1994.
INTEREST, OTHER INCOME AND INCOME TAXES. The Company had $23,000 in net
interest income in 1994, compared to $10,000 in 1993, as the Company was able to
repay its short-term debt in 1993 with cash flow
14
<PAGE>
from operations. Other income in 1994 came from a $141,000 extraordinary gain
from settlement of a debt agreement with Minnesota Technology, Inc. ("MTI"). The
Company issued 5,500 shares of Common Stock to MTI.
NET INCOME. The Company had net income of $784,000 (12% of revenues) in
1994, compared to a $1.20 million loss (17% of revenues) in 1993. The
improvement in profitability for 1994 came from lower operating expenses (29% of
revenues in 1994 versus 43% in 1993) and a higher gross margin (38% in 1994
versus 27% in 1993). Net income was $.21 per common and common equivalent share
in 1994, compared to a loss of $.33 per share in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Prior to becoming profitable in 1994, the Company financed its operations
through private placements of Common Stock, customer prepayments for merchandise
and short-term borrowings. Beginning in 1994, the Company was able to fulfill
prepayment obligations and meet its working capital and capital expenditure
requirements from cash flow from operations. During 1995, 1994 and 1993, the
Company generated (used) cash of $1.72 million, ($377,000), and $70,000,
respectively, from operating activities. During the first quarter of 1996, the
Company's operating activities generated cash flow of $241,000. Cash and
short-term cash investments were $2.80 million at March 30, 1996, compared to
$2.57 million at December 31, 1995 and $626,000 at April 1, 1995. The Company's
current ratio (current assets to current liabilities) improved to 7.1 at March
30, 1996, compared to 5.4 at December 31, 1995 and 4.2 at April 1, 1995.
Inventories were $1.62 million at March 30, 1996, compared to $1.73 million at
December 31, 1995 and $2.12 million at April 1, 1995, due to a continuing effort
to increase inventory turnover. The Company has recorded inventory reserves
approximating $550,000 at March 30, 1996 and December 31, 1995 and 1994 to
reduce the inventory to its estimated net realizable value. These reserves
result from the continuous modification and upgrading of the Company's products,
the need to provide repair parts for its installed base of equipment which are
no longer in current production and price erosion for electronic components.
Management estimates that the Company will need to continue to carry inventory
which may exceed its net realizable value in amounts approximating the
historical level of the reserve.
The Company's liquidity was such that management elected not to renew the
Company's $1 million bank line of credit, which expired September 1, 1995. The
Company purchased property and equipment of $15,000, $50,000 and $73,000 in
1995, 1994 and 1993, respectively. The Company purchased property and equipment
of $15,000 during the first quarter of 1996. The Company anticipates capital
expenditures of approximately $100,000 in the remainder of 1996. The Company has
no material non-cancelable commitments for the purchase of products or services
other than inventory purchases in the normal course of business. The Company
believes that existing cash balances and cash generated from operations will be
sufficient to finance its existing operations through at least December 31,
1997.
BACKLOG
The Company's backlog of customer orders was approximately $3.0 million as
of both March 30, 1996 and April 1, 1995. All backlog orders are expected to be
filled within one year. Backlog consists primarily of the portion of supplies on
long-term contracts expected to be shipped within one year and Platesetter
orders. The Platesetter backlog as of March 30, 1996 is expected to be filled by
September 30, 1996, although the Company expects additional orders to be placed
by that time.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("SFAS 123"). SFAS 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) application of
the fair value recognition provision of SFAS 123 to such arrangements. SFAS 123
is required to be adopted for reporting purposes by the Company in 1996.
Companies are permitted, however, to continue to apply APB opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
investment awarded. The Company will continue to apply APB opinion No. 25 to its
stock based compensation awards to employees and will disclose the required pro
forma effect on net income and earnings per share.
15
<PAGE>
BUSINESS
GENERAL
Printware designs, builds and markets "Computer-to-Plate" systems which are
used by the offset printing industry to create printing plates directly from
computer data. These systems replace the traditional process (see figure below)
of typesetting, paste-up, camera work and film processing to produce a printing
plate:
TRADITIONAL PLATEMAKING PROCESS
[CHART]
Chart: Drawing depicting Traditional Platemaking Process of typesetting,
paste-up, camera work and film processing to produce a printing plate.
Computer-to-Plate technology provides one-step platemaking (including text,
graphics and photographic halftones) directly from computer data, much as a
laser printer makes printed pages directly from computer data (see figure
below):
COMPUTER-TO-PLATE PROCESS
[CHART]
Chart: Drawing depicting Computer-to-Plate Process in which a plate is made
directly from computer data.
The key benefits of Computer-to-Plate technology are:
- Lower costs from savings in supplies and labor
- Faster turnaround times
- Fewer pieces of equipment
- Fewer environmental limitations on by-product disposal
Some of the Company's customers have found that Computer-to-Plate technology
can reduce their costs for some printing operations by up to 50%. The check
printing, social printing and envelope printing segments of the printing
industry have been early adopters of Computer-to-Plate technology, largely
because of higher volumes and early computerization.
16
<PAGE>
The key hardware element of a Computer-to-Plate system is called a
Platesetter, which produces the printing plate by imaging the computer data on
the physical plate material. The heart of Printware's Platesetters is a
high-resolution laser marker system, the key technology obtained from 3M in
1985. The system is based on a resonant galvanometer, which management believes
has certain performance advantages over conventional systems which use rotating
multifaceted mirrors. The Company's system uses a proprietary method where a
mirror mounted on a resonating torsion bar, in conjunction with
microprocessor-controlled electronics, precisely controls the laser raster scan.
The method was first used in Printware's laser printers, then later in its
Platesetters. In 1990 Printware's Model 1440 Platesetter received the InterTech
Technology Award for Innovative Excellence from the Graphic Arts Technical
Foundation. This award is reserved for products judged to have the potential for
a major impact in the industry. There can be no assurance that the Company's
resonant galvanometer technology will remain competitive with other types of
laser scanners. The Company is continually monitoring and evaluating advances in
relevant technologies, such as scanning mirrors and holographic systems, which
could provide cost or performance advantages.
Printware was organized in 1985 and began deliveries in 1987 of its first
product, a high resolution laser printer. In 1988 Printware began selling its
first Platesetter, the Model 1440 electrostatic Platesetter. Printware
subsequently expanded its product line with new Platesetter models, new laser
printers and filmsetters. In 1993, however, Printware began to focus exclusively
on Computer-to-Plate products and phased out its other product lines. This
resulted in reduced revenues in 1993 and 1994, but a significant improvement in
profitability. During this period Printware completed development of and began
to deliver a new photographic process (silver-halide) Platesetter, called the
Model 3240, to serve a broader range of users. The Model 3240 is marketed for
the Company by Mitsubishi under Mitsubishi's brand name.
INDUSTRY OVERVIEW
According to Printing Industries of America ("PIA"), a trade association,
there were approximately 52,400 printing firms in the United States in 1995. The
Company believes that most of the printing presses installed at these firms are
small format (18" wide or less), one and two color presses, which is the market
segment of the printing industry that the Company serves.
Printers in the United States are rapidly computerizing. Vantage Strategic
Marketing, a market research firm, estimates that 29% of print jobs now
originate electronically and that this will grow to 53% by the year 2000.
Although only a small percentage of printers now use Computer-to-Plate
technology, this is expected to grow rapidly. A 1995 poll by PIA of 6,000
printers in the United States and Canada indicated that approximately 6% were
using Computer-to-Plate technology. According to PIA, this percentage is
expected to grow to 33% by 1997. State Street Consultants, a consulting firm
which focuses on the graphic arts industry, surveyed 232 in-plant, commercial
and newspaper printers and found in 1995 that:
- 82% expect Computer-to-Plate technology to be widely accepted by the year
2000
- 80% expect to buy a Computer-to-Plate system eventually
- nearly 70% of newspapers expect to shift to Computer-to-Plate technology
Mills-Davis, a consulting firm, in a study commissioned by the Association
for Suppliers of Printing and Publishing Technologies ("NPES"), predicted that
because of competitive pressure on printers to increase efficiency and reduce
costs, "Direct-to-Plate will be a boom industry by 1997 and for the years that
follow." According to the NPES QUARTERLY ECONOMIC FORECAST for the fourth
quarter of 1995, much of the growth in imaging/prepress equipment shipments in
the next two years will stem from the purchase of computer-related equipment,
with only a minor portion attributed to gains in traditional prepress equipment.
A 1995 study by Professor Frank Romano of the Rochester Institute of Technology
estimates that Platesetter equipment sales will exceed $2 billion for the
six-year period between 1995 and the year 2000.
CUSTOMERS
OVERVIEW. The Company has sold over 300 Platesetters to date, which it
believes, based on trade journal reports, is more than any other single
competitor. Printware's customers include a number of leading
17
<PAGE>
printers, such as Deluxe, Pitney Bowes, Thomson Publishing, Liberty Check
Printers and Northrop-Grumman. Most of the Company's large customers have one or
two year contracts for service and supplies. Sales to Deluxe accounted for $3.50
million and $2.85 million of revenue in 1995 and 1994, respectively, which
constituted 41.7% and 43.0% of 1995 and 1994 revenue, respectively. Sales to
Mitsubishi, principally of the Model 3240 which it markets for the Company under
Mitsubishi's brand name, accounted for $1.46 million and $140,000 of revenue in
1995 and 1994, respectively, which constituted 17.5% and 2.1% of 1995 and 1994
revenue, respectively. The loss of Deluxe or Mitsubishi as a customer, or a
substantial reduction in their purchases, would have a material adverse effect
on the Company. The Company provides a majority of the Platesetter supplies used
by Deluxe under a multi-year contract that expires at the end of 1997. See
"Certain Transactions."
REVENUES FROM DELUXE. The Company sells both equipment and consumable
supplies to Deluxe. In 1994 the Company entered into a purchase agreement with
Deluxe under which Deluxe has agreed to purchase from the Company a minimum
annual amount of this plate material for each of 1995, 1996 and 1997 at a fixed
price. The 1994 agreement resulted in increased sales of paper plate material by
the Company to Deluxe in 1995, and the Company does not expect any reduction in
such revenues in 1996 and 1997. Deluxe also purchases paper printing plate
material for the Model 1440 from other suppliers.
During the period from 1991 to 1995 the Company sold to Deluxe various
Platesetters, film imagers and other equipment under certain development and
purchase order contracts. The Company has no current commitments from Deluxe
under these equipment contracts, except for an order to retrofit certain Deluxe
equipment with the results of a software research and development contract from
Deluxe which the Company is performing. See "Certain Transactions."
BUSINESS STRATEGY
Printware's strategic plan is to continue to focus on Computer-to-Plate
products and pursue these specific strategies:
COVER A BROAD RANGE OF MAINSTREAM PRINTING. In the past several years the
Company has focused on providing a broad Computer-to-Plate product line for
"mainstream" printing, which management believes currently accounts for most
printing. The Company has no plans to pursue "high-end" Platesetter business
geared toward magazine-quality color printing (above 2,400 dots per inch
resolution) or large presses over 18" wide.
CUSTOMER DRIVEN INNOVATION. The Company's product strategy is primarily
driven by customer requirements, rather than technology. The Company believes
that this strategy will allow it to bring products and services to the
marketplace with the best chance of success. The Company endeavors to have all
areas of the Company maintain a close relationship with current and prospective
customers.
INCREMENTAL INNOVATION FROM CORE PRODUCTS. Printware's philosophy is to
develop new products from modules and technologies that are already available,
either within Printware or from third parties. The Company believes that this
philosophy will allow the Company to broaden its product line without excessive
research and development expenses or inordinate technical risks.
MAINTAIN EXCEPTIONAL QUALITY. The Company believes that its customers
demand near-perfect quality, and that quality demands will increase in the
future. The Company maintains a detailed problem reporting system and devotes
considerable engineering resources to improving designs and promptly eliminating
problems. The Company has improved and broadened its incoming inspection and
vendor quality efforts. Especially in the area of supplies, the Company has
tightened its specifications in response to customer requirements and instituted
more rigorous testing programs. Management believes that these efforts have
resulted in significant quality improvements in recent years.
PRODUCTS
The Company makes two lines of Platesetters, the Model 3240 Platesetter line
for digital photographic (silver-halide) plates and the Model 1440 family of
digital electrostatic Platesetters. Photograhic Platesetters use silver-halide
based chemistry in which the plate is chemically developed and fixed after
exposure. Electrostatic Platesetters use a process where toner is fused onto a
plate in the image areas. The Company also sells service and proprietary
supplies (primarily digital plate material for the Model 1440 product line).
18
<PAGE>
MODEL 3240 PLATESETTER. This versatile product uses commodity silver-halide
plate material for a wide range of printing applications. The product is sold by
Mitsubishi under its brand name internationally and through several leading
domestic graphic arts dealers, giving it broad market coverage. The Model 3240
is approximately 3' wide by 4' high by 4' long, and consists of two integrated
modules: an imager module, where a laser "writes" the digital image on the
plate; and a processor module, where the plate is developed and fixed, similar
to conventional photography. It has a liquid-crystal operator panel to enter
machine settings and for checking machine status. The Model 3240 has input and
output cassettes for rolls of plate material. Imaged plates exit the machine
into a tray already dried, cut to size and press-ready.
MODEL 1440 PLATESETTER. This product line has three models: one for
economical paper-based plates; another for durable metal plates; and a third for
either paper or metal. The Model 1440 serves niche markets such as check
printing, social printing and envelope printing. It is sold by the Company's own
sales force, which has expertise in the specialized applications served by the
Model 1440. The Model 1440 is approximately 3' wide by 1 1/2' high by 2 1/2'
deep, and has liquid crystal operator panels to enter machine settings and for
checking machine status. The units have an area to load a roll of plate material
stock, or in the case of the metal plate version, a plate sheet feeder. Imaged
plates exit the machine into a tray or into optional post-processing modules.
The Company sells in-line plate handling modules for fully automated systems.
Optional equipment includes plate converters for paper plates, plate decoaters
for metal plates and plate sheet feeders for metal plates.
The Model 3240 resolution is 3,240 thousand dots per square inch (1,800 dots
per inch), which is suitable for high quality color and photographs. The Model
1440 resolution is 1,440 thousand dots per square inch (1,200 dpi), which is
suitable for text, graphics and medium-quality photographs. The imaging speed of
the Model 3240 is up to 36 inches per minute, and for the Model 1440 is 40
inches per minute. Based on independent surveys conducted by THE SEYBOLD REPORT
ON PUBLISHING SYSTEMS ("THE SEYBOLD REPORT"), a trade journal, in 1995 and
PrintCom Consulting Group in 1996, the Company believes that its products are
among the fastest Platesetters available.
End-user pricing is $85,000 to $100,000 for Model 3240 Platesetters and
$75,000 to $150,000 for Model 1440 Platesetters, depending on the specific model
and configuration. The Company also provides consulting services, software,
support and training for the Model 1440. The Company has been able to raise the
list prices of Model 1440 units by more than 50% since 1993 because of the
unique value it provides in certain applications.
RASTER IMAGE PROCESSORS (RIPS). Printware sells RIPs to connect
Platesetters to the customer's computer network and convert computer data to the
digital images which appear on the printing plate. The Company's RIPs are fully
compatible with the industry-standard PostScript language and most popular
networks. The Company has two RIP models, the economical ZipRip and the
high-speed ZAPrip.
SUPPLIES. Printware specifies, tests and markets supplies for Model 1440
Platesetters. These supplies consist mostly of digital laser sensitive plate
material used in the Platesetter. The Company also sells a paper-based plate
material for cost-sensitive applications and an aluminum-based plate material
for longer-run printing. Approximately 90% of the Company's supplies revenue is
from plate materials, but other supplies sold by the Company include developer
(toner), conversion solution, press fountain solution, dispersant, decoating
solution and plate gum.
The Company believes that its metal printing plates have unique
environmental advantages over other metal printing plates. Tests conducted by an
engineering consulting firm concluded that by-products from processing the
Company's plates can be disposed of without special treatment. Printware's paper
and metal printing plates are both recyclable and contain no heavy metals such
as silver. The Company knows of no other digital plates that can be recycled as
easily as its plates. The Company believes that the environmental advantages of
its plates will become increasingly important to printers.
Printware's current generation of paper plate material, called Platinum
grade, was introduced in 1995. This plate material uses a zinc-oxide coating and
a triple plastic-coated paper base stock. The Company believes that this
plasticized stock provides more stability and consistency than other paper
plates. The plates
19
<PAGE>
can be used for run lengths of up to 5,000 impressions, handling work which
would otherwise require more expensive metal or silver-halide plates. Platinum
plate material comes in 425-foot rolls in various widths up to 16 inches. The
plates are cut to exact length by the Platesetter. The Company believes that
paper-based printing plates used in Printware Platesetters are the lowest cost
digital plates available.
PRODUCT WARRANTY. The Company provides a 90-day limited warranty on its
Platesetters under which the Company will provide repair or replacement for
defects in materials or workmanship. On Platesetters sold by Mitsubishi, the
warranty covers 90 days from first installation, up to a maximum of 180 days
from shipment by the Company. Mitsubishi also has the right to purchase an
extended warranty for Model 3240 Platesetters it markets. For the Model 1440,
the Company offers parts under warranty if the customer purchases supplies
exclusively from Printware for the first year after the Model 1440 is purchased,
or if the customer enters into an extended term agreement to purchase supplies.
The Company provides a one-year limited warranty on plate materials and most
of the related chemical supplies for the Model 1440. This warranty provides
replacement of any defective material returned to the Company. To the extent the
Company experiences warranty claims related to the sale of consumable supplies,
the Company has generally received replacement supplies or a credit from the
Company's vendor. The warranty claims made to the Company to date have been
minimal for both Platesetters and supplies.
MARKETING
Printware has separate marketing strategies for its two different
Platesetter lines. The Model 3240 Platesetter is sold by Mitsubishi, Printware's
marketing partner, who sells the Model 3240 to customers directly or through
graphic arts dealers. The Company has retained the right to market the Model
3240 directly or through other marketing partners. The Model 1440 line is sold
directly by Printware's own sales force, which has expertise in the specialized
applications served by the Model 1440.
Through its original equipment manufacturer ("OEM") partnership with
Mitsubishi, the Company is enjoying much broader product exposure. Mitsubishi
began a significant advertising campaign in late 1994 to introduce the Model
3240 and explain its benefits. Advertisements have been placed in several trade
publications, including AMERICAN PRINTER, INPLANT GRAPHICS and PRINTING
IMPRESSIONS. In 1995 the Model 3240 was introduced at tradeshows in the U. S.,
Canada, Europe and Japan by Mitsubishi. Pitman Co., the largest graphic arts
dealer in the country, and other dealers are exhibiting and promoting the
product.
The Company believes that its OEM strategy for the Model 3240 allows
Mitsubishi to add value, such as brand awareness, promotion, distribution and
service. Mitsubishi also couples the sale of the Model 3240 to the sale of its
plate material supplies. The Company believes that Mitsubishi is the world's
leading supplier of photographic plate material. The Company has been satisfied
with the results of the Mitsubishi partnership, but there can be no assurance
that the relationship will continue or that the business level will continue to
grow. Currently the supplies marketed by Mitsubishi for the Model 3240 do not
materially affect the Company's sales of supplies for the Model 1440.
The Company's goal is to significantly expand distribution of its products
in order to reach a broader customer base. Management envisions this expansion
taking place gradually as the Computer-to-Plate market grows. The Company plans
to use a portion of the net proceeds of this Offering to expand its distribution
by hiring additional sales and marketing personnel, expanding advertising and
attending trade shows.
RESEARCH AND DEVELOPMENT
Printware has research and development programs underway or planned to
develop higher performance RIPs, faster Platesetters and lower-cost
Platesetters. The Company believes that these programs are necessary to maintain
its competitive advantage and that the technology to accomplish these programs
is already developed. The Company plans to continue to make use of outside
suppliers as part of these development efforts. No assurance can be given that
any of these programs will be successful in producing revenue for the Company.
HIGHER-PERFORMANCE RIPS. The Company is developing a next-generation raster
image processor using the current industry standard Adobe Level 2 PostScript
software interface. Products using this interface are
20
<PAGE>
intended to be available in 1996, and will allow Printware equipment to
integrate more easily with a wider range of computer and network systems. The
Company believes that offering the widely-accepted Adobe software interface will
improve the market acceptance of the Company's products. In addition, Printware
plans to improve the speed of its RIPs with higher-speed microprocessors and
other higher speed components.
FASTER PLATESETTERS. Based on independent surveys conducted by THE SEYBOLD
REPORT in 1995 and PrintCom Consulting Group in 1996, the Company believes that
its Platesetters are among the fastest in the industry, with a top speed of 40
inches per minute. The Company plans to maintain and extend its speed advantage
by developing a next generation of even faster Platesetters. Through changes in
the laser marker system, the Company believes it can increase the speed of its
Platesetters by up to 50%. If this can be accomplished, the Company believes it
will provide an important competitive advantage by helping the Company meet the
printing industry's ever-increasing productivity demands.
LOWER-COST PLATESETTERS. Printware plans to develop a Platesetter with an
end-user price in the $50,000 range, compared to $75,000 for Printware's current
lowest-priced model. Costs will be reduced by scaling down the maximum plate
width to approximately 13" and by eliminating certain features. The 13" width
would allow printing of up to two 8 1/2" by 11" pages simultaneously, and would
be compatible with a large number of small-format printing presses (sometimes
called duplicator presses). Management believes that such a product would allow
customers with lower plate volumes to justify a Platesetter purchase, thus
making it viable for smaller printing operations in segments such as business
forms and technical/legal publishing. Printware had completed the development of
such a product for a former OEM partner (A. B. Dick Company) in 1994. A. B. Dick
canceled its orders for the product, but the Company believes parts of that
design can be used in the new product. A current customer has expressed strong
interest in such a product, although pricing and other supply terms have not
been agreed to, and there is no assurance that an acceptable supply agreement
can be reached with the customer.
In addition to new products, the Company is committed to the continual
improvement of its existing products. Based on the results of rigorous quality
audits, the Company believes that Model 3240 product quality has improved
steadily since its introduction. The product meets the strenuous quality demands
of the world market and a number of Model 3240 units have been exported to
Japan. In 1996 the Company introduced an enhanced external design of the Model
3240, which is stronger and has a more rounded look.
In the long term (three to five years), the Company plans to develop more
highly automated digital printing systems built around Computer-to-Plate
technology. There can be no assurance that such a development effort will be
successful. The Company believes that there is and will continue to be
significant competition in this area.
COMPETITION
The growth in the Computer-to-Plate business has attracted considerable
competition. The Company's competitors and potential competitors are established
companies that have significantly greater financial, technical and marketing
resources than the Company. There can be no assurance that the Company's
competitors will not succeed in developing and marketing products which perform
better and are less expensive than the Company's products, or that will render
the Company's products and technology obsolete or noncompetitive in other ways.
The Company divides its competition into four categories: other platesetters;
film imagers; enhanced xerographic/laser printers; and supplies competitors.
OTHER PLATESETTERS. The Company believes, based on surveys reported in THE
SEYBOLD REPORT and by the PrintCom Consulting Group and others, that there are
at least 50 Platesetter models currently being marketed by more than 20
companies. THE SEYBOLD REPORT recently identified the four leaders as Printware,
Gerber Scientific, Creo Products and the Optronics division of Intergraph.
Another company, Presstek, a leader in digital presses, has recently introduced
Platesetters. THE SEYBOLD REPORT noted that: "...Printware has manufactured more
[Platesetters] than anyone else, giving it an enviable position in the market."
The Company believes that it has a head start over Platesetter competition,
although there can be no assurance the Company will be able to maintain that
advantage.
21
<PAGE>
All major competitors mentioned above use metal plates, and most of their
Platesetters are relatively expensive ($250,000 to $500,000), as they are geared
towards the relatively small market for high-end color printing. Creo Products
serves large printers, such as magazine publishers. Gerber Scientific
specializes in metal Platesetters, and Optronics focuses on craft-oriented
printing.
Printware's products are focused at mainstream, smaller presses and
mid-range quality, which management believes currently accounts for most
printing. The Company believes that this type of printing will continue for the
foreseeable future, although there can be no assurance that a shift to large
format presses or higher-quality color printing might not render the Company's
products obsolete. From independent industry surveys, the Company believes its
Platesetters are unmatched in cost-effectiveness and speed. Gerber Scientific
and Presstek have announced lower cost models, but the Company believes they are
still more expensive to buy and to operate than Printware's products. All four
major competitors use metal plates, which are much more expensive than the
Printware's economical paper plates. Presstek has introduced a nonmetallic
version of its plate, but the plate is still much more costly than Printware's
paper-based plates. Printware's latest Platesetter for paper-based plates, the
Model 1440 ZNX, costs $75,000, which the Company believes is less than most
competitive Platesetters. The Company also believes that Printware Platesetters
have the lowest variable platemaking cost of any digital method.
In addition to the metal Platesetter competition summarized above, the
Company also faces significant competition from other photographic Platesetters
which use non-metallic printing plates. This competition could particularly
affect the Model 3240 photographic Platesetter. Management believes the most
significant of these competitors include A. B. Dick Company, Eskofot
International and PrePress Systems. The Company believes that its advantages
over those products include higher speed, less plate waste and the reputation of
the Mitsubishi brand name.
FILM IMAGERS. Digital film imagers are used in the traditional multi-step
platemaking process being obviated by Platesetters. Several film imager
manufacturers are attempting to adapt film imagers to image plates directly.
Competitors in this category include the Agfa division of Bayer Corp.,
Linotype-Hell and ECRM Incorporated. From discussions with customers, the
Company believes that such "plate-enabled" film imagers represent a slow,
awkward approach, compared to the Company's Platesetters. The Company's systems
are fully daylight-safe (no darkrooms) and chemical processing steps are
contained, providing so-called "dry-to-dry" operation. The Company's
Platesetters are faster than most film imagers and, unlike film imagers, have
virtually no plate waste.
XEROGRAPHIC/LASER PRINTERS. Enhanced xerographic/laser printers can replace
offset printing in certain applications, but are currently limited to
lower-quality applications such as overseas check printing and low-quality
business forms. These devices also have a higher variable cost per impression
than Computer-to-Plate technology. Companies in this area include Check
Technology Corporation, Delphax Systems and Xerox Corporation. Management
believes that competitors in this area are making efforts to improve the quality
and reduce the cost of their systems, and there can be no assurance that systems
marketed by the Company will sustain their advantage.
SUPPLIES COMPETITION. Printware has competitors that sell paper plate
supplies for Model 1440 Platesetters. The Company is not aware of competition
for metal plates used in the Model 1440. The most significant competitive paper
plate material is made by a Japanese paper mill and sold through a U. S.
distributor. There have also been several less significant competitors in this
market from time to time. Printware has addressed the competitive threat with
lower prices where appropriate and a program to improve the quality and
consistency of its supplies. The Company believes that competitive materials are
inferior to Printware supplies in certain respects, such as strength and
dimensional stability, but not inferior in other respects. The Company also
believes that many of its customers would prefer to purchase their supplies from
Printware as the manufacturer of the equipment. The Company expects supplies
revenues to grow at a modest rate, but there can be no assurance that the
Company will be able to maintain its product advantage or that competition might
not adversely affect the profitability or viability of its supplies business.
PROPRIETARY RIGHTS
PATENTS AND TRADE SECRETS. Printware's policy is to attempt to protect its
technology by seeking patents, maintaining certain trade secrets and continuing
technological innovation. As of March 30, 1996, the
22
<PAGE>
Company had rights to 17 patents, consisting of 11 granted to Printware and six
licensed from 3M. The 3M patents expire between 2002 and 2004; the royalties
which the Company paid to 3M in 1995, 1994 and 1993 for licenses of these
patents were not material to the Company. The Company's own patents begin to
expire in 2004. There can be no assurance that such patent rights will not be
challenged, rendered unenforceable, invalidated or circumvented. Efforts to
enforce patent rights can involve substantial expense and may not be successful.
In addition to patents, the Company relies on trade secrets and other unpatented
proprietary technology. Printware seeks to protect its trade secrets and
proprietary know-how with confidentiality agreements with employees and
suppliers. There can be no assurance that the Company's patent portfolio will
provide a competitive advantage in the future, or that the Company's agreements
will adequately protect the Company's trade secrets.
PRODUCT SUPPLY AGREEMENTS. In 1995 Printware obtained the non-exclusive
right to use Adobe Systems' software interface for all of its Platesetters.
Adobe originated the printing industry standard PostScript language and is
viewed as controlling its future evolution. The Company entered into a
three-year development and license agreement with a licensee of Adobe to develop
software to utilize the Adobe software with the Model 3240 Platesetter and to
supply the combined software to Printware at defined prices. The Company also
has non-exclusive rights for the ZAPrip for fixed prices for an indefinite term,
fonts in the ZipRip under a current license amendment through 1997, and to the
plate processor module under a sale of technology and parts supply agreement.
The Company has the exclusive right to sell the proprietary plate materials made
by its suppliers. The Company has a supply agreement for paper plate material
with E.J. Gaisser, Inc. on a defined price basis and on an exclusive basis
subject to minimum annual volumes. The Company has a supply agreement for metal
plate material with Polychrome Corporation on a defined price and exclusive
basis. All of the product supply agreements to which the Company is a party can
be canceled by either party under certain circumstances. Cancellation of the
supply agreements for paper plate material or metal plate material could
seriously jeopardize the Company's ability to provide products that are critical
to the Company's revenues.
SUPPLIERS
The Company has a number of single source suppliers for materials that are
critical to production of its products. For the Model 1440 and Model 3240, these
single source suppliers provide spherical mirrors, galvanometer mirrors,
application specific integrated circuits and galvanometer torsion bar material,
all of which are supplied to the Company on a purchase order basis, and ZAPrip
dongles which are supplied under a supply agreement. For the supplies sold by
the Company for the Model 1440, the single source suppliers provide paper plate
material, metal plate material, paper plate toner and metal plate toner, all of
which are supplied to the Company on a purchase order basis. Any significant
interruption of supply from any of these vendors would have a material adverse
effect on the Company. The Company has not identified or qualified alternate
suppliers for the materials now being obtained from single sources.
MANUFACTURING AND FACILITIES
Printware's manufacturing operation consists of the assembly, integration,
testing and quality audits of equipment. The Company purchases all of its
supplies and many of the hardware components it uses from third-party vendors,
some of which are single-source vendors. Printware's principal manufacturing
areas include laser markers, transport mechanisms, electronics/RIPs and final
assembly/test. Printware makes extensive use of computer-aided design and
transmits most of its fabricated part drawings to its suppliers electronically.
The Company believes that this use of technology shortens turnaround time and
improves quality.
Printware's offices and manufacturing facility are located at 1270 Eagan
Industrial Road, St. Paul, Minnesota. The Company occupies 35,410 square feet
pursuant to a lease which expires July 31, 1998. Management believes that this
facility will be adequate for Printware's needs at least until the expiration of
the lease. The lease also has an option to extend for three additional years at
then-existing market rates. Monthly rent expense is currently $7,029, plus a pro
rata share of real estate taxes and common area maintenance.
23
<PAGE>
EMPLOYEES
As of March 30, 1996, Printware had 48 employees, including 44 full-time
employees and 4 part-time or contract employees. Of the 44 full-time employees,
17 were in manufacturing, 5 were in marketing, sales and customer service, 14
were in research and development and 8 were in general and administrative
functions. Management considers the future success of the Company to be
dependent in part upon its continued ability to maintain a highly-skilled
workforce and to attract, motivate and retain qualified employees. Accordingly,
Printware began an employee profit-sharing plan in 1995. The program provides
payments to each non-officer employee of up to 3% of salary, depending on the
Company's performance against quarterly profit goals. No Printware employees are
covered by collective bargaining agreements and the Company considers its
relationship with its employees to be good.
LEGAL PROCEEDINGS
The Company is involved in various legal actions in the normal course of
business. Management is of the opinion that the outcome of such actions will not
have a significant effect on the Company's financial position or its results of
operations.
24
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
March 30, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ----------------------------- --- ----------------------------------------------------------
<S> <C> <C>
Allen L. Taylor, Ph.D.(1)(2) 60 Co-chairman of the Board, Director
Donald V. Mager(2) 60 Co-chairman of the Board, Director
Daniel A. Baker, Ph.D 38 President, Chief Executive Officer and Director
Thomas W. Petschauer 56 Executive Vice President and Chief Financial Officer
Joseph F. Dayton 49 Senior Vice President
Brian D. Shiffman(1)(2) 56 Director, Secretary
Jerry K. Twogood(2) 55 Director
Charles M. Osborne(1) 42 Director
</TABLE>
- ---------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee
ALLEN L. TAYLOR, PH.D. has served as Co-chairman of the Board since February
1993 and prior to that time as Chairman of the Board beginning in May 1985. Dr.
Taylor is a co-founder of the Company but has never been an employee of the
Company. He has been an employee of 3M (a publicly-held diversified
manufacturer) for over 30 years and was instrumental in obtaining for the
Company in 1985 a license from 3M for the key galvanometer technology.
DONALD V. MAGER has served as Co-chairman of the Board since February 1993
and prior to that time was President, Chief Executive Officer and a director of
the Company since May 1985. Mr. Mager is a co-founder of the Company. Since
February 1993 Mr. Mager has been a part-time employee acting in a consulting
capacity and is no longer active in the day-to-day management of the Company.
Mr. Mager's employment by the Company will terminate on June 1, 1996.
Previously, he was employed by Sperry Corporation (a publicly-held manufacturer
of computer systems) and its predecessors for 30 years, most recently as
Director of New Product Ventures.
DANIEL A. BAKER, PH.D. has served as the Company's President and a member of
its Board of Directors since February 1993 and as Chief Executive Officer since
January 1995. Dr. Baker joined the Company in May 1990 as Vice President of
Engineering and was later appointed Vice President of Sales, Marketing and
Product Development. He has 20 years of experience in high-tech industry, and
personally holds 15 patents. His previous experience includes executive
positions at Minntech Corporation (a publicly-held manufacturer of medical and
industrial devices) and Percom Data Corporation (a privately-held manufacturer
of computer peripherals).
THOMAS W. PETSCHAUER has served as a Vice President of the Company since
June 1985 and was named Executive Vice President and Chief Financial Officer in
January 1995. Mr. Petschauer is a co-founder of the Company. He has over 30
years of technical, managerial and business experience in the computer and
peripheral field. Prior to joining Printware, he was Venture Executive at Sperry
Corporation, where he was employed for over 20 years.
JOSEPH F. DAYTON has served as a Vice President of the Company since October
1986 and was named Senior Vice President of Manufacturing and Customer Service
in January 1995. Prior to October 1986 he was employed by E. F. Johnson Company
(a publicly-held manufacturer of cellular radio systems), where he held
increasingly responsible executive positions in program management, quality and
manufacturing functions.
25
<PAGE>
BRIAN D. SHIFFMAN has served on the Board of Directors since the Company's
incorporation in May 1985. Mr. Shiffman has been Business Development Manager at
Minnesota Project Innovation, Inc. since 1991. Previously, Mr. Shiffman was Vice
President at the Minnesota Cooperation Office, as a loaned executive from
Control Data Corporation, and was instrumental to the formation of the Company.
Mr. Shiffman was employed at Control Data Corporation (a publicly-held computer
systems business) for over 20 years.
JERRY K. TWOGOOD has served on the Board of Directors since January 1987.
Mr. Twogood has been the Executive Vice President of Deluxe (a publicly-held
provider of checks and related electronic-based payment systems) since 1987 and
since November 1995 has been its President of Manufacturing. He has also been a
member of the Board of Directors of Deluxe since 1987, where he has been
employed since 1959. Deluxe owned 51.3% of the Company's outstanding Common
Stock as of March 30, 1996 and is one of the Company's major customers.
CHARLES M. OSBORNE joined the Company's Board of Directors in January 1989.
Mr. Osborne has been Deluxe's Chief Financial Officer since 1984 and Senior Vice
President since 1989. He has been employed by Deluxe since 1981. Previously, Mr.
Osborne was at Deloitte & Touche LLP, public accountants. In 1996 Mr. Osborne
completed a term as President of the Financial Stationers Association. He also
serves on the board of directors of Graco Corporation (a publicly-held paint
sprayer business) and of Computer Petroleum Corporation (a publicly-held
provider of market research to the petroleum industry).
In addition to the above executive officers and directors, the Company has
certain other employees who the Company believes are important to its
operations. These key employees are: RODNEY S. CERAR, age 48, who has been with
the Company since March 1992 and has been Director of Platesetter Engineering
since February 1993 and was previously employed by ADC Telecommunications (a
publicly-held manufacturer of telecommunications equipment) from February 1990
to November 1991 as Manager of Manufacturing; ALEXANDER K. KOSS, age 37, who
joined the Company in July 1985 and has been Director of Product Development
since August 1994; TIMOTHY S. MURPHY, age 32, who has been employed by the
Company since October 1987 and has been Director of Marketing and Sales since
August 1994; and CORDELL E. LOMEN, age 50, who has been the Company's Controller
since October 1986.
The Company's Articles of Incorporation provide that the Board of Directors
may consist of up to 11 members. Currently the Board of Directors has 6 members.
Each director is elected to hold office until the next annual meeting of
shareholders.
The Company has not paid any fees to members of its Board of Directors, with
the exception of Mr. Shiffman, who receives $750 per quarter for serving as
Secretary. Under the Company's 1996 Stock Plan, each of the non-employee
directors (except for Messrs. Osborne and Twogood) was automatically granted a
non-qualified stock option for 1,000 shares of Common Stock (at an exercise
price of $3.00 per share) on April 25, 1996 when the Plan was approved by
shareholders and will be automatically granted an option for an additional 1,000
shares (at an exercise price equal to the then fair market value of the Common
Stock) upon each election or re-election as a member of the Board of Directors
(see "Stock Plans" below).
There are no family relationships among any of the Company's directors and
executive officers.
BOARD OF DIRECTORS COMMITTEES
The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee consists of Messrs. Osborne, Shiffman and Taylor.
This committee will review the Company's accounting, auditing and reporting
practices, make recommendations concerning the work of the Company's independent
auditors and review the adequacy of internal controls. The Compensation
Committee consists of Messrs. Taylor, Shiffman, Twogood and Mager. This
committee is responsible for establishing salaries, bonuses and other
compensation for the Company's executive officers, and for the administration of
the 1996 Stock Plan and the Employee Stock Purchase Plan. See "Stock Plans"
below.
26
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the compensation earned for services rendered in
all capacities to the Company by the President and Chief Executive Officer and
the two other most highly compensated executive officers of the Company whose
salary and bonuses exceeded $100,000 for the year ended December 31, 1995 (the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE FOR 1995
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ----------------------
------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
- ---------------------------------------- -------- ------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Baker $110,000 $44,814 $ 0 $ 7,500(1) 11,203(2) $1,413(3)
President and CEO
Thomas W. Petschauer 95,000 38,703 0 0 9,675(2) 1,226(3)
Executive Vice President and CFO
Joseph F. Dayton 83,000 33,814 0 0 8,453(2) 956(3)
Senior Vice President
</TABLE>
- ---------------------------
(1) Represents the value of a restricted stock award of 2,500 shares approved
by the Board of Directors.
(2) Consists of Incentive Stock Options awarded under the Company's 1995 Bonus
Plan for executive officers (see "Executive Bonus Plan").
(3) Consists of matching contributions made under the Company's 401(k) Plan
(see "401(k) Profit Sharing Plan").
None of the executive officers and directors of the Company are parties to
any employment or severance agreements, except for a Change in Control Severance
Agreement with Dr. Baker. This agreement provides that in the event of a change
in control of the Company followed by termination of Dr. Baker's employment
within one year thereafter, he will generally receive a lump sum severance
payment equivalent to two years of compensation.
The following table summarizes option grants in 1995 to each of the Named
Executive Officers:
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
INDIVIDUAL GRANTS STOCK PRICE
---------------------------------------------------------------------------- APPRECIATION FOR
NUMBER OF SECURITIES PERCENTAGE OF TOTAL EXERCISE OR OPTION TERM
UNDERLYING OPTIONS OPTIONS GRANTED BASE PRICE EXPIRATION --------------------
GRANTED EMPLOYEES IN 1995 PER SHARE DATE 5%(1) 10%(1)
----------------------- --------------------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Daniel A Baker(2).......... 8,000 34.4% $ 3.00 Jan. 13, 2005 $ 15,093 $ 38,250
Thomas W. Petschauer(2).... 7,000 30.0 3.00 Jan. 13, 2005 13,207 33,469
Joseph F. Dayton(2)........ 6,250 26.9 3.00 Jan. 13, 2005 11,792 29,883
</TABLE>
- ---------------------------
(1) Represents the potential net realizable value of each grant of options
assuming that the market price of the underlying Common Stock appreciates
in value from its fair market value on the date of grant to the end of the
option term at the indicated annual rates. As determined by the Company's
Board of Directors, the fair market value of the Common Stock on the date
of grant of the options described in the table was $3.00 per share.
(2) The options were granted under the 1986 Incentive Stock Option Plan and are
currently 100% vested.
27
<PAGE>
The following table summarizes the value of options held at December 31,
1995 by the Named Executive Officers. There were no options exercised by the
Named Executive Officers during 1995.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
- ---------------------------------------------------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Daniel A. Baker..................................... 18,750 11,203 $ 65,625 $ 39,211
Thomas W. Petschauer................................ 22,125 9,675 77,438 33,863
Joseph F. Dayton.................................... 25,700 8,453 89,950 29,586
</TABLE>
- ---------------------------
(1) The amounts set forth represent the difference between the assumed Price to
Public of $6.50 per share and the exercise price of the options, multiplied
by the applicable number of shares underlying the options.
(2) The unexercisable options were granted in January 1996 for 1995
performance.
STOCK PLANS
1996 STOCK PLAN
The shareholders approved the Company's 1996 Stock Plan (the "Plan") on
April 25, 1996. The Plan is administered by the Compensation Committee of the
Board of Directors and expires on April 25, 2006. The Plan provides for the
grant of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), to employees of the
Company and non-qualified stock options and restricted stock awards to
employees, consultants and directors of the Company. Options and awards of
restricted stock for up to 500,000 shares of Common Stock are authorized under
the Plan. The Compensation Committee has broad discretion to prescribe
conditions (such as the completion of a period of employment with the Company
following the grant of an option to an employee) to be satisfied before an
option becomes exercisable. The Plan also provides for the automatic grant of a
non-qualified stock option for 1,000 shares at 100% of the fair market value,
fully vested upon grant, exercisable for five years, to each non-employee
director upon adoption of the Plan and upon each election or re-election as a
member of the Board of Directors.
The Company's 1986 Incentive Stock Option Plan and the Company's original
Incentive Stock Option Plan have been utilized to grant all of the Company's
options through March 30, 1996. The original plan expired in June 1995. Although
the 1986 Incentive Stock Option Plan will not terminate until October 1996, the
Company decided not to grant any additional options under this plan after March
30, 1996.
1996 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan")
was adopted on April 25, 1996 and provides for the issuance of up to 100,000
shares of Common Stock. The Stock Purchase Plan is administered by the
Compensation Committee of the Board of Directors. With certain exceptions, all
employees of the Company who have been employed by the Company for at least six
months and who are employed at least 20 hours per week and at least five months
per year, including officers and directors who are employees, are eligible to
participate in the Stock Purchase Plan. The Stock Purchase Plan consists of
periodic offerings, with the first such offering planned to begin on April 1,
1997. Each offering under the Stock Purchase Plan will be for a period
determined by the Compensation Committee of the Board of Directors, but not to
exceed 27 months. An employee may elect to have up to a maximum of 10% deducted
from his or her regular salary for the purpose of purchasing shares under the
Stock Purchase Plan. The price at which the employee's shares are purchased is
the lower of (a) 85% of the closing price of the Common Stock on the day that
the offering commences or (b) 85% of the closing price of the Common Stock on
the day that the offering terminates. No shares have been issued under the Stock
Purchase Plan.
28
<PAGE>
401(K) PROFIT SHARING PLAN
The Company's 401(k) Profit Sharing Plan (the "401(k) Plan") became
effective August 1, 1994. The 401(k) Plan is intended to qualify under Section
401(k) of the Code. All employees employed by the Company in the United States
for at least 30 hours per week are eligible to participate in the 401(k) Plan as
of the next calendar quarter following one year after date of hire by the
Company. Each eligible employee may contribute to the 401(k) Plan, through
payroll deductions, up to 15% of his or her salary, subject to statutory
limitations. The 401(k) Plan permits, but does not require, additional
contributions to the 401(k) Plan by the Company of up to 2% of the compensation
paid by the Company to each employee in the previous calendar quarter. The
Company's contributions are made at the discretion of the Board of Directors,
within the limits of the 401(k) Plan. The Company has made a contribution of 1%
of the compensation of each participating employee each quarter since the
adoption of the 401(k) Plan. Under Section 401(k) of the Code, contributions by
employees or by the Company to the 401(k) Plan and income earned on plan
contributions are not taxable to employees until withdrawn from the 401(k) Plan.
Contributions by the Company, if any, will be deductible by the Company when
made.
EXECUTIVE BONUS PLAN
The Compensation Committee authorizes and approves an executive officer
bonus plan ("Bonus Plan") near the beginning of each year based on the Company's
financial plan for the year and based on its view of the overall compensation of
the executive officers. For 1996 the Bonus Plan provides for a formula-
determined cash payment of up to 52% of the base salary of each of the executive
officers based on the overall revenues and profit of the Company in 1996. The
Compensation Committee also reserves the right to make additions to the awarded
bonuses based on additional subjective measures of executive officer performance
and achievement. In addition, each executive officer will receive a grant of an
Incentive Stock Option for a number of shares of Common Stock determined by
dividing by four the number of dollars of Bonus Plan cash payment to each
officer. These Incentive Stock Options will be exercisable at the fair market
value of the Common Stock on the date of grant, will be 100% vested after one
year and will be exercisable for nine years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of the current non-employee directors is entitled to receive
compensation in the form of cash for their services as directors. At present,
and during the year ended December 31, 1995, no director or executive officer of
the Company and no member of the Compensation Committee is, or was during the
year ended December 31, 1995, a director or compensation committee member of any
other business entity which had a director that sits on the Company's Board of
Directors or Compensation Committee.
29
<PAGE>
CERTAIN TRANSACTIONS
Deluxe owned 51.3% of the Company's outstanding Common Stock as of March 30,
1996 and two of its executive officers (Messrs. Osborne and Twogood) are members
of the Company's Board of Directors. From time to time over the last nine years,
the Company has had agreements with Deluxe to develop or deliver products,
supplies and services to Deluxe. Under some of these agreements the Company
received prepayments as a source of financing in exchange for providing
favorable pricing to Deluxe. The Company has recorded these prepayments as a
deferred revenue liability and no revenue was recognized until the Company
delivered the goods or services to Deluxe.
In February 1991 Deluxe ordered several units of a film imager version of
the Model 3240 and associated ZipRip raster image processors for a purchase
price and advance payment of $516,000. The Company offered favorable pricing to
Deluxe due to the Company's desire to receive financing from the advance payment
and the need for Deluxe to wait for completion of the development and subsequent
production of the units. A change to the product resulted in Deluxe paying an
additional $40,000 in November 1991. The Company delivered a portion of the
Model 3240 film imagers in 1993. In August 1994 Deluxe replaced its order with
another order for the Platesetter version of the Model 3240. The replacement
order was for a number of Model 3240 Platesetters, ZAPrips and a film imager
Model 3240, for an increase of $155,000 in the aggregate price. The Company
delivered the products for the replacement order in 1995.
In August 1993 the Company and Deluxe entered into a contract that called
for the Company to provide special equipment to Deluxe for $1.59 million.
Approximately $635,000 of the contract amount was paid as a down payment in
order to allow the Company to finance the procurement of components and
assemblies to ensure their availability for subsequent equipment production.
Deluxe later determined not to proceed with the transaction and paid the Company
an additional $45,000. As a result of the contract cancellation, the Company
wrote down the related inventory. The Company had no material gain or loss
resulting from the contract cancellation and settlement.
Effective in January 1995, the Company entered into a three year supply
contract with Deluxe to supply Deluxe with Model 1440 plate material. The
contract calls for Deluxe to purchase a fixed quantity of plate material each
year. In 1995 this contract produced revenues to the Company of between $2 and
$3 million. The Company believes this contract will produce similar revenues for
the Company in 1996 and 1997.
In February 1996, the Company entered into an $80,000 contract with Deluxe
under which the Company is performing software research and development work. In
April 1996 Deluxe placed a $102,000 purchase order for the Company to retrofit
certain Deluxe equipment to incorporate the results of this software research
and development work.
The Company believes that its agreements and transactions with Deluxe have
been on terms (taking into account advance payments and delayed delivery dates)
that are no less favorable to the Company than could have been obtained in arm's
length transactions with an unaffiliated party. The Company's policy with
respect to future transactions with affiliates is that where such transactions
are material, approval will be required by a majority of the disinterested
members of the Company's board of directors.
30
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 30, 1996 and as adjusted to
reflect the sale of the shares offered hereby by (i) each person known to the
Company to beneficially own more than five percent (5%) of Common Stock, (ii)
each director, (iii) each of the Named Executive Officers, (iv) all directors
and executive officers of the Company as a group and (v) each Selling
Shareholder. Except as otherwise indicated below, to the knowledge of the
Company, all shareholders have sole voting and investment power over the shares
beneficially owned, except to the extent authority is shared by spouses under
applicable law.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING SHARES TO OFFERING
----------------------- BE SOLD -----------------------
NAME NUMBER PERCENT IN OFFERING NUMBER PERCENT
- -------------------------------------------------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Deluxe Corporation(1) ............................ 1,862,290 51.31% 274,600 1,587,690 32.87%
P.O. Box 64235
St. Paul, MN 55164-0235
Donald V. Mager(2)(3) ............................ 454,862 12.53% 62,300 392,562 8.13%
c/o Printware, Inc.
1270 Eagan Industrial Rd.
St. Paul, MN 55121
Allen L. Taylor(3) ............................... 405,875 11.18% 62,300 343,575 7.11%
c/o Printware, Inc.
1270 Eagan Industrial Rd.
St. Paul, MN 55121
Thomas W. Petschauer(4)........................... 99,823 2.75% 0 99,823 2.07%
Daniel A. Baker(5)................................ 28,750 * 0 28,750 *
Joseph F. Dayton(6)............................... 25,800 * 0 25,800 *
Minnesota Technology, Inc......................... 5,500 * 800 4,700 *
Brian D. Shiffman................................. 500 * 0 500 *
Jerry K. Twogood(7)............................... 1,862,290 51.31% ** 1,587,690 32.87%
Charles M. Osborne(7)............................. 1,862,290 51.31% ** 1,587,690 32.87%
Directors and executive officers as a group (8
persons)(8)...................................... 2,877,900 79.29% 399,200 2,478,700 51.32%
</TABLE>
- ---------------------------
* Less than 1%
** Not applicable
(1) Includes 5,000 shares issuable upon the exercise of warrants exercisable
within 60 days of March 30, 1996. Deluxe is a major customer of the Company
and two of its officers are members of the Company's Board of Directors. See
"Business-- Customers" and "Management."
(2) Includes 18,700 shares issuable upon the exercise of options exercisable
within 60 days of March 30, 1996.
(3) Mr. Mager and Mr. Taylor are members of the Company's Board of Directors.
(4) Includes 22,125 shares issuable upon the exercise of options exercisable
within 60 days of March 30, 1996. The shares listed above for Mr. Petschauer
include 5,000 issued to his wife, as to which Mr. Petschauer disclaims
beneficial ownership.
(5) Includes 18,750 shares issuable upon the exercise of options exercisable
within 60 days of March 30, 1996.
(6) Includes 25,700 shares issuable upon the exercise of options exercisable
within 60 days of March 30, 1996.
(7) Shares indicated for Messrs. Twogood and Osborne consist entirely of shares
owned by Deluxe, as to which Messrs. Twogood and Osborne disclaim beneficial
ownership. They are officers of Deluxe and members of the Company's Board of
Directors.
(8) Includes 85,275 shares issuable upon the exercise of options exercisable
within 60 days of March 30, 1996, the shares owned by Deluxe and 5,000
shares issuable to Deluxe upon the exercise of its warrants exercisable
within 60 days of March 30, 1996.
31
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 15,000,000 shares of
Common Stock, no par value per share, and 1,000,000 shares of Preferred Stock.
The following summary of the terms and provisions of the Company's capital stock
does not purport to be complete and is qualified in its entirety by reference to
the Company's Articles of Incorporation and applicable law.
COMMON STOCK
On March 30, 1996, there were 3,629,713 shares of Common Stock outstanding
held by 209 shareholders of record. All shares of Common Stock have equal voting
rights and have one vote per share in all matters to be voted upon by
shareholders. Cumulative voting in the election of directors is not allowed. No
share of Common Stock is entitled to preference over any other share of Common
Stock, and each share of Common Stock is equal to any other share of Common
Stock in all respects. All of the outstanding shares of Common Stock are, and
the shares to be sold pursuant to this offering will be, fully paid and
nonassessable.
The shares of Common Stock have no preemptive or conversion rights, no
redemption or sinking fund provisions and are not liable for further call or
assessment. Subject to the rights of holders of the Preferred Stock, each share
of Common Stock is entitled to receive a return of paid-in capital and to
participate pro rata in any distribution of capital assets, whether voluntary or
involuntary, after creditors have been paid in full.
Subject to the rights of holders of the Preferred Stock, shareholders of
Common Stock are entitled to receive dividends when and as declared by the
Company's Board of Directors out of funds legally available thereof. Any such
dividends may be paid in cash, property or shares of Common Stock. The Company
has not paid any cash dividends since its inception and presently anticipates
that no dividends on its Common Stock will be declared in the foreseeable
future.
PREFERRED STOCK
There are no shares of Preferred Stock issued and outstanding. The Preferred
Stock is issuable by the Board of Directors from time to time in one or more
series without approval of the Company's shareholders. Each series will have a
distinctive designation or title as is fixed by the Board of Directors. Each
series of Preferred Stock will have such voting power (or no voting power),
preferences, rights, qualifications, limitations or restrictions as are adopted
by the Board of Directors prior to the issuance of the series, and would likely
have rights superior to the rights of Common Stock. The Company presently has no
plan to issue any Preferred Stock.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Bylaws and Minnesota law require the Company to indemnify any
director, officer, employee or agent of the Company who was or is a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, against certain liabilities and
expenses incurred in connection with the action, suit or proceeding, except
where such persons have not acted in good faith or did not reasonably believe
that the conduct was in the best interests of the Company.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers or other persons controlling the Company pursuant to the foregoing
provisions, the opinion of the Securities and Exchange Commission (the
"Commission") is that such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
ANTI-TAKEOVER PROVISIONS OF MINNESOTA BUSINESS CORPORATION ACT
Certain provisions of Minnesota law described below could have an
anti-takeover effect. These provisions are intended to provide management
flexibility to enhance the likelihood of continuity and stability in the
composition of the Company's Board of Directors and in the policies formulated
by the Board and to discourage an unsolicited takeover of the Company, if the
Board determines that such a takeover is not in
32
<PAGE>
the best interests of the Company and its shareholders. However, these
provisions could have the effect of discouraging certain attempts to acquire the
Company which could deprive the Company's shareholders of opportunities to sell
their shares of Common stock at prices higher than prevailing market prices.
Section 302A.671 of the Minnesota Business Corporation Act ("MBCA") provides
that, unless the acquisition of certain new percentages of voting control of the
Company (in excess of 20%, 33 1/3% or 50%) by an existing shareholder or other
person is approved by a majority of the disinterested shareholders of the
Company, the shares acquired above such new percentage level of voting control
will not be entitled to voting rights. The Company is required to hold a special
shareholders' meeting to vote on any such acquisition within 55 days after the
delivery to the Company by the acquiror of an information statement describing,
among other things, the acquiror and any plans of the acquiror to liquidate or
dissolve the Company and copies of definitive financing agreements for any
financing of the acquisition not to be provided by funds of the acquiror. If any
acquiror does not submit an information statement to the Company within ten days
after acquiring shares representing a new threshold percentage of voting control
of the Company, or if the disinterested shareholders vote not to approve such an
acquisition, the Company may redeem the shares so acquired by the acquiror at
their market value. Section 302A.671 generally does not apply to a cash offer to
purchase all shares of voting stock of the issuing corporation if such offer has
been approved by a majority vote of disinterested board members of the issuing
corporation.
Section 302A.673 of the MBCA restricts certain transactions between the
Company and a shareholder who becomes the beneficial holder of 10% or more of
the Company's outstanding voting stock (an "interested shareholder") unless a
majority of the disinterested directors of the Company have approved, prior to
the date on which the shareholder acquired a 10% interest, either the business
combination transaction suggested by such a shareholder or the acquisition of
shares that made such a shareholder a statutory interested shareholder. If such
prior approval is not obtained, the statute imposes a four-year prohibition from
the statutory interested shareholder's share acquisition date on mergers, sales
of substantial assets, loans, substantial issuances of stock and various other
transactions involving the Company and the statutory interested shareholder or
its affiliates.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar with respect to the Common Stock will be
American Securities Transfer, Incorporated of Denver, Colorado.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no market for the Common Stock of the
Company. Sales of substantial amounts of Common Stock of the Company in the
public market after restrictions lapse could adversely affect the prevailing
market price and the ability of the Company to raise equity capital in the
future.
Upon the completion of this Offering, the Company will have 4,829,713 shares
of Common Stock outstanding, assuming no exercise of currently outstanding
options or warrants. Of these shares, the 1,600,000 shares sold in this Offering
will be freely tradeable without restriction under the Securities Act, unless
held by "affiliates" of the Company, as that term is defined in Rule 144 under
the Securities Act. The remaining 3,229,713 shares of Common stock held by
existing stockholders were issued and sold by the Company in reliance on
exemptions from the registration requirements of the Securities Act. These
shares may be sold in the public market only if registered, or pursuant to an
exemption from registration such as Rule 144, 144(k) or 701 under the Securities
Act. Holders of an aggregate of 2,383,425 shares of Common Stock and holders of
options and warrants to purchase an additional 119,606 shares, have entered into
lock-up agreements under which they have agreed not to offer, sell or otherwise
dispose, or directly or indirectly cause or permit the offer, sale or other
disposition, of any Common Stock of the Company owned of record or beneficially
and of which such shareholder has the power to control the disposition for a
period of six months after the date of this Prospectus, without the prior
written consent of the Underwriter. The Company has entered into a similar
agreement, except that the Company may grant options and issue stock under its
current stock option plans and pursuant to other currently outstanding options.
33
<PAGE>
As of March 30, 1996, 135,567 shares were subject to outstanding options.
Following this Offering, the Company intends to file a Registration Statement on
Form S-8 covering shares issuable under the Company's Incentive Stock Option
Plan adopted in 1985, 1986 Incentive Stock Option Plan, 1996 Stock Plan and 1996
Employee Stock Purchase Plan, thus permitting the resale of such shares in the
public market without restrictions under the Securities Act after expiration of
the applicable lock-up agreements.
Upon the effective date of the Offering, 748,876 shares of Common Stock will
become eligible for sale in the public market pursuant to Rule 144(k). Beginning
90 days after the date of this Prospectus, 23,698 additional shares of Common
Stock (including 14,792 shares subject to outstanding vested options) will
become available for sale in the public market subject, in certain cases, to the
vesting requirements and volume and manner of sale limitations of Rule 144. Upon
expiration of the lock-up agreements, an additional 2,473,700 shares of Common
Stock (including 66,575 shares subject to outstanding vested options
and 5,000 shares subject to outstanding vested warrants) will become eligible
for immediate public resale, subject in some cases to vesting provisions and
volume limitations pursuant to Rule 144. The remaining 4,700 shares will become
eligible for public resale at various times over a period of less than two years
following the completion of this Offering, subject in some cases to vesting
provisions and volume limitations.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least two
years (including the holding period of any prior owner, except an affiliate) is
entitled to sell in "broker's transactions" or to market makers, within any
three-month period commencing 90 days after the date of this Prospectus, a
number of shares that does not exceed the greater of (i) one percent of the
number of shares of Common Stock then outstanding (approximately 48,297 shares
immediately after this Offering) or (ii) the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the required filing of
a Form 144 with respect to such sale. Sales under Rule 144 are generally subject
to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least three years, is entitled to sell such shares
without having to comply with the manner of sale, public information, volume
limitation or notice provisions of Rule 144. Under Rule 701 under the Securities
Act, persons who purchase shares upon exercise of options granted prior to the
effective date of this Offering are entitled to sell such shares 90 days after
the effective date of this Offering in reliance on Rule 144, without having to
comply with the holding period requirements of Rule 144 and, in the case of
non-affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144.
The Securities and Exchange Commission has recently proposed reducing the
initial Rule 144 holding period to one year and the Rule 144(k) holding period
to two years. There can be no assurance as to when or whether such rule changes
will be enacted. If enacted, such modification may have a material effect on the
time when shares of the Company's Common Stock become eligible for resale.
REGISTRATION RIGHTS
In connection with their acquisition of securities of the Company, two of
the Company's existing shareholders, 3M and Minnesota Technology, Inc., have
agreements with the Company under which these shareholders have the right to
have a total of 109,961 shares of Common Stock owned by them included in future
registration statements filed by the Company under the Securities Act. The
Company would bear most of the expense associated with including the additional
shares in such a registration.
34
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, each
Underwriter named below has severally agreed to purchase, and the Company and
the Selling Stockholders have agreed to sell to such Underwriters, the number of
shares of Common Stock set forth opposite the name of such Underwriter below, at
the Price to Public set forth on the cover page of this Prospectus, less the
underwriting discount.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------------------------------------------------------------------------------ ------------------
<S> <C>
R.J. Steichen & Company.............................................................
----------
Total............................................................................. 1,600,000
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the shares of the Common Stock offered hereby if any are
purchased.
The Company and the Selling Shareholders have been advised by the
Representative that the Underwriters propose to offer the shares of Common Stock
to the public at the Price to Public set forth on the cover page of this
Prospectus and to certain selected dealers at such Price to Public less usual
and customary concessions not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $.05 per
share to certain other securities dealers. Each of the concessions allowed will
be to members of the National Association of Securities Dealers, Inc. After the
initial public offering, the offering price and other selling terms may be
changed by the Underwriters.
The Company and the Selling Shareholders have granted to the Underwriters an
option, exercisable not later than 30 days after the date of this Prospectus, to
purchase up to an additional 180,000 shares of Common Stock from the Company,
and up to an additional 60,000 shares from the Selling Shareholders, at the
Price to Public less the underwriting discount set forth on the cover page of
this Prospectus. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of Common Stock offered hereby.
If purchased, the Underwriters will offer such additional shares on the same
terms as those on which the 1,600,000 shares are being offered.
The Company and the Selling Shareholders have agreed to pay, on a pro rata
basis, to the Representative a nonaccountable expense allowance equal to 2.0% of
the aggregate offering price of the shares offered hereby, including the shares
sold by the Selling Shareholders, or $ ($ if the over-allotment
option is exercised in full), of which $10,000 has been paid. Such allowance is
included in the expenses of the Offering set forth on the cover page of this
Prospectus.
The Company has agreed to sell to the Representative upon the closing of
this Offering, for nominal consideration, the Representative's Warrant to
purchase 120,000 shares of Common Stock at an exercise price per share equal to
120% of the Price to Public. The Representative's Warrant contains anti-dilution
provisions providing for appropriate adjustments upon the occurrence of certain
events and contains a one-time demand and certain "piggyback" registration
rights with respect to the shares of Common Stock issuable upon the exercise of
the Representative's Warrant. The Representative's Warrant will have a "cashless
exercise" feature entitling the holder to convert the Representative's Warrant
into shares of Common Stock. This provision allows the holder of the
Representative's Warrant to apply the difference
35
<PAGE>
between the exercise price of the Representative's Warrant and the higher fair
market value of the Common Stock underlying the Representative's Warrant to the
payment of the exercise price. The Representative's Warrant will be exercisable
commencing one year from the date of this Prospectus until five years after such
date. The Representative's Warrant is not transferable for a period of one year
after the effective date of the Offering, except for transfers by operation of
law, by will or pursuant to the laws of descent and distribution or to officers
of the Representative. Furthermore, the Representative's Warrant will not be
transferable absent an exemption from applicable state and federal securities
laws. Any profits realized upon the sale of the Representative's Warrant or the
Common Stock issuable upon exercise thereof may be deemed to constitute
additional underwriting compensation.
The Company, the Selling Shareholders and the Underwriters have agreed in
the Underwriting Agreement to indemnify each other or provide contribution with
respect to certain liabilities, including liabilities under the Securities Act
and liabilities arising from breaches of representations and warranties
contained in the Underwriting Agreement. Such indemnification is limited or
unavailable in certain circumstances, including where legally unavailable.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable.
Shareholders of the Company holding in the aggregate 2,383,425 shares of
Common Stock and holders of options and warrants to purchase an additional
119,606 shares have agreed not to offer, sell or otherwise dispose, or directly
or indirectly cause or permit the offer, sale or other disposition, of any
Common Stock of the Company owned of record or beneficially and of which such
shareholder has the power to control the disposition for a period of six months
after the date of this Prospectus without the prior consent of the
Representative. See "Shares Eligible for Future Sale."
The Underwriters have advised the Company that they do not intend to confirm
sales to any account over which any of them exercises discretionary authority.
Prior to this Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiation between the Company and the
Representative. Among the factors considered in such negotiations will be
prevailing market conditions, the results of operations of the Company in recent
periods, the market capitalizations and stages of development of other companies
which the Company and the Representative believe to be comparable to the
Company, estimates of the business potential of the Company, the present state
of the Company's development and other factors deemed relevant.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995 included in
this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota. Certain legal
matters relating to the Offering will be passed upon for the Underwriters by
Winthrop & Weinstine, P.A., Minneapolis, Minnesota.
36
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Common Stock, reference is made to such
Registration Statement and exhibits. Statements made in this Prospectus as to
the contents of any contract, agreement or other documents referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved. The
Registration Statement and exhibits may be inspected without charge and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West Madison, Suite
1400, Chicago, Illinois 60661; and 7 World Trade Center, New York, New York
10048. Copies of such material may be obtained at prescribed rates from the
Commission's Public Reference Section at 450 Fifth Street, N.W., Washington,
D.C. 20549.
37
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PRINTWARE, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................... F-2
Balance Sheets as of March 30, 1996 (unaudited) and December 31, 1995
and 1994............................................................. F-3
Statements of Operations for the three months ended March 30, 1996 and
April 1, 1995 (unaudited) and the years ended December 31, 1995, 1994
and 1993............................................................. F-4
Statements of Changes in Shareholders' Equity for the three months
ended March 30, 1996 (unaudited) and the years ended December 31,
1995, 1994 and 1993.................................................. F-5
Statements of Cash Flows for the three months ended March 30, 1996 and
April 1, 1995 (unaudited) and the years ended December 31, 1995, 1994
and 1993............................................................. F-6
Notes to Financial Statements for the three months ended March 30,
1996 and April 1, 1995 (unaudited) and the years ended December 31,
1995, 1994 and 1993.................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Shareholders of Printware, Inc.:
We have audited the accompanying balance sheets of Printware, Inc. (the
Company) as of December 31, 1995 and 1994 and the related statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Printware, Inc. at December 31, 1995 and
1994 and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
February 2, 1996
(April 25, 1996 as to the
first paragraph of Note 3)
F-2
<PAGE>
PRINTWARE, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
MARCH 30, ------------ ------------
1996
------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 2,795,856 $ 2,568,852 $ 860,668
Receivables from non affiliates (Note 2).................. 441,384 511,085 276,290
Receivables from affiliates (Note 10)..................... 301,710 262,655 231,652
Inventories (Notes 1 and 2)............................... 1,624,238 1,727,342 1,843,698
Prepaid expenses.......................................... 69,193 17,394 43,651
------------ ------------ ------------
Total current assets.................................... 5,232,381 5,087,328 3,255,959
PROPERTY AND EQUIPMENT, net of accumulated depreciation and
amortization (Notes 1 and 2)............................... 130,419 130,677 183,415
INTANGIBLE ASSETS, net of accumulated amortization (Notes 1
and 2)..................................................... 33,606 34,396 37,554
------------ ------------ ------------
$ 5,396,406 $ 5,252,401 $ 3,476,928
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 390,602 $ 436,852 $ 445,059
Accrued expenses (Notes 1 and 2).......................... 308,650 469,108 342,988
Deferred revenues (Note 7)................................ 41,488 29,773 175,350
------------ ------------ ------------
Total current liabilities............................... 740,740 935,733 963,397
COMMITMENTS AND CONTINGENCIES (Notes 4, 5, 7 and 11)
SHAREHOLDERS' EQUITY (Note 3):
Preferred Stock, no specified par value; 1,000,000 shares
authorized; none issued and outstanding.................. -- -- --
Common Stock, no par value, authorized 15,000,000 shares:
issued and outstanding 3,629,713 shares at March 30,
1996; 3,627,013 and 3,623,776 shares at December 31, 1995
and 1994, respectively................................... 15,522,238 15,514,138 15,504,426
Accumulated deficit....................................... (10,866,572) (11,197,470) (12,990,895)
------------ ------------ ------------
Total shareholders' equity.............................. 4,655,666 4,316,668 2,513,531
------------ ------------ ------------
$ 5,396,406 $ 5,252,401 $ 3,476,928
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
PRINTWARE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------- YEAR ENDED DECEMBER 31,
MARCH 30, APRIL 1, -----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES FROM NON AFFILIATES (Note 1, 7, and 8)............. $1,125,959 $1,005,934 $4,889,761 $3,775,958 $ 4,348,484
REVENUES FROM AFFILIATES (Note 10).......................... 706,054 801,689 3,498,387 2,850,967 2,948,000
---------- ---------- ---------- ---------- -----------
TOTAL REVENUES.............................................. 1,832,013 1,807,623 8,388,148 6,626,925 7,296,484
COST OF REVENUES............................................ 1,110,046 1,000,871 5,003,956 4,102,401 5,344,519
---------- ---------- ---------- ---------- -----------
Gross margin................................................ 721,967 806,752 3,384,192 2,524,524 1,951,965
PERIOD COSTS:
Research and development.................................. 178,941 205,778 757,131 956,807 1,314,355
Selling, general and administrative....................... 238,471 270,869 1,072,878 945,533 1,851,507
---------- ---------- ---------- ---------- -----------
Total................................................... 417,412 476,647 1,830,009 1,902,340 3,165,862
---------- ---------- ---------- ---------- -----------
INCOME (LOSS) FROM OPERATIONS............................... 304,555 330,105 1,554,183 622,184 (1,213,897)
OTHER INCOME (EXPENSE):
Net gain on arbitration award (Note 11)................... -- -- 192,335 -- --
Interest expense.......................................... (235) (1,250) (3,333) (4,457) (8,143)
Interest and other income................................. 33,078 9,628 72,740 27,375 18,442
---------- ---------- ---------- ---------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM.... 337,398 338,483 1,815,925 645,102 (1,203,598)
INCOME TAXES (Note 9)....................................... 6,500 12,000 22,500 2,000 1,109
---------- ---------- ---------- ---------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM..................... 330,898 326,483 1,793,425 643,102 (1,204,707)
EXTRAORDINARY ITEM -- GAIN ON EXTINGUISHMENT OF DEBT (Note
3)......................................................... -- -- -- 140,927 --
---------- ---------- ---------- ---------- -----------
NET INCOME (LOSS)........................................... $ 330,898 $ 326,483 $1,793,425 $ 784,029 $(1,204,707)
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
(Note 1):
Income (loss) before extraordinary item................... $ .09 $ .09 $ .48 $ .17 $ (.33)
Extraordinary item........................................ -- -- -- .04 --
---------- ---------- ---------- ---------- -----------
Net income (loss)......................................... $ .09 $ .09 $ .48 $ .21 $ (.33)
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING (Note 1)................................ 3,705,403 3,705,627 3,705,627 3,685,580 3,635,226
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
PRINTWARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 30, 1996 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------------- ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT DEFICIT EQUITY
---------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992.......................... 3,611,889 $ 15,468,763 $ (12,570,217) $ 2,898,546
Shares issued pursuant to exercise of stock options... 750 2,250 -- 2,250
Shares redeemed and retired at $3.00 per share........ (700) (2,100) -- (2,100)
Shares issued for services performed for the
Company.............................................. 3,387 10,163 -- 10,163
Net loss.............................................. -- -- (1,204,707) (1,204,707)
---------- ------------- -------------- -------------
BALANCE AT DECEMBER 31, 1993.......................... 3,615,326 15,479,076 (13,774,924) 1,704,152
Shares issued in connection with extinguishment of
debt................................................. 5,500 16,500 -- 16,500
Shares issued pursuant to exercise of stock options... 150 450 -- 450
Shares issued for services performed for the
Company.............................................. 2,800 8,400 -- 8,400
Net income............................................ -- -- 784,029 784,029
---------- ------------- -------------- -------------
BALANCE AT DECEMBER 31, 1994.......................... 3,623,776 15,504,426 (12,990,895) 2,513,531
Shares issued pursuant to exercise of stock options... 737 2,212 -- 2,212
Shares issued for services performed for the
Company.............................................. 2,500 7,500 -- 7,500
Net income............................................ -- -- 1,793,425 1,793,425
---------- ------------- -------------- -------------
BALANCE AT DECEMBER 31, 1995.......................... 3,627,013 15,514,138 (11,197,470) 4,316,668
Shares issued pursuant to exercise of stock options
(unaudited).......................................... 200 600 -- 600
Shares issued for services performed for the Company
(unaudited).......................................... 2,500 7,500 -- 7,500
Net income (unaudited)................................ -- -- 330,898 330,898
---------- ------------- -------------- -------------
BALANCE AT MARCH 30, 1996 (UNAUDITED)................. 3,629,713 $ 15,522,238 $ (10,866,572) $ 4,655,666
---------- ------------- -------------- -------------
---------- ------------- -------------- -------------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
PRINTWARE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------- YEARS ENDED DECEMBER 31,
MARCH 30, APRIL 1, ------------------------------------
1996 1995 1995 1994 1993
---------- --------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)......................................... $ 330,898 $ 326,483 $1,793,425 $ 784,029 $(1,204,707)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 16,097 20,432 71,271 92,813 190,217
Common Stock issued for services.......................... 7,500 7,500 7,500 8,400 10,163
Extraordinary item........................................ -- -- -- (140,927) --
Changes in operating assets and liabilities:
Receivables from non affiliates......................... 69,701 (156,636) (234,795) 98,149 535,864
Receivables from affiliates............................. (39,055) (9,524) (31,003) (31,652) 160,573
Inventories............................................. 103,104 (273,018) 116,356 636,099 405,332
Prepaid expenses........................................ (51,799) (3,612) 26,257 (15,559) 80,542
Accounts payable........................................ (46,250) 106,558 (8,207) (479,317) 56,946
Accrued expenses........................................ (160,458) (96,089) 126,120 (227,093) 221,916
Deferred revenues....................................... 11,715 (153,050) (145,577) (1,102,361) (387,064)
---------- --------- ---------- ----------- -----------
Net cash provided by (used in) operating activities... 241,453 (230,956) 1,721,347 (377,419) 69,782
---------- --------- ---------- ----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment....................... (15,049) (4,457) (15,375) (50,200) (72,771)
Increase in intangible assets............................. -- -- -- (984) (25,707)
---------- --------- ---------- ----------- -----------
Net cash used in investing activities................. (15,049) (4,457) (15,375) (51,184) (98,478)
---------- --------- ---------- ----------- -----------
FINANCING ACTIVITIES:
Advances on equipment and consumable sales................ -- -- -- -- 755,712
Proceeds from issuance of Common Stock.................... 600 1,012 2,212 450 2,250
Common Stock redeemed and retired......................... -- -- -- -- (2,100)
---------- --------- ---------- ----------- -----------
Net cash provided by financing activities............. 600 1,012 2,212 450 755,862
---------- --------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 227,004 (234,401) 1,708,184 (428,153) 727,166
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 2,568,852 860,668 860,668 1,288,821 561,655
---------- --------- ---------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $2,795,856 $ 626,267 $2,568,852 $ 860,668 $ 1,288,821
---------- --------- ---------- ----------- -----------
---------- --------- ---------- ----------- -----------
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid during the period for:
Interest................................................ $ 236 $ 1,250 $ 3,333 $ 4,457 $ 8,143
---------- --------- ---------- ----------- -----------
---------- --------- ---------- ----------- -----------
Income taxes............................................ $ 6,500 $ 12,000 $ 15,488 $ 2,000 $ 1,109
---------- --------- ---------- ----------- -----------
---------- --------- ---------- ----------- -----------
OTHER NON CASH ITEM:
Issuance of Common Stock for extinguishment of debt (Note
3)....................................................... -- -- -- $ 16,500 --
---------- --------- ---------- ----------- -----------
---------- --------- ---------- ----------- -----------
</TABLE>
See notes to financial statements.
F-6
<PAGE>
PRINTWARE, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 30, 1996 AND APRIL 1, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Printware, Inc. ("Printware" or the "Company") designs, builds and markets
"Computer-to-Plate" systems that are used by the offset printing industry to
create printing plates directly from computer data. These systems replace the
traditional process of typesetting, paste-up, camera work and processing film to
produce a printing plate.
INTERIM FINANCIAL STATEMENTS
The accompanying balance sheet as of March 30, 1996 and the statements of
operations and cash flows for the three months ended March 30, 1996 and April 1,
1995, the statement of shareholders' equity for the three months ended March 30,
1996 and the interim information as of and for the three months ended March 30,
1996 and April 1, 1995 appearing in the notes to financial statements are
unaudited. In the opinion of management, such unaudited financial statements
include all adjustments, consisting of only normal, recurring accruals,
necessary for a fair presentation thereof. The results of operations for any
interim period are not necessarily indicative of the results for the year.
REVENUE RECOGNITION
Revenue for equipment and supply sales is recognized at the time of shipment
to customers. Revenue from development projects and their related costs is
recognized as the work is performed. Revenue related to installation, training
and support is recognized when the services are performed. Revenue from
development projects, installation, training and support is less than 10% of
total revenues for the three months ended March 30, 1996 and April 1, 1995 and
the years ended December 31, 1995, 1994 and 1993.
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net income (loss) per common and common equivalent share is computed by
dividing net income (loss) by the weighted average number of shares of Common
Stock and dilutive Common Stock equivalents outstanding. The total weighted
average number of common and common equivalent shares outstanding has been
adjusted to give effect to the reverse stock split authorized by the Company's
shareholders effective April 25, 1996 (Note 3). Common Stock equivalents result
from dilutive stock options and warrants. Common equivalent shares are not
included in the per share calculations when the effect of their inclusion would
be antidilutive, except that, in accordance with Securities and Exchange
Commission requirements, common and common equivalent shares issued during the
12 months prior to the Company's proposed initial public offering have been
included in the calculation (using the treasury stock method based on an assumed
initial public offering price of $6.50 per share) as if they were outstanding
for all periods presented. The net income (loss) per common share will change if
the actual initial public offering price differs from the assumed initial public
offering price per share utilized in this calculation. Fully diluted earnings
(loss) per common share is substantially equivalent to primary earnings per
share and is therefore not separately presented.
CASH EQUIVALENTS
Cash equivalents consist primarily of investments in commercial paper and
certificate of deposits, which have original maturities of three months or less.
CREDIT RISK
The Company generally does not require collateral for its trade accounts
receivable. The Company manages credit risk by evaluating creditworthiness
regularly. Accounts receivable for which collectibility is not assured are
reserved for through establishment of an allowance for doubtful accounts.
Customer accounts considered by management to be uncollectible are written off.
F-7
<PAGE>
PRINTWARE, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 30, 1996 AND APRIL 1, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are valued at the lower of cost (determined on a first-in,
first-out basis) or market. The Company has recorded inventory valuation
reserves of $562,000 at March 30, 1996 and $545,000 and $516,000 at December 31,
1995 and 1994, respectively.
Inventories are periodically reviewed for obsolescence or surplus stock.
Items considered obsolete or surplus are written off or a valuation reserve is
established to write such inventories down to their net realizable value.
The Company is dependent on several key suppliers for plate material and
raster image processing software. All of the Company's agreements with these
suppliers can be canceled by either party under certain circumstances.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Office equipment, software,
machinery and equipment and tooling are depreciated on a straight-line basis
over five years. Motor vehicles are depreciated on a straight-line basis over
three years. Leasehold improvements are amortized on a straight-line basis over
the term of the lease.
IMPAIRMENT OF LONG-LIVED ASSETS
Management periodically reviews the carrying value of long-term assets for
potential impairment by comparing the carrying value of these assets to the
estimated undiscounted future cash flows expected to result from the use of
these assets. Should the sum of the related, expected future net cash flows be
less than the carrying value, an impairment loss would be recognized. An
impairment loss would be measured by the amount by which the carrying value of
the asset exceeds the fair value of the asset. To date, management has
determined that no impairment of these assets exists.
INTANGIBLE ASSETS
Intangible assets are recorded at cost and are being amortized on a
straight-line basis over the following lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Patents.......................................................... 17
License rights................................................... 2-5
</TABLE>
RESEARCH AND DEVELOPMENT EXPENDITURES
Research and development expenditures are charged to expense as incurred.
ACCOUNTING FOR WARRANTY COSTS
The Company records estimated future warranty costs when the equipment is
shipped to customers.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
PRINTWARE, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 30, 1996 AND APRIL 1, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL RISKS AND UNCERTAINTIES
In accordance with American Institute of Certified Public Accountants
Statement of Position No. 94-6, DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND
UNCERTAINTIES, the Company has disclosed in the financial statements certain
financial risks and uncertainties to which it is subject, including
concentration of sales to a limited number of customers, certain suppliers of
raw materials and other key components included in its manufactured equipment
and the use of estimates to review the carrying value of long-lived assets. The
nature of the Company's operations exposes the Company to certain business
risks. The market for "Computer-to-Plate" systems is highly competitive and
subject to rapid technological change and evolving industry standards that may
affect both the operations, operating results and financial condition of the
Company and its customers.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October, 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION (SFAS 123). SFAS 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
application of the fair value recognition provisions of SFAS 123 to such
arrangements. SFAS 123 is required to be adopted for reporting purposes by the
Company in 1996. Companies are permitted, however, to continue to apply APB
opinion No. 25, which recognizes compensation cost based on the intrinsic value
of the equity instrument awarded. The Company will continue to apply APB opinion
No. 25 to its stock based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share.
F-9
<PAGE>
PRINTWARE, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 30, 1996 AND APRIL 1, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 (CONTINUED)
2. DETAILS OF SELECTED BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 30, ----------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
RECEIVABLES FROM NON AFFILIATES:
Trade...................................... $ 463,855 $ 532,883 $ 296,811
Employees.................................. 2,442 3,115 1,017
Allowance for doubtful accounts............ (24,913) (24,913) (21,538)
---------- ---------- ----------
Total receivables from non affiliates.... $ 441,384 $ 511,085 $ 276,290
---------- ---------- ----------
---------- ---------- ----------
INVENTORIES:
Raw materials.............................. $ 687,200 $ 782,189 $ 860,885
Work-in-process............................ 153,292 165,246 109,701
Finished goods............................. 783,746 779,907 873,112
---------- ---------- ----------
Total inventories........................ $1,624,238 $1,727,342 $1,843,698
---------- ---------- ----------
---------- ---------- ----------
PROPERTY AND EQUIPMENT:
Office equipment........................... $ 400,061 $ 395,650 $ 386,697
Software................................... 98,685 94,547 94,154
Machinery and equipment.................... 232,406 225,906 219,876
Leasehold improvements..................... 74,762 74,762 74,763
Tooling and spares......................... 334,001 334,001 334,001
Motor vehicles............................. 10,063 10,063 10,063
---------- ---------- ----------
Total property and equipment............. 1,149,978 1,134,919 1,119,554
Less accumulated depreciation and
amortization.............................. 1,019,559 1,004,252 936,139
---------- ---------- ----------
Net property and equipment............... $ 130,419 $ 130,677 $ 183,415
---------- ---------- ----------
---------- ---------- ----------
INTANGIBLE ASSETS:
License rights............................. $ 560,020 $ 560,020 $ 560,020
Patents.................................... 53,701 53,701 53,701
---------- ---------- ----------
Total intangible assets.................. 613,721 613,721 613,721
Less accumulated amortization.............. 580,115 579,325 576,167
---------- ---------- ----------
Net intangible assets.................... $ 33,606 $ 34,396 $ 37,554
---------- ---------- ----------
---------- ---------- ----------
ACCRUED EXPENSES:
Accrued payroll and related................ $ 50,560 $ 77,339 $ 75,932
Accrued vacation and benefits.............. 127,927 126,479 102,750
Accrued professional services.............. 77,844 204,175 97,175
Accrued warranty reserve................... 31,965 33,038 29,310
Accrued income taxes....................... -- 7,012 --
Accrued other.............................. 20,354 21,065 37,821
---------- ---------- ----------
Total accrued expenses................... $ 308,650 $ 469,108 $ 342,988
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-10
<PAGE>
PRINTWARE, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 30, 1996 AND APRIL 1, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 (CONTINUED)
3. SHAREHOLDERS' EQUITY
On April 25, 1996, the Company's shareholders approved a one-for-four
reverse stock split, effective immediately. All references in the financial
statements to the number of shares, per share amounts, stock option plan data
and the statements of shareholders' equity have been restated to reflect the
split. On April 25, 1996 the Company's shareholders approved an amendment to the
Company's Articles of Incorporation, whereby the authorized stock of the Company
was stated as 15,000,000 shares of Common Stock, no par value and 1,000,000
shares of Preferred Stock, no specified par value. The Company's Board of
Directors may designate any series and fix any relative rights and preferences
of the Preferred Stock. The authorized shares have been restated in the
financial statements to reflect the impact of this amendment. No shares of
Preferred Stock are issued and outstanding.
During the three months ended March 30, 1996 and the years ended December
31, 1995, 1994 and 1993, certain employees exercised their options and purchased
a total of 200, 737, 150 and 750 shares of Common Stock, respectively, at $3.00
per share.
The Company also issued 2,500, 2,500, 2,800 and 3,387 shares of Common Stock
valued at $7,500, $7,500, $8,400 and $10,163 in consideration for services
rendered during the three months ended March 30, 1996 and the years ended
December 31, 1995, 1994 and 1993, respectively.
During 1994, the Company extinguished debt of $157,427 through the issuance
of 5,500 shares of the Company's Common Stock valued at $16,500 which resulted
in an extraordinary gain of $140,927. The repurchase of the debt canceled the
Company's obligation under a research agreement with a governmental agency.
Common Stock values were based on management's estimates of the fair value
of the Company's Common Stock.
STOCK OPTIONS
On April 25, 1996 the Company's shareholders approved a new stock option
plan (the 1996 Stock Plan) which provides for the granting of options and
restricted stock to certain officers, employees, directors and consultants to
purchase up to 500,000 shares of Common Stock. On April 25, 1996, the Company
granted options to purchase 900 shares of the Company's Common Stock under this
plan to certain employees. The options become exercisable 33 1/3% per year for
three years. The exercise price is $3.00 per share. The options expire six years
after the date of grant. The 1996 Stock Plan also provides for the automatic
grant of an option for 1,000 shares of the Company's Common Stock, exercisable
for a period of five years, to each non-employee director, upon the adoption of
the 1996 Stock Plan and upon the election or re-election as a member of the
Board of Directors. Such Board of Directors options will be issued with an
exercise price equal to the fair market value of the Common Stock on the date
the option is granted. On April 25, 1996, options to purchase 2,000 shares of
Common Stock were granted under this plan with an exercise price of $3.00 per
share.
The Company's prior incentive stock option plans provided that stock options
to purchase an aggregate of 375,000 shares of Common Stock may be granted to
certain officers and employees. The exercise price could not be less than 100%
of the fair market value of the Common Stock on the date the option was granted.
No additional options under the Company's prior plans will be granted.
All options issued after August 1992 and before March 30, 1996 are
exercisable 33 1/3% per year for three years or 100% one year after grant. All
of these options expire either five, six or ten years from the date of grant.
F-11
<PAGE>
PRINTWARE, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 30, 1996 AND APRIL 1, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 (CONTINUED)
3. SHAREHOLDERS' EQUITY (CONTINUED)
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PRICE PER EXERCISE
EMPLOYEE STOCK OPTIONS SHARES SHARE PRICE
- --------------------------------------------- --------- ------------ ---------
<S> <C> <C> <C>
Balance at December 31, 1992................. 116,028 $3.00 $ 348,084
Granted.................................... 3,175 3.00 9,525
Canceled................................... (23,293) 3.00 (69,879)
Exercised.................................. (750) 3.00 (2,250)
--------- ---------
Balance at December 31, 1993................. 95,160 3.00 285,480
Granted.................................... 1,912 3.00 5,736
Canceled................................... (14,516) 3.00 (43,548)
Exercised.................................. (150) 3.00 (450)
--------- ---------
Balance at December 31, 1994................. 82,406 3.00 247,218
Granted.................................... 23,087 3.00 69,261
Canceled................................... (1,784) 3.00 (5,352)
Exercised.................................. (737) 3.00 (2,211)
--------- ---------
Balance at December 31, 1995................. 102,972 3.00 308,916
Granted.................................... 33,382 3.00 100,146
Canceled................................... (587) 3.00 (1,761)
Exercised.................................. (200) 3.00 (600)
--------- ---------
Balance at March 30, 1996.................... 135,567 $3.00 $ 406,701
--------- ---------
--------- ---------
</TABLE>
At March 30, 1996 and December 31, 1995, there were 100,067 and 79,548
options exercisable at $3.00 per share, respectively.
WARRANTS
Warrant activity is summarized as follows:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PRICE PER EXERCISE
SHARES SHARE PRICE
--------- ------------- -----------
<S> <C> <C> <C>
Balance at December 31, 1993................. 530,069 $3.00 - 12.00 $ 5,515,119
Canceled..................................... (525,069) 9.22 - 12.00 (5,500,119)
--------- -----------
Balance at December 31, 1994 and 1995 and
March 30, 1996.............................. 5,000 $3.00 $ 15,000
--------- -----------
--------- -----------
</TABLE>
All outstanding warrants expire on August 28, 1997.
RESTRICTED STOCK
The Company has entered into a restricted stock compensation plan with an
officer of the Company under which the Company issued 10,000 shares of
restricted stock to the officer over a four year period, provided that the
officer remained an employee of the Company as of the anniversary date of the
plan. Under this plan the last 2,500 shares were issued as of March 30, 1996.
Compensation expense related to these restricted stock issuances has been
recorded in the statements of operations.
F-12
<PAGE>
PRINTWARE, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 30, 1996 AND APRIL 1, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 (CONTINUED)
3. SHAREHOLDERS' EQUITY (CONTINUED)
1996 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan")
was adopted on April 25, 1996 and provides for the issuance of up to 100,000
shares of Common Stock. With certain exceptions, all employees of the Company
who have been employed by the Company for at least six months and who are
employed at least 20 hours per week and at least five months per year, including
officers and directors who are employees, are eligible to participate in the
Stock Purchase Plan. The Stock Purchase Plan consists of periodic offerings,
with the first offering planned to begin on April 1, 1997. Each offering under
the Stock Purchase Plan will be for a period determined by the Compensation
Committee of the Board of Directors, but not to exceed 27 months. An employee
may elect to have up to a maximum of 10% deducted from his or her regular salary
for the purpose of purchasing shares under the Stock Purchase Plan. The price at
which the employee's shares are purchased is the lower of (a) 85% of the closing
price of the Common Stock on the day that the offering commences or (b) 85% of
the closing price of the Common Stock on the day that the offering terminates.
No shares have been issued under the Stock Purchase Plan.
4. LEASES
During 1993, the Company moved into new leased office and manufacturing
space of 35,410 square feet under a noncancelable operating lease which expires
on July 31, 1998 and contains an option to renew for up to three additional
years. The Company is also responsible for all taxes, utilities, and
assessments. Rent expense for all leases was approximately $21,000 for each of
the three month periods ended March 30, 1996 and April 1, 1995, and $87,000,
$107,000 and $129,000 for the years ended December 31, in 1995, 1994 and 1993,
respectively.
At December 31, 1995, future minimum lease payments due, excluding taxes and
utilities, were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
--------------- --------
<S> <C>
1996....................................... $ 84,000
1997....................................... 84,000
1998....................................... 50,000
--------
$218,000
--------
--------
</TABLE>
5. LICENSING AND ROYALTY AGREEMENTS
The Company has a licensing agreement with a minority shareholder whereby it
received all associated laser printer technology, including rights to patents,
know-how, software, firmware, documentation and access to their experts who were
involved in the development effort. The Company also received multiple
prototypes of two models. In return, the minority shareholder receives royalties
of up to 2% of net revenues from laser imager sales and received warrants to
purchase shares of Common Stock of the Company which were issued in 1987. The
warrants expired during 1994. Royalty expense relating to this agreement was
$600 and nil for the three months ended March 30, 1996 and April 1, 1995,
respectively, and $1,800, $9,014 and $11,640 for the years ended December 31, in
1995, 1994 and 1993, respectively.
The Company had a software development and license agreement with a third
party in which the Company was to fund certain software development costs, and
to pay royalties on products sold. The agreement expired during 1994. Royalty
expense relating to this agreement was insignificant during 1994 and 1993.
F-13
<PAGE>
PRINTWARE, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 30, 1996 AND APRIL 1, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 (CONTINUED)
5. LICENSING AND ROYALTY AGREEMENTS (CONTINUED)
The Company has purchased license rights for up to 100,000 copies of 300
fonts (typefaces) for $395,000. In December 1989, the Company paid $100,000 to
extend the original agreement through December 31, 1993. These payments have
been included in intangible assets and were amortized over the four years ended
December 31, 1993. During 1994 and 1995, the Company extended this agreement
through December 31, 1997 at no additional cost.
6. BANK LINE OF CREDIT
During 1995, due to its cash position, the Company did not renew its line of
credit with a local bank. The agreement had provided for borrowings up to the
lesser of $1,000,000 or 75% of receivables outstanding less than 90 days from
invoice date.
7. DEFERRED REVENUES
During 1993, the Company entered into several agreements with customers for
the purchase of new products, supplies and research and development projects. As
part of these agreements, the Company received advance payments totaling
$755,712 during 1993. The Company had shipped equipment and supplies under these
agreements totaling $142,750, $385,450 and $387,064 during 1995, 1994 and 1993,
respectively. During 1994, a customer, who is a shareholder, canceled a contract
for equipment which led to the forfeiture of certain equipment advances totaling
$679,434. As a result of the contract cancellation, the Company devalued the
related inventory. There was no material gain or loss resulting from the
contract cancellation.
8. MAJOR CUSTOMERS AND EXPORT REVENUES
Revenues to one customer, excluding the related party total revenues (see
note 10), amounted to $539,000 (29.4% of total revenues) and $253,000 (14.0%)
for the three months ended March 30, 1996 and April 1, 1995 and $1,464,000
(17.5%), $140,000 (2.1%) and nil for the years ended December 31, 1995, 1994 and
1993, respectively. No other customer accounted for 10% or more of total
revenues for these periods.
The Company's export revenues did not exceed 10% of total revenues for the
three months ended March 30, 1996 and April 1, 1995 or the years ended December
31, 1995, 1994 and 1993.
9. INCOME TAXES
The Company records income taxes under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
For income tax purposes, the Company had net operating loss carryforwards of
approximately $10,500,000 as of December 31, 1995. If not used, these
carryforwards will begin to expire in 2001. Under the Tax Reform Act of 1986,
certain future changes in ownership resulting from the sale or issuance of stock
may limit the amount of net operating loss carryforwards which can be utilized
on an annual basis.
Deferred tax assets and liabilities represent temporary differences between
the basis of assets and liabilities for financial reporting purposes and tax
purposes. Deferred tax assets are primarily comprised of reserves which have
been deducted for financial statement purposes, but have not been deducted for
income tax purposes and the tax effect of net operating loss carryforwards. The
Company has recorded a valuation allowance to reduce recorded deferred tax
assets to zero because management believes it is more likely than not that the
Company will not utilize the deferred tax assets.
F-14
<PAGE>
PRINTWARE, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 30, 1996 AND APRIL 1, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 (CONTINUED)
9. INCOME TAXES (CONTINUED)
Deferred taxes as of December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Current deferred tax assets:
Inventory reserves......................... $ 192,000 $ 181,000
Accrued vacation........................... 35,000 30,000
Allowance for doubtful accounts............ 9,000 8,000
Other...................................... 18,000 24,000
Valuation allowance........................ (254,000) (243,000)
----------- -----------
Total.................................... $ -- $ --
----------- -----------
----------- -----------
Long-term deferred tax assets:
Tax net operating loss carryforwards....... 3,675,000 4,305,000
Tax credit carryforwards................... 32,000 --
Valuation allowance........................ (3,707,000) (4,305,000)
----------- -----------
Total.................................... $ -- $ --
----------- -----------
----------- -----------
</TABLE>
A reconciliation of the expected federal income taxes, using the effective
statutory federal rate of 35%, with the provision for income taxes is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Expected federal expense (benefit)........... $ 635,000 $ 275,000 $(421,300)
State taxes, net of federal benefits......... 2,000 2,000 1,109
Net operating loss which cannot currently be
recognized.................................. -- -- 419,200
Change in valuation allowance................ (587,000) (275,000) --
Other........................................ (27,500) -- 2,100
--------- --------- ---------
$ 22,500 $ 2,000 $ 1,109
--------- --------- ---------
--------- --------- ---------
</TABLE>
10. RELATED PARTY TRANSACTIONS
The Company sells products to two of its shareholders and also contracts for
certain products and production services with these shareholders. In addition to
revenues from affiliates and accounts receivable from affiliates as shown on the
financial statements, a summary of these transactions as of and for the three
months ended March 30, 1996 and April 1, 1995 and the years ended December 31,
1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 30, APRIL 1, ----------------------------------
1996 1995 1995 1994 1993
--------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total purchases of production services....... $ 1,000 $ 1,000 $ 44,000 $ 91,000 $ 210,000
Accounts payable............................. 1,000 1,000 -- 8,000 28,000
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
During 1995, the Company received a favorable arbitration award from a
dispute with A. B. Dick Company, a former customer. The Company recognized a
gain of $192,000 after expenses of approximately $142,000 in this dispute. This
gain is included in the statements of operations under other income (expense).
F-15
<PAGE>
PRINTWARE, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 30, 1996 AND APRIL 1, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993 (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is involved in various other legal actions in the normal course
of business. Management is of the opinion that the outcome of such actions will
not have a significant effect on the Company's financial position or results of
operations.
401(K) PROFIT SHARING PLAN
The Company's 401(k) Profit Sharing Plan (the "401(k) Plan") became
effective August 1, 1994. The 401(k) Plan is intended to qualify under Section
401(k) of the Internal Revenue Code. All employees employed by the Company in
the United States for at least 30 hours per week are eligible to participate in
the 401(k) Plan as of the next calendar quarter following one year after date of
hire by the Company. Each eligible employee may contribute to the 401(k) Plan,
through payroll deductions, up to 15% of his or her salary, subject to statutory
limitations. The 401(k) Plan permits, but does not require, additional
contributions to the 401(k) Plan by the Company of up to 2% of the compensation
paid by the Company to each employee in the previous calendar quarter. The
Company's contributions are made at the discretion of the Board of Directors,
within the limits of the 401(k) Plan. The Company has made a contribution of 1%
of the compensation of each participating employee each quarter since the
adoption of the 401(k) Plan. The Company's contributions to the 401(k) Plan were
$4,576 and $4,246 for the three months ended March 30, 1996 and April 1, 1995
and $13,352 and $4,769 for the years ended December 31, 1995 and 1994,
respectively. There were no contributions in 1993.
12. SUBSEQUENT EVENTS
The Company is planning an initial public offering of 1,200,000 shares of
Common Stock at an assumed initial public offering price of $6.50 per share. In
addition, current shareholders are planning to offer 400,000 shares of Common
Stock to the public at such time. The Company will grant to the Underwriters an
over-allotment option pursuant to which an additional 240,000 shares may be sold
(180,000 shares from the Company and 60,000 shares from existing shareholders)
on the same terms for the purpose of covering any over-allotment sales made in
the public offering. In connection with the proposed initial public offering,
the Representative of the Underwriters would be granted warrants to purchase up
to 120,000 shares of Common Stock at 120% of the price to public, exercisable
commencing one year after the date of the Offering for a period of four years.
F-16
<PAGE>
[INSIDE BACK COVER GRAPHICS]
Photographs showing various Printware products:
Top right-hand photo: Model 1440 APF Platesetter
Text below photo: The Model 1440 APF Platesetter for bulk-fed metal
printing plates.
Middle right-hand photo: Model 1440 EZ Platesetter
Text next to photo: The Model 1440 EZ Platesetter produces paper and
metal printing plates.
Lower right-hand photo: Supplies for Model 1440 Platesetters
Text next to photo: Printware provides a full line of supplies for its
Model 1440 Platesetters.
Top left-hand photo: Model 1440 ZNX Platesetter
Text below photo: The Model 1440 ZNX Platesetter produces paper
printing plates directly from a computer.
Bottom left-hand photo: Raster Image Processor
Text below photo: Raster Image Processor (RIPs) connect Platesetters
to computer networks.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE UNDERWRITERS OR THE SELLING SHAREHOLDERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 8
Dividend Policy........................................................... 8
Capitalization............................................................ 8
Dilution.................................................................. 9
Selected Financial Data................................................... 10
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 11
Business.................................................................. 16
Management................................................................ 25
Certain Transactions...................................................... 30
Principal and Selling Shareholders........................................ 31
Description of Capital Stock.............................................. 32
Shares Eligible for Future Sales.......................................... 33
Underwriting.............................................................. 35
Experts................................................................... 36
Legal Matters............................................................. 36
Additional Information.................................................... 37
Index to Financial Statements............................................. F-1
</TABLE>
---------------------
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
1,600,000 SHARES
[LOGO]
COMMON STOCK
---------------------
PROSPECTUS
------------------
[R.J. STEICHEN LOGO]
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following fees and expenses will be paid by the Company in connection
with issuance and distribution of the securities registered hereby and do not
include underwriting commissions and discounts. All of such expenses, except for
the SEC, NASD and Nasdaq fees are estimated.
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 4,441
NASD filing fee................................................... 1,788
Nasdaq fee........................................................ 36,750
Legal fees and expenses........................................... 55,000
Accounting fees and expenses...................................... 50,000
Blue Sky fees and expenses........................................ 1,800
Transfer agent and registrar fees................................. 1,000
Printing expenses................................................. 60,000
Miscellaneous..................................................... 26,221
---------
Total......................................................... $ 237,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation and Bylaws of Printware, Inc. provide for
indemnification of directors to the full extent permitted by the Minnesota
Business Corporation Act. Minnesota Statutes Section302A.521 provides that a
Minnesota business corporation shall indemnify any director, officer, employee
or agent of the corporation made or threatened to be made a party to a
proceeding, by reason of the former or present official capacity (as defined
therein) of the person, against judgments, penalties, fines, settlements and
reasonable expenses incurred by the person in connection with the proceeding if
certain statutory standards are met. "Proceeding" means a threatened, pending or
completed civil, criminal, administrative, arbitration or investigative
proceeding, including one by or in the right of Printware, Inc.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Printware, Inc.
pursuant to the foregoing provisions, Printware, Inc. has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Under Section 7(c) of the Underwriting Agreement filed as Exhibit 1.1
hereto, the Underwriters agree to indemnify, under certain conditions, the
Company, its directors, certain of its officers and persons who control the
Company within the meaning of the Securities Act against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The information in this Item gives retroactive effect to the one-for-four
reverse stock split of the Company which was effective April 25, 1996.
II-1
<PAGE>
The Company has sold the following unregistered securities during the past
three years (since March 30, 1993):
<TABLE>
<CAPTION>
NO. SHARES OF PRICE
DATE PURCHASER COMMON STOCK PER SHARE
- --------- --------------------------------- ----------------- -----------
<C> <S> <C> <C>
04/21/93 William Fuess, Esq.(1) 587 $ 3.00
09/01/93 William Fuess, Esq.(1) 300 3.00
11/26/93 Employee ISO exercise 650 3.00
11/26/93 Employee ISO exercise 50 3.00
12/27/93 Employee ISO exercise 50 3.00
01/22/94 Daniel A. Baker(2) 2,500 3.00
02/11/94 Employee ISO exercise 50 3.00
03/14/94 Employee ISO exercise 50 3.00
03/18/94 William Fuess, Esq.(1) 300 3.00
08/30/94 Employee ISO exercise 25 3.00
10/28/94 Employee ISO exercise 25 3.00
12/29/94 Minnesota Technology, Inc.(3) 5,500 3.00
01/20/95 Employee ISO exercise 75 3.00
01/22/95 Daniel A. Baker(2) 2,500 3.00
03/24/95 Employee ISO exercise 262 3.00
09/29/95 Employee ISO exercise 25 3.00
12/01/95 Employee ISO exercise 375 3.00
01/22/96 Daniel A. Baker(2) 2,500 3.00
02/28/96 Employee ISO exercise 200 3.00
</TABLE>
- ---------------------
(1) These shares were issused to William Fuess, Esq., the Company's patent
counsel, in consideration for patent services he provided to the Company.
(2) These shares were issued to Dr. Baker pursuant to an agreement made between
him and the Company in January 1993 that provided that if he remained
employed by the Company he would be issued a total of 10,000 shares in
annual installments of 2,500 shares. Each issuance of shares has been
accounted for as taxable compensation.
(3) These shares were issued to Minnesota Technology, Inc. as part of the
extinguishment of debt owed to it by the Company that is referred to in the
fourth paragraph of footnote 3 to the Financial Statements.
Each of the above transactions involved the offering of such securities to a
limited number of persons who took the securities as an investment for his, her
or its own account and not with a view to a distribution thereof. Based in part
on the foregoing the Company has been advised by counsel that the transactions
enumerated above were transactions not involving any public offering within the
meaning of Sections 3(b) or 4(2) of the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1* Underwriting Agreement
1.2* Selected Dealers' Agreement
1.3* Agreement Among Underwriters
3.1* Articles of Incorporation, as amended
3.2* Bylaws of the Company
4.1* Form of Common Stock Certificate
5.1* Opinion of Lindquist & Vennum P.L.L.P.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.1* Incentive Stock Option Plan of 1985
10.2* 1986 Incentive Stock Option Plan
10.3* 1996 Stock Plan
10.4* 1996 Employee Stock Purchase Plan
10.5* Form of 1996 Bonus Compensation Plan for executive officers
10.6* Change in Control Severance Agreement dated April 25, 1996
10.7* Office/Warehouse Lease dated December 22, 1992 between the Company and
The Northwestern Mutual Life Insurance Company
10.8 Plate Material Agreement dated December 11, 1991 between the Company
and E.J. Gaisser, Inc.(1)
10.9 Supply Agreement dated May 2, 1991 between the Company and Polychrome
Corporation(1)
10.10* License Agreement dated May 17, 1985 among the Company, Minnesota
Mining and Manufacturing Company and Allen L. Taylor
10.11 Purchase Agreement dated January 1, 1995 between the Company and
Deluxe Corporation, as amended December 12, 1995(1)
11.1* Statement re computation of Per Share Earnings/Losses
23.1 Consent of Deloitte & Touche LLP
23.2* Consent of Lindquist & Vennum P.L.L.P., included in Exhibit 5.1
24.1* Power of Attorney, included in the Signature Page
</TABLE>
- ---------------------------
* Previously filed with the initial filing of this Registration Statement.
(1) Certain information has been deleted from this exhibit and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 406.
(b) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted because they are either not
required, are not applicable, or the required information is shown in the
Financial Statements and related notes.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
had been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The Registrant hereby undertakes that:
(1) It will provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.
II-3
<PAGE>
(2) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and this offering of such securities at that
time be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of St.
Paul, State of Minnesota, on the 27th day of June, 1996.
PRINTWARE, INC.
By: /s/ DANIEL A. BAKER
-----------------------------------
Daniel A. Baker, Ph.D.,
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below on June 27, 1996 by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ------------------------
<C> <S> <C>
* President, Chief
------------------------------------ Executive Officer and
Daniel A. Baker, Ph.D. Director
Executive Vice President
* and Chief Financial
------------------------------------ Officer (principal
Thomas W. Petschauer financial and
accounting officer)
*By /s/ DANIEL A. BAKER
* ----------------------
------------------------------------ Director ATTORNEY-IN-FACT
Allen L. Taylor, Ph.D. June 27, 1996
*
------------------------------------ Director
Donald V. Mager
*
------------------------------------ Director and Secretary
Brian D. Shiffman
*
------------------------------------ Director
Jerry K. Twogood
*
------------------------------------ Director
Charles M. Osborne
</TABLE>
II-5
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
---------------------------
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND CHARGED TO DEDUCTIONS -- BALANCE AT END
DESCRIPTION PERIOD EXPENSES OTHER ACCOUNTS WRITE-OFFS OF PERIOD
- ------------------------------------- ------------ ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Allowance for Doubtful
Accounts........................ $ 21,538 $ -- $ 4,335(1) $ (960) $ 24,913
Inventory Reserve................ 516,039 374,000 -- (344,920) 545,119
Year ended December 31, 1994
Allowance for Doubtful
Accounts........................ $ 67,263 $ (31,000) $ -- $ (14,725) $ 21,538
Inventory Reserve................ 525,126 215,000 679,434(2) (903,521) 516,039
Year ended December 31, 1993.........
Allowance for Doubtful
Accounts........................ $ 67,600 $ 36,000 $ -- $ (36,337) $ 67,263
Inventory Reserve................ 553,690 560,000 -- (588,564) 525,126
</TABLE>
- ---------------------
(1) Collection of customer accounts previously written off.
(2) Inventory related to cancelled production contract.
<PAGE>
EXHIBIT 10.8
Certain portions of this Exhibit have been deleted and filed separately with the
Commission pursuant to Rule 406. (Spaces corresponding to deleted portions
appear in brackets with asterisks.)
December 11, 1991
PLATE MATERIAL AGREEMENT
PRINTWARE - GAISSER
PURPOSE: The purpose of this agreement is to establish the criteria for a
business relationship between PRINTWARE, Inc., a Minnesota Corporation, having
its principal offices at 1385 Mendota Heights Road, St. Paul, Minnesota 55120,
herein after referred to as "PRINTWARE," and E. J. Gaisser, Inc., a Connecticut
Corporation, having its principal offices at 49 Liberty Place, Stamford, CT,
06904 hereinafter referred to as "Gaisser," for the distribution of
electrostatic material for use in the PRINTWARE 1440 plate imager and its
variations. This agreement clarifies and supersedes the Plate Material
Agreement dated April 21, 1988.
CONFIDENTIALITY: Certain trade information, 1440 plate imager information, and
future product information shall be kept confidential per Attachment A.
PRODUCTS: Products include "Economy grade plate material" and "Premium-grade
plate material." Future products may be added by mutual agreement.
PRODUCT QUALITY: The plate material to be initially supplied by Gaisser shall
be of customer acceptable quality, and shall meet the specifications per
Attachment B. Future specifications may define additional materials. In the
event that materials do not meet the specifications or standards of customer
acceptable quality, Gaisser shall accept the returned material for credit.
Gaisser shall not be held liable for consequential damages as a result of
defective plate material.
EXCLUSIVITY: PRINTWARE shall make its reasonable best efforts to market and
sell the Gaisser plate materials. Gaisser shall not, independently of
PRINTWARE, distribute or provide for distribution electrostatic infrared-
sensitive material usable in the PRINTWARE 1440 plate imager or its variations.
MINIMUM PURCHASE: In consideration of such exclusivity, and subject to
PRINTWARE's continued determination that the materials are of acceptable
quality, PRINTWARE agrees to purchase a minimum of $600,000 in plate material
from Gaisser in each year beginning January 1, 1992. If the minimum purchase
quantities are not met without good cause, Gaisser's only remedy is relief from
exclusivity restrictions.
PLATE MATERIAL PRICE: The price of Premium-grade plate material shall not
exceed $0.12/square foot and the price of the Economy-grade plate material shall
not exceed $0.091/square foot for the period ending June 30, 1992.
<PAGE>
PLATE MATERIAL PRICE ADJUSTMENTS: Subsequent price increases shall not exceed
the sum of 80% of the change in the Producer Price Index in the period between
plate material price adjustments as reported by the U.S. Department of
Commerces, and 20% of the change in the average price paid by Gaisser for raw
paper stock from the previous plate material price adjustment. Gaisser shall
provide evidence, such as invoices, of price changes in raw paper stock. Price
adjustments shall occur on June 30, 1992 and then annually beginning January 1,
1993.
DYE SUPPLY: In consideration of exclusivity, PRINTWARE agrees to supply
infrared-sensitive dyes to Gaisser for use in the plate materials at PRINTWARE'S
then current standard cost. The standard cost of the dye as of November 8,
1991, was $6.54/gram.
PRINTWARE SUPPORT: In consideration of exclusivity during the term of this
agreement, PRINTWARE agrees to provide production support to Gaisser including
the loan of a 1440 plate imager, and reasonable technical support of the
refinement and production of the plate material by PRINTWARE personnel.
TERM: The term of this Agreement shall extend from the date shown above until
the first to occur of the following dates: (a) the date, if any, mutually
agreed to in writing by both parties for the termination of the term of this
Agreement; (b) either party defaults in the performance or compliance with any
material provision of this Agreement and such default has not been remedied
within thirty days after the date the other party gives written notice to the
defaulting party; or (c) either party ceases to function as a going concern.
ENFORCEABILITY: Delay or failure of either party in exercising any right
hereunder or partial or single exercise thereof, shall not be deemed to
constitute the waiver of that right. If any provision of this Agreement shall
become inoperative or unenforceable as applied in any particular case or becomes
in conflict with any other provisions hereof, such circumstances shall not have
the effect of rendering the provision in question invalid, inoperative or
unenforceable in any other case or circumstances. The invalidity of any
provision of this Agreement shall not affect the remaining provisions of this
Agreement.
EXCUSABLE DELAYS AND DEFAULT: Either party shall be excused from any delay or
failure in performance hereunder caused by reason of any occurrence of
contingency beyond its reasonable control, including, but not limited to an act
of God, earthquake, labor disputes, fiats, governmental requirements, inability
to secure materials and transportation difficulties. The obligations and rights
of the party so excused shall be extended on a day-to-day basis for the time
period equal to the period of such excusable delay.
GOVERNING LAW/ARBITRATION: All disputes and controversies arising out of the
performance of this Agreement shall be settled by arbitration in Chicago,
Illinois as a neutral venue. The arbitrators shall have substantial familiarity
with the subject matter at issue.
2
<PAGE>
WARRANTY: Gaisser warrants its products conform to the statements made in
Attachment B; to meet customer acceptable quality standards; to be free of
defects in material and workmanship for a period of eighteen months from the
date of sale by Gaisser; not to infringe a valid U.S. Patent; and to be free of
title encumbrance. Gaisser will credit PRINTWARE's account upon determination
of defective material.
PAYMENT: Payment for purchase orders shall be net thirty (30) days from the
date of shipment.
COMPLETE AGREEMENT AND AMENDMENT: This Agreement contains the entire agreement
of the parties, and no representation, inducements, promises or agreements, oral
or otherwise, among the parties not embodied herein shall be of any force or
effect; provided, however, that the terms of this Agreement may be changed,
amended, or waived by a subsequent writing signed each of the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the 12th
day of December, 1991.
PRINTWARE, Inc. E. J. Gaisser Inc.
By /s/ Daniel Baker By /s/ James H. Gaisser 12-16-91
---------------------------------- ------------------------------------
Its Vice President Its President
------------------------------- ---------------------------------
3
<PAGE>
ATTACHMENT A: CONFIDENTIAL INFORMATION
Printware Confidential Information Includes, but is not limited to the following
items:
1. Plate Material Specification P/N 802222
2. Printware Customer Lists
3. Pricing of Plate Material Sold by Gaisser to Printware
4. Printware Customer Pricing
4
<PAGE>
ATTACHMENT B
PRINTWARE INC.
1440 PS
ELECTROSTATIC PLATE MATERIAL
PART NUMBER 802222-TAB REV 5/1/91
CONFIDENTIAL MATERIAL
NON-DISCLOSURE AGREEMENT REQUIRED
<PAGE>
PRINTWARE
ELECTROSTATIC PLATE MATERIAL
P/N 8022222-TAB REV
1.0 SCOPE
This document establishes the requirements for the lithographic printing plate
to be used in the Printware Model 1440es Platemaker.
A lithographic Electrostatic printing plate consists of an offset master base
paper and an eletrophotographic layer. It is to be imaged in the Printware
Model 1440es Platemaker in the following sequence:
Charging
Exposure by laser diode
Liquid electrostatic toner development
Heating to dry and fuse the toner
This printing plate will be run on commercially available manual and automatic
offset presses after the plate has been treated with an electrostatic conversion
solution.
For purposes of periodic audits, characterization and qualification, evaluations
shall be made to the limits of this document and specified reference documents.
Specified values within this specification without tolerances shall be regarded
as nominal values.
2.0 DOCUMENTS
Applicable documents, of issue in effect on the date of invitation for bid, form
a part of this specification.
Order of precedence shall be as follows:
2.1 Applicable OEM Purchase Agreement
2.2 This Document
2.3 MIL-STD-105D, Sampling Procedure and Tables for Inspection by Attributes
2
<PAGE>
PRINTWARE
ELECTROSTATIC PLATE MATERIAL
P/N 802222-TAB
3.0 REQUIREMENTS
3.1 PHYSICAL
Configuration - Rolls
Winding - Infrared sensitive or coated side out.
Length - 400 feet.
Roll Diameter - Not to exceed 7.5 inches.
Core Diameter - 3 3/4'' ID, 4 1/4'' OD.
Roll Width - as indicated + or - 1/64 inch
Core Width - Roll width + 0 -1/8 inch.
Width of roll; economy grade:
Rolls Rolls
Dash No. Roll Width Per Box Dash No. Roll Width Per Box
- -------- ---------- ------- -------- ---------- -------
- -001 8 inch 2 -101 8 inch 2
- -002 9 inch 2 -102 9 inch 2
- -003 10 inch 2 -103 10 inch 2
- -004 11 inch 2 -104 11 inch 2
- -005 12 inch 2 -105 12 inch 2
- -010 13 inch 2 -110 13 inch 2
- -008 14 inch 2 -108 14 inch 2
- -006 14.563 inch 2 -106 14.563 inch 2
- -007 15 inch 2 -107 15 inch 2
Basis Weight 95/lb 3300 ft(2), economy grade; 101lb/3300 ft(2), premium grade.
[**]
- --------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
3
<PAGE>
3.2 MECHANICAL
3.2.1 Plate must be machine compatible with the Printware Model 1440es
Platesetter.
3.2.2 Plate must be acceptable to handling under normal press operating
conditions.
3.2.3 Plate must work with common convertors, both off-line and those that
are on-line with offset presses.
3.3 ELECTRICAL
3.3.1 Exposure Sensitivity: 780 nm.
3.3.2 Charge acceptance: TBD
3.3.3 Dark decay: TBD
3.3.4 Laser light decay: TBD
4
<PAGE>
PRINTWARE
ELECTROSTATIC PLATE MATERIAL
P/N 802222-TAB
3.4 ENVIRONMENTAL
Electrostatic Plate Material shall be capable of meeting all functional and
performance requirements of this specification when operated within the combined
environments shown without regarding any adjustments.
Ambient Temp Relative Humidity Altitude
------------- ----------------- -----------
Storage 65 to 75 F. 40% to 50% 0-8,200 Ft
Operating 50 to 90 F. 30% to 70% 0-8,200 Ft
Transport -40 to 122 F. 0% to 99% 0-40,000 Ft
Store in a cool, dry place in original packaging. Keep in plastic bag when not
in use.
3.5 PERFORMANCE
3.5.1. The plate shall perform both as a lithographic plate and as a camera
ready copy.
3.5.2 [**]
- [**]
[**]
- [**]
- [**]
- [**]
- [**]
3.5.3 [**]
- [**]
- [**]
- [**]
- [**]
- [**]
3.5.4 Run length, economy grade - 1000 impressions.
Run length, premium grade - 10,000 impressions.
3.5.5 Stretch, economy grade - around press cylinder, short grain
orientation for rolls 12'' or wider, long grain orientation for rolls
under 12'', less than 2.0% at 1000 impressions.
Stretch, premium grade - around press cylinder, short grain
orientation for rolls 12'' or wider, long grain orientation for rolls
under 12'', less than 0.2% at 1250 impressions.
3.5.6 Shelf life - 18 months.
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
5
<PAGE>
PRINTWARE
ELECTROSTATIC PLATE MATERIAL
P/N 802222-TAB REV
4.0 QUALITY
4.1 Quality
Product design, material selection and manufacturing workmanship shall be in
accordance with standard industry practices such that products meet PRINTWARE
INC. incoming quality requirements per paragraph 4.2 of this specification.
PRINTWARE INC. reserves the right to conduct in-plant surveillance of vendor
operations to assure that quality procedures comply with contractual
requirements.
4.2 Incoming Requirements
The indicated Receiving Inspection criteria shall be used to determine
acceptability of lot quality levels. All inspection procedures shall be in
accordance with MIL-STD-105D Normal II level.
The following incoming acceptance procedure indicated in Appendix I shall be
performed in accordance with the following AQLAEs on a representative lot sample
as speciifed.
Workmanship 0.65AQL
Mechanical Criteria and Electrical 0.65 AQL
4.3 Identification
Each roll shall have an identification number to allow traceability of its
manufacture.
xxx - yy - zz
| | ||
| | ||________Position across jumbo roll width (A to E)
| | |________# of set as taken from jumbo roll diameter
| | (1-25, where 1 is the top)
| |____________Jumbo roll #
|_______________Quality Control Lot #
The identification number shall be stamped on the end of the roll as close to
the core as possible.
Each box of plate material is to be marked with the quality control lot # and
jumbo roll #.
6
<PAGE>
5.0 SHIPPING AND HANDLING
Preparation for delivery shall include unit packaging capable of protecting the
unit when shipped using a commercial common carrier. PRINTWARE reserves the
right to test packaging to National Safe Transit Association (NSTA) to verify
compliance.
Pallet size - 8'' - 11 1/4'' 120 rolls
a. 120 rolls, 60 cartons/pallet
(4 tiers, 15 cartons/tier)
b. 96 rolls, 48 cartons/pallet
(4 tiers, 12 cartons/tier)
12'' - 18'' rolls:
40 rolls, 20 cartons/pallet
(2 tiers, 10 cartons/tier)
Artwork master for box label to be approved by Printware, Inc. (See Figure 1.)
6.0 DESIGN OR PROCESS CHANGES
Notification of any process changes, design changes or material changes that
will affect fit, form or function, shall be made to PRINTWARE Purchasing
Department prior to shipment of the unit. The information submitted shall
include a complete description of the change and the effect the change will have
on characteristics specified or unspecified of the unit. The design, materials
and manufacturing process upon which approval was based, shall be the reference
to which requested changes will be compared.
7.0 APPROVED VENDOR LIST
E.J. Gaisser Company, Stamford, Connecticut 06902
7
<PAGE>
IR EP MASTER SPECIFICATION
(TEST ENVIROMENT)
E.J. GAISSER GRADE CODE
PRINTWARE TECHNICAL SPECIFICATION 802222-TAB
TEST LOCATION(S):
1. E.J. Gaisser (Stamford) - QUALITY CERTIFIER
2. Printware - QUALITY MONITOR
TEST CONDITION:
1. Imaging: - Hardware Printware 1440 Platesetter
- Environment: 67-77 F, 35-55% RH
- Toner: Printware 821630 (Specification in Appendix II)
- Laser: Calibrated by Printware
- Fuser setting 40% - 80%
- Test Image: Process Control Test Image (Appendix III)
- Laser: Dial - 0 to10
Top adjustment - 1/4 to 3/4
- Corona: AC from 3-10
DC - full operational range
- Toner Bias: Full operational range
2. Conversion: - Hardware: Prepco TP-16 convertor with a 18 rpm motor
option, note that the plate must be useable
with Deluxe model 105 convertor.
-Solution: Printware Conversion Solution 802239
(no more than 1 week old)
3. Printing - Press: A.B. Dick 369
- Ink: A B Dick 101-2C with tack range of 16-20
- Fountain Solution: Printware Fountain Solution mixed by
volume:
25 parts deionized or distilled water
2 parts isopropyl alcohol
5 parts conversion solution
- Stripe: Ink form rollers to plate 3/16''
Plate to blanket 3/16''
Blanket to impression 3/16''
- Speed: 6000 - 8000 impressions per hour
- Paper: Nekoosa 23# or 24# MICR bond 8.5'' x 11''
8
<PAGE>
IR EP MASTER SPECIFICATION
(TEST ENVIRONMENT)
E.J. GAISSER GRADE CODE
PRINTWARE TECHNICAL SPECIFICATION 802222-TAB
- Plate size and press orientation:
a. 12'' or wider rolls: 10'' x roll width with the roll width or
short grain dimension around the plate cylinder.
b. under 12'' wide rolls: roll width x 15'' with the 15'' long
grain dimension around the plate cylinder.
- Blanket wash: AM Blankrola Power Solve
- Environment: 67-77 F, 45-55% RH
TEST SAMPLES:
[**]
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
9
<PAGE>
APPENDIX II
PRINTWARE 821630 TONER SPECIFICATION
FUNCTIONAL PROPERTIES: 821630
Charge to mass ratio (KG/Coulomb) [**]
----------------------
Total charge (Microcolombs) [**]
----------------------
Conductivity (Picomhos/Cm) [**]
----------------------
Optical density [**]
----------------------
% Solids [**]
----------------------
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
10
<PAGE>
EXHIBIT 10.9
Certain portions of this Exhibit have been deleted and filed separately with the
Commission pursuant to Rule 406. (Spaces corresponding to deleted portions
appear in brackets with asterisks.)
SUPPLY AGREEMENT
THIS AGREEMENT is made as of the 2nd day of May 1991, between Polychrome
Corporation, a Division of Sun Chemical Corporation, a Delaware Corporation
having its principal offices at 137 Alexander Street, Yonkers, New York 10702
("POLYCHROME"), and Printware, Inc. a Minnesota Corporation, having its
principal offices at 1385 Mendota Heights Road, St. Paul, Minnesota 55120
("PRINTWARE").
WHEREAS, POLYCHROME and PRINTWARE have cooperated in and made valuable
contributions to the development of digital laser platemaking systems (the
"SYSTEMS"), comprised of tangible and intangible components including equipment,
consumables, technical services, know-how and proprietary and confidential
information ("SYSTEMS COMPONENTS"); and
WHEREAS, each party intends to sell SYSTEMS bearing its own label to third
parties on its own account; and
WHEREAS, in order to offer comprehensive SYSTEMS for sale to third parties, each
party wishes to obtain certain SYSTEMS COMPONENTS from the other;
<PAGE>
NOW, THEREFORE, the parties agree to the following:
1.0 DEFINITIONS
1.1 POLYCHROME shall mean Polychrome Corporation, Polychrome Ltd.,
Polychrome G.m.b.H., Polychrome France S.A.R.L., and any subsidiary or affiliate
of any one of them.
1.2 PRODUCTS shall mean those tangible SYSTEMS COMPONENTS set forth on SCHEDULE
1.2, attached hereto. From time to time during the term of this Agreement, the
parties may add or delete PRODUCTS covered by the Agreement upon mutual written
agreement.
1.3 SERVICES shall mean those services more specifically described in Section 7
below.
1.4 CONFIDENTIAL INFORMATION shall mean all information which is disclosed by
either party to the other in connection with this Agreement and is specifically
designated in writing as such (or if disclosed orally, confirmed in writing
within thirty (30) days of such disclosure). CONFIDENTIAL INFORMATION does not
include information which is or becomes a matter of public knowledge without the
fault of the recipient party; was known to recipient party prior to disclosure
to it by the other party; or was or is received by the recipient party from a
third person under circumstances permitting its disclosure. CONFIDENTIAL
INFORMATION shall be used solely for purposes contemplated by this Agreement
including provision of SERVICES and installation, operation, maintenance,
support and development of the PRODUCTS furnished hereunder. CONFIDENTIAL
INFORMATION shall be protected by the recipient from disclosure to others to the
same extent it would protect its own confidential or proprietary information.
2
<PAGE>
1.5 TERM shall mean the period of two (2) years commencing on April 1, 1991 and
terminating on March 31, 1993; provided that this Agreement shall be
automatically renewed for successive one-year terms unless either party gives
the other written notice of termination at least one hundred and eighty (180)
days prior to the end of the term then in effect.
1.6 TERRITORY shall mean the United States, Canada and Europe.
2.0 DELIVERY
2.1 All PRODUCTS shall be sold F.O.B. point of manufacture, and according to
the ordering party's written instructions. Risk of loss and title shall pass
when goods are placed with a common carrier.
2.2 The supplying party shall ship PRODUCTS in accordance with Purchase Orders,
packaged in adequate boxes or containers. Any Purchase Order terms and
conditions at variance with or in addition to those of this Agreement shall be
of no force and effect. The supplying party shall apply labels to and insert
health and safety information in the boxes and containers. The supplying party
shall additionally label those products which it supplies with the ordering
party's logo and mark. The ordering party shall furnish all appropriate copy
and artwork therefor at its expense.
2.3 The supplying party shall set and confirm delivery schedules immediately
upon receipt of a Purchase Order. When existing priorities and schedules
prevent strict compliance with requested delivery dates, orders will be entered
as closely as possible to the requested delivery date and the ordering party
will be advised of the actual shipping schedule. If a supplying party cannot
ship
3
<PAGE>
duly ordered PRODUCTS within (30) days of dates requested the ordering party
may cancel the order in whole, or in part, with no penalties or charges as
otherwise defined under Section 3.
2.4 Upon request, a supplying party shall assist the receiving party in
preparing such documentation as may be required to export any products to or
perform SERVICES at locations outside the country of origin, but all fees and
costs shall be for the receiving party's account.
3.0 PRICES
3.1 Unit prices shall be as set forth in SCHEDULE 1.2, subject to the
provisions for price adjustments herein. Prices are firm for the first twelve
(12) months of this Agreement, except prices may be decreased at any time.
Price decreases will apply to all orders shipped on or after the effective date
of the decrease.
3.2 After the initial twelve (12) months, prices may be increased no more than
once per twelve (12) month period and then only provided the party increasing
the price gives the other party at least ninety (90) days notification before
the effective date of any such price change. In the event of a price increase
notification the purchasing party may increase PRODUCT quantities purchased at
the then present price provided delivery is requested prior to the price
increase date; provided, however, that any such increased order shall be made in
good faith and in a commercially reasonable manner (taking into account such
factors as historical order figures). Either party, after receipt of written
notification of a price increase, may terminate this Agreement without further
liability. In the event of such termination, the parties agree to accept
shipments and to deliver units under the then scheduled Purchase Orders.
4
<PAGE>
3.3 The foregoing notwithstanding, in the event the established pricing is not
industry competitive or does not provide reasonable gross margins for either
party, the parties agree to renegotiate prices in good faith. In the event
reasonably industry-competitive pricing with reasonable margins is not achieved
for any reasons, either party may terminate this Agreement upon one hundred and
eighty (180) days' written notice and neither party shall have any further
liability to the other.
4.0 PAYMENTS
4.1 Terms of payment shall be net 30 days from date of invoice (which shall not
precede shipment). For Polychrome Corporation, any payment mailed on or before,
and for non-domestic POLYCHROME affiliates a wire transfer sent before, the
thirtieth day from the date of invoice shall be deemed to have been made within
the 30 day period. POLYCHROME shall receive an additional $3,000 discount for
each complete SYSTEM (i.e., platesetter and RIP system) purchased for the
continental United States with SERVICES (as set forth in Section 6.2) fully paid
for within fifteen (15) days. All accounts unpaid after 30 days by either party
shall bear interest at the rate of one percent (1%) per month.
4.2 Each party reserves the right to suspend further deliveries if the other
fails to pay for any one shipment when payment becomes due and does not cure
within ten (10) days of written notice of such nonpayment.
5
<PAGE>
5.0 ORDERS
5.1 Each party will provide to the other an initial ninety (90) day Blanket
Purchase Order for PRODUCTS and SERVICES, plus a forecast for the six (6) months
immediately following the ninety (90) day period. Purchase Orders for the
months subsequent to the initial 90 day Blanket Purchase Order will be provided
monthly with each having a sixty (60) day lead time. Subsequent six (6) month
forecasts will be provided quarterly. Each party will advise the other of
significant forecast changes if they occur.
5.2 Blanket Purchase Order Releases and Subsequent Purchase Order Deferments or
Cancellations.
Either party may alter specific delivery dates or cancel orders specified in the
above in writing. The degree of penalty is based upon the lead time given.
A party may, without cost, upon more than seven (7) days written notice prior to
scheduled shipment dates, defer shipment of any PRODUCT up to sixty (60) days.
Delivery deferments provided within seven (7) days for same shall be subject to
a deferment charge of 7% of the invoice price.
A party may request an advance in a scheduled shipment date and the supplying
party will use its reasonable best efforts to meet the requested delivery, at
no additional cost.
A party shall have the right to cancel any shipment scheduled for delivery
under any acknowledged Purchase Order by written notice of cancellation prior
to the scheduled delivery date if such party is not in default of its
obligations under this Agreement at time of such notice. In any such case,
the canceling party shall remit, within thirty (30) days following
cancellation notice, a cancellation fee according to the following schedule:
6
<PAGE>
Days before scheduled Cancellation fee as
shipment date that percentage of invoice price
cancellation notice received
0 - 30 days 30%
31 - 60 days 10%
61 - or more 0%
5.3 Changes. By mutual agreement an order may be suspended or changes may be
made in quantity, model types, options, place of delivery, methods of shipment,
or other particulars. If any such change causes an increase or decrease in the
price of the PRODUCTS or in the time required for performance, the supplying
party shall promptly notify the requesting party and an equitable adjustment
shall be made. No changes shall be effective unless agreed to in writing by
both parties.
6.0 SERVICES
6.1 PRINTWARE shall provide POLYCHROME and POLYCHROME's present and prospective
customers with SYSTEMS sales and technical support for charge or no charge to
POLYCHROME depending upon the nature of services specified below. Whether for
charge or no charge, PRINTWARE will use best efforts to provide these SERVICES
in a timely and quality manner when requested by POLYCHROME.
7
<PAGE>
6.2 No Charge Services
POLYCHROME shall require SERVICES throughout the continental United States from
PRINTWARE during the initial Term of this Agreement and the price of SYSTEMS
sold to POLYCHROME in the continental United States already includes the cost of
the following SERVICES:
1) PRODUCT lead qualification training for POLYCHROME's sales
organization.
2) The marketing and selling of SYSTEMS (except consumable supplies) to
customer leads provided by POLYCHROME.
3) Achieving SYSTEM acceptance by the end user.
4) Providing computer software support.
5) On-site warranty services.
In the continental United States, upon ninety (90) days' notice, POLYCHROME may
elect not to use the above listed SERVICES (other than warranty services) from
PRINTWARE and PRINTWARE will reduce prices for SYSTEMS sold to POLYCHROME to the
same prices as sold to Polychrome Europe. However, any POLYCHROME order placed
for a customer which had, within the prior one hundred and twenty (120) days,
received a SYSTEM proposal (prepared with PRINTWARE assistance as contemplated
above) will be sold at the price that includes the above-listed SERVICES.
Otherwise, all orders placed will be billed at the price in effect at the time
of order. If, at a later date, POLYCHROME again requests PRINTWARE to provide
such SERVICES, then PRINTWARE will provide these SERVICES on a quality and
timely basis and charge POLYCHROME at the then published rates (which shall be
reasonably based upon PRINTWARE's current rates, attached hereto as SCHEDULE
6.1) or on a time and materials basis.
8
<PAGE>
In Europe, POLYCHROME will not require PRINTWARE's SERVICES (other than
warranty services). PRODUCT prices from PRINTWARE to POLYCHROME in these
territories will not include SERVICES costs. If POLYCHROME requests PRINTWARE
to provide SERVICES, then PRINTWARE will provide these SERVICES on a timely
and quality basis and charge POLYCHROME at the then published rates (which
shall be reasonably based upon PRINTWARE's current rates, attached hereto as
SCHEDULE 6.1), including reasonable expenses of travel from the United States
as necessary.
6.3 It is expressly agreed that in performing SERVICES, PRINTWARE will be
acting as POLYCHROME's limited agent as directly related to the provision of
SERVICES hereunder. In performing SERVICES, PRINTWARE shall conduct itself as
POLYCHROME's fiduciary with regard to customer relations and sensitive
commercial information.
7.0 ADDITIONAL DUTIES OF THE PARTIES
7.1 Each party further agrees to the following:
a) To make available to the other at no charge, in the United States
training for technical support and applications sufficient to foster and promote
sales and service of the SYSTEMS. However, the party requiring training will
pay for all travel and living expenses incurred by its designated trainees.
b) To supply to the other, at no charge, a reasonable amount of sales and
technical support literature in English for all PRODUCTS sold.
c) To advise the other party promptly of any modifications or
improvements to the PRODUCTS and offer them to such other party. The supplying
party agrees that any such
9
<PAGE>
modifications or improvements shall not be installed into PRODUCTS sold to
the ordering party without written consent by the latter, which consent shall
not be unreasonably withheld.
d) As to equipment, to stock and supply spare parts, accessories, options
and supplies for the PRODUCTS sold by it to the other party during the TERM, any
renewals thereof, and for five (5) years after any individual PRODUCT is
discontinued, whichever occurs first, at prices discounted at least 30% from the
then current price list, which is to be provided no later than July 1, 1991.
Spare parts for PRODUCTS shall be shipped, subject to availability, within two
(2) weeks after receipt of order and shall not be subject to any quantity
limitations. Each party intends to stock spare parts adequate to meet routine
needs of its customers, but the supplying party shall ship emergency orders for
spare parts to locations designated by the requesting party by the most
expeditious method by 5:00 P.M. of its local time the day following receipt of
the emergency order.
e) As to consumables (including plates and chemistry), to provide (itself
or through a suitable alternative supplier) a continuing supply for five (5)
years from the expiration of this Agreement.
f) To advertise and otherwise promote the SYSTEMS at its own expense to
an extent determined in its sole discretion.
g) To market the PRODUCTS under its own trade name or trademark and not
to use any trade name, trademark and/or logo of the other party or any which may
be considered confusingly similar to those used by such other party. If a party
requests the other to label PRODUCTS, packaging or any other material for such
requesting party's benefit, the requesting
10
<PAGE>
party shall indemnify and hold the other party harmless from any and all
infringement claims, losses or liabilities arising therefrom.
h) To comply with all applicable laws and regulations relating to the
sale, use, packaging and labeling of the PRODUCTS, including, but not limited to
those related to OSHA, Right to Know legislation, and export/import of goods,
with the cooperation of the other party as set out herein. All taxes, duties,
fees, insurance and like costs incurred in connection with the sale of PRODUCTS
under this Agreement, shall be for the purchasing party's account.
8.0 WARRANTY
8.1 Each party warrants that the PRODUCTS shall conform to the specifications
attached hereto as SCHEDULE 8.1 ("SPECIFICATIONS") and shall be free from
defects in materials or workmanship (a) as to hardware, for ninety (90) days
from installation, (but in no event more than two hundred and seventy (270) days
from the date of shipment), and (b), as to consumables, for twelve (12) months
from date of shipment. Each party disclaims all other warranties, express or
implied, including the implied warranties of merchantability or fitness for a
particular purpose. Warranty will be further subject to the condition that the
PRODUCTS have not been modified or altered without approval of the supplying
party and have been stored, maintained and used with the appropriate processing
equipment and chemistry as directed by the supplying party. A party's sole
obligation on account of breach of warranty is to replace or repair defective
PRODUCT, or at its discretion to issue a credit for same. The providing party
retains the right to inspect any PRODUCT alleged to be defective. In no event
shall either party be liable for any damages, whether direct, indirect,
incidental or consequential.
11
<PAGE>
9.0 PROPRIETARY RIGHTS INDEMNITY
9.1 Each party shall defend (at its expense) and indemnify the other in any and
all suits brought by any third party for infringement of any proprietary right
by reason of any PRODUCT furnished under this Agreement and its use, unless such
infringement is caused by unauthorized modification of same by the receiving
party. Each party shall notify the other promptly of any notice of claim of
infringement and the manufacturing party shall have sole control of the defense
of any action on such claim and all negotiations for its settlement or
compromise. Each party shall reasonably cooperate in the defense of any alleged
infringement as reasonably requested by the other. Neither party shall be
responsible for any costs, expenses or compromises made without the allegedly
infringing party's prior written consent. Obligations under this section shall
survive this Agreement.
10.0 DISTRIBUTION
10.1 In partial consideration of contributions to the development of the
SYSTEMS, including the provision of input of a confidential and proprietary
nature, the fiduciary elements of this Agreement, and POLYCHROME's substantial
investment in building a market for the SYSTEMS in the continental United States
and Europe, PRINTWARE shall manufacture SYSTEMS as an OEM (private label)
exclusively for POLYCHROME among metal lithographic plate manufacturers and
POLYCHROME agrees to purchase its requirements for SYSTEMS exclusively from
PRINTWARE. Notwithstanding the foregoing, PRINTWARE reserves the right to sell
SYSTEMS under its own label directly, as an OEM (other than as qualified above)
and through dealer/distributors.
12
<PAGE>
10.2 The OEM exclusivity set forth in Section 10.1 is further conditioned upon
POLYCHROME's purchase of a minimum of seventy-five (75) SYSTEMS during the
initial two-year term of this Agreement. Loss of exclusivity shall be
POLYCHROME's only liability for failure to meet such minimum.
11.0 NEW PRODUCTS, TECHNOLOGY, AND RIGHT TO MANUFACTURE
In consideration of the close cooperation of the parties in developing the
SYSTEMS, the valuable resources each has expended in such development efforts,
the mutual interest in fostering future developments, and the anticipated
commercial value of same, the parties specifically agree as follows:
11.1 All information disclosed or generated during the course of SYSTEMS
development will be deemed to be CONFIDENTIAL INFORMATION as defined under
Section 1.4 of this Agreement.
11.2 In the event the active collaboration of the parties generates patentable
subject matter, the parties will cooperate in preparation and prosecution of a
patent application (including execution of assignments of rights to each party
equally) and will share expenses equally. However, if one party chooses not to
pursue any application for patent, the other may proceed at its sole expense and
retain sole title, right and interest thereto, but nothing shall relieve either
party of its duty to cooperate in good faith with the other in the
application/prosecution process.
11.3 Any additional PRODUCTS developed as a result of mutual cooperation may be
added to the list of PRODUCTS and shall be sold and bought under this Agreement
for prices to be negotiated in good faith.
13
<PAGE>
11.4 Unless otherwise agreed, each party will bear its own development expenses.
11.5 In the event this Agreement is terminated by POLYCHROME pursuant to Section
13.1 (A) or (B) or PRINTWARE elects to cease manufacturing any PRODUCT,
PRINTWARE shall offer to POLYCHROME the right of first refusal in all
proprietary rights to such PRODUCT (including trade secrets, patents, licenses
or other entitlement) necessary or desirable to make, have made, use and sell
such PRODUCT on mutually agreeable terms and conditions to be negotiated in good
faith. In the event this Agreement is terminated by PRINTWARE pursuant to
Section 13.1(A) or (B), POLYCHROME shall provide to PRINTWARE full authority and
information adequate for PRINTWARE to approach POLYCHROME's vendors to directly
source as an OEM any PRODUCT plate processing equipment, chemistry or supplies.
12.0 EXCLUSIVITY
12.1 In consideration of past and future contributions to development of the
SYSTEMS, the fiduciary elements of this Agreement, and POLYCHROME's substantial
investment in building a market for the SYSTEMS, PRINTWARE agrees that during
the TERM or any renewal thereof, (a) it will purchase all of its requirements
for OPC plates, plate processing equipment and plate processing chemistry from
POLYCHROME, and (b) it will not enter into any OPC sensitized material or metal
plate procurement relationship with any entity that manufactures, markets or
sells printing plates, plate processing equipment or chemistry. If POLYCHROME
is unable to achieve a selling price to PRINTWARE of 41% off the then-current
list price per foot for OPC-D plates by January 1, 1992, PRINTWARE may thereupon
seek to purchase (only) such plates from
14
<PAGE>
third parties (and, in such case, POLYCHROME may also purchase its
requirements pursuant to Paragraph 12.2 from third parties as well).
12.2 In consideration of past and future contribution to the development of
SYSTEMS (including the Models 1440 ES and MP platesetters, the Model 1440 MP
ZipRip raster image processor and associated consumables), the fiduciary
elements of this Agreement and PRINTWARE's substantial investment in SYSTEMS and
market development, during the TERM of this Agreement and any renewal thereof,
POLYCHROME agrees to purchase all its requirements for digital laser platemakers
meeting the specific description in Schedule 1.2 from PRINTWARE. During the
initial two-year TERM of this Agreement only, POLYCHROME agrees to purchase all
its requirements for related IR-sensitive zinc oxide paper plates from
PRINTWARE.
13.0 TERMINATION
13.1 PRINTWARE or POLYCHROME will have the right to immediately
terminate this Agreement and/or any Purchase Orders hereunder if the other
party:
A) makes an assignment for the benefit of creditors, or a receiver, trustee in
bankruptcy or similar officer is appointed to take charge of all or part of its
property, and/or is adjudged bankrupt, or
B) neglects or fails to perform or observe any existing or future material
obligations(s) to the other party (including failure to meet SPECIFICATIONS and
late delivery by more than 30 days) under this Agreement, and such condition(s)
is not remedied within thirty (30) days after written notice thereof has been
given particularizing the default.
15
<PAGE>
13.2 Upon the termination of this Agreement each party shall promptly deliver to
the other all price lists, information, brochures and such other pertinent
documentation of the PRODUCTS or the requirements of customers as it may
possess.
13.3 Neither party shall use or disclose to any other person CONFIDENTIAL
INFORMATION for a period of five (5) years from the termination of this
AGREEMENT.
14.0 MISCELLANEOUS PROVISIONS
14.1 The waiver by either party of a breach of this Agreement by the other shall
not be deemed to be a waiver of any subsequent breach.
14.2 PRINTWARE and POLYCHROME each shall act as principals in all respects
concerning this Agreement and neither of them shall hold itself out as the agent
of the other, except as otherwise provided herein. Each party shall keep the
other free from all expenses and costs other than those that may be specifically
authorized by the other in writing.
14.3 All notices and requests required or authorized hereunder shall be given in
writing either by personal delivery to the party to whom notice is to be given,
or by registered or certified mail, return receipt requested, or by confirmed
facsimile or telex and the date upon which any such notice is received shall be
deemed to be the date of such notice, irrespective of the date appearing
therein. Each notice shall be addressed as follows (or to such other address as
either party may designate pursuant to this paragraph):
16
<PAGE>
If to POLYCHROME:
POLYCHROME CORPORATION
137 Alexander Street
Yonkers, New York 10702
Attn: William R. Palafox
Director, Imaging Systems
If to PRINTWARE:
PRINTWARE, INC.
1385 Mendota Heights Road
St. Paul, Minnesota 55120
Attn: Daniel A. Baker
14.4 In any action by either party to collect the purchase price of the PRODUCTS
or to otherwise enforce any provision of this Agreement, the prevailing party
shall be entitled to reimbursement of its reasonable attorneys' fees. Under no
circumstances shall either party be liable for consequential damages.
14.5 This Agreement shall be governed by, and for all purposes be construed and
deemed to be a contract made under and pursuant to, the laws of the State of
Minnesota (without giving effect to any choice of law provisions thereunder).
14.6 If any provision hereof shall be determined to be illegal or unenforceable,
the remaining provisions of this Agreement shall not be affected thereby and
shall remain in full force and effect.
14.7 Each party hereto shall be relieved of its obligations hereunder to the
extent that fulfillment of such obligations shall be prevented by any occurrence
beyond the reasonable control of the party affected thereby.
14.8 The captions and headings set forth herein are for convenience and
reference only.
17
<PAGE>
14.9 Neither party shall assign this Agreement or any rights or obligations
hereunder without the prior written consent (which consent shall not be
unreasonably withheld in the case of a requested assignment to an affiliate or
subsidiary or to a purchaser or transferee of all or substantially all of the
assets of a party) of the other and any attempt to do so will be null and void.
14.10 This Agreement, including the Schedules attached hereto, contains the
entire agreement between the parties with respect to the subject matter hereof
and may be changed only by written amendment signed by the parties. Any prior
understandings and agreements between the parties are merged herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
PRINTWARE, INC. POLYCHROME CORPORATION
By: /s/ D. V. Mager By: /s/ Donald O. Wheeler
---------------------------------- ---------------------------------
Title: President Title: President
------------------------------- ------------------------------
18
<PAGE>
SCHEDULE 1.2
POLYCHROME PRICE LIST TO PRINTWARE
April 15, 1991
POLYCHROME CONSUMABLES:
1. OPC-D ALUMINUM PRINTING PLATES (1 ROLL/CARTON):
- Specially formulated laser-exposable printing plates on .150mm thick
graphic arts quality aluminum substrate. Capable of 50,000 copy run
lengths.
- Roll sizes:
-9-3/8" x 147 feet
-10" x 147 feet
-11" x 147 feet
-13-3/8" x 147 feet
-14-1/2" x 147 feet
-15" x 147 feet
-15-1/2" x 147 feet
-16" x 147 feet
- Additional sizes available on request. 20 roll minimum order required.
OEM LIST OEM
USA USA EUROPE
--- ---- ------
(US $) (BRITISH
POUNDS
STERLING)
- Per square foot of roll plate material. .[**] . 1.80
- Per square meter of roll plate material . . . . . . . . .[**]
2. OPC-D ALUMINUM PRINTING PLATES (CUT SHEETS, 50 PLATES/PACKAGE):
- Specifically formulated laser-exposable printing plates on graphic arts
quality aluminum substrate.
- Up to 50,000 run length for 0.150mm thickness.
- Up to 100,000 for greater thickness.
OEM LIST OEM
USA USA EUROPE
--- ---- ------
(US $) (BRITISH
POUNDS
STERLING)
- 0.150mm thickness
- Per quare foot . . . . . . . . . . [**] . 1.70
- Per square meter . . . . . . . . . . . . . . . . . [**]
- 0.200mm thickness
- Per square foot. . . . . . . . . . [**] . 1.75
- Per square meter . . . . . . . . . . . . . . . . . [**]
- 0.300mm thickness
- Per square foot. . . . . . . . . . [**] . 1.78
- Per square meter . . . . . . . . . . . . . . . . . [**]
- -------------------
Brackets with asterisks correspond to deleted text that is subject to a
confidential treatment request filed with the Commission pursuant to Rule 406.
CONFIDENTIAL 1
<PAGE>
POLYCHROME CONSUMABLES (CONTINUED):
OEM LIST OEM
USA USA EUROPE
--- ---- ------
(US $) (BRITISH
POUNDS
STERLING)
3. OPC-D LIQUID TONER CONCENTRATE
- Liter. . . . . . . . . . . . . . . . 85.50. 120.00 . 49.36
- 1/2 Liter bottle . . . . . . . . . . 42.75. 60.00
4. OPC-D LIQUID TONER DILUTED 30:1
- Case (6 x 1 qt). . . . . . . . . . . 33.84. 56.40
- 5 Litre containers . . . . . . . . . . . . . . . . . . 16.35
5. OPC-D DEVELOPER
- 5 gallon cubitainer. . . . . . . . . 42.00. 84.93
- 5 Litre containers . . . . . . . . . . . . . . . . . . 5.75
6. POLYCHROME FINISHING GUM
- Gallon . . . . . . . . . . . . . . . 14.18. 26.93
- 5 Litre containers . . . . . . . . . . . . . . . . . . 6.50
POLYCHROME EQUIPMENT:
OEM LIST OEM
USA USA EUROPE
--- ---- ------
(US $) (BRITISH
POUNDS
STERLING)
1. OPC 450 TABLETOP PLATE PROCESSOR:
- Specially designed for Polychrome's OPC plates. Develop, wash, gum, dry
functions.
- Thermostatically-controlled developer heater.
- Variable speed control, manual start/stop.
- With delivery table and stand.
[**] . 8,738. .[**]
2. OPC 450 PLATE PROCESSOR OPTIONS:
- Converts 450 tabletop processor to upright model
- Stand. . . . . . . . . . . . . . . . 205. . 275. . 95
- Delivery Table . . . . . . . . . . . 121. . 162. . 56
3. OPC 450 "SUPER" PLATE PROCESSOR:
- Deluxe version of 450 model. Additional features include: plate
transport system auto sensor start-up, auto stop at end of plate
developing cycle, auto developer and gum replenishment, stand and
delivery table.
[**] . 10,709 [**]
4. OPC 450 PLATE PROCESSOR SPARE PARTS:
- Pending
- -------------------
Brackets with asterisks correspond to deleted text that is subject to a
confidential treatment request filed with the Commission pursuant to Rule 406.
CONFIDENTIAL 2
<PAGE>
JOINT
U.S. SALES OEM
---------- ---
1440 MP PLATESETTER-ZIPRIP SYSTEM. . . . . . . . . . . $[**] $[**]
1440 MP PLATESETTER - 220V.
System includes:
- Computer-to-metal-printing-plate imaging
capability for 1st-generation output
- 1200x1200 dpi resolution
- 98 pica maximum plate width
- 90 pica maximum imageable region
- Variable imaging length
- 40" per minute imaging speed
- Compatible with 1440 MP Plate media
- 120 lip halftone capability
- Liquid toner technology
- Operator key-pad with on-line diagnostics
- Automatic media cutter
- 1440 MP ZipRip
1440 MP PLATESETTER. . . . . . . . . . . . . . . . . . $[**] $[**]
1440 MP ZIPRIP . . . . . . . . . . . . . . . . . . . . $19,995 $12,995
1440 ZIPRIP-TM- OPTIONS
Hard Disk Drives
- 105 MB hard disk . . . . . . . . . . . . . . . $1,350 $880
- 210 MB hard disk . . . . . . . . . . . . . . . $2,225 $1,445
Internal Memory Upgrades
- 4 MB RAM . . . . . . . . . . . . . . . . . . . $1,500 $975
- 16 MB RAM. . . . . . . . . . . . . . . . . . . $6,000 $3,900
1440 MP PRODUCT OPTIONS
Choice of one interpreter:
- Printstyle-TM- (PostScript-Registered
Trademark- compatible). . . . . . . . . . . . . $N/C $N/C
- Printset-TM- (Printware native command set) . . $N/C $N/C
- Autologic-Registered Trademark- ICL subset. . . $1,000 $650
Automatic Converter. . . . . . . . . . . . . . . . . $695 $550
- Automatic converter used to convert (etch)
1440 Zinc Oxide Plates
Optical Mastering System (on-line storage of data;
high-speed access) . . . . . . . . . . . . . . . . . $19,040 $12,375
- IBM-PS/2 model 30 Mastering Host, keyboard,
monitor, SCSI cable, Printware optical master
software, documentation
- Optical Mastering Station: 2-400MB WORM disk
drives, 20MB hard disk
Mass Storage Options:
- 800MB Optical Disk Drive (WORM), 400MB on-line
per side. . . . . . . . . . . . . . . . . . . . $5,000 $3,250
- 800MB Optical Disk Media (400MB per side) . . . $150 $120
Diagnostics Option:
- 1440 Information Terminal for diagnostic
information and operational status of 1440
Platesetter/Image Processor . . . . . . . . . . $550 $385
1440 Platesetter Stand . . . . . . . . . . . . . . . $790 $555
- Sturdy stand designed to hold the 1440 Platesetter.
- -------------------
Brackets with asterisks correspond to deleted text that is subject to a
confidential treatment request filed with the Commission pursuant to Rule 406.
CONFIDENTIAL 3
<PAGE>
PRINTWARE CONSUMABLES OEM
---
1440 Toner (6 x 1 qt.). . . . . . . . . . . . . . . . . . . . $58/box
1440 Dispersant (6 x 1 qt.) . . . . . . . . . . . . . . . . . $25/box
1440 Conversion/Fountain Solution Concentrate
- 4 x 1 concen. gallon/box--mixes 5 liquid gallons
per 1 dry gallon . . . . . . . . . . . . . . . . . . . . $280/box
- 4 x 1 quart/box--mixes 1 liquid gallon in each
container provided . . . . . . . . . . . . . . . . . . . $69/box
1440 Non-ferrocyanide Fountain Solution Concentrate for
magnetic ink users
- 4 x 1 concen. gallon/box--mixes 10 liquid gallons
per 1 dry gallon . . . . . . . . . . . . . . . . . . . . $69/box
1440 Standard Zinc Oxide Plates (2 rolls/carton):
- 8" x 400 feet. . . . . . . . . . . . . . . . . . . . . . $[**]/roll
- 9" x 400 feet. . . . . . . . . . . . . . . . . . . . . . [**]/roll
- 10" x 400 feet . . . . . . . . . . . . . . . . . . . . . [**]/roll
- 11" x 400 feet . . . . . . . . . . . . . . . . . . . . . [**]/roll
- 12" x 400 feet . . . . . . . . . . . . . . . . . . . . . [**]/roll
- 12-9/16" x 400 feet. . . . . . . . . . . . . . . . . . . [**]/roll
- 15" x 400 feet . . . . . . . . . . . . . . . . . . . . . [**]/roll
- additional sizes available upon request
1440 Premium Zinc Oxide Plates (2 rolls/carton):
- Specially formulated laser plates developed for
long-run use with the 1440.
Premium plates offer up to 10,000 run length.
- 8" x 400 feet. . . . . . . . . . . . . . . . . . . . . . $[**]/roll
- 9" x 400 feet. . . . . . . . . . . . . . . . . . . . . . [**]/roll
- 10" x 400 feet . . . . . . . . . . . . . . . . . . . . . [**]/roll
- 11" x 400 feet . . . . . . . . . . . . . . . . . . . . . [**]/roll
- 12" x 400 feet . . . . . . . . . . . . . . . . . . . . . [**]/roll
- 14-9/16" x 400 feet. . . . . . . . . . . . . . . . . . . [**]/roll
- 15" x 400 feet . . . . . . . . . . . . . . . . . . . . . [**]/roll
- additional sizes available upon request
JOINT
U.S. SALES OEM
---------- ---
PRINTWARE TYPEFACE LIBRARY
Downloadable typeface packages (4 typefaces/package):
SPECIFY MAC OR DOS
1 - 5 packages . . . . . . . . . . . . . . . $149/pkg. $105/pkg.
6 - 10 packages. . . . . . . . . . . . . . . $139/pkg. $97/pkg.
11 - 24 packages . . . . . . . . . . . . . . $129/pkg. $90/pkg.
25 - 49 packages . . . . . . . . . . . . . . $119/pkg. $83/pkg.
50 and up. . . . . . . . . . . . . . . . . . $109/pkg. $76/pkg.
FontHelper Installation Kit - PC Screen Font
Generation Program
- Microsoft Windows or Xerox Ventura
Publisher versions - please specify. . . . $50/each $35/each
Using fonts in multi-host environments:
- 35 RESIDENT SCREEN FONTS: for Macintosh
users only . . . . . . . . . . . . . . . . $125 $90
- MAC: screen fonts for downloadable
typeface packages*. . . . . . . . . . . .$50/first pkg $35/first pkg
- PC: character width tables for
downloadable typeface packages.*. . . . .$25/add'l pkg $18/add'l pkg
FontHelper Installation Kit needed to create PC screen fonts (same order)
* SCREEN FONTS/CHARACTER WIDTH TABLES CAN ONLY BE PURCHASED WITH
CORRESPONDING LIBRARY FONT PURCHASE
- -------------------
Brackets with asterisks correspond to deleted text that is subject to a
confidential treatment request filed with the Commission pursuant to Rule 406.
CONFIDENTIAL 4
<PAGE>
SCHEDULE 1.2
PRINTWARE PRICE LIST
April 15, 1991
PLAIN PAPER LASER PRINTERS: JOINT
U.S. SALES OEM
---------- ---
720 IQ PROFESSIONAL II SYSTEM. . . . . . . . . . . . . $13,990 $9,095
STANDARD CONFIG.: 720 IQ Laser Imager (1200x600
dpi plain paper laser imager)
720 IQ ZipRip-TM-
- 4 MB memory
- 68030 microprocessor
- Printstyle interpreter
- 20 MB hard disk with 35
resident typefaces
- Type 1 and Type 3 compatible
- Diskette back-up of 35
resident typefaces (choice of
Mac or DOS media format)
- Serial interface
- Centronics parallel interface
- AppleTalk (for Macintosh
connectivity)
OPTIONS: Memory - 4 MB increments. . . . . $990 $645
Hard Disk:
- 40 MB hard drive . . . . . . $825 $540
- 105 MB hard drive. . . . . . $1,350 $880
- 210 MB hard drive. . . . . . $2,225 $1,445
CONSUMABLES
Color Toner Station . . . . . . . $250 $175
Red, Blue, or Brown
Toner:
- Black (4x250g). . . . . . . . $225 $145
- Red (4x50g) . . . . . . . . . $32 $21
- Blue (4x50g). . . . . . . . . $32 $21
- Brown (4x50g) . . . . . . . . $32 $21
DISCOUNTS FOR VOLUME PURCHASE (EXCLUDES CONSUMABLES) JOINT
U.S. SALES OEM
---------- ---
Equipment Per End User - 4 to 10 systems delivered
within 9 months of the first shipment 5% --
Quantity 1440 systems delivered first contract
year: 25 - 74 -- 12%
75 - 99 -- 20%
100 + -- 23%
Quantity 1440 systems delivered second contract
year: 25 - 74 -- 12%
75 - 99 -- 20%
100 + -- 23%
PRINTWARE, INC. POLYCHROME CORPORATION
By ______________________________ By _______________________________
Title ______________________________ Title _______________________________
Date ______________________________ Date _______________________________
CONFIDENTIAL 5
<PAGE>
SCHEDULE 6.1
1991 STANDARD SERVICES RATES
1. Customer Support Services
- Service Technician
- Hardware or Software Support Specialist
Rates
-----
Labor $95 per hour
Travel time $50 per hour
Plus travel expenses and materials
2. System Engineering Services
- Prospect's systems analysis
- Technical system proposal generation
- Post-sales system integration and acceptance
Rates
-----
Labor $125 per hour
Travel time $65 per hour
Plus travel expenses and materials
<PAGE>
APPENDIX II - 12-17-90
POLYCHROME TONER SPECIFICATION
TONER
% Solid 10%
Storage Temperature Room Temperature (store in a cool dry place)
Dilution TBD
Diluent Isopar H
Operating Temp. Below 100DEG. F
Shelf Life 1 year
Fusing Temperature 120DEG. C
<PAGE>
SCHEDULE 8.1
SPECIFICATIONS
ORGANIC PHOTOCONDUCTOR (OPC)
ELECTROSTATIC ALUMINUM PLATE MATERIAL
CONFIDENTIAL MATERIAL
NON-DISCLOSURE AGREEMENT REQUIRED
<PAGE>
ORGANIC PHOTOCONDUCTOR (OPC)
ELECTROSTATIC ALUMINUM PLATE MATERIAL
1.0 SCOPE
This document establishes the requirements for the lithographic printing plate
to be used in the Printware Model 1440 MP Platemaker.
A lithographic Electrostatic aluminum printing plate consists of an offset
aluminum base and an electrophotographic layer. It is to be imaged in the
Printware Model 1440 MP Platemaker in the following sequence:
Charging
Exposure
Liquid electrostatic toner development
Fusing of toner (heat)
This printing plate will be run on commercially available manual and automatic
offset presses.
For the purpose of periodic audits, characterization and qualification,
evaluations shall be made to the limits of this document and specified reference
documents.
Specified values within this specification without tolerances shall be
considered as nominal values.
Subsequent to imaging on the Platemaker, the plate will undergo a plate
processing which includes decoating, water rinse and coating with protective
gum, all by machine or hand.
3.0 REQUIREMENTS
3.1 Physical
Configuration - Rolls
Width of roll:
Roll Width Rolls per Box
---------- -------------
12 inch 1
TBD inch 1
16 inch 1
Winding - Light sensitive or coated side out
Length - TBD.
Roll Diameter - Not to exceed 7.625 inches.
Core Diameter - 6'' I.D.
Core Width - Roll width + or - 1/64 inch.
Weight - TBD.
Caliper - 5.5 mls.
2
<PAGE>
ORGANIC PHOTOCONDUCTOR (OPC)
ELECTROSTATIC ALUMINUM PLATE MATERIAL
3.2 MECHANICAL
3.2.1 Plate must be machine compatible with the Printware Model 1440 MP
Platesetter and standard plate processing equipment.
3.2.2 Plate must be acceptable to handling under normal press operating
conditions.
3.2.3 Plate must work with conventional acid fountain solutions.
3.3 ELECTRICAL
3.3.1 Exposure Sensitivity: Panchromatic.
3.3.2 Charge acceptance: 35OV.
3.3.3 [**]
3.3.4 Laser light decay: 1 - 2 micro Joule/cm.
3.4 ENVIRONMENTAL
Electrostatic Aluminum Plate Material shall be capable of meeting all functional
and performance requirements of this specification when operated within the
combined environments shown without requiring any adjustments.
AMBIENT TEMP. RELATIVE HUMIDITY ALTITUDE
------------- ----------------- ----------
Storage 65 to 75 F. 40% to 50% 0-8,200 Ft
Operating 50 to 90 F. 30% to 70% 0-8,200 Ft
Transport -40 to 122 F. 0% to 99% 0-40,000 Ft
Store in a cool, dry place in original packaging.
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE
406.
3
<PAGE>
Organic Photoconductor (OPC)
ELECTROSTATIC ALUMINUM PLATE MATERIAL
3.5 PERFORMANCE
3.5.1 The plate shall perform as a lithographic printing plate.
3.5.2 [**]
- [**]
- [**]
- [**]
- [**]
- [**]
3.5.3 [**]
- [**]
- [**]
- [**]
- [**]
- [**]
3.5.4 [**]
3.5.5 Stretch - around press cylinder, less than TBD at TBD impressions.
3.5.6 Daylight Operation - The operation of the plate shall not be
affected by normal room light either before, during or after imaging.
3.5.7 Shelf life - 12 months.
5.0 SHIPPING AND HANDLING - TBD
Preparation for delivery shall include unit packaging capable of protecting the
unit when shipped using a commercial common carrier. PRINTWARE reserves the
right to test packaging to National Safe Transit Association (NSTA) to verify
compliance.
Pallet size - TBD.
Artwork master for box label to be approved by Printware, Inc. (See Figure 1.)
6.0 DESIGN OR PROCESS CHANGES
None.
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
4
<PAGE>
ORGANIC PHOTOCONDUCTOR (OPC)
ELECTROSTATIC PLATE MATERIAL
7. APPROVED VENDOR LIST
Polychrome Corporation
137 Alexander Street
Yonkers, New York 10702
5
<PAGE>
OPC 450 DECOATER
SPECIFICATION
Application:
Processing OPC-F and OPC-D metal plates.
Functions:
Decoat, wash, gum and dry plates to press ready conditions.
Procedure:
Decoater bath "dip tank".
Dwell time 35 seconds
Squeegee Section
Plumbed in wash section with single brush roller, (can be closed loop
with tank fitted), plus drainage.
Squeegee Rollers
Gum Section
Dryer - delivers press ready plate
Plate Sizes:
Maximum width 43cm - 17in
Minimum length 34cm - 13 1/2 in
Thickness: 0.15mm - (.006'') 0.30 (.12'')
Tank Capacities:
Developer 16 litres
Gum 1.5 litres
Throughput Speed:
Variable .3 to 2.2 metres per min
1 - 7 feet per min
Normal setting: Speed 4 (90cm or 3 feet/min)
Temperature Control:
The Decoater solution is thermostatically controlled at a pre-set
optimum of 22 C - 72 F.
6
<PAGE>
Supplies: POWER-Standard 240v 5OHz 13amps single phase from a mains
isolator. Upon request: to suit mains supply in the country of use -
USA - 220v 60HZ
WATER- Input: 15mm copper inlet 5/8''
Outlet:21mm waste 13/16''
Weight: 100 Kgs
7
<PAGE>
[DRAWING DEPICTING OPC MODEL EXTERNAL DIMENSIONS]
A = 1600 D = 200
B = 720 E = 510
C = 1000 DIMENSIONS - m.m.
FIGURE 2. OPC MODEL - EXTERNAL DIMENSIONS
8
<PAGE>
RECOMMENDED OPC 450 SPARE STOCKS (30 MACHINES)
$ $
List DEM
QTY DESCRIPTION PART # (USA) (USA)
30 20 mm x 1A Fuse 041029 1.81 [**]
30 20 mm x 2A Fuse 041037 1.81 [**]
30 20 mm x 3A Fuse 040134 0.00 [**]
30 20 mm x 5A Fuse 041039 1.81 [**]
10 Huco Spider 050113 7.10 [**]
6 Funnel 050036 8.54 [**]
15 3/32 Allen Key
3 Motor SD11 040486 635.51 [**]
5 Tank heater (9" long) 040300 103.19 [**]
5 Mears Thermostat 040053 131.58 [**]
3 Speed Control PCB 041018 481.29 [**]
5 Scrub Motor 040085 335.74 [**]
5 Float Switch 040124 58.74 [**]
15 Bearing Block (top) 600303 15.26 [**]
15 Bearing Block (bottom) 600304 15.26 [**]
30 Bush 050052 14.57 [**]
15 Huco Copier 050067 31.02 [**]
2 Drive Roller (top) 570303 235.70 [**]
2 Drive Roller (bottom) 570304 235.70 [**]
20 S 070164 23.52 [**]
30 Cable Tie 040035 0.37 [**]
6 Compression Spring 050024 4.32 [**]
6 Flange Bearing 050037 62.73 [**]
3 Plate Bearing 050010 49.74 [**]
33 Chain 050014 19.35 [**]
15 Segmented Rollers 100218 4.04 [**]
3 Segmented Roller Shaft 570172 17.68 [**]
10 Safi Top 1/2" 060019 24.22 [**]
6 1012 Circulation Pump 040021 154.97 [**]
3 Dryer Fan 12" 041040 220.30 [**]
6 Relay 8 Pin 041001 50.81 [**]
10 Adaptor 1/2" Safi Tap 060029 9.70 [**]
10 Coupling 1/2" Safi Tap 060113 7.10 [**]
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
9
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date 8/15/90
Page
1440 MP PLATESETTER
SPECIFICATION NUMBER 700201
PRINTWARE, INC. CONFIDENTIAL
ORIGINATOR ENGINEERING QUALITY
10
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
REVISION HISTORY
- ------------------------------------------------------------------------
| REV. | ECO | | | |
| NO. | NO. | REVISION DESCRIPTION | DATE | APP'D |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
- ------------------------------------------------------------------------
11
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
1.0 SCOPE
This document establishes the requirements for the Printware model 1440 MP
platesetter. It contains detailed information on the units performance and a
functional description of each major subsystem. Data concerning physical
characteristics, reliability, maintainability, and environmental requirements is
also provided.
The platesetter shall be capable of full text, graphics, and halftone printing.
For purposes of periodic audits, characterization, and qualification,
evaluations shall be made to the limits of this document and specified reference
documents.
Test methods shall be based on agreed upon procedures.
Specified values within this specification without
tolerances shall be regarded as nominal values.
1.1 Product Description
The 1440 MP platesetter shall image a lithographic, electrostatic printing
plate (paper and metal) from electronic data files via a controller and
raster scan video interface. This direct to plate process eliminates
costly preplate film and camera work. The laser imaging, electrostatic
platesetter shall be designed for use in a wide range of printing
operations requiring quick response, high volume output. The 1440 MP shall
be designed to operate reliably in the heavy-duty cycle environments in
which high volume platesetters typically perform. Figure 1.1 shows the
dimensions of the platesetter.
The platesetter shall use roll fed paper and metal plate material and sheet
fed metal plate material with widths from 8 inches to 16 inches. Plate
exposure shall be by a 780 nanometer wavelength laser diode at a resolution
of 1200 dots per inch. Imaging data shall be input via a raster scan video
interface.
Both plate materials shall be developed using the same liquid toner and are
fixed and dried using a radiant heater.
12
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
The platesetter shall be a compact table top unit having outside dimensions of
35 x 29 x 19.5 inches. Its weight shall be no more than 300 lbs when fully
loaded.
The 1440 MP platesetter shall be designed to ease operator interactions by
providing quick access to the plate material and toner unit, simple straight-
through plate feed and a built-in diagnostic display to report the status of the
platesetter's systems and media path.
1.2 Summary Characteristics
Type: Tabletop, liquid toned, electrostatic, laser
imaging platesetter for paper and metal plates
Maximum plate image area: 15"
Maximum plate size: 16" x 27"
Minimum plate size: 8" x 12"
Processing speed: 40" per minute (0.5"
minimum gap between plates)
Image resolution 1200 dots per inch (dpi)
Media feed: Roll feed for paper and metal plates
Sheet feed for metal plates
Registration: [**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
13
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
Plate length variation: = 1/64" at 22"
Cut sheet tolerance: = 1/64" maximum
Imaging: Raster scan video interface
Exposure: Laser diode, 780 nm
Developing: Liquid toner
Toner Capacity: 6 quarts
Fixing: Radiant heat with forced air
Electrical: 200/220/240VAC, 50/60 Hz
Dimensions: 35" (W) x 29" (D) x 19.5" (H)
Weight: 300 lbs (fully laden)
Operating Environment: Temperature 50 to 104 F,
Humidity 30 to 80% RH non-condensing
1.3 System Description
2.0 DOCUMENTS
2.1 Applicable Documents
1440 MP Platesetter Operator Manual 700XXX
1440 MP Platesetter Service Manual 700XXX
Laser Liquid Electrostatic Plate Material 700007
14
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
UL Standard 775
VDE Standard 0805, 0806
FCC Subpart J Part 15
2.2 Reference Documents
MIL-STD-105D, Sampling Procedures and Tables for Inspection by
Attributes
3.0 REQUIREMENTS
3.1 Electrical Input Power
3.1.1 Voltage
Voltage operating range shall be 185-260 VAC
3.1.2 Frequency
Machine operation per specification (including print
quality):
48-62 Hz
3.1.3 Current
Operating Voltage Frequency (ID Plate Value)
--------------------------------------------------------
200/220/240 VAC 50/60 Hz 6 amps
15
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
3.1.4 Power Dissipation
Operating Voltage Frequency Rated Power
--------------------------------------------------------
200/220/240 VAC 50/60 Hz 1320 Watts
3.1.5 Short Term Power Outage
Loss of power to the machine will not cause hardware
damage.
3.1.6 Power Cord
Platesetter shall be provided with a 3-wire 7.0 ft.
(2.1 m) AC line cord. Cord shall be attached to the
printer and provided with the plug type per the following
table.
Power Option Plug Type
------------ ---------
U.S.
220/240 VAC 60 Hz CEE 7/7
(8XXXXX-XXX)
Europe
220 VAC 50 Hz CEE 7/7
(8XXXXX-XXX)
U.K.
240 VAC 50 Hz BS 1363
(8XXXXX-XXX)
3.1.7 Input Overcurrent Protection
Adequate input overcurrent protection shall be provided to
meet the safety requirements of referenced agencies, section 3.6.
16
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
3.1.8 Caloric Output
The caloric output of the platesetter shall not exceed the
following:
Standby - 194 BTU/hour
Operating - 4500 BTU/hour
3.2 Functional
3.2.1 Print Rate
The print rate shall be 40 inches per minute or two
unique plates per minute of continuous operation
(16" x 19.5" plates). The minimum possible gap between
plates shall be 0.5".
3.2.2 Duty Cycle
Power On Duty Cycle
The platesetter shall be capable of a 100% power
on duty cycle.
Printing Duty Cycle
The platesetter shall be capable of imaging 960
plates in an 8 hour day.
3.2.3 Imaging System
3.2.3.1 Image Scan Frequency
The raster scan shall operate at a frequency of
800 Hz + or - 1 Hz.
17
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
3.2.3.2 Laser
The laser power shall be adjusted separately for paper and
metal. The platesetter will sense which type of plate
material is currently running and automatically select the
correct laser power.
3.2.3.2.1 Laser Head
The laser head shall be fully enclosed except for the
0.125" x 16.5" image aperture. The aperture shall be
visually inaccessible during operation. A safety
interlock shall cut power to the laser when the
platesetter is opened for maintenance or repair.
3.2.3.2.2 Type
Laser Diode, 20 milliwatt
3.2.3.2.3 Wave Length
780 nanometers
3.2.3.2.4 Maximum Printing Zone
The maximum printing zone shall be 15" (381 cm) wide
and to within .125" of the leading and trailing edges.
Refer to Figure 5-2.
3.2.4 Charging Unit
Charger Dual Corona wires
Charging Voltage -3 KVDC to -6 KVDC upper 0 to 4 KVAC
p-p min, 0 to 7.5 KVAC p-p max lower
18
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
Wire thickness 100 m
Corona settings switch platesetter senses whether paper
or metal plate material is
currently running, and internal
setting switch automatically
adjusts the corona voltage to
the correct level for that
material
Access Easily accessible for operator
cleaning
3.2.5 Developing System
The developer and toner particles shall be suspended in
an isopar-H based fluid. Developing shall be accomplished
by means of the PRINTWARE even flow system. The same toner
shall be used for both paper and metal plates.
The toner in the toner reservoir shall be adequately
agitated to prevent the toner particles from settling out.
All key components of the toner station shall be easily
removable for cleaning.
3.2.6 Toner Capacity
The toner capacity shall be 6 quarts (5.7 litres).
3.2.7 Fixing Station
Drying time 2 seconds
Heater single IR quartz lamp, 1000 watt
Fans 4 DC brushless fans
19
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
Control Thermistor controlled
The platesetter senses which type of plate material is
currently running and automatically adjusts the fuser
duty cycle accordingly to fuse the toner evenly across
the plate.
3.2.8 Electronics System
Microprocessor-controlled stepper motors using plate
path sensing feedback
Microprocessor-controlled laser modulation and
scanner functions
3.2.9 Power Supply
Central drawer with switching 200 watt power supply
3.3 Physical
3.3.1 Dimensions
The platesetter shall measure 35"W x 29"D x 19.5"H
(88.9 cm x 73.7 cm x 49.5 cm).
3.3.2 Recommended Installation Clearances
Height: 30"
Width: 30"
Depth: 10"
Refer to Figure 3.1.
3.3.3 Weight
The platesetter shall weigh 300 lbs (82 kg) fully laden.
20
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
3.4 Environmental
The platesetter shall be capable of meeting all functional and reliability
requirements of this specification when operated within the combined
environments shown without requiring any adjustment. No adverse or
degrading effects shall be sustained by the printer under either the
operating or storage/transportation environments shown.
3.4.1 Characteristics
The platesetter shall be designed and manufactured to meet
the following EMI and environmental requirements. While the
platesetter will operate under these conditions, significant
image degradation may occur at the extremes listed. See
media specifications for optimum imaging conditions.
Climatic Conditions
Temperature ( F) Rel. Humidity (%) (non-condensing)
Storage and shipping range -40 to +150 DEG.F
Operating range +50 to +104 DEG.F
30 to 80% RH
non-condensing
Electromagnetic compatibility: The equipment shall comply
with the requirements of:
- FCC Class A Subpart J of Part 15
- VDE Std. 0871 and 0875
Altitude - operating 0-7500 ft (0-2286 m)
Altitude - shipping 0-40,000 ft (0-12,190 m)
3.5 System Safety
21
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
3.5.1 System Grounding
The frame and any metal parts required by safety standard
to be grounded shall be connected to AC frame ground.
3.5.2 Optical Protection
The platesetter shall be provided with warning labels
indicating the presence of a laser beam. Figure 3.2 shows
the system warning labels.
3.6 Agency
3.6.1 Listing Agency Requirements
The platesetter shall be listed with the following agencies
and be so labeled.
Underwriters Lab #El3l666
VDE #G 88040
FCC, Limits for Class A computing devices, Subpart J of
Part 15 of FCC Rules
CDRH, Class 1 Laser Device
U.S. Federal, Federal Performance Standard as projected
under the Radiation Control for Health and Safety Act of
1968, and certification requirement of 21 CFR, Subchapter J.
Figure 3.3 shows the agency labels.
22
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
3.7 Warm-up
3.7.1 Time
Warm-up time shall be less than 2 minutes when operated
within the specified environmental conditions.
3.7.2 Procedure
During the power-up sequence, the platesetter shall
perform self-tests of its major electrical components. Upon
successful completion of the tests, "ON-LINE Ready=-="shall
be displayed on the operator control panel.
4.0 CONTROLS AND INDICATORS
4.1 On/Off Switch
A switch shall be located apart from the control panel, yet convenient
to the operator its function shall be to connect the A/C line voltage
to the internal electronics.
4.2 Operator Control Panel (Control Panel)
The control panel (Figure 4-1) shall include a keypad, digital
display, and control switches.
4.2.1 Keypad
The keypad shall have two keys: a "START/YES" key and a
"SELECT/NO" key.
4.2.2 Display
The display shall be a 16-character LED display.
23
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
4.2.3 Control Switches
It shall be possible to select the following functions and view
the following status information to the platesetter via the
control panel:
See Figure 4.2.
4.3 Print Quality Controls (Internal Panel)
Laser Intensity - this control is analogous to the exposure control on a
plate camera. Its major effect is on character stroke width and background
density.
DC Corona - this control regulates the amount of electrical charge the
plate receives. its major effect is on the image density.
AC Corona - this control also regulates the amount of electrical charge on
the plate. It can be thought of as a fine tuning of the charge. Its major
effect is on the background quality.
Toner Bias - this control regulates a voltage between the upper and lower
applicator plates of the toner station. Its major effect is on background
density although it can also affect image density to a slight degree.
Each of these adjustments shall be made separately for metal and paper.
The 1440 MP will then detect which material is running and set these
parameters accordingly.
4.4 Toner Station Adjustments
Adjustments which can be made on the toner station are the squeegee roller
pressure and the toner flow.
4.5 Print Counter
24
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
The platesetter shall be provided with a non-resettable plate counter read
out from the control panel LED display.
5.0 PERFORMANCE CHARACTERISTICS
5.1 Plate Material
Plate material having exposure sensitivity at 780nm wavelength shall
be used. The paper plate material roll shall be a maximum of 400 feet
(122 M) in length. The metal plate material shall be a maximum of 150
feet (45.7 M) in length.
The flatness of metal plates shall be such that when an 18" plate is
placed coated side up on a flat surface, no part of the plate shall be
more than 2" above the surface. In addition, no waviness of radius
.5" or smaller shall be present.
5.2 Print Quality
Print quality within the area defined by Figure 5.1 shall conform to
the following paragraphs. Print Quality standards apply to new
platesetters with new supplies and properly maintained platesetters
immediately following scheduled preventive maintenance when new
supplies have been installed. The Print Quality standards apply only
to a platesetter operating within the environmental and operational
limits specified for the 1440 MP and the media being used. The 1440
MP shall conform to the specified print quality level in its entirety
with a 95% confidence level.
5.2.1 Image Density
TBD
5.2.2 Resolution
5.2.2.1 Lines
25
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
Minimum resolution on OPC metal plates shall [**].
5.2.2.2
Halftone images and tint patterns will be printed
at 65, 85, 100, 110 and 120 screen lines per inch.
The two required screen angles are 45DEG. and 90DEG.
A tint pattern will be a large uniform area of half
tone dots at a single dot spacing and a single dot
diameter.
The uniformity of halftone images will be specified
only for tint patterns printed with an inked plate
on high gloss paper. The three types of plate
material (metal coils, metal plates and paper
plates) will be used for these test images.
Screen lines per inch: 65, 85, 100, 110
and 120
Dot percentages: 20 and 50
Dimensions of printed area: 8 inch square
The platesetter shall resolve a 120 line screen,
5% to 95% with uniform reproduction of the 120 line
screen tints.
5.3 Plate Size
Plate lengths shall be determined by command over the Raster Scan
Video Interface. Minimum plate length shall be 12 inches, maximum 27
inches. Plate widths shall be determined by the plate material roll
width. The 1440 MP platesetter shall accept any roll width from 8 to
16 inches. The maximum plate size is therefore 16"W x 27"L (40.6 cm x
68.6 cm). The minimum plate size is
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
26
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
8"W x 12"L (20.3 cm x 30.5 cm). The thickness of the metal
plates shall be .006" (.15 mm).
5.4 Print Size
The laser marking mechanism shall allow a maximum image width of 15"
(38.1 cm) with no loss of resolution or quality. The maximum image
length shall be 26.94" (68.4 cm). See Figure 5.1.
5.5 Plate Material Loading
Accurately loading and threading rolls of plate material will be
easily done by the operator.
Sheets of metal plate material will be loaded using a "jogging"
button, which allows the plate to sit in the nip of the feed rollers
until imaging starts. An input tray will adequately support a metal
sheet up to 24" long.
5.6 Plate material Output Tray
The Platesetter shall be equipped with an output tray. The output
tray shall measure approximately 16.5"W x 19"L x 1"D. Tray capacity
shall be approximately 150 plates.
5.7 Out-of-Plate-Material Indication
An out-of-plate-material condition shall be indicated on the LED
display on the control panel when the plate material roll has less
than 65" of plate material remaining.
5.8 Jams
Plate material jams shall be less than 1-1000 when using the specified
material, under specified optimum operating conditions.
27
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
5.9 Consumables
PRINTWARE shall market the following consumables for the 1440 MP
Platesetter:
Toner, which is compatible with both media Plate material,
including both paper and metal Conversion/Fountain solution.
6.0 QUALITY AND RELIABILITY
6.1 Quality
Product design, material selection and Manufacturing workmanship shall
be in accordance with standard industry practices.
6.2 Inspection
6.2.1 Requirements
The indicated inspection criteria shall be used to
determine acceptability of lot quality levels. All
inspection procedures shall be in accordance with
MIL-STD-105D Normal II level. The following acceptance
tests may be performed in accordance with the following
AQLs on a representative lot sample.
Workmanship 4.0 AOL
Mechanical Critical 1.5 AQL
Electrical, Functional,
Parametric and
Print Quality
6.2.2 Definitions
The following definitions shall apply:
28
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
*Workmanship shall be defined as that criteria specified by
PRINTWARE workmanship Standard Number 700000.
*Mechanical, Critical shall be defined as any physical
error, omission, or specification, deviation which affects
assembly, functionality or appearance.
*Electrical, Functional, and Parametric shall be
defined as any defect which results in the inability to
meet specification performance requirements.
*Print Quality shall be defined by this Specification,
section 5.2.
6.3 Reliability
6.3.1 Quality and Reliability Documentation
6.3.2 Reliability Program
PRINTWARE shall maintain an ongoing reliability
program, the scope of which shall be consistent with the
reliability requirements of this specification.
6.4 Design workload
The platesetter is designed for a normal workload of 9.9 hours-day,
5.6 days-week at a 70% printing duty cycle (Duty cycle = print time-
power on time) which will typically generate 20,000 plates per month.
6.5 Mean Time Between Service Calls (MTBSC)
The MTBSC which is realized in the field is a function of the design,
use and maintenance of the platesetter. A filed MTBSC design goal of
[**] months is based upon the design workload specified in section
6.4. The platesetter can be used for higher workloads; however, the
MTBSC will be reduced accordingly. Service calls to complete PM
procedures are not included in this goal.
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
29
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
7.0 SERVICE REQUIREMENTS
7.1 Mean Time To Repair (MTTR)
An MTTR of less than thirty (30) minutes is achieved by the use of
functional packaging and modular design. The enclosure is designed to
provide easy access to all areas of the platesetter. Troubleshooting
is facilitated by the presence of the self test and diagnostic
display indicators. In addition to design features inherent to the
platesetter, the realization of MTTR objectives requires adequate
service training and proper spares provisioning.
7.2 Availability of spare Parts
PRINTWARE shall supply replacement parts for a minimum period of not
less than five years from date of last shipment. Specific
availability requirements shall be referenced in the applicable OEM
purchase agreement.
7.3 Useful Life
The platesetter shall have a useful life of 5 years or 1 million
plates, whichever comes first.
7.4 Preventive Maintenance
PM should be performed according to the Platesetter Preventive
Maintenance Schedule. This schedule is based upon the platesetter
being used in accordance with its design workload. The Preventive
Maintenance Schedule is contained within the 1440 MP Platesetter
Field Service Manual.
Normal operator actions, such as plate material and toner loading,
cutter replacement, and general cleaning are not considered to be in
the PM schedule.
30
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
8.0 RASTER SCAN VIDEO INTERFACE
The platesetter shall be provided with a Raster Scan Video interface.
Refer to Figure 8.1 and Printware specification number 700125 for physical,
electrical, and software interface requirements.
9.0 IDENTIFICATION
9.1 Logo
The logos shall be silkscreened on the front of the platesetter at the
location shown on Figure 1.1.
9.2 Identification Plate
An identification plate shall be securely affixed at the location
shown by Figure 1.1. Figure 9.1 shows the identification plate.
10.0 SHIPPING AND HANDLING
10.1 Delivery
Preparation for delivery shall include unit packaging capable of
meeting National Safe Transit Association Project 1 and carton
marking information as follows:
- Purchase Order Number
- Part Number
10.2 Accessories Shipped With Platesetter
The following specified accessories shall be shipped with the
platesetter:
-Operator Manual
31
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
- Installation procedure
10.3 Shipping Documents
11.0 REFERENCE DOCUMENTATION
11.1 1440 MP Platesetter Illustrated Parts List
Printware Part Number 800TBD
11.2 Cable
PRINTWARE Specification Number 700125
Figures: 1.1 1440 Platesetter
3.1 Recommended Installation Clearances
3.2 Warning Labels
3.3 Agency Labels
4.1 Control Panel
5.1 Right Angle Accuracy Test
5.2 Print Field
8.1 Connector Socket
9.1 I.D. Plates
32
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
[DRAWING DEPICTING THE 1440 PLATESETTER]
FIGURE 1.1 THE 1440 PLATESETTER
[DRAWING DEPICTING 1440 PLATESETTER INSTALLATION
CLEARANCE RECOMMENDATION]
FIGURE 3.1 RECOMMENDED INSTALLATION CLEARANCES
33
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
[DRAWING DEPICTING OPERATOR CONTROL PANEL]
FIGURE 4.1 1440 OPERATOR CONTROL PANEL
34
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
[DRAWING OF CONTROL PANEL FLOW CHART]
FIGURE 4.2 CONTROL PANEL FLOW CHART
35
<PAGE>
Spec No.
PRINTWARE, INC. ENGINEERING Revision
SPECIFICATION Date
Page
[DRAWING ON UPPER LEFTHAND [DRAWING ON UPPER RIGHTHAND
SIDE OF PAGE DEPICTING SIDE OF PAGE DEPICTING PLATE
DIMENSIONS OF PRINT FIELD] IMAGING SPECIFICATIONS]
FIGURE 5.1 MAXIMUM PRINT FIELD FIGURE 5.2 PLATE IMAGING SPECIFICATIONS
[DRAWING ON BOTTOM OF PAGE DEPICTS
EXTERNAL VIEW OF CONNECTOR]
FIGURE 8.1 EXTERNAL VIEW OF CONNECTOR
36
<PAGE>
ZIPRIP TECHNICAL SPECIFICATIONS
PROCESSORS
Motorola 68030 enhanced 32-bit microprocessor running at 25MHz.
Printware proprietary Graphics Processor and dual Pixel Processor ASIC
devices.
MEMORY
RAM: 8MB standard (user upgradeable to 12, 16, 20, 32,
36, 48, 52 and 64MB)
Hard Disk: High speed 20MB fixed disc for font, program
storage and application use. Optional 40MB (and larger) drives
available.
800MB WORM (write once, read many) optical disk option
available.
LANGUAGE COMPATIBILITY/EMULATIONS
PostScript language (via Printstyle)
Printset - Printware native command set
Autologic - ICL
FONT SUPPORT
35 outline masters included
Additional typefaces supported: PostScript Type 1 and Type 3, Printware
library (Bitstream).
Size from 2 - 720 points
INTERFACES
Two (2) RS-232C Serial ports with baud rate selections up to 38.4 kbps
Parallel port (Centronics)
AppleTalk port
RS-422 port
Asynchronous SCSI part
OUTPUT PARTS
Bidirectional 8-bit parallel command/data interface to output device
Bidirectional serial command/data interface to output device
IMAGE OUTPUT
Resolution: 300 dpi to 4000 dpi
Image region: Vertical page addressing to 128K pixels
Horizontal page addressing to 512K pixels
IMAGING SPEED
Call for Seybold test results (pending)
Output bandwidth: Up to 6MB/sec
37
<PAGE>
PHYSICAL DIMENSIONS:
(Printed circuit assembly only) (Standard enclosure)
Width 14 inches 21 inches
Depth 12 inches 15.5 inches
Height 1.25 inches 6.5 inches
POWER REQUIREMENTS
+ 5 Volts, +/- 5% @ 8 amps maximum US and Canada - 115V, 60Hz
+ 1 2 Volts, +/- 10% @ 2 amps maximum International - 220/240V, 50Hz
- 12 Volts, +/- 10% @ 25 milliamps maximum
38
<PAGE>
7/19/90
ADDENDUM TO 1440 MP SPECIFICATION
The following are clarifications and additions to the 1440 MP specification.
This is intended to define the configuration and design goals of the first three
units to be built and delivered to POLYCHROME.
PARAGRAPH
1.1,1.2 Any dimensional changes will be mutually agreed upon in advance.
3.3.1
1.2 The design goal of the 1440 MP is as described in paragraph
1.2. For the three units to be delivered to POLYCHROME the following
image repeatability tolerances will be acceptable:
For plates 12 inches wide and above: +/- .010 true position
For plates less than 12 inches wide: +/- .015 true position
2.1,3.4.1 These three units will have only FCC approval and no other
agency listing
3.6.1 or approval. The first unit to be delivered will not
be tested. FCC testing will be done on the second or third unit. Any
modifications required for FCC compliance will be installed into all
three units at no additional charge.
9.0 POLYCHROME will supply paint definition and artwork for any
logos by 9/1/90.
Figure 4.2 The flowchart for the 1440 PS will not be the same as
the 1440 MP but will be very similar.
Any materials used in the construction of the 1440 MP which are
immersed in toner under normal use will not deteriorate the
performance or life of the toner.
39
<PAGE>
Spec No. 800 953-TAB
PRINTWARE, INC. ENGINEERING Revision A
SPECIFICATION Date 6/21/90
Page
PRINTWARE INC. CONFIDENTIAL
ORIGINATOR ENGINEERING QUALITY
J. Amdahl R. F. Pliml, 1/22/91 8/28
40
<PAGE>
Spec No. 800 953-TAB
PRINTWARE, INC. ENGINEERING Revision A
SPECIFICATION Date 6/21/90
Page
- ------------------------------------------------------------------------
| REV. | ECO | | | |
| NO. | NO. | REVISION DESCRIPTION |DATE |APP'D |
|------|--------|------------------------------------|---------|-------|
| A | 02539 | Initial Release |10/23/90 |116/91|
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
|------|--------|------------------------------------|---------|-------|
| | | | | |
- ------------------------------------------------------------------------
41
<PAGE>
PRINTWARE INC.
1440 PS
ELECTROSTATIC PLATE MATERIAL
PART NUMBER 800953-TAB REV
CONFIDENTIAL MATERIAL
NON-DISCLOSURE AGREEMENT REQUIRED
42
<PAGE>
PRINTWARE
ELECTROSTATIC PLATE MATERIAL
P/N 800953-TAB REV
1.0 SCOPE
This document establishes the requirements for the lithographic printing plate
to be used in the Printware Model 1440es Platemaker.
A lithographic Electrostatic printing plate consists of an offset master base
paper and an electrophotographic layer. It is to be imaged in the Printware
Model 1440es Platemaker in the following sequence:
Charging
Exposure by laser diode
Liquid electrostatic toner development
Heating to dry and fuse the toner
This printing plate will be run on commercially available manual and automatic
offset presses after the plate has been treated with an electrostatic conversion
solution.
For purposes of periodic audits, characterization and qualification, evaluations
shall be made to the limits of this document and specified reference documents.
Specified values within this specification without tolerances shall be regarded
as nominal values.
2.0 DOCUMENTS
Applicable documents, of issue in effect on the date of invitation for bid, form
a part of this specification.
Order of precedence shall be as follows:
2.1 Applicable OEM Purchase Agreement
2.2 This Document
2.3 MIL-STD-105D, Sampling Procedure and Tables for Inspection
by Attributes
43
<PAGE>
PRINTWARE
ELECTROSTATIC PLATE MATERIAL
P/N 800953-TAB REV
3.0 REQUIREMENTS
3.1 Physical
Configuration - Rolls
Width of roll:
Dash No. Roll Width Rolls per Box
-------- ---------- -------------
-001 8 inch 2
-002 9 inch 2
-003 10 inch 2
-004 11 inch 2
-005 12 inch 2
-010 13 inch 2
-008 14 inch 2
-006 14.563 inch 2
-007 15 inch 2
Winding - Infrared sensitive or coated side out.
Length - 400 feet.
Roll Diameter - Not to exceed 7.5 inches.
Core Diameter - 3 3/4" ID, 4 1/4" OD.
Core Width - Roll width = 1/64 inch.
Basis Weight - 110 lb/3300 ft.
[**]
3.2 Mechanical
3.2.1 Plate must be machine compatible with the Printware Model 1440es
Platesetter.
3.2.2 Plate must be acceptable to handling under normal press operating
conditions.
3.2.3 Plate must work with common convertors, both off-line and those
that are on-line with offset presses.
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
44
<PAGE>
PRINTWARE
ELECTROSTATIC PLATE MATERIAL
P/N 800953-TAB REV
3.3 Electrical
3.3.1 Exposure Sensitivity: 780 nm.
3.3.2 Charge acceptance: TBD
3.3.3 Dark decay: TBD
3.3.4 Laser light decay: TBD
45
<PAGE>
PRINTWARE
ELECTROSTATIC PLATE MATERIAL
P/N 800953-TAB REV
3.4 Environmental
Electrostatic Plate Material shall be capable of meeting all functional and
performance requirements of this specification when operated within the combined
environments shown without requiring any adjustments.
Ambient Temp. Relative Humidity Altitude
------------- ----------------- -----------
Storage 65 to 75 F. 40% to 50% 0-8,200 Ft
Operating 50 to 90 F. 30% to 70% 0-8,200 Ft
Transport -40 to 122 F. 0% to 99% 0-40,000 Ft
Store in a cool, dry place in original packaging. Keep in plastic bag when not
in use.
3.5 Performance
3.5.1 The plate shall perform both as a lithographic plate and as a camera
ready copy.
3.5.2 [**]
- [**]
[**]
[**]
- [**]
[**]
- [**]
- [**]
- [**]
3.5.3 [**]
- [**]
- [**]
- [**]
- [**]
- [**]
3.5.4 Run length - 5000 impressions.
3.5.5 Stretch - around press cylinder, short grain orientation for rolls 12"
or wider, long grain orientation for rolls under 12", less than [**]
impressions.
3.5.6 Shelf life - 18 months.
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
46
<PAGE>
PRINTWARE
ELECTROSTATIC PLATE MATERIAL
P/N 800953-TAB REV
4.0 QUALITY
4.1 Quality
Product design, material selection and manufacturing workmanship shall be in
accordance with standard industry practices such that products meet PRINTWARE
INC. incoming quality requirements per paragraph 4.2 of this specification.
PRINTWARE INC. reserves the right to conduct in-plant surveillance of vendor
operations to assure that quality procedures comply with contractual
requirements.
4.2 Incoming Requirements
The indicated Receiving Inspection criteria shall be used to determine
acceptability of lot quality levels. All inspection procedures shall be in
accordance with MIL-STD-105D Normal II level. The following incoming acceptance
procedure indicated in Appendix I shall be performed in accordance with the
following AQL's on a representative lot sample as specified.
Workmanship 0.65 AQL
Mechanical Criteria and Electrical 0.65 AQL
4.3 Identification
Each roll shall have an identification number to identify the order (lot#) and
roll.
xxxx - yyy - zz
| | ||
| | ||________Position across jumbo roll width (A to E)
| | |________M (middle), T (top), B (bottom) as taken from jumbo
| | roll diameter (1-25, where 1 is the top)
| |____________Jumbo roll #
|_______________Order #
The identification number shall be stamped on the end of the roll as close to
the core as possible.
Each box of plate material is to be marked with the order# (lot#) and jumbo
roll#.
47
<PAGE>
PRINTWARE
ELECTROSTATIC PLATE MATERIAL
P/N 800953-TAB REV
5.0 SHIPPING AND HANDLING
Preparation for delivery shall include unit packaging capable of protecting the
unit when shipped using a commercial common carrier. PRINTWARE reserves the
right to test packaging to National Safe transit Association (NSTA) to verify
compliance.
Pallet size - 8" - 11 1/4" 120 rolls:
a. 120 rolls, 60 cartons/pallet
(4 tiers, 15 cartons/tier)
b. 96 rolls, 48 cartons/pallet
(4 tiers, 12 cartons/tier)
12" - 18" rolls:
40 rolls, 20 cartons/pallet
(2 tiers, 10 cartons/tier)
Artwork master for box label to be approved by Printware, Inc. (See Figure 1.)
6.0 DESIGN OR PROCESS CHANGES
Notification of any process changes, design changes or material changes that
will affect fit, form or function, shall be made to PRINTWARE Purchasing
Department prior to shipment of the unit.
The information submitted shall include a complete description of the change and
the effect the change will have on characteristics specified or unspecified of
the unit. The design, materials and manufacturing process upon which approval
was based, shall be the reference to which requested changes will be compared.
7.0 APPROVED VENDOR LIST
S. D. Warren Company, Westbrook, Maine 04092
46
<PAGE>
APPENDIX I - 6/19/90 Updated
IR EP MASTER SPECIFICATION
(TEST ENVIRONMENT)
S. D. WARREN GRADE CODE - 4132
PRINTWARE TECHNICAL SPECIFICATION 800953-TAB
TEST LOCATION(S):
1. S.D. Warren (Westbrook) - QUALITY CERTIFIER
2. Printware - QUALITY MONITOR
TEST CONDITION:
1. Imaging: - Hardware: Printware 1440 Platesettter
- Environment: 67-77 F, 35-55% RH
- Toner: Printware 802217 or 802222 (Specifications in
Appendix II)
- Laser: Calibrated by Printware
- Fuser setting 40% - 80%
- Test Image: Process Control Test Image (Appendix III)
- Laser: Dial - 0 to 10
Top adjustment - 1/4 to 3/4
- Corona: AC - from 8 - 10
DC - full operational range
- Toner Bias: Full operational range
2. Conversion: - Hardware: Prepco TP-16 convertor with a 18
rpm motor option, note that the plate must also be useable with
Deluxe model 105 convertor.
- Solution: Printware Conversion Solution 802239 (no more than 1
week old)
3. Printing: - Press: A.B. Dick 360
- Ink: Multigraphics CS 274-5 with tack range of 16 - 20
- Fountain Solution: Printware Fountain Solution mixed by volume:
19 parts deionized or distilled water
8 parts isopropyl alcohol
5 parts fountain solution
- Stripe: Ink form rollers to plate 3/16"
Plate to blanket 3/16"
Blanket to impression 3/16"
- Speed: 7200 - 8000 impressions per hour
- Paper: Nekoosa 23# or 24# MICR bond 8.5" x 11"
49
<PAGE>
APPENDIX I - 6/19/90 Updated
IR EP MASTER SPECIFICATION
(TEST ENVIRONMENT)
S. D. WARREN GRADE CODE - 4132
PRINTWARE TECHNICAL SPECIFICATION 800953-TAB
- Plate size and press orientation:
a. 12" or wider rolls: 10" x roll width
with the roll width or short grain dimension around the
plate cylinder.
b. under 12" wide rolls: roll width x 15"
with the 15" long grain dimension around the plate
cylinder.
- Blanket wash: AM Blankrola Power Solve
- Environment: 67-77 F, 45-55% RH
TEST SAMPLES:
[**]
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
Revised 6-26-90
50
<PAGE>
Revised 6-20-90
APPENDIX II
PRINTWARE TONER SPECIFICATION
FUNCTIONAL PROPERTIES: 821630 802217
Charge to mass ratio (Kg/Coulomb) [**] [**]
-------- ----------
Total charge (Microcolombs) [**]. [**]
-------- ----------
Conductivity (Picomhos/Cm) [**] [**]
-------- ----------
Optical density [**] [**]
-------- ----------
% Solids [**] [**]
-------- ----------
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
51
<PAGE>
APPENDIX III
[DRAWING DEPICTING PROCESS CONTROL TEST IMAGE]
52
<PAGE>
[PRINTWARE ARTWORK FOR BOX LABEL]
53
<PAGE>
EXHIBIT 10.11
Certain portions of this Exhibit have been deleted and filed separately with the
Commission pursuant to Rule 406. (Spaces corresponding to deleted portions
appear in brackets with asterisks.)
PURCHASE AGREEMENT
This agreement executed as of the first day of January, 1995 by and between
Printware, Inc. ("Seller") and Deluxe Corporation ("Buyer").
1. Sale and Purchase of Products. During the term of this agreement Buyer
agrees to purchase from Seller, upon the terms and conditions set forth
herein, 1440 Electrostatic Plate Material ("plate material") as per
performance specifications referenced in Schedule A entitled "Plate
Material-Premium; Spec No. D802222" and/or "Plate Material - Platinum;
Spec. No. D804444" attached hereto and made a part of this agreement
(Products). It is understood and agreed, that during each calendar year of
the term hereof, Buyer will purchase from Seller [**] rolls of plate
material. Each roll of platinum-plate material will be counted as
1.0625 rolls for calculation of total purchases.
2. Prices. During the term of this agreement, the prices for Products
hereunder shall be as follows:
<TABLE>
<CAPTION>
ROLL PRICE
DELUXE# PRODUCT # DIMENSIONS PER ROLL ORDER LEAD TIME
- ------- --------- ---------- -------- ---------------
<S> <C> <C> <C> <C>
Q201021 802222-105 12" X 400 ft. [**] 3 months in advance of purchase
Q201022 802222-106 14.563" X 400 ft. [**] 3 months in advance of purchase
T201068 804444-105 12" X 425 ft. [**] 3 months in advance of purchase
T201069 804444-106 14.563" X 425 ft. [**] 3 months in advance of purchase
</TABLE>
3. Shipping. Title and risk of loss shall pass to Buyer F.O.B. origin.
Charges for freight from the F.O.B. point, handling and insurance are the
responsibility of Buyer.
4. Term. This agreement shall (unless terminated as provided below) be in
effect for the period from January 1, 1995 through December 31, 1997.
- ---------------
Brackets with asterisks correspond to deleted text that is subject to a
confidential treatment request filed with the Commission pursuant to Rule 406.
<PAGE>
5. Termination. This agreement may be terminated:
a. by either party in the event of a breach of contract, upon thirty (30)
days prior written notice to the breaching party unless the breach is
cured within such 30-day period; or
b. by either party upon written notice effective immediately if the other
party becomes insolvent, files or has filed against it any bankruptcy
petition, or makes any general assignment for the benefit of its
creditors.
6. Warranty. Seller warrants to the Buyer that the Products furnished
hereunder will be in full conformance to the specifications set forth in
Schedule A. Buyer may at its option, return to Seller for replacement or
full credit any Products which do not meet the performance specifications
herein. Seller will complete corrective action within two weeks of initial
contact.
7. Payment. A separate invoice shall be issued for each shipment made under
this agreement. Invoices shall not be issued prior to delivery of the
goods. Payment for each invoice shall be made within thirty (30) days
after date of invoice. No extra charges will be allowed unless
specifically agreed to in writing by Buyer. The payment of an invoice does
not constitute acceptance of the goods covered by the invoice.
8. Force Majeure. Neither party shall be deemed in default if its performance
or obligations hereunder are delayed or become impossible or impractical
due to acts of God, war, fire, earthquake, strike, accident or acts of
civil or military authority. Force Majeure events shall not include delays
in transportation, shortages of material, or delays by suppliers.
9. Amendments. This agreement may be modified only by writings duly signed by
authorized representatives of both parties.
10. Entire Agreement. This agreement, including the exhibits hereto,
constitutes the entire agreement between Seller and Buyer with respect to
the subject matter hereof, and supersedes all prior discussions,
correspondence and understandings between the parties relating thereto.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PRINTWARE, INC. DELUXE CORPORATION
By: /s/ Thomas W. Petschauer By: /s/ Jay B. Skutt
------------------------------------ ------------------------------
Name: Thomas W. Petschauer 11/14/94 Name: Jay Skutt 11/10/94
---------------------------------- ----------------------------
Title: Vice President Finance and Title: Senior Vice President
Administration Manufacturing
--------------------------------- ---------------------------
<PAGE>
SCHEDULE A
- ---------------------------------------------------------------------------
PRINTWARE INC. ENGINEERING SPEC NO. D802222
SPECIFICATION REVISION L
DATE 11/05/93
PAGE 1 of 10
- ---------------------------------------------------------------------------
PLATE MATERIAL-PREMIUM
PRINTWARE INC. CONFIDENTIAL
- ---------------------------------------------------------------------------
ORIGINATOR ENGINEERING MANUFACTURING QUALITY
PETE KENNEDY RICK PLIML WAYNE DREYER ROD CERAR
- ---------------------------------------------------------------------------
<PAGE>
SCHEDULE A
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. D802222
REVISION L
DATE 11/05/93
PAGE 1 of 10
PLATE MATERIAL-PREMIUM
PRINTWARE INC. CONFIDENTIAL
ORIGINATOR PETE KENNEDY
ENGINEERING RICK PLIML
MANUFACTURING WAYNE DREYER
QUALITY ROD CERAR
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. D802222
PAGE 2 of 10
REVISION HISTORY
REV ECO
NO NO REVISION DESCRIPTION DATE APP'D
- --------------------------------------------------------------------------------
E 04367 Change speed spec 11/18/93 Rick Pliml
F 04748 Add surface roughness requirement 06/22/94 Rick Pliml
G 04817 Add curl specification 08/11/94 Rick Pliml
H 04896 Curl changed from 1.5 inch to 2.0 inch 11/10/94 Alex Koss
J 04926 Add specking specification 11/17/94 Alex Koss
K 04942 Raise density spec and change speed 12/14/94 Alex Koss
specification
L 04992 Change background density spec. 1/16/95 Alex Koss
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. D802222
PAGE 3 of 10
PRINTWARE ELECTROSTATIC PLATE MATERIAL
1.0 SCOPE
This document establishes the requirements for the lithographic printing
plate to be used in the Printware model 1440 ES, 1440 ZN, 1440MP and 144OEZ
Platesetters.
This lithographic electrostatic printing plate consists of an offset master
base paper and an electrophotographic layer. It is designed to be imaged in
the Printware model 1440 ES, 1440 ZN, 1440 MP and 1440 EZ Platesetters in the
following sequence.
Charging
Exposure by laser diode
Liquid electrostatic toner development
Heating to dry and fuse the toner
This printing plate will be run on commercially available manual and
automatic offset presses after the plate has been with an electrostatic
conversion solution.
For the purposes of periodic audits, characterization and qualification,
evaluations shall be made to the limits of this document and specified
reference documents.
Specified values within this specification without tolerances shall be
regarded as nominal values.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. D802222
PAGE 4 of 10
2.0 REQUIREMENTS
2.1 PHYSICAL
Configuration - Rolls.
Winding - Infrared sensitive or coated side out.
Length - 400 feet
Roll Diameter - Not to exceed 7.5 inches.
Core Diameter - 3 3/4" ID, 4 1/4 OD
Roll Width - as indicated plus/minus 1/64 inch.
Core Width - Roll Width + 0 - 1/8 inch.
Width of roll; Premium grade:
Dash # Roll Width Rolls Per Box
- ------ ---------- -------------
- -105 12 inch 2
- -106 14.563 inch 2
Basis Weight - 95 lb/3300 ft2, economy grade; 101 lb/3300 ft2, premium grade.
Caliper - [**], economy grade; [**], premium grade.
Surface Roughness - Not to exceed [**] as measured by a Parker Print Surf
tester.
2.2 MECHANICAL
2.2.1 The plate must be compatible with all Printware model 1440
Platesetters.
2.2.2 The plate must be acceptable to handling under normal press operating
conditions.
2.2.3 The plate must work with common converters, both off-line and
those that are on line with offset presses.
- ---------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. D802222
PAGE 5 of 10
2.2.4 Exposure Sensitivity: 780 mm.
2.2.5 Charge acceptance: 660 Volts plus/minus 25 Volts
2.2.6 [**]
2.2.7 Laser light decay level: 30 volts
2.2.8 Conductivity: (using a Kethley cell #6105 at 500 volts)
3.5 x 10- 7 mhos
2.4 OPERATIONAL ENVIRONMENT
Electrostatic Plate Material shall be capable of meeting all functional and
performance requirements of this specification when operated within the
combined environments shown without requiring any formulation adjustments.
Ambient Temp. Rel. Humidity Altitude
------------- -------------- -----------
Storage 65 to 75 F 40% to 50% 0-8,200 ft.
Operation 50 to 90 F 30% to 70% 0-8,200 ft.
Transport -40 to 122 F 0% to 99% 0-40,000 ft.
Store in a cool dry place in original packaging. Keep in plastic bag when
not in use.
2.5 PERFORMANCE
2.5.1 The plate shall perform both as a lithographic plate and as a
camera ready copy.
2.5.2 [**]
-[**]
-[**]
-[**]
-[**]
-[**]
-[**]
-[**]
- ---------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. D802222
PAGE 6 of 10
2.5.3 [**]
-[**]
-[**]
-[**]
-[**]
-[**]
2.5.4 Run length, premium grade = 10,000 impressions
2.5.5 Stretch, premium grade - around press cylinder, short grain
orientation for rolls 12" or wider, long grain orientation
for rolls under 12", [**].
2.5.6 Shelf life = 18 months.
2.5.7 Image density as a function of corona setting - The image density
shall not drop more [**].
2.5.8 Image density with 804115 toner - The image density shall be a
minimum of .98 when using a fresh load of 804115 toner.
2.5.9 Speed Range
Laser Power
(plus/minus 5%) Milliwatts
- -------------------------------------------
Maximum [**]
Optimum [**]
Minimum [**]
The speed of the material shall be referenced in test results and any
customer information by the number indicated on the platesetter operator
panel.
- ---------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. D802222
PAGE 7 of 10
Quality assurance testing must be done only on a properly calibrated
Platesetter per Printware procedure C92-2 for the 1440 ES model or
procedure C92-6 for the 1440 ZN. Laser power variation between calibrated
platesetters will fall within the range indicated.
The plate material is acceptable only if it is found to have either:
a) [**]
or
b) [**]
2.5.10 Curl
As a cut plate, the material shall not curl any more than 2.0 inch. Curl is to
be measured after converting the plate twice thru a Prepco TP 16 converter or
equivalent. Curl is then measured by laying the plate, image up, on a flat
surface table top and measuring between any edge or corner and the table
surface.
2.5.11 Specking
[**]
3.0 QUALITY
3.1 Product design, material selection and manufacturing workmanship shall
be in accordance with standard industry practices such that products meet
Printware Inc. incoming quality requirements per paragraph 3.2 of this
specification. Printware Inc. reserves the right to conduct in plant
surveillance of vendor operations to assure that quality procedures comply
with contractual requirements.
- ---------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. D802222
PAGE 8 of 10
3.2 Incoming requirements
The indicated receiving inspection criteria shall be used to determine
acceptability of lot quality levels. All inspection procedures shall be in
accordance with MIL-STD-105D Normal II level.
3.3 Identification
Each roll shall have an identification number to allow traceability of its
manufacture.
XXXXX - Quality Control Lot #
XX Position across jumbo roll
# of set as taken from jumbo roll diameter
The identification number shall be stamped on the end of the roll as close to
the core as possible.
Each box of plate material is to be marked with the quality control lot #.
4.0 SHIPPING AND HANDLING
Preparation for delivery shall include unit packaging capable of protecting the
unit when shipped using a common commercial carrier. Printware reserves the
right to test packaging to National Safe Transit Association (NSTA) to verify
compliance.
Pallet size - 12" rolls:
a. 36 rolls, 18 cartons/pallet
(3 tiers, 6 cartons/tier)
14 9/16" rolls
24 rolls, 12 cartons/pallet
(2 tiers, 6 cartons/tier)
Artwork master or box label to be approved by Printware, Inc.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. D802222
PAGE 9 of 10
5.0 DESIGN AND PROCESS CHANGES
Notification of any process changes, design changes or material changes that
will affect fit, form or function, shall be made to Printware Purchasing
Department prior to shipment of the unit. The information submitted shall
include a complete description of the change and the effect the change will have
on characteristics specified or unspecified of the unit. The design, materials
and manufacturing process upon which approval was based, shall be the reference
to which requested changes will be compared.
6.0 APPROVED VENDOR LIST
E.J. Gaisser Inc.
49 Liberty Place
Stamford, Connecticut 06902
E.J. Gaisser Grade Code - LT496
(Test Environment)
Printware Technical Specification D802222-TAB
TEST LOCATIONS:
1. E.J. Gaisser (Stamford) - Quality Certifier
2. Printware - Quality Monitor
TEST CONDITION:
1. Imaging: -Hardware: Printware 1440 Platesetter
-Environment: 67-77 F; 35-55% RH
-Toner: Printware 821630 or 804115
-Laser: Calibrated per procedure C92-2 or C92-6
-Fuser setting 40%-80%
-Test Image: Process control test image
-Laser dial: 0 - 999 for ES model
0% - 99% for ZN model<PAGE>
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. D802222
PAGE 10 of 10
2. Conversion: -Hardware: PrepcoTP-16 converter with an 18 rpm
motor option, note that the plate must also be usable with
Deluxe model 105 converter.
-Solution: Printware conversion solution 802239 or
803185-TAB (no more than one week old).
3. Printing: -Press: AM Multigraphics Model 1850
-Ink: AM Multigraphics Electrostatic black ink
-Fountain solution: Printware fountain solution mixed by volume:
25 parts deionized or distilled water
2 parts anhydrous isopropyl alcohol
5 parts conversion solution
-Stripe: Ink from rollers to plate 3/16"
Plate to blanket 3/16"
Blanket to impression 3/16"
-Speed: 6000 - 8000 impressions per hour
-Paper: Mead Chief 11" x 17"
-Plate size and press orientation:
-Blanket wash: AM Blankrola Power Solve
-Environment: 67-77 F, 45-55% RH
TEST SAMPLES: -[**]
-[**]
- ---------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
REVISION D
DATE 9/15/94
PAGE 1 of 13
PRINTWARE, INC.
"PLATINUM"
1440 ELECTROSTATIC PLATE MATERIAL
Part Number 804444-TAB, D804444-TAB
Printware, Inc. CONFIDENTIAL
ORIGINATOR Peter Kennedy
ENGINEERING Alex Koss
MANUFACTURING Joe Dayton
QUALITY Rod Cerar
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 2 of 13
REV ECO
NO NO REVISION DESCRIPTION DATE APP'D
- --------------------------------------------------------------------------------
A 04395 Initial Release 9/15/94 Peter Kennedy
B 05108 Remove reference to "Gold", change
speed spec, change roll length 5/9/95 Alex Koss
C 05122 Change Caliper Spec. to [**] 6/15/95 Alex Koss
D 05313 Change solids and background density 2/19/96 Alex Koss
- ----------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 3 of 13
PRINTWARE ELECTROSTATIC PLATE MATERIAL
1.0 SCOPE
This document establishes the requirements for the lithographic printing plate
to be used in the Printware model 1440 ES, 1440 ZN, 1440 MP and 1440 EX
Platesetters.
This lithographic electrostatic printing plate consists of an offset master base
paper and an electrophotographic layer. It is designed to be imaged in the
Printware model 1440 ES, 1440 ZN, 1440 MP and 1440 EZ Platesetters in the
following sequence.
Charging
Exposure by laser diode
Liquid electrostatic toner development
Heating to dry and fuse the toner
This printing plate will be run on commercially available manual and automatic
offset presses after the plate has been treated with an electrostatic conversion
solution.
For the purposes of periodic audits, characterization and qualification,
evaluations shall be made to the limits of this document and specified reference
documents.
Specified values within this specification without tolerances shall be regarded
as nominal values.
2.0 REQUIREMENTS
2.1 PHYSICAL
Configuration - Rolls.
Winding - Infrared sensitive or coated side out.
Length - 425 feet.
Roll Diameter - Not to exceed 7.5 inches.
Roll Width - as indicated plus/minus 1/64 inch.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 4 of 13
Core Width - Roll Width plus/minus 1/8 inch.
[**]
Width of roll; Platinum grade:
Dash # Roll Width Rolls Per Box
- -102 9 inch 2
- -103 10 inch 2
- -104 11 inch 2
- -105 12 inch 2
- -110 13 inch 2
- -106 14.563 inch 2
- -107 15 inch 2
- -112 15.5 inch 2
- -111 15.75 inch 2
- -109 16 inch 2
Basis Weight - 108 lb/3300 ft2.
[**]
[**]
[**]
2.2 MECHANICAL
2.2.1 The plate must be compatible with all Printware model 1440
Platesetters.
2.2.2 The plate must be acceptable to handling under normal press operating
conditions.
2.2.3 The plate must work with common converters, both off-line and
those that are on line with offset presses.
- ----------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 5 of 13
2.2.4 The plate must be capable of being used with all commercial
automatic press insertion devices.
2.3 MECHANICAL
2.3.1 Exposure Sensitivity: 780 nm.
2.3.2 Charge acceptance: 600 Volts plus/minus 25 Volts
2.3.3 [**]
2.3.4 Laster light decay level: plus/minus 30 Volts
2.3.5 Conductivity: (using a Keithley cell #6105 at 500 Volts)
3.5 x 10-7 mhos
2.4 OPERATIONAL ENVIRONMENT
Electrostatic Plate Material shall be capable of meeting all functional and
performance requirements of this specification when operated within the combined
environments shown without requiring any formulation adjustments.
Ambient Temp. Rel. Humidity Altitude
Storage 65 to 75 F 40% to 50% 0-8,200 ft.
Operation 50 to 90 F 30% to 70% 0-8,200 ft.
Transport -40 to 122 F 0% to 99% 0-40,000 ft.
Store in a cool dry place in original packaging. Keep in plastic bag when not
in use.
2.5 PERFORMANCE
2.5.1 The plate shall perform both as a lithographic plate and as a camera
ready copy.
2.5.2 [**]
- ----------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 6 of 13
- [**]
- [**]
- [**]
- [**]
- [**]
2.5.3 [**]
- [**]
- [**]
- [**]
- [**]
2.5.4 Run length, = 10,000 impressions
2.5.5 Stretch, - around press cylinder, short grain orientation for
rolls 12" or wider, long grain orientation for rolls under 12", [**].
2.5.6 Shelf life = 18 months.
2.5.7 Image density as a function of corona setting - The image density
shall not drop more than [**].
2.5.8 Image density with 804115 toner - The image density shall be a
minimum of [**] when using a fresh load of 804115 toner.
2.5.9 Curl - Less than 1/2" (measured laying flat on a table, from table top
up to corners of plate) after two passes through a Prepco TP-16
converter filled with Printware Conversion Solution (part #803185-001,
803185-001).
2.5.10 Speed Range
Laser Power 50k Potentiometer Equiv. Laser
Exposure Setting Power (plus/minus 5%) Milliwatts
Maximum 800 [**]
- -------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 7 of 13
Laser Power 50k Potentiometer Equiv. Laser
Exposure Setting Power (plus/minus 5%) Milliwatts
Optimum 600 [**]
Minimum 500 [**]
The speed of the material shall be referenced in test results and any customer
information by the number indicated on the potentiometer dial.
The equivalent laser power is given here as reference and assumes that the
Platesetter laser power has been calibrated per Printware procedure C92-2 for
the 1440 ES model or procedure C92-6 for the 1440 ZN. Laser power variation
between calibrated platesetters will fall within the range indicated. Quality
assurance testing must be done only on a properly calibrated Platesetter.
The plate material is acceptable only if the image quality is acceptable (plate
per paragraph 2.5.2 and press per paragraph 2.5.3) over a laser power range of
[**].
Optimum speed shall be determined by imaging the Printware process control plate
and inspecting the resolution target for "even eight's". The laser power
exposure is properly adjusted when the forward eight pixel line (black on white)
is equal in width to the reverse eight pixel line (white on black). Line width
can be accurately measured using an optical comparitor with .0005 gradations
such as the Digiscope available from Byers Graphic Imaging Systems. When the
proper exposure is attained, the plate material speed is indicated on the laser
power potentiometer dial.
2.6 ENVIRONMENTAL
2.6.1 Waste Disposal - All materials making up the plate material shall
be non-toxic, capable of normal disposal and shall be biodegradable
to the maximum extent possible.
2.6.2 Ozone Protection - No ozone depleting chemicals shall be used
either in the plate or in the process used to mare the plate material.
- --------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 8 of 13
3.0 QUALITY
3.1 Product design, material selection and manufacturing workmanship shall
be in accordance with standard industry practices such that products meet
Printware Inc., incoming quality requirements per paragraph 3.2 of this
specification. Printware Inc. reserves the right to conduct in plant
surveillance of vendor operations to assure that quality procedures comply
with contractual requirements.
3.2 Incoming requirements
The indicated receiving inspection criteria shall be used to determine
acceptability of lot quality levels. All inspection procedures shall be in
accordance with MIL-STD-105D Normal II level.
3.3 Identification
Each roll shall have an identification number to allow traceability of its
manufacture.
XXXXX - Quality Control Lot #
XX Position across jumbo roll
# of set as taken from jumbo roll diameter
The identification number shall be stamped on the end of the roll as close to
the core as possible.
Each box of plate material is to be marked with the quality control lot #.
4.0 SHIPPING AND HANDLING
Preparation for delivery shall include unit packaging capable of protecting the
unit when shipped using a common commercial carrier. Printware reserves the
right to test packaging to National Safe Transit Association (NSTA) to verify
compliance.
Pallet size - 8 - 11 rolls:
80 rolls, 40 cartons/pallet
(4 tiers, 10 cartons/tier)
12"-18" rolls:
40 rolls, 20 cartons/pallet
(2 tiers, 10 carton/tier)
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 9 of 13
D part number 12" rolls
36 rolls, 18 cartons/pallet
(3 tiers, 6 cartons/tier)
14 9/16" rolls
24 rolls, 12 cartons/pallet
(2 tiers, 6 cartons/tier)
A carton should contain only one lot number of plate material.
A skid should be packed with no more than two lot numbers total.
Artwork master for box label to be approved by Printware, Inc.
5.0 DESIGN AND PROCESS CHANGES
Notification of any process changes, design changes or material changes that
will affect fit, form or function, shall be made to Printware Purchasing
Department prior to shipment of the unit. The information submitted shall
include a complete description of the change and the effect the change will have
on characteristics specified or unspecified of the unit. The design, materials
and manufacturing process upon which approval was based, shall be the reference
to which requested changes will be compared.
6.0 APPROVED VENDOR LIST
E.J. Gaisser Inc.
49 Liberty Place
Stamford, Connecticut 06902
Digital Laser Plate Specification
(Test Environment)
Printware Technical Specification 804444-TAB
TEST LOCATIONS:
1. E.J. Gaisser (Stamford) - Quality Certifier
2. Printware - Quality Monitor
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 10 of 13
TEST CONDITION:
1. Imaging: - Hardware: Printware 1440 Platesetter
- Environment: 67-77 F; 40-50% RH
- Toner: Printware 804115
- Laser: Calibrated per procedure C92-2 or C92-6
- Fuser setting 40% - 80%
- Test Image: Process control test image
2. Conversion: - Hardware: Prepco TP-16 converter with an 18
rpm motor option, note that the plate must also be usable with
Deluxe model 105 converter.
- Solution: Printware conversion solution 802239,
803185-TAB, 806161-TAB or 806450-TAB (no more than one week old).
3. Printing: - Press: AM Multigraphics Model 1850
- Ink: Multigraphics PS-274 Electrostatic black ink
- Fountain solution: Printware fountain solution mixed by volume:
25 parts deionized or distilled water
2 parts anhydrous isopropyl alcohol
5 parts conversion solution
- Stripe: Ink form rollers to plate 3/16"
Plate to blanket 3/16"
Blanket to impression 3/16"
- Speed: 6000 - 8000 impressions per hour
- Mead Chief Paper 11" x 17"
- Blanket wash: AM Blankrola Power Solve
- Environment: 67-77 F, 40-50% RH
TEST SAMPLES:
[**]
- ------------------------
BRACKETS WITH ASTERIKS CORRESPOND TO DELETED TEXT THAT IS SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION PURSUANT TO RULE 406.
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 11 of 13
MATERIAL SAFETY DATA SHEET
5/30/89
SECTION I - IDENTIFICATION
PRINTWARE 1440 PLATESETTER PLATE MATERIAL
Printware, Inc.
1270 Eagan Industrial Road
Eagan, MN 55121
(612) 456-1400
SECTION II - HAZARDOUS INGREDIENTS/IDENTITY INFO.
Hazardous Components CAS# OSHA PEL ACGIH TLV %
Zinc Oxide 1314-13-2 10 mg/m3 10 mg/m3 17%
Total Dust Respirable
Non-Hazardous Components
Paper N/A N/A N/A 80%
Acrylic Polymer N/A N/A N/A 3%
Disclaimer:
As the conditions or methods of use are beyond our control, we do not assume any
responsibility and expressly disclaim any liability for any use of the material.
Information contained herein is believed to be true and accurate, but all
statements or suggestions are made without any warranty, expressed or implied,
regarding the accuracy of the information, the hazards connected with the use of
the material or the results to be obtained from the use thereof.
SECTION III - PHYSICAL DATA
Boiling Pont: N/A
Vapor Pressure (mm Hg): N/A
Vapor Density (Air = 1): N/A
Specific Gravity (H20 = 1): N/A
Melting Point: N/A
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 12 of 13
Evaporation Rate: N/A
Solubility in water: Complete
Appearance and Odor: Paper odorless
SECTION IV - FIRE AND EXPLOSION HAZARD DATA
Flash Point: N/A
Flammable Limits: N/A LEL: N/A UEL: N/A
Extinguishing Media: Water
Special Fire Fighting Procedures: Routine for paper products
Unusual Fire and Explosion Hazards: None
SECTION V - REACTIVITY DATA
Stability: Stable
Hazardous Polymerization: Will not occur
Conditions to Avoid: N/A
SECTION VI - HEALTH HAZARD DATA
Health Hazards (Acute and Chronic): Prolonged inhalation of high levels of free
fine zinc oxide dust may produce symptoms known as "oxide chills" which have no
recognized complications. (The zinc oxide in this product as supplied is not in
free form)
Carcinogenicity: NTP: No IARC: No OSHA Regulated: No
Signs and Symptoms of Exposure: None
Medical Conditions Aggravated by Exposure: None
Emergency First Aid Procedures: None
SECTION VII - PRECAUTIONS FOR SAFE HANDLING AND USE
Steps to be taken in case material is released or spilled: N/A
Waste Disposal Method: Standard Paper Disposal
Precautions to be taken in handling and storage: Store in original packaging in
a cool area (68 -72 F) 40-50% RH
<PAGE>
PRINTWARE, INC.
ENGINEERING SPECIFICATION
SPEC NO. 804444
PAGE 13 of 13
SECTION VIII - CONTROL MEASURES
Respiratory Protection: None
Ventilation: Local Exhaust - N/A Mechanical - None
Protective Gloves: None
Eye Protection: None
Other: None
Work/Hygienic Practices: Standard for handling paper
<PAGE>
AMENDMENT TO THE PURCHASE AGREEMENT
This amendment to the Purchase Agreement is made the 12th day of December, 1995,
by and between Printware, Inc. ("Seller") and Deluxe Corporation ("Buyer") and
replaces Paragraph 1 of the Purchase Agreement of January 1995.
1. SALE AND PURCHASE OF PRODUCTS. During the term of this agreement Buyer
agrees to order from Seller, upon the terms and conditions set forth
herein, 1440 Electrostatic Plate Material ("plate material") as per
performance specifications referenced in Schedule A entitled "Plate
Material-Premium; Spec. No. D802222" and/or "Plate Material-Platinum; Spec
No. D804444" attached hereto and made a part of this agreement (Products).
It is understood and agreed, that during each calendar year of the term
hereof, Buyer will order from Seller not less than 30,000 rolls of plate
material. Each roll of platinum-plate material will be counted at 1.0625
rolls for calculation of total orders.
Except as set forth above, all terms and conditions of the Purchase Agreement
shall remain unchanged and in full force and effect.
PRINTWARE, INC. DELUXE CORPORATION
BY: /s/ Thomas W. Petschauer BY: /s/ Jay B. Skutt
------------------------------------ ------------------------------
NAME: Thomas W. Petschauer NAME: Jay Skutt
---------------------------------- ----------------------------
TITLE: Executive Vice President Finance TITLE: Chief Procurement
and Chief Financial Officer Officer
--------------------------------- ---------------------------
DATE: 12/15/95 DATE: 12/12/95
---------------------------------- ----------------------------
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-3629 of Printware, Inc. (the Company) on Form S-1 of our report dated
February 2, 1996 (April 25, 1996 as to the first paragraph of Note 3), appearing
in the Prospectus, which is part of this Registration Statement. We also consent
to the reference to us under the headings "Selected Financial Data" and
"Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of the Company, listed in
Item 16(b); this financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
June 27, 1996
