<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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 MAY 13, 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.
[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. 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. In 1993 the
Company began to focus exclusively on Computer-to-Plate products and phased out
its other products. This resulted in a reduction in revenue but a significant
improvement in profitability in 1994 and 1995.
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--Customers" 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. 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."
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. 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 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."
5
<PAGE>
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. There
can be no assurance that such measures will be effective or afford the Company
any meaningful competitive advantage. 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."
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
6
<PAGE>
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............................ $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(1)............. -- -- -- 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(2):
Income (loss) before extraordinary
item............................. $ .09 $ .09 $ .48 $ .17 $ (.33) $ (.84) $ .03
---------- ---------- ---------- ---------- ----------- ----------- -----------
---------- ---------- ---------- ---------- ----------- ----------- -----------
Net income (loss)(1).............. $ .09 $ .09 $ .48 $ .21 $ (.33) $ (.84) $ .03
---------- ---------- ---------- ---------- ----------- ----------- -----------
---------- ---------- ---------- ---------- ----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding(2)... 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) 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.
(2) 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 focused
exclusively on Computer-to-Plate and phased out other product lines, resulting
in a reduction in revenues but an improvement in profitability. The improvement
in profitability came from elimination of low-margin product lines, such as
laser printers, and elimination of engineering and sales expenses associated
with non-Platesetter products. 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.
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.
11
<PAGE>
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............................ 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 revenues in 1996 were $1.83 million, an increase of
1% over first-quarter 1995 revenues of $1.81 million. This was the sixth
consecutive quarter in which revenues increased from the corresponding quarter
in the previous year. 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. There were laser printer sales and unusually strong
raster image processor sales in the first quarter of 1995 which did not recur in
1996.
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 were unusually high in the 1995 period because
of expenses associated with a dispute with A.B. Dick Company.
12
<PAGE>
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. Revenues were up 27% to $8.39 million in 1995 from $6.63 million
in 1994, primarily due to a sharp increase in unit sales of the Model 3240
Platesetter line. 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 revenue in 1995, up from 9% in 1994. Supplies
revenues were up 7%. Laser printer revenues were down considerably in 1995 as
the Company continued to phase out that product line to focus on
Computer-to-Plate products.
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 $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
13
<PAGE>
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. Revenues declined to $6.63 million in 1994 from $7.30 million in
1993. This decline was caused by reduced sales of laser printers and film
imagers due to 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.
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 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.
14
<PAGE>
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 for the foreseeable future.
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
16
<PAGE>
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.
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 exploring the feasibility of incorporating laser scanners based on
other technologies into its products.
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.
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CUSTOMERS
The Company has sold over 300 Platesetters to date, which it believes is
more than any other single competitor. Printware's customers include a number of
leading 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."
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. The Company also sells service and
proprietary supplies (primarily digital plate material for the Model 1440
product line).
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.
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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 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.
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
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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. A significant
advertising campaign, which Mitsubishi began in several industry trade magazines
in late 1994, is raising product awareness for the Model 3240. 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 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.
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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.
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
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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 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. 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 also has non-exclusive
rights to raster image processing software used in the ZAPrip, to fonts used in
the ZipRip and to the plate processor module used in the Model 3240. The Company
has the exclusive right to sell the proprietary plate materials made by its
suppliers. All of the product supply agreements to which the Company is a party
can be canceled by either party under certain circumstances. Such cancellation
would seriously jeopardize the Company's ability to provide products that are
critical to the Company's revenues.
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SUPPLIERS
The Company has a number of single source suppliers for materials that are
critical to production of its products. These include the suppliers of the
Company's Model 1440 paper plate material, Model 1440 metal plate material,
Model 1440 liquid toner and certain key components used in Model 1440
Platesetters, Model 3240 Platesetters and/or ZAPrip raster image processors. Any
significant interruption of supply from any of these vendors would have a
material adverse effect on the Company.
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.
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.
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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.
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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.
25
<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.
26
<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.
27
<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.
28
<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.
29
<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)............................... 0 * 0 0 *
Charles M. Osborne(7)............................. 0 * 0 0 *
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%
(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) Mr. Twogood and Mr. Osborne are officers of Deluxe.
(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.
30
<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
31
<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.
32
<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 have agreements with the Company under which
the shareholders have the right to have their shares of Common Stock included in
future registration statements filed by the Company under the Securities Act.
33
<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
34
<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 to
indemnify each other against certain liabilities, including liabilities under
the Securities Act. 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.
35
<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.
36
<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 (Note 2)...................................... 743,094 773,740 507,942
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 (Note 1, 7, 8 and 10).............................. $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............................................. 30,646 (166,160) (265,798) 66,497 696,437
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:
Trade...................................... $ 765,565 $ 795,538 $ 528,463
Employees.................................. 2,442 3,115 1,017
Allowance for doubtful accounts............ (24,913) (24,913) (21,538)
---------- ---------- ----------
Total receivables........................ $ 743,094 $ 773,740 $ 507,942
---------- ---------- ----------
---------- ---------- ----------
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 the amount of deferred tax benefit expected to be realized.
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. 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 revenues............................... $706,000 $802,000 $3,498,000 $2,851,000 $2,948,000
Total purchases of production services....... 1,000 1,000 44,000 91,000 210,000
Accounts receivable.......................... 302,000 241,000 63,000 232,000 200,000
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................................................................ 24
Certain Transactions...................................................... 29
Principal and Selling Shareholders........................................ 30
Description of Capital Stock.............................................. 31
Shares Eligible for Future Sales.......................................... 32
Underwriting.............................................................. 34
Experts................................................................... 35
Legal Matters............................................................. 35
Additional Information.................................................... 36
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
------------------
[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............................................ *
Accounting fees and expenses....................................... *
Blue Sky fees and expenses......................................... *
Transfer agent and registrar fees.................................. *
Printing expenses.................................................. *
Miscellaneous...................................................... *
---------
Total.......................................................... $
---------
---------
</TABLE>
- ---------------------------
* To be filed by amendment
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>
DATE TYPE OF SALE NO. SHARES PRICE
- --------- -------------------- ------------- ---------
<S> <C> <C> <C>
04/21/93 Trade for services 587 $ 3.00
09/01/93 Trade for services 300 3.00
11/26/93 ISO exercise 650 3.00
11/26/93 ISO exercise 50 3.00
12/27/93 ISO exercise 50 3.00
01/22/94 Trade for services 2,500 3.00
02/11/94 ISO exercise 50 3.00
03/14/94 ISO exercise 50 3.00
03/18/94 Trade for services 300 3.00
08/30/94 ISO exercise 25 3.00
10/28/94 ISO exercise 25 3.00
12/29/94 Trade for debt 5,500 3.00
01/20/95 ISO exercise 75 3.00
01/22/95 Trade for services 2,500 3.00
03/24/95 ISO exercise 262 3.00
09/29/95 ISO exercise 25 3.00
12/01/95 ISO exercise 375 3.00
01/22/96 Trade for services 2,500 3.00
02/28/96 ISO exercise 200 3.00
</TABLE>
The Company believes that all transactions were exempt pursuant to Section
4(2) of the Securities Act of 1933.
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.
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)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
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>
- ---------------------------
* To be filed by amendment
(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
All 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.
(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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this 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 13th day of May, 1996.
PRINTWARE, INC.
By: /s/ Daniel A. Baker
-----------------------------------------
Daniel A. Baker, Ph.D.,
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
Each person whose signature appears below hereby constitutes and appoints
Daniel A. Baker and Thomas W. Petschauer, and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his or
her behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this Registration Statement on Form S-1 and to file
the same, with all exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission under the Securities Act
of 1933, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as each might or could do in person, hereby ratifying and confirming each act
that said attorneys-in-fact and agents may lawfully do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------ ------------
<C> <S> <C>
/s/ Daniel A. Baker President, Chief
------------------------------------- Executive Officer and
Daniel A. Baker, Ph.D. Director
Executive Vice President
/s/ Thomas W. Petschauer and Chief Financial
------------------------------------- Officer (principal
Thomas W. Petschauer financial and
accounting officer)
/s/ Allen L. Taylor
------------------------------------- Director
Allen L. Taylor, Ph.D.
/s/ Donald V. Mager
------------------------------------- Director
Donald V. Mager
/s/ Brian D. Shiffman
------------------------------------- Director and Secretary
Brian D. Shiffman
/s/ Jerry K. Twogood
------------------------------------- Director
Jerry K. Twogood
/s/ Charles M. Osborne
------------------------------------- Director
Charles M. Osborne
</TABLE>
II-4
<PAGE>
EXHIBIT 1.2
1,600,000 Shares(1)
PRINTWARE, INC.
Common Stock
SELECTED DEALERS' AGREEMENT
Gentlemen:
1. R.J. Steichen & Company and the other Underwriters named in the
Prospectus referred to below (the "Underwriters"), acting through us as
Representative, have severally agreed to purchase, subject to the terms and
conditions set forth in the Underwriting Agreement referred to in the Prospectus
(the "Underwriting Agreement"), from Printware, Inc., a Minnesota corporation
(the "Company"), and certain selling shareholders of the Company named in the
Underwriting Agreement (the "Selling Shareholders"), an aggregate of 1,600,000
shares (the "Firm Shares") of the Company's common stock, $.01 par value per
share ("Common Stock"). Of the Firm Shares, 1,000,000 Firm Shares are to be
sold by the Company and 600,000 Firm Shares are to be sold by the Selling
Shareholders. In addition, the several Underwriters have been granted an option
to purchase from the Company and the Selling Shareholders up to an aggregate of
an additional 240,000 shares of Common Stock (the "Option Shares") to cover
overallotments in connection with the sale of the Firm Shares. The Firm Shares
and the Option Shares are hereinafter collectively called the "Shares." The
Shares and the terms upon which they are to be offered for sale by the several
Underwriters are more particularly described in the enclosed Prospectus.
2. The Shares are to be offered to the public by the several Underwriters
at a price of $_______ per share (hereinafter called the "Public Offering
Price") and in accordance with the terms of offering set forth in the
Prospectus.
3. Subject to the terms and conditions hereof, some or all of the several
Underwriters are severally offering a portion of the Shares for sale to (i)
certain dealers which are members of the National Association of Shares Dealers,
Inc. (the "NASD") and which agree to comply with all applicable rules of the
NASD, including, without limitation, the NASD's Interpretation with respect to
Free-Riding and Withholding and Section 24 of Article III of the NASD's Rules of
Fair Practice, and (ii) foreign dealers or institutions ineligible for
membership in the NASD which agree (x) not to resell the Shares (A) to
purchasers in, or to persons who are nationals or residents of, the United
States of America, or (B) when there is a public demand for the Shares, to
persons specified as those to whom members of the NASD participating in a
distribution may not sell, and (y) to comply, as though such foreign dealer or
institution were a member of the NASD, with such Interpretation with respect to
Free-Riding and Withholding and with Sections 8, 24, 25 (as such Section applies
to foreign non-members) and 36 of such Rules of Fair Practice (such dealers and
institutions agreeing to purchase Shares hereunder being hereinafter referred to
as "Selected Dealers") at the Pubic Offering Price less a selling
________________________
(1) Plus an option to purchase up to 240,000 additional shares to cover
over-allotments.
<PAGE>
concession of $________ per share, payable as hereinafter provided, out of which
concession an amount not exceeding $______ per share may be reallowed by
Selected Dealers to members of the NASD or to foreign dealers or institutions
ineligible for membership therein which agree as aforesaid. This offering is
made subject to delivery of the Shares and their acceptance by us, to the
approval of all legal matters by counsel and to the terms and conditions herein
set forth. Some or all of the Underwriters may be included among the Selected
Dealers. Each of the Underwriters has agreed that, during the term of this
Agreement, it will be governed by the terms and conditions hereof whether or not
such Underwriter is included among the Selected Dealers.
4. We, acting as Representative, and with our consent, any Underwriter,
may buy Shares from, or sell Shares to, any Selected Dealer, or any other
Underwriter, and any Selected Dealer may buy Shares from, or sell Shares to, any
other Selected Dealer or any Underwriter at the Public Offering Price less all
or any part of the concession. We, acting as Representatives, after the initial
public offering, may change the Public Offering Price, the concession and the
reallowance.
5. If, prior to the termination of this Agreement, we purchase or
contract to purchase, in the open market or otherwise, for the account of any
Underwriter, any Shares purchased by you hereunder, you agree to pay us on
demand for the accounts of the several Underwriters an amount equal to the
concession on such Shares. In addition, we may charge you with any transfer
taxes and broker's commissions or dealer's mark-up paid in connection with such
purchase or contract to purchase.
6. We shall act on behalf of the Underwriters under this Agreement and
shall have full authority to take such action as we may deem advisable in
respect of all matters pertaining to the public offering of the Shares.
7. If you desire to purchase any of the Shares, your subscription should
reach us promptly by telephone or telegraph at the offices of R.J. Steichen &
Company, 801 Nicollet Mall, Suite 1100, Minneapolis, Minnesota 55402, and we
will use our best efforts to fill the same. We reserve the right to reject all
subscriptions, in whole or in part, to make allotments and to close the
subscription books at any time without notice. The Shares allotted to you will
be confirmed, subject to the terms and conditions of this Agreement.
8. The privilege of purchasing the Shares is extended to you only on
behalf of the several Underwriters, if any, that may lawfully sell the Shares to
dealers in your state.
9. Any of the Shares purchased by you under the terms of this Agreement
may be immediately reoffered to the public in accordance with the terms of the
offering thereof set forth herein and in the Prospectus, subject to the
securities laws of the various states. Neither you nor any other person is or
has been authorized to give any information or to make any representations in
connection with the sale of the Shares other than as contained in the
Prospectus.
10. This Agreement will terminate when we shall have determined that the
public offering of the Shares has been completed and upon telegraphic notice to
you of such
-2-
<PAGE>
termination, but, if not previously terminated, this Agreement will terminate
at the close of business on the thirtieth (30th) full business day after the
date hereof; provided, however, that we shall have the right to extend this
Agreement for an additional period or periods not exceeding thirty (30) full
business days in the aggregate upon telephonic notice to you. Promptly after
the termination of this Agreement, there shall become payable to you the
selling concession on the number of Shares that you shall have purchased
hereunder and that shall not have been purchased or contracted for (including
certificates issued upon transfer) by us, in the open market or otherwise
(except pursuant to Section 12 hereof), during the term of this Agreement for
account of one or more of the several Underwriters.
11. For the purpose of stabilizing the market in the Common Stock of the
Company, we have been authorized to make purchases and sales thereof, in the
open market or otherwise, and, in arranging for sale of the Shares, to over-
allot.
12. You agree to advise us from time to time upon request, prior to the
termination of this Agreement, of the number of Shares purchased by you
hereunder and remaining unsold at the time of such request, and if, in our
opinion, any such Shares shall be needed to make delivery of the Shares sold or
over-allotted for the account of one or more of the Underwriters, you will,
forthwith upon our request, grant to us for the account or accounts of such
Underwriter or Underwriters the right, exercisable promptly after receipt of
notice from you that such right has been granted, to purchase, at the Public
Offering Price less the selling concession or such part thereof as we shall
determine, such number of Shares owned by you as shall have been specified in
our request.
13. On becoming a Selected Dealer, and in offering and selling the Shares,
you agree (which agreement shall also be for the benefit of the Selling
Shareholders and the Company) to comply with all applicable requirements of the
Securities Act of 1933, as amended (the "Act"), and the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). You confirm that you are familiar
with Rule 15c2-8 under the Exchange Act relating to the distribution of
preliminary and final prospectuses for securities of an issuer and confirm that
you have complied and will comply therewith.
14. Upon request, you will be informed as to the jurisdictions in which we
have been advised that the Shares have been qualified for sale under the
respective securities or Blue Sky laws of such jurisdictions, but neither we nor
any of the Underwriters assume any obligation or responsibility as to the right
of any Selected Dealer to sell the Shares in any jurisdiction or as to any sale
therein. You authorize us to file a Further State Notice with respect to the
Shares with the State of New York, if required.
15. Additional copies of the Prospectus will be supplied to you in
reasonable quantities upon request.
16. It is expected that public advertisement of the Shares will be made on
the first day after the effective date of the Registration Statement or such
later date as the initial offering price of the Shares is determined if the
Company elects to rely on Rule 430A under the Act. Twenty-four (24) hours after
such advertisement shall have appeared, but not before, you will be free to
advertise at your own expense, over your own name, subject to any restriction of
local
-3-
<PAGE>
laws, but your advertisement must conform in all respects to the requirements
of the Act, and neither we nor the Underwriters shall be under any obligation
or liability in respect of your advertisement.
17. No Selected Dealer is authorized to act as our agent or as agent for
the Underwriters, or otherwise to act on our behalf or on behalf of the
Underwriters, in offering or selling the Shares to the public or otherwise.
18. We and the several Underwriters shall not be under any liability for
or in respect of the value, validity or form of the Shares, or delivery of the
certificates for the Shares, or the performance by anyone of any agreement on
his part, or the qualification of the Shares for sale under the laws of any
jurisdiction, or for or in respect of any matter connected with this Agreement,
except for lack of good faith and for obligations expressly assumed by use or by
the several Underwriters in this Agreement. The foregoing provisions shall not
be deemed a waiver of any liability imposed under the Act.
19. Payment for the Shares sold to you hereunder is to be made at the
Public Offering Price, on or about ___________________, 1996 or such later date
as we may advise, by certified or official bank check, payable to the order of
R.J. Steichen & Company, in current funds, at such place as we shall specify on
one day's notice to you against delivery of the Shares. Notwithstanding the
foregoing, if actions in the Shares can be settled through the facilities of The
Depository Trust Company, payment for and delivery of Shares purchased by you
hereunder will be made through the facilities of The Depository Trust Company,
if you are a member, unless you have otherwise notified us prior to the date
specified in our telex or telegram to you, or, if you are not a member,
settlement may be made through a correspondent who is a member pursuant to
instructions you may send us prior to such specified date.
20. Notice to us should be addressed to R.J. Steichen & Company, Midwest
Plaza, Suite 1100, 801 Nicollet Mall, Minneapolis, Minnesota 55402. Notices to
you shall be deemed to have been duly given if telegraphed or mailed to you at
the address to which this letter is addressed.
21. If you desire to purchase any of the Shares, please confirm your
subscription by signing and returning to us your confirmation overleaf on the
duplicate copy of this letter enclosed herewith, even though you have previously
advised us thereof by telephone, teletype or telegraph.
Very truly yours,
R.J. STEICHEN & COMPANY
As Representative
By: _______________________________
Managing Director
__________________, 1996
-4-
<PAGE>
CONFIRMATION
R.J. STEICHEN & COMPANY
As Representative
Midwest Plaza, Suite 1100
801 Nicollet Mall
Minneapolis, Minnesota 55402
Dear Sirs:
We hereby agree to purchase __________________ shares of common stock, $.01
par value per share, of Printware, Inc., in accordance with all terms and
conditions stated in the foregoing letter. We hereby acknowledge receipt of the
Prospectus referred to in the first paragraph thereof relating to said Shares.
We further state that in purchasing said Shares we have relied upon said
Prospectus and upon no other statement whatsoever, written or oral. We hereby
confirm that we are a dealer actually engaged in the investment banking or
securities business and that we are either (a) a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD") or (b) a dealer
with its principal place of business located outside the United States, its
territories and its possessions and not registered as a broker or dealer under
the Securities Exchange Act of 1934 who hereby agrees not to make any sales
within the United States, its territories or its possessions or to persons who
are nationals thereof or residents therein. We hereby agree to comply with all
applicable rules of the NASD, including, without limitation, the NASD's
Interpretation with respect to Free-Riding and Withholding and Section 24 of
Article III of the NASD's Rules of Fair Practice and, if we are a foreign dealer
and not a member of the NASD, we also agree to comply with such Interpretation
with respect to Free-Riding and Withholding and to comply, as though we were a
member of the NASD, with the provisions of Sections 8, 24, 25 (as such Section
applies to foreign non-members) and 36 of Article III of such Rules of Fair
Practice. We confirm that we will not sell any of the Shares to discretionary
accounts.
______________________________________
By: __________________________________
Authorized Representative
Address ______________________________
Dated: _________________, 1996.
MPLS:80186-1
<PAGE>
EXHIBIT 1.3
1,600,000 Shares(1)
PRINTWARE, INC.
Common Stock
AGREEMENT AMONG UNDERWRITERS
R. J. STEICHEN & COMPANY ______________, 1996
As Representative of the several Underwriters
named in Schedule II to Exhibit A annexed hereto
Midwest Plaza, Suite 1100
801 Nicollet Mall
Minneapolis, Minnesota 55402
Dear Sirs:
1. UNDERWRITING AGREEMENT. We understand that an underwriting
agreement (the "Underwriting Agreement") attached hereto as EXHIBIT A with
respect to 1,600,000 shares (the "Firm Shares") of common stock, $.01 par value
per share ("Common Stock"), of Printware, Inc., a Minnesota corporation (the
"Company"), proposed to be sold by the Company and by certain shareholders of
the Company (the "Selling Shareholders") is to be entered into among the
Company, the Selling Shareholders, and you and other prospective underwriters,
including us, acting severally and not jointly. The parties on whose behalf you
execute the Underwriting Agreement are named in Schedule II thereto and are
herein called the "Underwriters." The Underwriting Agreement also provides for
the grant by the Company and the Selling Shareholders to the several
Underwriters of an option, on the terms and conditions set forth therein, to
purchase up to an additional 240,000 shares of Common Stock (the "Option
Shares"). The Firm Shares and any Option Shares purchased pursuant to the
Underwriting Agreement are hereinafter collectively called the "Shares." It is
also understood that changes may be made to those who are to be Underwriters and
to the respective aggregate number of Shares to be purchased by them, but that
the aggregate number of the Shares to be purchased by us as set forth in the
accompanying form of Underwriting Agreement will not be changed without our
consent except as provided herein or in the Underwriting Agreement.
2. REGISTRATION STATEMENT AND PROSPECTUS. As used herein, the terms
"Registration Statement," "Preliminary Prospectus" and "Prospectus" shall have
the meanings ascribed to them in the Underwriting Agreement. You will furnish
to us as soon as possible copies of the Prospectus to be used in connection with
the offering of the Shares. We confirm that, if requested by you as
Representative, we have furnished a copy of any amended Preliminary Prospectus
to each person to whom we have furnished a copy of any previous Preliminary
Prospectus, and we confirm that we have delivered and agree that we will deliver
all Preliminary Prospectuses and Prospectuses and all supplements thereto
required for compliance with the
________________________
(1) Plus an option to purchase up to 240,000 additional shares to cover
over-allotments.
<PAGE>
provisions of Rule 15c2-8 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). We consent to being named in the Prospectus as one of the
Underwriters of the Shares.
3. AUTHORITY AND COMPENSATION. We hereby authorize you, as our
Representative and on our behalf, to enter into the Underwriting Agreement with
the Company in substantially the form attached hereto as EXHIBIT A and to take
such action as you deem advisable in connection with the performance of the
Underwriting Agreement and this Agreement and the purchase, carrying, sale and
distribution of the Shares. You may waive performance or satisfaction by the
Company of other obligations or conditions included in the Underwriting
Agreement if, in your judgment, such waiver will not have a material adverse
effect upon the interests of the Underwriters.
As compensation for your services, we will pay you an amount equal to
$_____ per share with respect to each share of the Shares which we agree to
purchase under the Purchase Agreement, and you may charge our account therefor.
4. PUBLIC OFFERING. In connection with the public offering of the
Shares, we authorize you, in your discretion:
(a) To determine the time of the initial public offering, to
change the public offering price and the concessions and discounts to
dealers after the initial public offering, to furnish the Company with the
information to be included in the Registration Statement or Prospectus with
respect to the terms of offering and to determine all matters relating to
advertising and communications with dealers or others;
(b) To reserve for sale to dealers selected by you ("Selected
Dealers") and to others, all or any part of our Shares, such reservations
for sales to others to be as nearly as practicable in proportion to the
respective underwriting obligations of the Underwriters unless you agree to
a smaller proportion at the request of any Underwriter and, from time to
time, to add to the reserved Shares any Shares retained by us remaining
unsold and to release to us any of our Shares reserved but not sold;
(c) To sell reserved Shares, as nearly as practicable in
proportion to the respective reservations, to Selected Dealers at the
public offering price less the Selected Dealers' concession and to others
at the public offering price; and
(d) To buy Shares for our account from Selected Dealers at the
public offering price less such amount not in excess of the Selected
Dealers' concession as you determine.
We authorize you to determine the form and manner of any communications or
agreements with Selected Dealers. If there shall be any agreements with
Selected Dealers, you are authorized to act as manager thereunder, and we agree
in such event to be governed by the terms and conditions of such agreements.
The form of Selected Dealers' Agreement attached hereto as EXHIBIT B is
satisfactory to us.
-2-
<PAGE>
Sales of Shares between Underwriters may be made with your prior consent,
or as you deem advisable for Blue Sky purposes.
After advice from you that the Shares have been released for public
offering, we will offer to the public in conformity with the terms of offering
set forth in the Prospectus such of our Shares as you advise us are not
reserved.
If, prior to the termination of this Agreement, you shall purchase or
contract to purchase, in the open market or otherwise, any Shares sold by us
(otherwise than through you) pursuant to this Agreement, we agree to repurchase
such Shares on demand at a price equal to the total cost of such purchase made
by you as Representative, including commissions, if any, and transfer taxes on
the redelivery. Certificates for the Shares delivered on such repurchase need
not be the identical certificates so purchased by you. In lieu of such action,
you may in your discretion sell for our account the Shares so purchased and
debit or credit our account for the loss or profit resulting from such sale, or
charge our account with an amount not in excess of the Selected Dealers'
concession with respect to such Shares.
5. PAYMENT AND DELIVERY. We authorize you to make payment on our
behalf to the Company of the purchase price of our Shares, to take delivery of
our Shares, registered as you may direct in order to facilitate deliveries, and
to deliver our reserved Shares against sales. At your request, we will pay you
an amount equal to the public offering price, less the selling concession, of
either our Shares or our unreserved Shares as you direct, and such payment will
be directed to our account and applied to the payment of the purchase price.
After you receive payment for reserved Shares sold for our account, you will
remit to us the purchase price (if any) paid by us for such Shares and credit or
debit our account with the difference between the sale price and the purchase
price thereof. You will deliver to us our unreserved Shares promptly, and our
reserved but unsold Shares against payment of the purchase price therefor
(except in the case of Shares for which payment has previously been made), as
soon as practicable after the termination of the provisions referred to in
Section 9 hereof, except that if the aggregate number of reserved but unsold
Shares upon such termination does not exceed 10% of the total number of the
Shares, you may in your discretion sell such reserved but unsold Shares for the
accounts of the several Underwriters as soon as practicable after such
termination, at such prices and in such manner as you determine.
6. AUTHORITY TO BORROW. In connection with the purchase or carrying
of our Shares, we authorize you, in your discretion, to advance your funds for
our account, charging current interest rates, to arrange loans for our account,
and in connection therewith to execute and deliver any notes or other
instruments and to hold or pledge as security any of our Shares. Any lender may
rely upon your instructions in all matters relating to any such loan. Any
Shares held by you for our account may be delivered to us for carrying purposes
and, if so delivered, will be redelivered to you upon demand.
7. STABILIZATION AND OVER-ALLOTMENT. We authorize you, in your
discretion, to make purchases and sales of Shares and of the outstanding shares
of Common Stock, in the open market or otherwise, for long or short account, on
such terms as you deem advisable, and to over-allot in arranging sales. Such
purchases and sales and over-allotments will be made for the accounts of the
Underwriters as nearly as practicable in proportion to their respective
-3-
<PAGE>
underwriting obligations. We authorize you, in your discretion, to cover any
short position incurred pursuant to this Section by purchasing securities on
such terms as you deem advisable. At no time will our net commitment under the
foregoing provisions of this Section exceed 15% of our underwriting obligation.
We will on demand take up at cost any securities so purchased and deliver any
securities so sold or over-allotted for our account, and, if any other
Underwriter defaults in its corresponding obligation, we will assume our
proportionate share of such obligation without relieving the defaulting
Underwriter from liability. Upon request, we will advise you of the Shares
retained by us and unsold and will sell to you for the account of one or more of
the Underwriters such of our unsold Shares at such price, not less than the net
price to Selected Dealers nor more than the public offering price, as you
determine.
If you effect stabilizing purchases pursuant to Section 7 hereof, you will
notify us promptly of the initiation and termination thereof. If stabilization
is effected, we will furnish to you not later than three business days following
the date on which stabilizing was commenced such information as is required by
Rule 17a-2(d) under the Exchange Act.
8. OPEN MARKET TRANSACTIONS. We and you agree not to bid for,
purchase, attempt to induce others to purchase, or sell, directly or indirectly,
any Shares or outstanding shares of Common Stock, except as brokers pursuant to
unsolicited orders and as otherwise provided in this Agreement.
We represent that we have not participated in any transaction prohibited by
the preceding paragraph and that we have at all times complied with the
provisions of Rule l0b-6 and l0b-6A of the Securities and Exchange Commission as
applicable to the offering of the Shares.
9. TERMINATION. The provisions of the last two paragraphs of
Section 4, the first sentence of Section 7, and all of Section 8 hereof, will
terminate at the close of business on the thirtieth (30th) day after the date of
the initial public offering of the Shares, unless sooner terminated as
hereinafter provided. You may terminate such provisions at any time by notice
to us to the effect that the offering provisions of this Agreement are
terminated.
10. EXPENSES AND SETTLEMENT. You may charge our account with any
transfer taxes on sales made by you of Shares purchased by us under the
Underwriting Agreement and with our proportionate share (based upon our
underwriting obligation) of all other expenses incurred by you under this
Agreement or in connection with the purchase, carrying, sale or distribution of
the Shares. The accounts hereunder will be settled as promptly as practicable
after the termination of the provisions referred to in Section 9 hereof, but you
may reserve such amount as you may deem advisable for additional expenses. Your
determination of the amount to be paid to or by us will be conclusive. You may
at any time make partial distributions of credit balances or call for payment of
debit balances. Any of our funds in your hands may be held with your general
funds without accountability for interest. Notwithstanding any settlement, we
will remain liable for any taxes on transfers for our account, and for our
proportionate share (based upon our underwriting obligation) of all expenses and
liabilities which may be incurred by or for the accounts of the Underwriters.
11. DEFAULT BY UNDERWRITERS. Default by one or more Underwriters
hereunder or under the Underwriting Agreement will not release the other
Underwriters from their obligations
-4-
<PAGE>
or affect the liability of any defaulting Underwriter to the other
Underwriters for damages resulting from such default. If one or more
Underwriters default under the Underwriting Agreement, you may arrange for
the purchase by others, including nondefaulting Underwriters, of Shares not
taken up by the defaulting Underwriter or Underwriters.
12. POSITION OF REPRESENTATIVE. You will be under no liability to us
for any act or omission except for obligations expressly assumed by you herein,
and no obligation on your part will be implied hereby or inferred herefrom. The
rights and liabilities of the Underwriters are several and not joint, and
nothing will constitute the Underwriters a partnership, association or separate
entity.
If for federal income tax purposes the Underwriters should be deemed to
constitute a partnership, then each Underwriter elects to be excluded from the
application of Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code
of 1986, as amended. You, as Representative of the several Underwriters, are
authorized, in your discretion, to execute on behalf of the Underwriters such
evidence of such election as may be required by the Internal Revenue Service.
13. INDEMNIFICATION. We will indemnify and hold harmless each other
Underwriter and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the Securities Act of 1933, as amended (the "Act"), or
Section 20(a) of the Exchange Act, and reimburse your and their expenses, to the
extent and upon the terms upon which each Underwriter agrees to indemnity the
Company in the Underwriting Agreement.
14. CONTRIBUTION. Each Underwriter (including you) will pay upon
your request, as contribution, its proportionate share, based upon its
underwriting obligation, of any losses, claims, damages or liabilities, joint or
several, paid or incurred by any Underwriter to any person other than an
Underwriter, arising out of or based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any related Preliminary
Prospectus, or any other selling or advertising material approved by you for use
by the Underwriters in connection with the sale of the Shares, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (other than
an untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by an Underwriter specifically for use therein); and will pay such
proportionate share of any legal or other expenses reasonably incurred by you or
with your consent in connection with investigating or defending any such loss,
claim, damage or liability, or any action in respect thereof. In determining the
amount of any Underwriter's obligation under this Section, appropriate
adjustment may be made by you to reflect any amounts received by one or more
Underwriters in respect of such claim from the Company pursuant to Section 6 of
the Underwriting Agreement or otherwise. There shall be credited against any
amount paid or payable by us pursuant to this Section any loss, damage,
liability or expense which is incurred by us as a result of any such claim
asserted against us, and if such loss, claim, damage, liability or expense is
incurred by us subsequent to any payment by us pursuant to this Section,
appropriate provisions shall be made to effect such credit, by refund or
otherwise. If any such claim is asserted, you may take such action in
connection therewith as you deem necessary or desirable, including retention
of counsel for the
-5-
<PAGE>
Underwriters, and in your discretion separate counsel for any
particular Underwriter or group of Underwriters, and the fees and
disbursements of any counsel so retained by you shall be included in the
amount payable pursuant to this Section. In determining amounts payable
pursuant to this Section, any loss, claim, damage, liability or expense
incurred by any person controlling any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act which has been
incurred by reason of such control relationship shall be deemed to have been
incurred by such Underwriter. Any Underwriter may elect to retain at its own
expense its own counsel. You may settle or consent to the settlement of any
such claim, on advice of counsel retained by you, with the approval of a
majority in interest of the Underwriters. Whenever you receive notice of the
assertion of any claim to which the provisions of this Section would be
applicable, you will give prompt notice thereof to each Underwriter. You
will furnish each Underwriter with periodic reports, at such times as you
deem appropriate, as to the status of such claim and the action taken by you
in connection therewith. If any Underwriter or Underwriters default in their
obligation to make any payments under this Section, each nondefaulting
Underwriter shall be obligated to pay its proportionate share of all
defaulted payments, based upon such Underwriter's underwriting obligation as
related to the underwriting obligations of all nondefaulting Underwriters.
15. REPORTS AND BLUE SKY MATTERS. We authorize you to file with the
Securities and Exchange Commission and any other governmental agency any reports
required in connection with any transaction effected by you for our account
pursuant to this Agreement, and we will furnish any information needed for such
reports. You will not have any responsibility with respect to the right of any
Underwriter or other person to sell the Shares in any jurisdiction,
notwithstanding any information you may furnish in that connection.
16. MISCELLANEOUS. Any notice hereunder from you to us or from us to
you shall be deemed to have been duly given when sent by mail, telegram or
delivered in person, if to us, at the address stated in the Underwriters'
Questionnaire or telex constituting Questionnaire which we have furnished in
connection with this offering or, if to you, to R. J. Steichen & Company,
Midwest Plaza, Suite 1100, 801 Nicollet Mall, Minneapolis, Minnesota 55402.
We understand that you are members in good standing of the National
Association of Securities Dealers, Inc. ("NASD"). We hereby confirm that we are
either (i) a member in good standing of the NASD or (ii) a dealer with its
principal place of business located outside the United States, its territories
and its possessions and not registered as a broker or dealer under the Exchange
Act who agrees not to make any sales within the United States, its territories
or its possessions or to persons who are nationals thereof or residents therein.
We hereby agree to comply with all applicable rules of the NASD, including,
without limitation, the NASD's Interpretation with respect to Free-Riding and
Withholding and Section 24 of Article III of the NASD's Rules of Fair Practice,
and, if we are a foreign dealer and not a member of the NASD, to comply with
such Interpretation with respect to Free-Riding and Withholding and the
provisions of Sections 8, 24, 25 (as such Section applies to foreign nonmembers)
and 36 of Article III of such Rules of Fair Practice as though we were a member
of the NASD. In connection with the sales and offers to sell Shares made by us
outside the United States (a) we will either furnish to each person to whom any
such sale or offer is made a copy of the then current Preliminary Prospectus or
the Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), as the case may be, or
-6-
<PAGE>
inform such person that such Preliminary Prospectus or Prospectus will be
available upon request and (b) we will furnish to each person to whom any
such sale or offer is made such Prospectus, advertisement or other offering
document containing information relating to the Shares or the Company as may
be required under the law of the jurisdiction in which such offer or sale is
made. Any prospectus, advertisement or other offering document furnished by
us to any such person in accordance with the preceding sentence and any such
additional offering material as we may furnish to any person (i) shall comply
in all respects with the law of the jurisdiction in which it is so furnished,
(ii) shall be prepared and so furnished at our sole risk and expense, and
(iii) shall not contain information relating to the Shares or the Company
which is inconsistent in any respect with the information contained in the
then current Preliminary Prospectus or in the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), as the case may be. We confirm that we will not make
sales of the Shares to discretionary accounts.
This instrument may be signed by the Underwriters in various counterparts
which together shall constitute one and the same agreement among all the
Underwriters and shall become effective at such time as all the Underwriters
shall have signed such counterparts and you shall have confirmed all such
counterparts.
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to us a counterpart hereof.
Very truly yours,
By: _________________________________________
Attorney-in-fact for the several
Underwriters listed in Schedule II to the
Underwriting Agreement
Confirmed as of the date first above written.
R. J. STEICHEN & COMPANY
As Representative
BY: ___________________________________
Managing Director
MPLS:80181-1
-7-
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
PRINTWARE, INC.
The undersigned, of full age, for the purpose of forming a corporation
under and pursuant to the provisions of Chapter 302A, Minnesota Statutes and all
amendments thereto, hereby adopts the following Articles of Incorporation:
ARTICLE I
The name of the corporation shall be Printware, Inc.
ARTICLE II
The location and post office address of the corporation's registered office
in the State of Minnesota shall be 1833 Lamplight Drive, Woodbury, Minnesota
55125.
ARTICLE III
The total authorized number of shares of the corporation shall be Twenty-
Five Million (25,000,000).
ARTICLE IV
The names and post office addresses of the first directors of the
corporation are as follows:
Name Address
---- -------
Allen E. Taylor 1833 Lamplight Drive
Woodbury, Minnesota
Donald V. Mager 186 East 95th Street Circle
Bloomington, Minnesota
Brian D. Shiffman 3656 Robin Lane
Minnetonka, Minnesota
<PAGE>
The term of office of each of the first directors shall be until his or
her successor is elected and has qualified, or until his or her earlier
death, resignation, removal or disqualification. The number of directors of
the corporation shall not be greater than eleven (11), and each director
shall hold office until his or her successor is elected and has qualified, or
until his or her earlier death, resignation, removal or disqualification.
ARTICLE V
The name and post office address of the incorporator is as follows:
Name Address
---- -------
Donna M. Watz Mackall, Crounse & Moore
1600 TCF Tower
Minneapolis, Minnesota 55402
ARTICLE VI
The shareholders of the corporation shall not have the preemptive right to
subscribe for and to purchase any or all of the shares or other securities or
rights to purchase shares or other securities of the corporation, now or
hereafter authorized. The shareholders of the corporation shall not have the
right of cumulative voting.
ARTICLE VII
An action required or permitted to be taken at a meeting of the directors
may be taken by written action signed by all of the directors, and in the case
of an action which need not be approved by the shareholders, such action may be
taken by written action signed by the number of directors that would be required
to take such action at a meeting of the directors at which all directors were
present. The directors shall have the authority to establish more than one
class or series of shares.
2
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of May,
1985.
/s/ Donna M. Watz
--------------------------------------
Donna M. Watz, Incorporator
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this 14th day of May,
1985, by Donna M. Watz.
/s/ Jean M. Hanska
--------------------------------------
Notary Public
(NOTARIAL SEAL)
3
<PAGE>
State of Minnesota -See instructions on reverse
Office of the Secretary of State side for completing this form.
CERTIFICATE OF CHANGE OF REGISTERED OFFICE
by
- -------------------------------------------------------------------------------
Name of Corporation
Printware, Inc.
- -------------------------------------------------------------------------------
Pursuant to Minnesota Statutes Section 301.33, 302A.123, or 317.19, the
undersigned hereby certifies that the Board of Directors of the above named
Minnesota corporation has resolved to change the corporation's registered
office:
- -------------------------------------------------------------------------------
F Address
R (No. & Street) 1833 Lamplight Drive
O -----------------------------------------------------------------------------
M City County Zip
Woodbury Ramsey MN 55125
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Address
T (No. & Street) 1385 Mendota Heights Road
O -----------------------------------------------------------------------------
City County Zip
St. Paul Dakota MN 55120
- -------------------------------------------------------------------------------
The effective date of this change will be the ________________________ day
of ____________________, 19______ or the day of filing of this certificate
with the Secretary of State, whichever is later.
- -------------------------------------------------------------------------------
Name of Officer or Other Authorized Agent of Corporation Signature
Donald V. Mager /s/ Donald V. Mager
- -------------------------------------------------------------------------------
Title or Office Date
President 3/10/87
- -------------------------------------------------------------------------------
REQUIRED FOR 302A CORPORATIONS ONLY
STATE OF MINNESOTA
County of Dakota ss.
The foregoing instrument was acknowledged before me this 10th day of
March, 1987. /s/ Patricia A. Reynolds
--------------------------------- (Notarial Stamp)
Notary Public
Do not write below this line. For Secretary of State's use only.
- -------------------------------------------------------------------------------
Receipt Number File Data
- -------------------------------------------------------------------------------
SC-001404
<PAGE>
STATE OF MINNESOTA
SECRETARY OF STATE
NOTICE OF CHANGE OF REGISTERED OFFICE/
REGISTERED AGENT
Please read the instructions on the back before completing this form.
1. Corporate Name:
Printware, Inc.
-------------------------------------------------------------------------
2. Registered Office Address (No. & Street): List a complete street address
or rural route and rural route box number. A post office box is not
acceptable.
1270 Eagan Industrial Road St. Paul MN 55121
-------------------------------------------------------------------------
Street City State Zip Code
3. Registered Agent (Registered agents are required for foreign corporations
but optional for Minnesota corporations):
None
-------------------------------------------------------------------------
If you do not wish to designate an agent, you must list "NONE" in this box.
DO NOT LIST THE CORPORATE NAME.
In compliance with MINNESOTA STATUTES, SECTION 302A.123, 303.10, 308A.025,
317A.123 OR 322B.135 I certify that the above listed company has resolved to
change the company's registered office and/or agent as listed above.
I certify that I am authorized to execute this certificate and I further
certify that I understand that by signing this certificate I am subject to
the penalties of perjury as set forth in MINNESOTA STATUTES SECTION 609.48 as
if I had signed this certificate under oath.
/s/ Thomas W. Petschauer - Vice President
- ----------------------------------------------
Signature of Authorized Person
Name and Telephone Number of a Contact Person: CORY LOMEN (612) 456-1407
--------------------------------
PLEASE PRINT LEGIBLY
OFFICE USE ONLY
Filing Fee: Minnesota Corporations,
Cooperatives and Limited
Liability Companies: $35.00.
Non-Minnesota Corporations: $50.00.
Make checks payable to
Secretary of State
Return to: Minnesota Secretary of State
180 State Office Bldg.
100 Constitution Ave.
St. Paul, MN 55155-1299
(612)296-2803
03930275 Rev. 5/93
<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
PRINTWARE, INC.
I, the undersigned, Daniel A. Baker, Ph.D., the President of Printware,
Inc. (the "Company"), a corporation subject to the provisions of Chapter 302A of
the Minnesota Statutes, known as the Minnesota Business Corporation Act, do
hereby certify that the resolutions hereinafter set forth were duly adopted by
the affirmative vote of a majority of the shareholders present and entitled to
vote at a Special Meeting of the Shareholders held on April 25, 1996:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby declares
a one-for-four reverse stock split on the authorized and outstanding shares
of Common Stock of the Company held by all shareholders of record as of the
close of business on April 25, 1996 (the "Record Date"), with each holder
of record of Common Stock of the Company as of the Record Date to be deemed
the holder of one share of Common Stock for each four shares of Common
Stock owned by such holder as of such date.
FURTHER RESOLVED, that fractional shares of the Common Stock shall not be
issued, and the Chief Financial Officer of the Company hereby is authorized
and directed to pay to shareholders who would otherwise receive fractional
shares of Common Stock pursuant to the foregoing reverse stock split an
amount of cash equal to the fair market value of such fractional shares on
the Record Date, which fair market value is hereby determined for this
purpose to be $3.00 per share (on a post-reverse split basis).
FURTHER RESOLVED, that in conjunction with and after giving effect to the
reverse stock split approved hereby, Article III of the Company's Articles
of Incorporation is hereby amended in its entirety to read as follows:
"ARTICLE III
The authorized capital stock of this Corporation shall consist of
Fifteen Million (15,000,000) shares of Common Stock, no par value, and One
Million (1,000,000) shares of Preferred Stock. The Preferred Stock may be
issued from time to time as shares of one or more series. Subject to the
provisions hereof and the limitations prescribed by law, the Board of
Directors is authorized, by adopting resolutions providing for the issuance
of Preferred Stock of any particular series, to establish the number of
shares of Preferred Stock to be included in each such series, and to fix
the par value, designation, relative powers, preferences, rights,
qualifications, limitations and restrictions thereof, including without
limitations the right to create voting, dividend and liquidation
preferences greater than those of Common Stock."
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of April,
1996.
/s/ Daniel A. Baker, Ph.D., President
--------------------------------------------
Daniel A. Baker, Ph.D., President
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
PRINTWARE, INC.
<PAGE>
INDEX
Page
----
Article I OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . 1
Article II SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.01 Regular Meetings . . . . . . . . . . . . . . . . . . . . 1
Section 2.02 Special Meetings . . . . . . . . . . . . . . . . . . . . 2
Section 2.03 Demand by Shareholders . . . . . . . . . . . . . . . . . 2
Section 2.04 Notice . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.05 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.06 Voting Rights. . . . . . . . . . . . . . . . . . . . . . 4
Section 2.07 Share Register . . . . . . . . . . . . . . . . . . . . . 5
Section 2.08 Voting of Shares by organizations
and Legal Representatives. . . . . . . . . . . . . . . . 6
Section 2.09 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.10 Action Without a Meeting . . . . . . . . . . . . . . . . 7
Article III BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . 8
Section 3.01 Board to Manage. . . . . . . . . . . . . . . . . . . . . 8
Section 3.02 Number, Qualifications and Terms . . . . . . . . . . . . 8
Section 3.03 Meetings . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.04 Notice . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.05 Quorum . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 3.06 Manner of Acting . . . . . . . . . . . . . . . . . . . .10
Section 3.07 Presumption of Assent. . . . . . . . . . . . . . . . . .10
Section 3.08 Absent Directors . . . . . . . . . . . . . . . . . . . .11
Section 3.09 Action Without a Meeting . . . . . . . . . . . . . . . .11
Section 3.10 Resignation. . . . . . . . . . . . . . . . . . . . . . .12
Section 3.11 Removal. . . . . . . . . . . . . . . . . . . . . . . . .12
Section 3.12 Vacancies. . . . . . . . . . . . . . . . . . . . . . . .12
Section 3.13 Compensation . . . . . . . . . . . . . . . . . . . . . .13
Article IV COMMITTEES . . . . . . . . . . . . . . . . . . . . . . .13
Section 4.01 Generally. . . . . . . . . . . . . . . . . . . . . . . .13
Section 4.02 Membership . . . . . . . . . . . . . . . . . . . . . . .13
Section 4.03 Quorum . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 4.04 Procedure. . . . . . . . . . . . . . . . . . . . . . . .14
Section 4.05 Minutes. . . . . . . . . . . . . . . . . . . . . . . . .14
<PAGE>
Article V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . .14
Section 5.01 Number . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 5.02 Election and Term of Office. . . . . . . . . . . . . . .15
Section 5.03 Resignation. . . . . . . . . . . . . . . . . . . . . . .15
Section 5.04 Removal. . . . . . . . . . . . . . . . . . . . . . . . .15
Section 5.05 Vacancy. . . . . . . . . . . . . . . . . . . . . . . . .15
Section 5.06 President. . . . . . . . . . . . . . . . . . . . . . . .16
Section 5.07 Vice President . . . . . . . . . . . . . . . . . . . . .16
Section 5.08 Secretary. . . . . . . . . . . . . . . . . . . . . . . .17
Section 5.09 Treasurer. . . . . . . . . . . . . . . . . . . . . . . .17
Section 5.10 Assistant Secretaries and
Assistant Treasurers . . . . . . . . . . . . . . . . . .18
Section 5.11 Chairman of the Board. . . . . . . . . . . . . . . . . .19
Section 5.12 Compensation . . . . . . . . . . . . . . . . . . . . . .19
Article VI INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . .19
Article VII CERTIFICATES FOR SHARES AND THEIR TRANSFER . . . . . . .19
Section 7.01 Certificates for Shares. . . . . . . . . . . . . . . . .19
Section 7.02 Transfer of Shares . . . . . . . . . . . . . . . . . . .20
Article VIII DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . .23
Article IX FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . .23
Article X SEAL . . . . . . . . . . . . . . . . . . . . . . . . . .23
Article XI AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . .24
Article XII GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . .24
<PAGE>
BYLAWS
OF
PRINTWARE, INC.
ARTICLE I
OFFICES
The principal office of the corporation shall be located in Minnesota. The
corporation may have such other offices, either within or without Minnesota, as
the Board of Directors may designate or as the business of the corporation may
require from time to time.
The registered office of the corporation required by Chapter 302A,
Minnesota Statutes, to be maintained in Minnesota may be, but need not be,
identical with the principal office in Minnesota, and the address of the
registered office may be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
Section 2.01. REGULAR MEETINGS. The Board of Directors may cause regular
meetings of the shareholders to be held on an annual or less frequent periodic
basis for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. Such regular meetings shall be
held on the date and at the time and place fixed by the Board of Directors.
<PAGE>
Section 2.02. SPECIAL MEETINGS. Special meetings of the shareholders may
be called for any purpose or purposes at any time, by the president, the
treasurer, two or more directors or a shareholder or shareholders holding ten
percent or more of the voting shares.
Special meetings shall be held on the date and at the time and place fixed
by the president or the Board of Directors, except that a special meeting called
by or at the demand of a shareholder or shareholders pursuant to Section 2.03 of
these bylaws shall be held in the county where the principal executive office is
located.
The business transacted at a special meeting shall be limited to the
purposes stated in the notice of the meeting.
Section 2.03. DEMAND BY SHAREHOLDERS. If a regular meeting of
shareholders has not been held during the immediately preceding 15 months, a
shareholder or shareholders holding three percent or more of all voting
shares may demand a regular meeting of shareholders. A shareholder or
shareholders holding ten percent or more of the voting shares may demand a
special meeting of shareholders. The demand for a regular or a special
meeting shall be given in writing to the president or the treasurer of the
corporation. Within 30 days after receipt of the demand by one of those
officers, the Board of Directors shall cause a meeting of shareholders to be
called and held on notice no later than 90 days after receipt of the demand,
all at the expense of the corporation. If the Board of Directors fails to
cause a meeting to be called and held as required by this section, the
shareholder or shareholders making the demand may call the meeting by giving
notice as required by Section 2.04 of these bylaws, all at the expense of the
corporation.
Section 2.04. NOTICE. Notice of all meetings of shareholders shall be
given to every holder of voting shares, except where the meeting is an adjourned
meeting and the date, time and
2
<PAGE>
place of the meeting were announced at the time of adjournment. The notice
shall be given at least five days before the date of the meeting, and not
more than 60 days before the date of the meeting. The notice shall contain
the date, time and place of the meeting, and any other information required
by this Article II. In the case of a special meeting, the notice shall
contain a statement of the purposes of the meeting. The notice may also
contain any other information deemed necessary or desirable by the Board of
Directors or by any other person or persons calling the meeting.
A shareholder may waive notice of a meeting of shareholders. A waiver
of notice by a shareholder entitled to notice shall be effective whether
given before, at or after the meeting, and whether given in writing, orally
or by attendance. Attendance by a shareholder at a meeting shall be a waiver
of notice of that meeting, except where the shareholder objects at the
beginning of the meeting to the transaction of business because the meeting
is not lawfully called or convened, or objects before a vote on an item of
business because the item may not lawfully be considered at that meeting and
does not participate in the consideration of the item at that meeting.
Section 2.05. QUORUM. The holders of a majority of the voting power of
the shares entitled to vote at a meeting present in person or by proxy at the
meeting shall constitute a quorum for the transaction of business. If a quorum
is present when a duly called or held meeting is convened, the shareholders
present may continue to transact business until adjournment, even though the
withdrawal of a number of shareholders originally present leaves less than the
proportion or number otherwise required for a quorum.
3
<PAGE>
Section 2.06. VOTING RIGHTS. The Board of Directors may fix a date not
more than 60 days before the date of a meeting of shareholders as the date
for the determination of the holders of voting shares entitled to notice of
and to vote at the meeting. When a date is so fixed, only shareholders on
that date are entitled to notice of and permitted to vote at that meeting of
shareholders. If no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders,
the date on which notice of the meeting is mailed shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
Section 2.07. SHARE REGISTER. The officer or agent having charge of the
share register of the corporation shall maintain a share register, not more than
one year old, containing a complete list of the shareholders with the address of
and the number, class and issuance dates of shares held by each. The share
register shall be kept on file at the principal executive office of the
corporation, or at another place or places within the United States determined
by the Board of Directors, and shall be subject to inspection by any shareholder
at any time during usual business hours.
A resolution approved by the affirmative vote of a majority of the
directors present may establish a procedure whereby a shareholder may certify in
writing to the corporation that all or a portion of the shares registered in the
name of the shareholder are held for the account of one or more beneficial
owners. Upon receipt by the corporation of the writing, the persons specified
as beneficial owners, rather than the actual shareholder, shall be deemed the
shareholders for the purposes specified in the writing.
4
<PAGE>
A shareholder shall have one vote for each voting share held. Shares owned
by two or more shareholders may be voted by any one of them unless the
corporation receives written notice from any one of them denying the authority
of that person to vote those shares. Except as provided herein, a holder of
voting shares may vote any portion of the shares in any way the shareholder
chooses. If a shareholder votes without designating the proportion or number of
shares voted in a particular way, the shareholder shall be deemed to have voted
all of the shares in that way.
Section 2.08. VOTING OF SHARES BY ORGANIZATIONS AND LEGAL
REPRESENTATIVES. Shares of the corporation registered in the name of another
domestic or foreign corporation may be voted by the president or another
legal representative of that corporation. Except as provided herein, shares
of the corporation registered in the name of a subsidiary shall not be
entitled to vote on any matter. Shares of the corporation in the name of or
under the control of the corporation or a subsidiary in a fiduciary capacity
shall not be entitled to vote on any matter, except to the extent that the
settlor or beneficial owner possesses and exercises a right to vote or gives
the corporation binding instructions on how to vote the shares.
Shares under the control of a person in a capacity as a personal
representative, administrator, executor, guardian, conservator or attorney-in-
fact may be voted by the person, either in person or by proxy, without
registration of those shares in the name of the person. Shares registered in
the name of a trustee of a trust or in the name of a custodian may be voted by
the person, either in person or by proxy, but a trustee of a trust or a
custodian shall not vote shares held by the person unless they are registered in
the name of the person.
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Shares registered in the name of a trustee in bankruptcy or a receiver may
be voted by the trustee or receiver either in person or by proxy. Shares under
the control of a trustee in bankruptcy or a receiver may be voted by the trustee
or receiver without registering the shares in the name of the trustee or
receiver, if authority to do so is contained in an appropriate order of the
court by which the trustee or receiver was appointed.
Shares registered in the name of any organization not described herein may
be voted either in person or by proxy by the legal representative of that
organization.
A shareholder whose shares are pledged may vote those shares until the
shares are registered in the name of the pledgee.
Section 2.09. PROXIES. A shareholder may cast or authorize the casting of
a vote by filing a written appointment of a proxy with an officer of the
corporation at or before the meeting at which the appointment is to be
effective. An appointment of a proxy for shares held jointly by two or more
shareholders shall be valid if signed by any one of them, unless the corporation
receives from any one of those shareholders written notice either denying the
authority of that person to appoint a proxy or appointing a different proxy.
The appointment of a proxy shall be valid for eleven months unless a longer
period is expressly provided in the appointment.
Section 2.10. ACTION WITHOUT A MEETING. An action required or permitted
to be taken at a meeting of the shareholders may be taken without a meeting by
written action signed by all of the shareholders entitled to vote on that
action. The written action shall be effective when it has been signed by all of
those shareholders, unless a different effective time is provided in the written
action.
ARTICLE III
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BOARD OF DIRECTORS
Section 3.01. BOARD TO MANAGE. The business and affairs of the
corporation shall be managed by or under the direction of the Board of
Directors, subject to the rights of the shareholders of the corporation as
provided in these bylaws or pursuant to Chapter 302A, Minnesota Statutes.
Section 3.02. NUMBER, QUALIFICATIONS AND TERMS. The number of directors
of the corporation shall not be greater than eleven and shall be set from time
to time by the shareholders. The Board of Directors may, at any time, increase
the number of directors up to a maximum of eleven or decrease the number of
directors except that any such decrease shall not result in the removal of a
director except a director named by the Board of Directors to fill a vacancy.
Directors shall be natural persons. Each director shall hold office until his
or her successor is elected and has qualified, or until his or her earlier
death, resignation, removal or disqualification. Directors need not be
residents of Minnesota or shareholders of the corporation.
Section 3.03. MEETINGS. Meetings of the Board of Directors may be called
from time to time by or at the request of the president or any director. The
person calling a meeting of the Board of Directors may fix the date, time and
place of the meeting. If the place fixed for the meeting is outside of
Minnesota, the Board of Directors may change the place of the meeting to a
location within Minnesota.
A conference among directors by any means of communication through which
the directors may simultaneously hear each other during the conference shall
constitute a meeting of the Board of Directors, if the same notice is given of
the conference as would be required by Section 3.04 of these bylaws for a
meeting, and if the number of directors participating in the
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conference would be sufficient to constitute a quorum at a meeting.
Participation in a meeting by such means shall constitute presence in person
at the meeting.
Section 3.04. NOTICE. Notice of any meeting shall be given at least five
days previously thereto by written notice mailed to each director at his or her
business address or at least 24 hours prior thereto delivered personally or by
telegram. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail so addressed, with postage thereon prepaid. If notice
be given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. A director may waive notice of
a meeting of the Board of Directors. A waiver of notice by a director entitled
to notice shall be effective whether given before, at or after the meeting, and
whether given in writing, orally or by attendance. Attendance by a director at
a meeting shall be a waiver of notice of that meeting, except where the director
objects at the beginning of the meeting to the transaction of business because
the meeting is not lawfully called or convened and does not participate
thereafter in the meeting.
Section 3.05. QUORUM. A majority of the directors currently holding
office present at a meeting shall constitute a quorum for the transaction of
business. In the absence of a quorum, a majority of the directors present may
adjourn a meeting from time to time until a quorum is present. If a quorum is
present when a duly called or held meeting is convened, the directors present
may continue to transact business until adjournment, even though the withdrawal
of a number of directors originally present leaves less than the number
otherwise required for a quorum.
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Section 3.06. MANNER OF ACTING. Except as otherwise provided in Minnesota
Statutes, Chapter 302A, the Board of Directors shall take action by the
affirmative vote of a majority of directors present at a duly held meeting.
Section 3.07. PRESUMPTION OF ASSENT. A director who is present at a
meeting of the Board of Directors when an action is approved by the affirmative
vote of a majority of the directors present is presumed to have assented to the
action approved, unless the director objects at the beginning of the meeting to
the transaction of business because the meeting is not lawfully called or
convened and does not participate thereafter in the meeting, or votes against
the action at the meeting or is prohibited from voting on the action due to a
conflict of interest.
Section 3.08. ABSENT DIRECTORS. A director may give advance written
consent or opposition to a proposal to be acted on at a Board of Directors
meeting. If the director is not present at the meeting, consent or opposition
to a proposal shall not constitute presence for purposes of determining the
existence of a quorum, but consent or opposition shall be counted as a vote in
favor of or against the proposal and shall be entered in the minutes or other
record of action at the meeting, if the proposal acted on at the meeting is
substantially the same or has substantially the same effect as the proposal to
which the director has consented or objected.
Section 3.09. ACTION WITHOUT A MEETING. An action required or permitted
to be taken at a meeting of the Board of Directors may be taken by written
action signed by all of the directors, and in the case of an action which need
not be approved by the shareholders, such action may be taken by written action
signed by the number of directors that would be required to take such action at
a meeting of the Board of Directors at which all directors were present.
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The written action shall be effective when signed by the required number of
directors, unless a different effective time is provided in the written action.
When written action is permitted to be taken by less than all directors,
all directors shall be notified immediately of its text and effective date.
Failure to provide the notice shall not invalidate the written action. A
director who does not sign or consent to the written action shall have no
liability for the action or actions taken thereby.
Section 3.10. RESIGNATION. A director may resign at any time by giving
written notice to the corporation. The resignation shall be effective without
acceptance when the notice is given to the corporation, unless a later effective
time is specified in the notice.
Section 3.11. REMOVAL. Any one or all of the directors may be removed at
any time, with or without cause, by the affirmative vote of the holders of a
majority of the common voting shares. A director may be removed at any time,
with or without cause, by the affirmative vote of a majority of the remaining
directors present if the director was named by the Board of Directors to fill a
vacancy, and the shareholders have not elected directors in the interval between
the time of appointment to fill the vacancy and the time of removal. Removal of
a director, whether by shareholders or directors, shall be subject to the
provisions of any shareholder control agreement.
Section 3.12. VACANCIES. Any vacancy occurring on the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors,
even though less than a quorum. Vacancies on the Board of Directors resulting
from newly created directorships may be filled by the affirmative vote of a
majority of the directors serving at the time of the increase. A director
elected to fill a vacancy shall hold office until a qualified successor is
elected by the shareholders
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at the next regular or special meeting of the shareholders, or until his or
her earlier death, resignation, removal or disqualification.
Section 3.13. COMPENSATION. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
ARTICLE IV
COMMITTEES
Section 4.01. GENERALLY. A resolution approved by the affirmative vote of
a majority of the directors currently holding office may establish committees
having the authority of the Board of Directors in the management of the business
of the corporation to the extent provided in the resolution. Committees shall
be subject at all times to the direction and control of the Board of Directors.
Section 4.02. MEMBERSHIP. A committee shall consist of one or more
natural persons, who need not be directors, appointed by affirmative vote of a
majority of the directors present.
Section 4.03. QUORUM. A majority of the members of the committee present
at a meeting shall constitute a quorum for the transaction of business, unless a
larger or smaller proportion or number is provided in a resolution approved by
the affirmative vote of a majority of the directors present.
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Section 4.04. PROCEDURE. The provisions of Sections 3.03, 3.04 and 3.05
of these bylaws shall apply to committees and members of committees to the same
extent as those sections apply to the Board of Directors and directors.
Section 4.05. MINUTES. Minutes, if any, of committee meetings shall be
made available upon request to members of the committee and to any director.
ARTICLE V
OFFICERS
Section 5.01. NUMBER. The officers of the corporation shall be a
president, one or more vice presidents (the number thereof to be determined by
the Board of Directors), a secretary and a treasurer, each of whom shall be
natural persons and elected by the Board of Directors. A chairman of the Board
of Directors and such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two or
more offices may be held by the same person, except the offices of president and
vice president.
Section 5.02. ELECTION AND TERM OF OFFICE. The officers of the
corporation shall be elected by the Board of Directors. In the absence of an
election or appointment of officers by the Board of Directors, the person or
persons exercising the principal functions of the president or the treasurer
shall be deemed to have been elected to those offices. Each officer shall hold
office until his or her successor is elected and has qualified, or until his or
her earlier death, resignation, removal or disqualification. The election or
appointment of a person as an officer or agent shall not, of itself, create
contract rights.
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Section 5.03. RESIGNATION. An officer may resign at any time by giving
written notice to the corporation. The resignation shall be effective without
acceptance when the notice is given to the corporation, unless a later effective
date is specified in the notice.
Section 5.04. REMOVAL. An officer may be removed at any time, with or
without cause, by a resolution approved by the affirmative vote of a majority of
the directors present, subject to the provisions of any shareholder control
agreements.
Section 5.05. VACANCY. A vacancy in any office because of death,
resignation, removal, disqualification or other cause may, or in the case of a
vacancy in the office of president or treasurer shall, be filled by the Board of
Directors for the unexpired portion of the term.
Section 5.06. PRESIDENT. The president shall be the chief executive
officer of the corporation and shall:
(a) Have general active management of the business of the corporation;
(b) When present, preside at all meetings of the Board of Directors and of
the shareholders;
(c) See that all orders and resolutions of the Board of Directors are
carried into effect;
(d) Sign and deliver in the name of the corporation any deeds, mortgages,
bonds, contracts, certificates for shares or other instruments pertaining to the
business of the corporation, except in cases in which the authority to sign and
deliver is required by law to be exercised by another person or is expressly
delegated by the articles or these bylaws or by the Board of Directors to some
other officer or agent of the corporation; and
(e) Perform other duties prescribed by the Board of Directors.
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Section 5.07. VICE PRESIDENT. In the absence of the president or in the
event of his or her death, inability or refusal to act, the vice president (or
in the event there be more than one vice president, the vice presidents in the
order designated at the time of their election, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the president, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the president. Any vice president may sign, with
the secretary or an assistant secretary, certificates for shares of the
corporation, and shall perform other duties prescribed by the Board of Directors
or by the president.
Section 5.08. SECRETARY. The secretary shall:
(a) Maintain records of and, whenever necessary, certify all proceedings
of the Board of Directors and the shareholders;
(b) See that all notices are duly given in accordance with the provisions
of these bylaws or as required by law;
(c) Be custodian of the corporate records and of the corporate seal, if
any;
(d) See that a share register of the corporation is maintained in
accordance with Section 2.07 of these bylaws;
(e) Sign with the president, or a vice president, certificates for shares
of the corporation; and
(f) Perform other duties prescribed by the Board of Directors or by the
president.
Section 5.09. TREASURER. The treasurer shall be the chief financial
officer of the corporation and shall:
(a) Keep accurate financial records for the corporation;
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(b) Deposit all moneys, drafts and checks in the name of and to the credit
of the corporation in the banks and depositories designated by the Board of
Directors;
(c) Endorse for deposit all notes, checks and drafts received by the
corporation as ordered by the Board of Directors, making proper vouchers
therefor;
(d) Disburse corporate funds and issue checks and drafts in the name of
the corporation, as ordered by the Board of Directors;
(e) Render to the Board of Directors and the president, whenever
requested, an account of all transactions by the treasurer and of the financial
condition of the corporation;
(f) Perform other duties prescribed by the Board of Directors or by the
president; and
(g) If required by the Board of Directors, give a bond for the faithful
discharge of his or her duties in such sum and with such surety or sureties as
the Board of Directors shall determine.
Section 5.10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries may sign with the president or a vice president
certificates for shares of the corporation. The assistant treasurers shall, if
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of Directors shall
determine. The assistant secretaries and assistant treasurers shall perform
such duties as shall be prescribed by the secretary or the treasurer,
respectively, or by the Board of Directors or by the president.
Section 5.11. CHAIRMAN OF THE BOARD. A chairman of the Board of Directors
may be elected by the Board of Directors. He or she shall perform such duties
as shall be prescribed by the Board of Directors.
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Section 5.12. COMPENSATION. The compensation of the officers shall be
fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such compensation by reason of the fact that he or she
is also a director of the corporation.
ARTICLE VI
INDEMNIFICATION
The corporation shall indemnify a person made or threatened to be made a
party to a proceeding by reason of the former or present official capacity of
the person with the corporation in accordance with, and to the fullest extent
provided by, the provisions of Chapter 302A, Minnesota Statutes.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 7.01. CERTIFICATES FOR SHARES. The shares of the corporation
shall be either certificated shares or uncertificated shares. Each holder of
certificated shares shall be entitled to a certificate of shares.
A certificate representing shares of the corporation shall contain on its
face the name of the corporation, a statement that the corporation is
incorporated under the laws of Minnesota, the name of the person to whom it is
issued, the number and class of shares, and the designation of the series, if
any, of shares represented by the certificate. A new share certificate may be
issued in place of one that is alleged to have been lost, stolen or destroyed.
All certificates surrendered to the corporation for transfer shall be cancelled
and no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a certificate that is alleged to have been lost, stolen or destroyed a new
one may be
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issued therefor upon such terms and indemnity to the corporation as the
Board of Directors may prescribe.
Section 7.02. TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the share register of the corporation by the record holder
thereof or by his or her legal representative, who shall furnish proper evidence
of authority to transfer, or by his or her attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares, or by
evidence of transfer. The person in whose name shares stand on the share
register of the corporation shall be deemed by the corporation to be the owner
thereof for all purposes unless a different beneficial owner shall have been
designated as provided in Section 2.07 of these bylaws.
ARTICLE VIII
DISTRIBUTIONS
The Board of Directors may authorize, and the corporation may make, a
distribution only if the corporation will be able to pay its debts in the
ordinary course of business after making the distribution. For purposes of this
section, "distribution" means a direct or indirect transfer of money or other
property, other than shares of the corporation, with or without consideration,
or an incurrence of indebtedness by the corporation to or for the benefit of its
shareholders in respect of its shares. A distribution may be in the form of a
dividend or a distribution in liquidation or as consideration for the purchase,
redemption or other acquisition of the corporation's shares, or otherwise.
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ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of January
and end on the thirty-first day of December, next succeeding.
ARTICLE X
SEAL
The Board of Directors may provide a corporate seal which shall be circular
in form and shall have inscribed thereon the state of incorporation and the
words "Corporate Seal."
ARTICLE XI
AMENDMENT
These Bylaws may be amended or repealed and new Bylaws may be adopted by
the Board of Directors, or by the shareholders, as provided in Chapter 302A,
Minnesota Statutes.
ARTICLE XII
GOVERNING LAW
The corporation has been formed under and pursuant to the provisions of
Chapter 302A, Minnesota Statutes. All references in these bylaws to Chapter
302A, Minnesota Statutes shall mean and include such chapter as currently
enacted or hereafter amended.
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EXHIBIT 10.1
INCENTIVE STOCK OPTION PLAN
OF
PRINTWARE, INC.
1. PURPOSE. The purpose of this Incentive Stock Option Plan (the "Plan")
is to encourage key employees of Printware, Inc. (the "Company") to acquire a
proprietary interest in the Company, thereby creating an additional incentive to
such employees to promote the Company's best interests and to continue in its
employ, and further to provide an additional inducement for the acquisition of
the services of persons expected to become key employees and to implement the
growth and development of the Company. This Plan will be effected through the
granting of stock options as herein provided, which options are intended to
qualify as "incentive stock options" within the provisions of Section 422A of
the Internal Revenue Code of 1954 and any amendments thereto, and all provisions
of this Plan and any options granted hereunder shall be interpreted so as to
qualify thereunder.
2. ADMINISTRATION.
a. This Plan shall be administered by the Stock Option Committee
(the "Committee") of the Board of Directors of the Company (the "Board"). The
Committee shall be comprised of the entire Board or, if the Board so determines,
of three or more members of the Board who shall be "disinterested persons" as
defined in Rule 16b-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934.
b. The Committee shall have full authority and discretion to
determine, consistent with the provisions of this Plan, the employees to be
granted options, the times at which options shall be granted, the option price
of the shares subject to each option (subject to Section 6), the number of
shares subject to each option (subject to Section 3), the period during which
each option becomes exercisable (subject to Section 7), and the terms to be set
forth in each option agreement. The Committee shall also have full authority
and discretion to adopt and revise such rules and procedures as it shall deem
necessary for the administration of this Plan.
c. The Committee's interpretation and construction of any provisions
of this Plan or any option granted hereunder shall be final, conclusive and
binding on the Company, the optionee and all other persons.
3. ELIGIBILITY. The Committee shall from time to time determine the key
employees of the Company who shall be granted options under this Plan. No
option shall be granted to any officer or director of the Company who is not an
employee of the Company. An employee who has been granted an option may be
granted an additional option or options under this Plan if the Committee shall
so determine, with the restriction that (i) no individual employee may receive
options aggregating more than 100,000 shares under this Plan, and (ii) no
individual employee may receive incentive stock options (under this Plan and all
incentive stock option plans of the
<PAGE>
Company), in any calendar year, for shares having an aggregate Fair Market
Value (determined as of the time the option is granted) in excess of
$100,000, plus the amount of any unused limit carryover available for use in
that calendar year, as determined pursuant to Section 422A(c) (4) of the
Internal Revenue Code of 1954, as amended. The granting of an option under
this Plan shall not affect any outstanding stock option previously granted to
an optionee under this Plan or any other plan of the Company, except that no
option under this Plan shall be exercisable while there is outstanding
(within the meaning of Section 422A(c)(7) of the Internal Revenue Code of
1954, as amended) any incentive stock option, under this Plan or any other
plan of the Company, which was granted to the optionee before the granting of
such option.
4. SHARES OF STOCK SUBJECT TO THIS PLAN. The number of shares which may
be issued pursuant to the options granted by the Committee under this Plan shall
not exceed 500,000 shares of the common voting stock of the Company (the "Common
Stock"), subject to adjustment as provided herein. Such shares may be
authorized and unissued shares or shares previously acquired or to be acquired
by the Company and held in treasury. Any shares subject to an option which
expires for any reason or is terminated unexercised as to such shares may again
be subject to an option under this Plan.
5. ISSUANCE AND TERMS OF OPTION AGREEMENTS. Each key employee to whom an
option is granted under this Plan shall be entitled to receive an appropriate
Option Agreement, executed in the Company's name and also by the employee,
evidencing his option and referring to the terms and conditions of this Plan.
6. OPTION PRICE.
a. Each Option Agreement shall state the number of shares to which
it pertains and shall state the option price, which shall not be less than 100%
of the Fair Market Value of the Common Stock on the date the option is granted.
If the employee, at the time the option is granted, owns more than 10% of the
total combined voting power of all classes of stock of the Company, the option
price shall not be less than 110% of the Fair Market Value of the Common Stock
on the date the option is granted. "Fair Market Value," as used in this Plan,
shall mean the value of the Common Stock on a pertinent date as determined by
the Committee, using such valuation methods as it, in its sole discretion, shall
deem appropriate.
b. Upon the exercise of the option, the option price shall be
payable either (i) in United States dollars, in cash or by check, or (ii) if the
Board of Directors, in its sole discretion, shall so authorize, in shares of the
Common Stock of the Company then owned by the employee. Shares of Common Stock
delivered in payment of the option price shall be valued at their Fair Market
Value on the date of such delivery.
c. The proceeds of the sale of the Common Stock subject to option
shall be added to the general funds of the Company and used for its corporate
purposes.
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7. TERMS AND EXERCISE OF OPTIONS. Each option granted under this Plan
shall be exercisable during the periods and for the number of shares as shall be
provided in the Option Agreement evidencing the option granted by the Committee
and the terms thereof. However, no option shall be exercisable after the
expiration of ten years from the date of grant.
8. WITHHOLDING TAXES. The Company shall have the right to require the
payment (through withholding from the optionee's salary or otherwise) of any
federal, state, or local taxes required by law to be withheld with respect to
the issuance of shares upon the exercise of an option or with respect to any
disposition of such shares by the optionee.
9. REQUIREMENTS OF LAW. The granting of options and the issuance of
shares of Common Stock upon the exercise of an option shall be subject to all
applicable laws, rules, and regulations, and shares shall not be issued except
upon approval of proper government agencies or stock exchanges as may be
required. The exercise of any option will be contingent upon receipt from the
optionee (or the purchaser acting under Section 11(b)) of a representation in
writing that at the time of such exercise it is then his intention to acquire
the shares being purchased for investment and not for resale or other
distribution thereof to the public.
10. NONTRANSFERABILITY. All options granted under this Plan shall be
nontransferable by the optionee, otherwise than by will or the laws of descent
and distribution, and shall be exercisable during his lifetime, only by him.
11. TERMINATION OF EMPLOYMENT; DEATH OF OPTIONEE.
a. If an optionee shall cease to be employed by the Company as a
result of retirement for age or disability, he may, but only within a period of
ninety days beginning the day following the date of such termination of
employment, exercise his option, to the extent he was entitled to exercise it at
the date of such termination. Termination for any other reason (other than
death) shall result in cancellation of the option as of the date of such
termination.
b. In the event of the death of an optionee while in the employ of
the Company, the option theretofore granted to him shall be exercisable only by
the proper beneficiary within a period of one year after the date of death and
then only if and to the extent the optionee was entitled to exercise it at the
date of his death.
c. Notwithstanding paragraphs (a) and (b) of this Section 11, no
option shall be exercisable by the optionee or any beneficiary after the
expiration of the term of the option.
12. ADJUSTMENTS. In the event of any change in the outstanding shares of
Common Stock by reason of any stock dividend or split, recapitalization,
reclassification, merger, consolidation, combination or exchange of shares, or
other similar corporate change, then if the Board shall determine, in its sole
discretion, that such change necessarily or equitably requires an adjustment in
the number of shares subject to each outstanding option and the option prices or
in
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the maximum number of shares subject to this Plan, such adjustments shall be
made by the Board and shall be conclusive and binding for all purposes of
this Plan. No adjustment shall be made in connection with the issuance by
the Company of any warrants, rights, or options to acquire additional shares
of Common Stock or of securities convertible into Common Stock.
13. MERGER, CONSOLIDATION, REORGANIZATION, LIQUIDATION, ETC. If the
Company shall become a party to any corporate merger, consolidation, major
acquisition of property for stock, reorganization, or liquidation, the Board
shall have power to make any arrangement it deems advisable with respect to
outstanding options, which shall be binding for all purposes of this Plan,
including, but not limited to, the substitution of new options for any options
then outstanding, the assumption of any such options, and the termination of
such options.
14. CLAIM TO STOCK OPTION, OWNERSHIP OR EMPLOYMENT RIGHTS. No employee or
other person shall have any claim or right to be granted options under this
Plan. No optionee, prior to issuance of the stock, shall be entitled to voting
rights, dividends, or other rights of shareholders except as otherwise provided
in this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any employee any right to be retained in the employ of the
Company.
15. EXPENSES OF PLAN. The expenses of administering this Plan shall be
borne by the Company.
16. RELIANCE ON REPORTS. Each member of the Board shall be fully
justified in relying or acting in good faith upon any report made by the
independent public accountants of the Company and upon any other information
furnished in connection with this Plan by any person or persons other than
himself. In no event shall any person who is or shall have been a member of the
Board be liable for any determination made or other action taken, or any
omission to act, in reliance upon any such report or information, or for any
action taken, including the furnishing of information, or failure to act, if in
good faith.
17. INDEMNIFICATION. Each person who is or shall have been a member of
the Board shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him in connection with or resulting from any claim, action, suit, or
proceeding to which he may be a party or in which he may be involved by reason
of any action taken or failure to act under this Plan and against and from any
and all amounts paid by him in settlement thereof, with the Company's approval,
or paid by him in satisfaction of judgment in any such action, suit, or
proceeding against him, provided he shall give the Company an opportunity, at
its own expense, to handle and defend the same before he undertakes to handle
and defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such person may
be entitled under the Company's articles of incorporation or bylaws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify him or
hold him harmless.
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18. AMENDMENT AND TERMINATION. No options may be granted under this
Plan after June 3, 1995, or earlier termination of this Plan as hereinafter
provided. The Board may terminate this Plan or modify or amend this Plan in
such respect as it shall deem advisable, provided, however, that the Board
may not, without further approval within twelve months by the Company's
shareholders, (i) increase the aggregate number of shares of Common Stock as
to which options may be granted under this Plan except as provided in Section
12, (ii) change the class of employees eligible to receive options, (iii)
change the provisions of this Plan regarding the option price, (iv) extend
the period during which options may be granted, or (v) extend the maximum
period of ten years after the date of grant during which options may be
exercised. No termination or amendment of this Plan may, without the consent
of an employee to whom an option shall theretofore have been granted,
adversely affect the rights of such employee under such option. Further,
this Plan may not, without the approval of the Company's shareholders, be
amended in any manner that will cause options issued under it to fail to meet
the requirements of incentive stock options as defined in Section 422A of the
Internal Revenue Code of 1954 or any amendments thereto.
19. GENDER. Any masculine terminology used in this Plan shall also
include the feminine gender.
20. EFFECTIVE DATE. The effective date of this Plan is June 3, 1985, the
date of its adoption by the Board; provided, however, that it and any and all
options granted hereunder shall be and become null and void if the shareholders
of the Company shall fail to approve this Plan within twelve months from the
date of its adoption.
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EXHIBIT 10.2
1986 INCENTIVE STOCK OPTION PLAN
OF
PRINTWARE, INC.
1. PURPOSE. The purpose of this 1986 Incentive Stock Option Plan (the
"Plan") is to encourage key employees of Printware, Inc. (the "Company") to
acquire a proprietary interest in the Company, thereby creating an additional
incentive to such employees to promote the Company's best interests and to
continue in its employ, and further to provide an additional inducement for the
acquisition of the services of persons expected to become key employees and to
implement the growth and development of the Company. This Plan will be effected
through the granting of stock options as herein provided, which options are
intended to qualify as "incentive stock options" within the provisions of
Section 422A of the Internal Revenue Code of 1954 and any amendments thereto,
and all provisions of this Plan and any options granted hereunder shall be
interpreted so as to qualify thereunder.
2. ADMINISTRATION.
a. This Plan shall be administered by the Stock Option Committee
(the "Committee") of the Board of Directors of the Company (the "Board"). The
Committee shall be comprised of the entire Board or, if the Board so determines,
of three or more members of the Board who shall be "disinterested persons" as
defined in Rule 16b-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934.
b. The Committee shall have full authority and discretion to
determine, consistent with the provisions of this Plan, the employees to be
granted options, the times at which options shall be granted, the option price
of the shares subject to each option (subject to Section 6), the number of
shares subject to each option (subject to Section 3), the period during which
each option becomes exercisable (subject to Section 7), and the terms to be set
forth in each option agreement. The Committee shall also have full authority
and discretion to adopt and revise such rules and procedures as it shall deem
necessary for the administration of this Plan.
c. The Committee's interpretation and construction of any provisions
of this Plan or any option granted hereunder shall be final, conclusive and
binding on the Company, the optionee and all other persons.
3. ELIGIBILITY. The Committee shall from time to time determine the
key employees of the Company who shall be granted options under this Plan.
No option shall be granted to any officer or director of the Company who is
not an employee of the Company. An employee who has been granted an option
may be granted an additional option or options under this Plan if the
Committee shall so determine, with the restriction that (i) no individual
employee may receive options aggregating more than 100,000 shares under this
Plan, and (ii) no individual employee may receive incentive stock options
(under this Plan and all incentive stock option plans of the Company), in any
calendar year, for shares having an aggregate Fair Market Value (determined
as
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of the time the option is granted) in excess of $100,000, plus the amount of
any unused limit carryover available for use in that calendar year, as
determined pursuant to Section 422A(c)(4) of the Internal Revenue Code of
1954, as amended. The granting of an option under this Plan shall not affect
any outstanding stock option previously granted to an optionee under this
Plan or any other plan of the Company, except that no option under this Plan
shall be exercisable while there is outstanding (within the meaning of
Section 422A(c)(7) of the Internal Revenue Code of 1954, as amended) any
incentive stock option, under this Plan or any other plan of the Company,
which was granted to the optionee before the granting of such option.
4. SHARES OF STOCK SUBJECT TO THIS PLAN. The number of shares which may
be issued pursuant to the options granted by the Committee under this Plan shall
not exceed 250,000 shares of the common voting stock of the Company (the "Common
Stock"), subject to adjustment as provided herein. Such shares may be
authorized and unissued shares or shares previously acquired or to be acquired
by the Company and held in treasury. Any shares subject to an option which
expires for any reason or is terminated unexercised as to such shares may again
be subject to an option under this Plan.
5. ISSUANCE AND TERMS OF OPTION AGREEMENTS. Each key employee to whom an
option is granted under this Plan shall be entitled to receive an appropriate
Option Agreement, executed in the Company's name and also by the employee,
evidencing his option and referring to the terms and conditions of this Plan.
6. OPTION PRICE.
a. Each Option Agreement shall state the number of shares to which
it pertains and shall state the option price, which shall not be less than 100%
of the Fair Market Value of the Common Stock on the date the option is granted.
If the employee, at the time the option is granted, owns more than 10% of the
total combined voting power of all classes of stock of the Company, the option
price shall not be less than 110% of the Fair Market Value of the Common Stock
on the date the option is granted. "Fair Market Value," as used in this Plan,
shall mean the value of the Common Stock on a pertinent date as determined by
the Committee, using such valuation methods as it, in its sole discretion, shall
deem appropriate.
b. Upon the exercise of the option, the option price shall be
payable either (i) in United States dollars, in cash or by check, or (ii) if the
Board of Directors, in its sole discretion, shall so authorize, in shares of the
Common Stock of the Company then owned by the employee. Shares of Common Stock
delivered in payment of the option price shall be valued at their Fair Market
Value on the date of such delivery.
c. The proceeds of the sale of the Common Stock subject to option
shall be added to the general funds of the Company and used for its corporate
purposes.
7. TERMS AND EXERCISE OF OPTIONS. Each option granted under this Plan
shall be exercisable during the periods and for the number of shares as shall be
provided in the Option
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Agreement evidencing the option granted by the Committee and the terms
thereof. However, no option shall be exercisable after the expiration of ten
years from the date of grant.
8. WITHHOLDING TAXES. The Company shall have the right to require the
payment (through withholding from the optionee's salary or otherwise) of any
federal, state, or local taxes required by law to be withheld with respect to
the issuance of shares upon the exercise of an option or with respect to any
disposition of such shares by the optionee.
9. REQUIREMENTS OF LAW. The granting of options and the issuance of
shares of Common Stock upon the exercise of an option shall be subject to all
applicable laws, rules, and regulations, and shares shall not be issued except
upon approval of proper government agencies or stock exchanges as may be
required. The exercise of any option will be contingent upon receipt from the
optionee (or the purchaser acting under Section 11(b)) of a representation in
writing that at the time of such exercise it is then his intention to acquire
the shares being purchased for investment and not for resale or other
distribution thereof to the public.
10. NONTRANSFERABILITY. All options granted under this Plan shall be
nontransferable by the optionee, otherwise than by will or the laws of descent
and distribution, and shall be exercisable during his lifetime, only by him.
11. TERMINATION OF EMPLOYMENT; DEATH OF OPTIONEE.
a. If an optionee shall cease to be employed by the Company as a
result of retirement for age or disability, he may, but only within a period of
ninety days beginning the day following the date of such termination of
employment, exercise his option, to the extent he was entitled to exercise it at
the date of such termination. Termination for any other reason (other than
death) shall result in cancellation of the option as of the date of such
termination.
b. In the event of the death of an optionee while in the employ of
the Company, the option theretofore granted to him shall be exercisable only by
the proper beneficiary within a period of one year after the date of death and
then only if and to the extent the optionee was entitled to exercise it at the
date of his death.
c. Notwithstanding paragraphs (a) and (b) of this Section 11, no
option shall be exercisable by the optionee or any beneficiary after the
expiration of the term of the option.
12. ADJUSTMENTS. In the event of any change in the outstanding shares of
Common Stock by reason of any stock dividend or split, recapitalization,
reclassification, merger, consolidation, combination or exchange of shares, or
other similar corporate change, then if the Board shall determine, in its sole
discretion, that such change necessarily or equitably requires an adjustment in
the number of shares subject to each outstanding option and the option prices or
in the maximum number of shares subject to this Plan, such adjustments shall be
made by the Board and shall be conclusive and binding for all purposes of this
Plan. No adjustment shall be made in
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connection with the issuance by the Company of any warrants, rights, or
options to acquire additional shares of Common Stock or of securities
convertible into Common Stock.
13. MERGER, CONSOLIDATION, REORGANIZATION, LIQUIDATION, ETC. If the
Company shall become a party to any corporate merger, consolidation, major
acquisition of property for stock, reorganization, or liquidation, the Board
shall have power to make any arrangement it deems advisable with respect to
outstanding options, which shall be binding for all purposes of this Plan,
including, but not limited to, the substitution of new options for any options
then outstanding, the assumption of any such options, and the termination of
such options.
14. CLAIM TO STOCK OPTION, OWNERSHIP OR EMPLOYMENT RIGHTS. No employee or
other person shall have any claim or right to be granted options under this
Plan. No optionee, prior to issuance of the stock, shall be entitled to voting
rights, dividends, or other rights of shareholders except as otherwise provided
in this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any employee any right to be retained in the employ of the
Company.
15. EXPENSES OF PLAN. The expenses of administering this Plan shall be
borne by the Company.
16. RELIANCE ON REPORTS. Each member of the Board shall be fully
justified in relying or acting in good faith upon any report made by the
independent public accountants of the Company and upon any other information
furnished in connection with this Plan by any person or persons other than
himself. In no event shall any person who is or shall have been a member of the
Board be liable for any determination made or other action taken, or any
omission to act, in reliance upon any such report or information, or for any
action taken, including the furnishing of information, or failure to act, if in
good faith.
17. INDEMNIFICATION. Each person who is or shall have been a member of
the Board shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him in connection with or resulting from any claim, action, suit, or
proceeding to which he may be a party or in which he may be involved by reason
of any action taken or failure to act under this Plan and against and from any
and all amounts paid by him in settlement thereof, with the Company's approval,
or paid by him in satisfaction of judgment in any such action, suit, or
proceeding against him, provided he shall give the Company an opportunity, at
its own expense, to handle and defend the same before he undertakes to handle
and defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such person may
be entitled under the Company's articles of incorporation or bylaws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify him or
hold him harmless.
18. AMENDMENT AND TERMINATION. No options may be granted under this Plan
after October, 28, 1996, or earlier termination of this Plan as hereinafter
provided. The Board may terminate this Plan or modify or amend this Plan in
such respect as it shall deem advisable, provided, however, that the Board may
not, without further approval within twelve months by the
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Company's shareholders, (i) increase the aggregate number of shares of Common
Stock as to which options may be granted under this Plan except as provided
in Section 12, (ii) change the class of employees eligible to receive
options, (iii) change the provisions of this Plan regarding the option price,
(iv) extend the period during which options may be granted, or (v) extend the
maximum period of ten years after the date of grant during which options may
be exercised. No termination or amendment of this Plan may, without the
consent of an employee to whom an option shall theretofore have been granted,
adversely affect the rights of such employee under such option. Further,
this Plan may not, without the approval of the Company's shareholders, be
amended in any manner that will cause options issued under it to fail to meet
the requirements of incentive stock options as defined in Section 422A of the
Internal Revenue Code of 1954 or any amendments thereto.
19. GENDER. Any masculine terminology used in this Plan shall also
include the feminine gender.
20. EFFECTIVE DATE. The effective date of this Plan is October 28, 1986,
the date of its adoption by the Board; provided, however, that it and any and
all options granted hereunder shall be and become null and void if the
shareholders of the Company shall fail to approve this Plan within twelve months
from the date of its adoption.
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EXHIBIT 10.3
As Adopted on
April 2, 1996
PRINTWARE, INC.
1996 STOCK PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this Plan is Printware, Inc. 1996 Stock Plan (the "Plan"). The
purpose of the Plan is to enable Printware, Inc. (the "Company") and its
Subsidiaries to retain and attract executives and other key employees and
consultants who contribute to the Company's success by their ability, ingenuity
and industry, and to enable such individuals to participate in the long-term
success and growth of the Company by giving them a proprietary interest in the
Company.
For purposes of the Plan, the following terms shall be defined as set forth
below:
a. "BOARD" means the Board of Directors of the Company.
b. "CAUSE" means a felony conviction of a participant or the failure of a
participant to contest prosecution for a felony, or a participant's
willful misconduct or dishonesty, any of which is directly and
materially harmful to the business or reputation of the Company.
c. "CODE" means the Internal Revenue Code of 1986, as amended.
d. "COMMITTEE" means the Committee referred to in Section 2 of the Plan.
If at any time no Committee shall be in office, then the functions of
the Committee specified in the Plan shall be exercised by the Board.
e. "COMPANY" means Printware, Inc., a corporation organized under the
laws of the State of Minnesota (or any successor corporation).
f. "DISABILITY" means permanent and total disability as determined by the
Committee.
g. "DISINTERESTED PERSON" shall have the meaning set forth in Rule 16b-
3(d)(3) as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, or any successor definition
adopted by the Commission.
h. "EARLY RETIREMENT" means retirement, with consent of the Committee at
the time of retirement, from active employment with the Company and
any Subsidiary or Parent Corporation of the Company.
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i. "FAIR MARKET VALUE" means the value of the Stock on a given date as
determined by the Committee in accordance with the applicable Treasury
Department regulations under Section 422 of the Code with respect to
"incentive stock options."
j. "INCENTIVE STOCK OPTION" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of
Section 422 of the Code.
k. "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option, and is intended to be and is designated as a
"Non-Qualified Stock Option."
l. "NORMAL RETIREMENT" means retirement from active employment with the
Company and any Subsidiary or Parent Corporation of the Company on or
after age 60.
m. "PARENT CORPORATION" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if each of
the corporations (other than the Company) owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one
of the other corporations in the chain.
n. "RESTRICTED STOCK" means an award of shares of Stock that are subject
to restrictions under Section 6 below.
o. "RETIREMENT" means Normal Retirement or Early Retirement.
p. "STOCK" means the Common Stock, no par value per share, of the
Company.
q. "STOCK OPTION" means any option to purchase shares of Stock granted
pursuant to Section 5 below.
r. "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of
the corporations (other than the last corporation in the unbroken
chain) owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Board of Directors or by a Committee
of not less than three Disinterested Persons, who shall be appointed by the
Board of Directors of the Company and who shall serve at the pleasure of the
Board.
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The Committee shall have the power and authority to grant to eligible
employees and consultants of the Company (which consultants shall serve pursuant
to a written agreement with the Company), pursuant to the terms of the Plan:
(i) Stock Options, or (ii) Restricted Stock.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the Company and
its Subsidiaries and consultants to whom Stock Options and/or
Restricted Stock awards may from time to time be granted
hereunder;
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options or Restricted Stock awards, or a
combination of the foregoing, are to be granted hereunder;
(iii) to determine the number of shares to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but
not limited to, any restriction on any Stock Option or other
award and/or the shares of Stock relating thereto); and
(v) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the
election of the participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to officers of the Company for the purpose of selecting
employees who are not officers of the Company for purposes of (i) above.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and Plan
participants.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 500,000 shares (after giving effect to the reverse stock
split approved by the Company's Board of Directors on April 2, 1996). Such
shares may consist, in whole or in part, of authorized and unissued shares.
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If any shares that have been optioned ceased to be subject to Options, or
if any shares subject to any Restricted Stock award granted hereunder are
forfeited or such award otherwise terminates without a payment being made to the
participant, such shares shall again be available for distribution in connection
with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding options granted under the Plan, and in the number of
shares subject to Restricted Stock awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
SECTION 4. ELIGIBILITY.
Officers, other employees, consultants (which consultants shall serve
pursuant to a written agreement with the Company) and members of the Board of
Directors of the Company and Subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the business of
the Company and its Subsidiaries are eligible to be granted Stock Options or
Restricted Stock awards under the Plan. The optionees and participants under
the Plan shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall determine, in
its sole discretion, the number of shares covered by each award.
SECTION 5. STOCK OPTIONS.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive
Stock Options shall be granted under the Plan more than ten years after the Plan
is adopted.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options. To the
extent that any option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify either the Plan or any Incentive Stock Option under Section 422
of the Code. The preceding sentence shall not preclude any modification or
amendment to an outstanding Incentive Stock Option, whether or
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not such modification or amendment results in disqualification of such Option
as an Incentive Stock Option, provided the optionee consents in writing to
the modification or amendment.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) OPTION PRICE. The option price per share of Stock purchasable under a
Stock Option shall be determined by the Committee at the time of grant and may,
except as provided in this paragraph, be less than the Fair Market Value of the
Stock on the date of the grant of the Option. In no event shall the option
price per share of Stock purchasable under an Incentive Stock Option be less
than 100% of the Fair Market Value of the Stock on the date of the grant of the
option. If an employee owns or is deemed to own (by reason of the attribution
rules applicable under Section 425(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Parent Corporation or
Subsidiary and an Incentive Stock Option is granted to such employee, the option
price shall be no less than 110% of the Fair Market Value of the Stock on the
date the option is granted. No Non-Qualified Stock Option shall have an option
price less than 85% of the Fair Market Value of the Stock on the date of grant.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 425(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) EXERCISABILITY. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time.
(d) METHOD OF EXERCISE. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the exercise
of a Non-Qualified Stock Option or Restricted Stock subject to an award
hereunder (based, in each case, on the Fair Market Value of the Stock on the
date the option is exercised, as determined by the Committee); provided,
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however, that, in the case of an Incentive Stock Option, the right to make a
payment in the form of already owned shares may be authorized only at the time
the option is granted, and provided further that in the event payment is made in
the form of shares of Restricted Stock, the optionee will receive a portion of
the option shares in the form of, and in an amount equal to, the Restricted
Stock award tendered as payment by the optionee. If the terms of an option so
permit, an optionee may elect to pay all or part of the option exercise price by
having the Company withhold from the shares of Stock that would otherwise be
issued upon exercise that number of shares of Stock having a Fair Market Value
equal to the aggregate option exercise price for the shares with respect to
which such election is made. No shares of Stock shall be issued until full
payment therefor has been made. An optionee shall generally have the rights to
dividends and other rights of a shareholder with respect to shares subject to
the option when the optionee has given written notice of exercise, has paid in
full for such shares, and, if requested, has given the representation described
in paragraph (a) of Section 10.
(e) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee.
(f) TERMINATION BY DEATH. If an optionee's employment by the Company and
any Subsidiary or Parent Corporation terminates by reason of death, the Stock
Option may thereafter be immediately exercised, to the extent then exercisable
(or on such accelerated basis as the Committee shall determine at or after
grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of three years (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.
(g) TERMINATION BY REASON OF DISABILITY. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after three years (or such shorter period as
the Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.
(h) TERMINATION BY REASON OF RETIREMENT. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after three years (or such shorter period as Committee shall specify
at grant) from the date of such termination of employment or the expiration of
the stated term of the option, whichever period is the shorter. In the event of
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termination of employment by reason of Retirement, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee, if
an optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option shall thereupon terminate, except that the option may be exercised to the
extent it was exercisable at such termination for the lesser of three months or
the balance of the option's term if the optionee is involuntarily terminated
without Cause by the Company and any Subsidiary or Parent Corporation.
(j) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Common Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company and any Subsidiary or Parent Corporation is exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.
(k) AUTOMATIC GRANT TO NON-EMPLOYEE DIRECTORS. Each individual who is
serving as a member of the Board and who is not an employee of the Company,
any Parent Corporation or any Subsidiary (a "Non-Employee Director") shall be
automatically awarded, on the date this Plan is approved by the Company's
stockholders, a Non-Qualified Stock Option, which shall be fully vested, to
purchase 1,000 shares of the Company's Common Stock at an exercise price
equal to 100% of the Fair Market Value of the Common Stock on such date and
which expires five years after the date of grant. An individual who is first
elected or appointed or who is re-elected as a Non-Employee Director at any
time hereafter shall receive a similar automatic grant, at the time of
election or appointment or re-election to the Board, of a Non-Qualified Stock
Option, which shall be fully vested, to purchase 1,000 shares of the
Company's Common Stock at an exercise price equal to 100% of the Fair Market
Value of the Common Stock on such date and which expires five years after the
date of grant.
SECTION 6. RESTRICTED STOCK.
(a) ADMINISTRATION. Shares of Restricted Stock may be issued either alone
or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.
(b) AWARDS AND CERTIFICATES. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such
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recipient has executed an agreement evidencing the award and has delivered a
fully executed copy thereof to the Company, and has otherwise complied with the
then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in respect
of shares of Restricted Stock awarded under the Plan. Such certificate
shall be registered in the name of the participant, and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such award, substantially in the following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of Printware, Inc. 1996
Stock Plan and an Agreement entered into between the
registered owner and the Company. Copies of such Plan and
Agreement are on file in the offices of the Company."
(ii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such award.
(c) RESTRICTIONS AND CONDITIONS. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award agreement,
during a period set by the Committee commencing with the date of such award
(the "Restriction Period"), the participant shall not be permitted to sell,
transfer, pledge or assign shares of Restricted Stock awarded under the
Plan. Within these limits, the Committee may provide for the lapse of such
restrictions in installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section 6, the
participant shall have, with respect to the shares of Restricted Stock, all
of the rights of a shareholder of the Company, including the right to vote
the shares and the right to receive any cash dividends. The Committee, in
its sole discretion, may permit or require the payment of cash dividends to
be deferred and, if the Committee so determines, reinvested in additional
shares of Restricted Stock (to the extent shares are available under
Section 3 and subject to paragraph (f) of Section 10). Certificates for
shares of unrestricted Stock shall be delivered to the grantee promptly
after, and only after, the period of forfeiture shall have expired without
forfeiture in respect of such shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement and paragraph
(c)(iv) of this Section 6, upon termination of employment for any reason
during the Restriction Period, all shares still subject to restriction
shall be forfeited by the participant.
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(iv) In the event of special hardship circumstances of a participant
whose employment is terminated (other than for Cause), including death,
Disability or Retirement, or in the event of an unforeseeable emergency of
a participant still in service, the Committee may, in its sole discretion,
when it finds that a waiver would be in the best interest of the Company,
waive in whole or in part any or all remaining restrictions with respect to
such participant's shares of Restricted Stock.
SECTION 7. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer of an employee from the Company to a Parent Corporation or
Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or from
one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for military
service or sickness, or for any other purpose approved by the Company if the
period of such leave does not exceed ninety (90) days (or such longer period as
the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in writing
by the Committee, but only if the employee's right to reemployment is guaranteed
either by a statute or by contract, and provided that, in the case of any leave
of absence, the employee returns to work within 30 days after the end of such
leave.
SECTION 8. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option, Restricted Stock or other
Stock-based award theretofore granted, without the optionee's or participant's
consent, or (ii) which without the approval of the stockholders of the Company
would cause the Plan to no longer comply with Rule 16b-3 under the Securities
Exchange Act of 1934, Section 422 of the Code or any other regulatory
requirements.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent.
Without limiting the generality of the foregoing, the Committee (or if there is
no Committee, then the Board) shall have the authority to accelerate the vesting
of any or all outstanding options or awards in the event of any actual or
threatened change in control of the Company. The Committee may also substitute
new Stock Options for previously granted options, including previously granted
options having higher option prices.
SECTION 9. UNFUNDED STATUS OF PLAN.
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The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize
the creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
SECTION 10. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares pursuant to a
Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan pursuant to
any Restricted Stock or other Stock-based awards shall be subject to such stock-
transfer orders and other restrictions as the Committee may deem advisable under
the rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed, and any
applicable Federal or state securities laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted Stock and
other Stock-based awards under the Plan (other than Stock Options) are not
required to make any payment or provide consideration other than the rendering
of services.
(c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.
(d) Each participant shall, no later than the date as of which any part of
the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the
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participant. With respect to any award under the Plan, if the terms of such
award so permit, a participant may elect by written notice to the Company to
satisfy part or all of the withholding tax requirements associated with the
award by (i) authorizing the Company to retain from the number of shares of
Stock that would otherwise be deliverable to the participant, or (ii) delivering
to the Company from shares of Stock already owned by the participant, that
number of shares having an aggregate Fair Market Value equal to part or all of
the tax payable by the participant under this Section 10(d). Any such election
shall be in accordance with, and subject to, applicable tax and securities laws,
regulations and rulings.
(e) At the time of grant, the Committee may provide in connection with any
grant made under this Plan that the shares of Stock received as a result of such
grant shall be subject to a repurchase right in favor of the Company, pursuant
to which the participant shall be required to offer to the Company upon
termination of employment for any reason any shares that the participant
acquired under the Plan, with the price being the then Fair Market Value of the
Stock or, in the case of a termination for Cause, an amount equal to the cash
consideration paid for the Stock, subject to such other terms and conditions as
the Committee may specify at the time of grant. The Committee may, at the time
of the grant of an award under the Plan, provide the Company with the right to
repurchase, or require the forfeiture of, shares of Stock acquired pursuant to
the Plan by any participant who, at any time within one year after termination
of employment with the Company, directly or indirectly competes with, or is
employed by a competitor of, the Company.
(f) The reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment shall only be permissible if the Committee (or the
Company's chief financial officer) certifies in writing that under Section 3
sufficient shares are available for such reinvestment (taking into account then
outstanding Stock Options and other Plan awards).
SECTION 11. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is approved by a vote of the
holders of a majority of the Stock present and entitled to vote at a meeting of
the Company's shareholders.
Adopted by the Board of Directors: April 2, 1996
Approved by Stockholders: April 25, 1996
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EXHIBIT 10.4
As Adopted on
April 2, 1996
PRINTWARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT OF PLAN. Printware, Inc. (hereinafter referred to as
the "Company") proposes to grant to certain employees of the Company the
opportunity to purchase common stock of the Company. Such common stock shall be
purchased pursuant to the plan herein set forth which shall be known as the
"PRINTWARE, INC. EMPLOYEE STOCK PURCHASE PLAN" (hereinafter referred to as the
"Plan"). The Company intends that the Plan shall qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended, and shall be construed in a manner consistent with the requirements of
said Section 423 and the regulations thereunder.
2. PURPOSE. The Plan is intended to encourage stock ownership by
employees of the Company, and as an incentive to them to remain in employment,
improve operations, increase profits, and contribute more significantly to the
Company's success.
3. ADMINISTRATION. The Plan shall be administered by a stock purchase
committee (hereinafter referred to as the "Committee") consisting of not less
than three directors or employees of the Company, as designated by the Board of
Directors of the Company (hereinafter referred to as the "Board of Directors").
The Board of Directors shall fill all vacancies in the Committee and may remove
any member of the Committee at any time, with or without cause. The Committee
shall select its own chairman and hold its meetings at such times and places as
it may determine. All determinations of the Committee shall be made by a
majority of its members. Any decision which is made in writing and signed by a
majority of the members of the Committee shall be effective as fully as though
made by a majority vote at a meeting duly called and held. The determinations
of the Committee shall be made in accordance with its judgment as to the best
interests of the Company, its employees and it shareholders and in accordance
with the purposes of the Plan; provided, however, that the provisions of the
Plan shall be construed in a manner consistent with the requirements of Section
423 of the Internal Revenue Code, as amended. Such determinations shall be
binding upon the Company and the participants in the Plan unless otherwise
determined by the Board of Directors. The Company shall pay all expenses of
administering the Plan. No member of the Board of Directors or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted under it.
4. DURATION AND PHASES OF THE PLAN. (a) The Plan will commence on April
1, 1997 and will terminate December 31, 2006, except that any phase commenced
prior to such termination shall, if necessary, be allowed to continue beyond
such termination until completion. Notwithstanding the foregoing, this Plan
shall be considered of no force and effect and any
<PAGE>
options granted shall be considered null and void unless the holders of a
majority of all of the issued and outstanding shares of the common stock of the
Company approve the Plan within twelve (12) months after the date of its
adoption by the Board of Directors.
(b) The Plan shall be carried out in one or more phases, each phase being
for a period of not more than 27 months as is determined by the Committee. Each
phase shall commence immediately after the termination of the preceding phase.
The existence and date of commencement of a phase (the "Commencement Date")
shall be determined by the Committee, provided that the commencement of the
first phase shall be within twelve (12) months before or after the date of
approval of the Plan by the shareholders of the Company. In the event all of
the stock reserved for grant of options hereunder is issued pursuant to the
terms hereof prior to the commencement of one or more phases scheduled by the
Committee or the number of shares remaining is so small, in the opinion of the
Committee, as to render administration of any succeeding phase impracticable,
such phase or phases shall be canceled. Phases shall be numbered successively
as Phase 1, Phase 2 and Phase 3.
(c) The Board of Directors may elect to accelerate the termination date of
any phase effective on the date specified by the Board of Directors in the event
of (i) any consolidation or merger of the Company in which the Company is not
the continuing or surviving corporation or pursuant to which shares would be
converted into cash, securities or other property, other than a merger of the
Company in which shareholders immediately prior to the merger have the same
proportionate ownership of stock in the surviving corporation immediately after
the merger; (ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the assets
of the Company, or (iii) any plan or liquidation or dissolution of the Company.
5. ELIGIBILITY. All Employees, as defined in Paragraph 19 hereof, who
have been employed by the Company for at least six months prior to the
Commencement Date of a phase, and whose customary employment is at least 20
hours per week, shall be eligible to participate in such phase.
6. PARTICIPATION. Participation in the Plan is voluntary. An eligible
Employee may elect to participate in any phase of the plan, and thereby become a
"Participant" in the Plan, by completing the Plan payroll deduction form
provided by the Company and delivering it to the Company or its designated
representative prior to the Commencement Date of that phase. Payroll deductions
for a Participant shall commence on the first payday after the Commencement Date
of the phase and shall terminate on the last payday immediately prior to or
coinciding with the termination date of that phase unless sooner terminated by
the Participant as provided in Paragraph 9 hereof.
7. PAYROLL DEDUCTIONS. (a) Upon enrollment, a Participant shall elect to
make contributions to the Plan by payroll deductions (in full dollar amounts and
in amounts calculated to be as uniform as practicable throughout the period of
the phase), in the aggregate amount not in excess of 10% of such Participant's
Base Pay for the term of the Phase, as determined
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<PAGE>
according to Paragraph 19 hereof. The Committee may at its discretion
establish a minimum authorized payroll deduction per Employee per pay period.
(b) In the event that the Participant's compensation for any pay period is
terminated or reduced from the compensation rate for such a period as of the
Commencement Date of the phase for any reason so that the amount actually
withheld on behalf of the Participant as of the termination date of the phase is
less than the amount anticipated to be withheld over the phase year as
determined on the Commencement Date of the phase, then the extent to which the
Participant may exercise his option shall be based on the amount actually
withheld on his behalf. In the event of a change in the pay period of any
Participant, such as from bi-weekly to monthly, an appropriate adjustment shall
be made to the deduction in each new pay period so as to ensure the deduction of
the proper amount authorized by the Participant.
(c) All payroll deductions made for Participants shall be credited to
their accounts under the Plan. A Participant may not make any separate cash
payments into such account.
(d) Except for his right to discontinue participation in the Plan as
provided in Paragraph 9, no Participant shall be entitled to increase or
decrease the amount to be deducted in a given phase after the Commencement Date.
8. OPTIONS.
(a) GRANT OF OPTION.
(i) A Participant who is employed by the Company as of the
Commencement Date of a phase shall be granted an option as of
such date to purchase a number of full shares of Company common
stock to be determined by dividing the total amount to be
credited to that Participant's account under Paragraph 7 hereof
by the option price set forth in Paragraph 8(a)(ii)(A) hereof,
subject to the limitations of Paragraph 10 hereof.
(ii) The option price for such shares of common stock shall be the
lower of:
A. Eighty-five percent (85%) of the fair market value of such
shares of common stock on the Commencement Date of the
phase; or
B. Eighty-five percent (85%) of the fair market value of such
shares of common stock on the termination date of the phase.
(iii) The fair market value of shares of common stock of the Company
shall be determined by the Committee for each valuation date in a
manner acceptable under Section 423 of the Internal Revenue Code
of 1986.
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<PAGE>
(iv) Anything herein to the contrary notwithstanding, no Employee
shall be granted an option hereunder:
A. Which permits his rights to purchase stock under all
employee stock purchase plans of the Company, its
subsidiaries or its parent, if any to accrue at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) of the fair
market value of such stock (determined at the time such
option is granted) for each calendar year in which such
option is outstanding at any time;
B. If immediately after the grant such Employee would own
and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power
or value of all classes of stock of the Company, its parent,
if any, or of any subsidiary of the Company. For purposes
of determining stock ownership under this Paragraph, the
rules of Section 424(d) of the Internal Revenue Code, as
amended, shall apply; or
C. Which can be exercised after the expiration of 27 months
from the date the option is granted.
(d) EXERCISE OF OPTION.
(i) Unless a Participant gives written notice to the Company pursuant
to Paragraph 8(b)(ii) or Paragraph 9 prior to the termination
date of a phase, his option for the purchase of shares will be
exercised automatically for him as of such termination date for
the purchase of the number of full shares of Company common stock
which the accumulated payroll deductions in his account at that
time will purchase at the applicable option price, subject to the
limitations set forth in Paragraph 10 hereof.
(ii) A Participant may, by written notice to the Company at any time
during the thirty (30) day period immediately preceding the
termination date of a phase, elect, effective as of the
termination date of that phase, to exercise his option for a
specified number of full shares less than the maximum number
which may be purchased under his option.
(iii) As promptly as practicable after the termination date of any
phase, the Company will deliver to each Participant herein the
common stock purchased upon the exercise of his option, together
with a cash payment equal to the balance, if any, of his account
which was not used for the purchase of common stock with interest
accrued thereon.
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<PAGE>
9. WITHDRAWAL OR TERMINATION OF PARTICIPATION. (a) A Participant may,
at any time prior to the termination date of a phase, withdraw all payroll
deductions then credited to his account by giving written notice to the
Company. Promptly upon receipt of such notice of withdrawal, all payroll
deductions credited to the Participant's account will be paid to him (without
interest) and no further payroll deductions will be made during the phase.
In such event, the option granted the Participant under that phase of the
Plan shall lapse immediately. Partial withdrawals of payroll deductions
hereunder may not be made.
(b) In the event of the death of a Participant, the person or persons
specified in Paragraph 14 may give notice to the Company within sixty (60) days
of the death of the Participant electing to purchase the number of full shares
which the accumulated payroll deductions in the account of such deceased
Participant will purchase at the option price specified in Paragraph 8(a)(ii)
and have the balance in the account distributed in cash (without interest)
thereon. If no such notice is received by the Company within said sixty (60)
days, the accumulated payroll deductions will be distributed in full in cash
(without interest).
(c) Upon termination of Participant's employment for any reason other than
death of the Participant, the payroll deductions credited to his account
(without interest) shall be returned to him.
10. STOCK RESERVED FOR OPTIONS. (a) One Hundred Thousand (100,000) shares
of the Company's common stock are reserved for issuance upon the exercise of
options to be granted under the Plan. Shares subject to the unexercised portion
of any lapsed or expired option may again be subject to option under the Plan.
(b) If the total number of shares of the Company common stock for which
options are to be granted for a given phase as specified in Paragraph 8 exceeds
the number of shares then remaining available under the Plan (after deduction of
all shares for which options have been exercised or are then outstanding) and if
the Committee does not elect to cancel such phase pursuant to Paragraph 4, the
Committee shall make a pro rata allocation of the shares remaining available in
as uniform and equitable a manner as it shall consider practicable. In such
event, the options to be granted and the payroll deductions to be made pursuant
to the Plan which would otherwise be effected may, in the discretion of the
Committee, be reduced accordingly. The Committee shall give written notice of
such reduction to each Participant affected.
(c) The Participant (or a joint tenant named pursuant to Paragraph 10(d)
hereof) shall have no rights as a shareholder with respect to any shares subject
to the Participant's option until the date of the issuance of a stock
certificate evidencing such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such stock certificate is actually issued, except as otherwise provided in
Paragraph 12 hereof.
(d) The shares of the Company common stock to be delivered to a
Participant pursuant to the exercise of an option under the Plan will be
registered in the name of the
5
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Participant or, if the Participant so directs by written notice to the
Committee prior to the termination date of that phase of the Plan, in the
names of the Participant and one other person the Participant may designate
as his joint tenant with rights of survivorship, to the extent permitted by
law.
11. ACCOUNTING AND USE OF FUNDS. Payroll deductions for each Participant
shall be credited to an account established for him under the Plan. A
Participant may not make any separate case payments into such account. Such
account shall be solely for bookkeeping purposes and no separate fund or trust
shall be established hereunder and the Company shall not be obligated to
segregate such funds. All funds from payroll deductions received or held by the
Company under the Plan may be used, without limitation, for any corporate
purpose by the Company.
12. ADJUSTMENT PROVISION. (a) Subject to any required action by the
shareholders of the Company, the number of shares covered by each outstanding
option, and the price per share thereof in each such option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of the Company common stock resulting from a subdivision or consolidation
of shares or the payment of a share dividend (but only on the shares) or any
other increase or decrease in the number of such shares effected without receipt
of consideration by the Company.
(b) In the event of a change in the shares of the Company as presently
constituted, which is limited to a change of all its authorized shares with par
value into the same number of shares with a different part value or without par
value, the shares resulting from any such change shall be deemed to be the
shares within the meaning of this Plan.
13. NON-TRANSFERABILITY OF OPTIONS. (a) Options granted under any phase
of the Plan shall not be transferable except under the laws of descent and
distribution and shall be exercisable only by the Participant during his
lifetime and after his death only by his beneficiary of the representative of
his estate as provided in Paragraph 9(b) hereof.
(b) Neither payroll deductions credited to a Participant's account, nor
any rights with regard to the exercise of an option or to receive common stock
under any phase of the Plan may be assigned, transferred, pledged, or otherwise
disposed of in any way by the Participant. Any such attempted assignment,
transfer, pledge or other disposition shall be null and void and without effect,
except that the Company may, at its option, treat such act as an election to
withdraw funds in accordance with Paragraph 9.
14. DESIGNATION OF BENEFICIARY. A Participant may file a written
designation of a beneficiary who is to receive any cash to the Participant's
credit plus interest thereon under any phase of the Plan in the event of such
Participant's death prior to exercise of his option pursuant to Paragraph
9(b) hereof, or to exercise his option and become entitled to any stock
and/or cash upon such exercise in the event of the Participant's death prior
to exercise of the option pursuant
6
<PAGE>
to Paragraph 9(b) hereof. The beneficiary designation may be changed by the
Participant at any time by written notice to the Company.
Upon the death of a Participant and upon receipt by the Company of proof
deemed adequate by it of the identity and existence at the Participant's death
of a beneficiary validly designated under the Plan, the Company shall in the
event of the Participant's death under the circumstances described in Paragraph
9(b) hereof, allow such beneficiary to exercise the Participant's option
pursuant to Paragraph 9(b) if such beneficiary is living on the termination date
of the phase and deliver to such beneficiary the appropriate stock and/or cash
after exercise of the option. In the event there is no validly designated
beneficiary under the Plan who is living at the time of the Participant's death
under the circumstances described in Paragraph 9(b) or in the event the option
lapses, the Company shall deliver the cash credited to the account of the
Participant (without interest) to the executor or administrator of the estate of
the Participant, or if no such executor or administrator has been appointed to
the knowledge of the Company, it may, in its discretion, deliver such cash to
the spouse or to any one or more dependents or relatives of the Participant, or
if no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate. The Company will not be responsible for or
be required to give effect to the disposition of any cash or stock or the
exercise of any option in accordance with any will or other testamentary
disposition made by such Participant or in accordance with the provision of any
law concerning intestacy, or otherwise. No designated beneficiary shall, prior
to the death of a Participant by whom he has been designated, acquire any
interest in any stock or in any option or in the cash credited to the
Participant under any phase of the Plan.
15. AMENDMENT AND TERMINATION. The Plan may be terminated at any time by
the Board of Directors provided that, except as permitted in Paragraph 4(c) with
respect to an acceleration of the termination date of any phase, no such
termination will take effect with respect to any options then outstanding.
Also, the Board may, from time to time, amend the Plan as it may deem proper and
in the best interests of the Company or as may be necessary to comply with
Section 423 of the Internal Revenue Code of 1986, as amended, or other
applicable laws or regulations; provided, however, that no such amendment shall,
without prior approval of the shareholders of the Company (1) increase the total
number of shares for which options may be granted under the Plan (except as
provided in Paragraph 12 herein), (2) permit aggregate payroll deductions in
excess of ten percent (10%) of a Participant's compensation as of the
Compensation Date of a phase, or (3) impair any outstanding option.
16. NO INTEREST. No interest shall be paid with respect to the payroll
deductions of Participants.
17. NOTICES. All notices or other communications in connection with the
Plan or any phase thereof shall be in the form specified by the Committee and
shall be deemed to have been duly given when received by the Participant or his
designated personal representative or beneficiary or by the Company or its
designated representative, as the case may be.
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<PAGE>
18. PARTICIPATION OF SUBSIDIARIES. The Employees of any Subsidiary of the
Company shall be entitled to participate in the Plan on the same basis as
Employees of the Company, unless the Board of Directors determines otherwise.
Effective as of the date of coverage of any Subsidiary, any references herein to
the "Company" shall be interpreted as referring to such Subsidiary.
In the event that any Subsidiary which is covered under the Plan ceases to
be a Subsidiary of Printware, Inc., the employees of such Subsidiary shall be
considered to have terminated their employment for purposes of Paragraph 9
hereof as of the date such Subsidiary ceases to be such a Subsidiary.
19. DEFINITIONS. (a) "Subsidiary" shall include any corporation defined
as a subsidiary of the Company in Section 424(f) of the Internal Revenue Code of
1986, as amended.
(b) "Employee" shall mean any employee, including an officer, of the
Company who as of the day immediately preceding the Commencement Date of a phase
is customarily employed by the Company for more than twenty (20) hours per week
and more than five (5) months in a calendar year.
(c) "Base Pay" is the regular pay for employment for each employee as
annualized for a twelve (12) month period, exclusive of overtime, commissions,
bonuses, disability payments, shift differentials, incentives and other similar
payments, determined as of the Commencement Date of each phase.
Adopted by the Board of Directors: April 2, 1996
Approved by Stockholders: April 25, 1996
8
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EXHIBIT 10.5
1996 PRINTWARE Bonus Plan for ______________
This bonus plan covers ______________, and is based upon his base salary and
upon Company Revenue and Profit achievements. Profit is defined as Net
Profit before Tax and extraordinary items. This bonus plan becomes operative
only if both the Profit exceeds $1,020,000 and Revenue exceeds $7.4 million;
below either of those figures, there will be no bonus.
Total bonus is composed of a Revenue component and a Profit component. The
Revenue component will be 40% of his total bonus and the Profit component will
be 60% of his total bonus.
Each component also has a percent, determined by results achieved. The Revenue
component is determined by the achieved Revenue converted to its bonus percent
(%) using the attached table. This bonus percent is then multiplied by 40% (the
bonus portion determined by Revenue). The Profit component is determined by the
achieved Profit converted to its bonus percent (%) using the attached table.
This bonus percent is then multiplied by 60% (the bonus portion determined by
Profit). The total bonus is the addition of the Revenue bonus dollars and
Profit bonus dollars. The conversion from Revenue achieved and Profit achieved
to their bonus percent will be done using the tables on the following pages; for
Revenue and Profit achievements that fall between the stated dollar values in
the table, a linear interpolation process will determine the bonus percent.
Sample bonus calculations are shown on the attached pages.
Up to a maximum of 52% of base salary can be earned as a bonus if Revenue meets
or exceeds $11.3 Million and Profit meets or exceeds $2.06 Million.
The percent calculations will be rounded to the nearest whole percent, and
Revenue and Profit dollars for both achieved results and bonus paid will be
rounded to the nearest whole dollar.
In addition to the cash bonus paid, Incentive Stock Options will be granted
based upon the Total Bonus dollars earned at a rate of one ISO share for every
Total Bonus dollar paid.
<PAGE>
$______ SALARY DIVIDED 60/40
<TABLE>
<CAPTION>
REV. % DOLLARS PROFIT % DOLLARS
MIL. BONUS PAID MIL. BONUS PAID
<S> <C> <C> <C> <C> <C>
7.4 0% 0 1.02 0% 0
7.7 4% 1520 1.10 4% 2280
8.0 8% 3040 1.18 8% 4560
8.3 12% 4560 1.26 12% 6840
8.6 16% 6080 1.34 16% 9120
8.9 20% 7600 1.42 20% 11400
9.2 24% 9120 1.50 24% 13680
9.5 28% 10640 1.58 28% 15960
9.8 32% 12160 1.66 32% 18240
10.1 36% 13680 1.74 36% 20520
10.4 40% 15200 1.82 40% 22800
10.7 44% 16720 1.90 44% 25080
11.0 48% 18240 1.98 48% 27360
11.3 52% 19760 2.06 52% 29640
</TABLE>
EXAMPLE 1:
$8.25 MILLION REVENUE
$1.2 MILLION PROFIT
BONUS CALCULATION:
$8.25 MILLION REVENUE = 11% OF $[SALARY] = $______ TIMES 40% = $_____
$1.2 MILLION PROFIT = 9% OF $[SALARY] = $_____ TIMES 60% = $_____
TOTAL BONUS = $_____ (___% of salary)
NUMBER OF ISO SHARES GRANTED = _____
EXAMPLE 2:
$10.5 MILLION REVENUE
$1.7 MILLION PROFIT
BONUS CALCULATION:
$10.5 MILLION REVENUE = 41% OF $[SALARY] = $______ TIMES 40% = $______
$1.7 MILLION PROFIT = 34% OF $[SALARY] = $______ TIMES 60% = $______
TOTAL BONUS = $______ (____% of salary)
NUMBER OF ISO SHARES GRANTED = ______
2
<PAGE>
EXHIBIT 10.6
CHANGE IN CONTROL
SEVERANCE AGREEMENT
THIS AGREEMENT, by and between Printware, Inc., a Minnesota corporation
with its principal offices at St. Paul, Minnesota ("Printware") and Daniel A.
Baker, Ph.D., residing at 12900 St. David's Road, Minnetonka, Minnesota 55305
(the "Executive"), is made and entered into as of this 25th day of April, 1996.
WHEREAS, the Executive has made and is expected to make, due to Executive's
intimate knowledge of the business and affairs of Printware, its policies,
methods, personnel, and proprietary information, a significant contribution to
the profitability, growth, and financial strength of Printware; and
WHEREAS, Printware recognizes that the possibility of a Change in Control
may exist, and that such possibility and the uncertainty and questions which it
may raise may result in the departure or the distraction of the Executive in the
performance of his duties, to the detriment of Printware and its shareholders;
and
WHEREAS, it is in the best interests of Printware and its stockholders to
reinforce and encourage the continued attention and dedication of Executive to
his assigned duties without distraction and to ensure the continued availability
to Printware of the Executive in the event of a Change in Control.
THEREFORE, in consideration of the foregoing and other respective covenants
and agreements of the parties herein contained, the parties hereto agree as
follows:
1. TERM OF AGREEMENT. This Agreement shall commence on the date hereof
and shall continue in effect until such time as Executive ceases to be employed
by Printware and any and all amounts due under this Agreement have been paid.
2. CHANGE IN CONTROL. The rights and benefits provided under this
Agreement shall be effective only upon the occurrence of a Change in Control.
For purposes of this Agreement, a "Change in Control" shall mean a change in
control of Printware which would be required to be reported in response to
Item 1 of Form 8-K promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not Printware is then subject to such
reporting requirement including, without limitation, if:
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) who is not, as of the date of this Agreement, a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Printware representing 25% or more of the combined voting power of
Printware's outstanding securities becomes, after the date
<PAGE>
of this Agreement, the beneficial owner, directly or indirectly, of
securities of Printware representing 25% or more of the combined voting power
of Printware's then outstanding securities; or
(b) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange
Act) who as of the date of this Agreement is the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
Printware representing 25% or more combined voting power of Printware's
outstanding securities increases at any time after the date of this Agreement
such person's percentage ownership of Printware's outstanding securities by ten
percentage points or more from the level held as of the date of this Agreement;
or
(c) there ceases to be a majority of the Board of Directors of Printware
comprised of: (i) individuals who on the date hereof constituted the Board of
Printware; (ii) individuals who are nominated as part of the management slate
and elected by the shareholders as a member of the Board of Directors in an
uncontested election; and (iii) individuals who after the date hereof are
nominated and elected by a majority of the members of the Board of Directors who
held such office prior to a Change in Control; or
(d) the occurrence of a transaction requiring shareholders' approval for
the acquisition of Printware through purchase of stock or assets or by merger or
otherwise.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If a Change in Control
occurs during the term of this Agreement, and if Executive's employment is
terminated during the 12 month period following the date of the Change in
Control (i) by Printware other than for Cause, Retirement, or Disability or (ii)
by Executive for Good Reason, then Executive shall be entitled to the benefits
provided below:
(a) Printware shall pay Executive, through the Date of Termination, the
Executive's base salary as in effect at the time the Notice of Termination is
given and any other form or type of compensation and benefit otherwise payable
for such period;
(b) Printware shall pay Executive a severance payment (the "Severance
Payment") equal to 24 months of 125% the Executive's monthly base salary as of
the Date of Termination (base salary shall include any amounts contributed by
the Executive to any cash or deferred arrangement that qualifies under Section
401(k) of the Code or any cafeteria plan under Section 125 of the Code sponsored
by Printware).
The Severance Payment shall be made in a single lump sum within 60 days after
the Date of Termination. The Severance Payment herein shall be in lieu of any
other cash severance benefits payable under any other policy, plan or program of
Printware.
(c) All nonvested options to purchase the capital stock of Printware held
by Executive on the Date of Termination shall immediately vest in full and all
restrictions on any restricted
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<PAGE>
stock held by Executive shall immediately lapse and Executive shall be
entitled to exercise all rights and to receive all benefits accruing to
Executive under any and all Printware stock purchase and stock option plans
or programs, or any successor to any such plans or programs, for a period of
90 days following the Date of Termination, which shall be in addition to, and
not reduced by, any other amounts payable to Executive under this Section 3.
(d) Executive shall be entitled to receive all benefits payable to the
Executive under any of Printware's pension, life insurance, medical, health and
accident, disability, deferred compensation, or savings plans in which Executive
was participating immediately prior to the Change in Control, which shall be in
addition to, and not reduced by, any other amounts payable to Executive under
this Section 3.
(e) Executive shall not be required to mitigate the amount of any payment
provided for in this Section 3 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by Executive as the result of employment by
another employer or by any other amounts of compensation or benefits payable by
Printware after the Date of Termination, or otherwise.
4. CAUSE AND GOOD REASON DEFINED.
(a) CAUSE. Termination by Printware of Executive's employment for "Cause"
during the 12 month period following a Change in Control shall mean termination
due to: (i) gross neglect by Executive of his duties to Printware, or gross
breach by Executive of Printware's reasonable policies that have been previously
communicated to Executive, which in each case is not cured by Executive within
15 days after written notice by Printware to Executive describing the gross
neglect or gross breach; or (ii) the conviction of the Executive by a court of
competent jurisdiction of felony criminal conduct relating to his employment by
Printware.
(b) GOOD REASON. Executive shall be entitled to terminate his employment
during the 12 month period following a Change in Control for Good Reason, which
shall mean, without Executive's express written consent, any of the following:
(i) the failure to elect or reelect the Executive to the offices of
President and Chief Executive Officer of Printware, or a change by
Printware of the Executive's functions, duties or responsibilities which
reduces the responsibility, importance or scope of Executive's position
with Printware;
(ii) a reduction by Printware in Executive's annual compensation or
bonus potential in effect immediately prior to a Change in Control;
(iii) the relocation of Printware's principal executive offices to
a location more than fifty miles from their current location, or Printware
requiring Executive to be based
3
<PAGE>
anywhere other than Printware's principal executive offices except for
required travel on Printware's business;
(iv) the material reduction by Printware of the benefits enjoyed by
Executive under any of Printware's pension, life insurance, medical, health
and accident, disability, deferred compensation, incentive awards,
incentive stock options, or savings plans in which Executive was
participating immediately prior to the Change in Control, or the material
reduction by Printware of any material fringe benefit enjoyed by Executive
immediately prior to the Change in Control;
(v) the failure of Printware to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 7; or
(vi) any purported termination of Executive's employment which is not
made pursuant to a Notice of Termination satisfying the requirements of
Section 5 (a) below.
Notwithstanding the foregoing, unless the Executive gives a Notice of
Termination satisfying the requirements of Section 5(a) below within 15 days of
the occurrence of an event constituting Good Reason, the Executive shall have
waived his rights under this Agreement for any benefits arising out of that
event.
(c) Disability and Retirement shall have the same meanings as set forth in
Printware's long term disability plan and its retirement plan, respectively.
5. TERMINATION PROCEDURE; DISPUTES.
(a) NOTICE OF TERMINATION. Any purported termination of Executive's
employment by Printware or by Executive following a Change in Control shall be
communicated by written Notice of Termination to the other party hereto and
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth the facts and circumstances claimed to provide a basis for
termination of Executive's employment under this Agreement. Notice of
termination and all other communications provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when delivered or mailed
by United States registered or certified mail, return receipt requested, postage
prepaid, addressed to the last known residence address of the Executive or, in
the case of Printware, to its principal office to the attention of each of the
then directors of Printware with a copy to its Secretary, or to such other
address as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
(b) DATE OF TERMINATION. For purposes of this Agreement, "Date of
Termination" shall mean the date the Executive's employment by Printware ceases,
as specified in a Notice of
4
<PAGE>
Termination. The Date of Termination shall be not be less than 10 nor more
than 30 days from the date the Notice of Termination is given.
(c) DISPUTES CONCERNING TERMINATION. If, within 10 days after any Notice
of Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or the time
for appeal therefrom having expired and no appeal having been perfected);
provided, that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, Printware shall continue to
pay Executive full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, base salary) and continue
Executive as a participant in all compensation, benefit and insurance plans in
which the Executive was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved in accordance with this
subsection. Amounts paid under this subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts under this Agreement.
6. FUNDING. In order to assure the performance of Printware or its
successor of its obligations under this Agreement, Printware shall deposit in a
so called "rabbi" trust, immediately upon the occurrence of a Change in Control,
an amount equal to the maximum payment that could become payable to the
Executive under Section 3(b) of this Agreement. Under the written instrument
governing the trust, the trustee shall be instructed to pay to the Executive (or
the Executive's legal representative, as the case may be) the amount to which
the Executive shall be entitled under the terms hereof, and the balance, if any,
of the trust not so paid or reserved for payment shall be repaid to Printware.
If and to the extent there are not amounts in trust sufficient to pay Executive
under this Agreement, Printware shall remain liable for any and all payments due
to Executive. In accordance with the terms of such trust, at all times during
the term of this Agreement, Executive shall have no rights, other than as an
unsecured general creditor of Printware, to any amounts held in trust and all
trust assets shall be general assets of Printware and subject to the claims of
creditors of Printware. Failure of Printware to establish or fully fund such
trust shall not be deemed a revocation or termination of this Agreement by
Printware.
7. SUCCESSORS; BINDING AGREEMENT.
(a) Printware will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Printware to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that Printware would be
required to perform it if no such succession had taken place. Failure of
Printware to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Executive to the
5
<PAGE>
benefit described in Section 3 herein, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, successors, heirs, and designated
beneficiaries. If Executive should die while any amount would still be payable
to Executive hereunder if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's designated beneficiaries, or, if there is no
such designated beneficiary, to the Executive's estate.
8. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the parties. No waiver by either party hereto at any time
of any breach by the other party to this Agreement of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or similar time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota.
9. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PRINTWARE, INC.
By _______________________________________
Its _______________________________________
EXECUTIVE:
___________________________________________
Daniel A. Baker, Ph.D.
6
<PAGE>
EXHIBIT 10.7
OFFICE/WAREHOUSE LEASE
This Indenture of lease, dated this 22nd day of December, 1992, by and
between The Northwestern Mutual Life Insurance Company, hereinafter referred to
as "Landlord," and Printware, Inc. (a Minnesota Corporation), hereinafter
referred to as "Tenant."
DEFINITIONS:
"Building" - That certain office/warehouse building containing
approximately 60,164 square feet of net rentable area located upon the Premises
and commonly described as Eagandale Business Campus II, 1270-1280 Eagan
Industrial Road, Eagan, Minnesota 55121.
"Common Areas" - The term "common area" means the entire areas to be used
for the non-exclusive use by Tenant and other tenants in the Building,
including, but not limited to, corridors, lavatories, driveways, truck docks,
parking lots, and landscaped areas. Subject to reasonable rules and regulations
to be promulgated by Landlord, the common areas are hereby made available to
Tenant and its employees, agents, customers, and invitees for reasonable use in
common with other Tenants, their employees, agents, customers and invitees.
"Demised Premises" - That certain portion of the Building consisting of
approximately 35,410 square feet (21,901 square feet of office space, 8,153
square feet of production space and 5,356 square feet of warehouse space), as
measured from the outside walls of the Demised Premises to the center of the
partition wall, as shown on the floor plan attached hereto as Exhibit "B" and
made a part hereof. The Demised Premises include a non-exclusive easement for
access to common areas, as hereinafter defined, and all licenses and easements
appurtenant to the Demised Premises.
"Premises" - That certain real property located in the City of Eagan,
County of Dakota and State of Minnesota and legally described on Exhibit "A"
attached hereto and made a part hereof, including all buildings and site
improvements located thereon.
WITNESSETH:
TERM: See Article 45 and 47
1. For and in consideration of the rents, additional rents, terms,
provisions, and covenants herein contained, Landlord hereby lets, leases, and
demises to Tenant the Demised Premises for the term of 66 months commencing on
the 1st day of February, 1993 (sometimes called "Commencement Date") and
expiring the last day of July, 1998 (sometimes called "Expiration Date"), unless
sooner terminated as hereinafter provided.
<PAGE>
BASE RENT: See Article 43
2. Tenant shall pay Landlord, a total rental of Four Hundred Sixty Three
Thousand Nine Hundred Twenty 00/100 Dollars ($463,920.00), payable in advance,
in equal monthly installments of Seven Thousand Seven Hundred Thirty-Two Dollars
($7,732.00), commencing on August 1, 1993 and continuing on or before the first
day of each and every month thereafter for the next succeeding months during the
balance of the term (sometimes called "Base Rent"). In the event the
Commencement Date falls on a date other than the first of a month, the rental
for that month shall be prorated and adjusted accordingly and one full month
shall be added to the Term of the Lease for each month of delay.
ADDITIONAL RENT: See Article 47
3. Tenant shall pay to Landlord throughout the term of this Lease the
following:
a. Tenant shall pay a sum equal to fifty-eight & 86/100 percent
(58.86%) of the Real Estate taxes. The term "Real Estate Taxes" shall mean all
real estate taxes, all assessments, and any taxes in lieu thereof which may be
levied upon or assessed against the Premises of which the Demised Premises are a
part. Tenant, in addition to all other payments to Landlord by Tenant required
hereunder shall pay to Landlord, in each year during the term of this Lease and
any extension or renewal thereof, Tenant's proportionate share of such real
estate taxes and assessments paid in the first instance by Landlord.
Any tax year commencing during any lease year shall be deemed to correspond
to such lease year. In the event the taxing authorities include in such real
estate taxes and assessments the value of any machinery, equipment, fixtures,
inventory, or other personal property or assets of Tenant, then Tenant shall pay
all the taxes attributable to such items in addition to its proportionate share
of said aforementioned real estate taxes and assessments. A photostatic copy of
the tax statement submitted by Landlord to Tenant shall be sufficient evidence
of the amount of taxes and assessments assessed or levied against the Premises
of which the Demised Premises are a part.
b. A sum equal to fifty-eight & 86/100% (58.86%) of the annual
aggregate operating expenses incurred by Landlord in the operation, maintenance,
and repair of the Premises. The term "Operating Expenses" shall include but not
be limited to maintenance, repair, replacement and care of all common area
lighting, common area plumbing and roofs, parking and landscaped areas, signs,
snow removal, non-structural repair, maintenance of the exterior of the
Building, insurance premiums, management fees, wages, and fringe benefits of
personnel employed for such work, costs of equipment purchased and used for such
purposes, and the cost or portion thereof property allocable to the Premises
(amortized over such reasonable period as Landlord shall determine together with
the interest at the rate of 12% per annum on the unamortized balance) of any
capital improvements (including those required to bring the common areas into
compliance with the Americans with Disabilities Act of 1990) made to the
Building by Landlord after the Base Year which result in a reduction of
Operating Expenses or made to the Building by Landlord after the date of this
2
<PAGE>
Lease that are required under any governmental law or regulation that was not
applicable to the Building at the time it was constructed.
The payment of the sums set forth in this Article 3 shall be in addition to
the Base Rent payable pursuant to Article 2 of this Lease. All sums due
hereunder shall be due and payable within thirty (30) days of delivery of
written certification by Landlord setting forth the computation of the amount
due from Tenant. In the event the lease term shall begin or expire at any time
during the calendar year, the Tenant shall be responsible for his pro rata share
of Additional Rent under subdivisions a. and b. during the Lease and/or
occupancy time.
Prior to commencement of this Lease, and prior to the commencement of each
calendar year thereafter commencing during the term of this Lease or any renewal
or extension thereof, Landlord may estimate for each calendar year (i) the total
amount of Real Estate Taxes; (ii) the total amount of Operating Expenses; (iii)
Tenant's share of Real Estate Taxes for such calendar year; (iv) Tenant's share
of Operating Expenses for such calendar year; and (v) the computation of the
annual and monthly rental payable during such calendar year as a result of
increases or decreases in Tenant's share of Real Estate Taxes and Operating
Expenses. Said estimates will be in writing and will be delivered or mailed to
Tenant at the Premises.
The amount of Tenant's share of Real Estate Taxes, and Operating Expenses
for each calendar year, so estimated, shall be payable as Additional Rent, in
equal monthly installments, in advance, on the first day of each month during
such calendar year. In the event that such estimate is delivered to Tenant
before the first day of January of such calendar year, said amount. so
estimated, shall be payable as additional rent in equal monthly installments, in
advance, on the first day of each month during such calendar year. In the event
that such estimate is delivered to Tenant after the first day of January of such
calendar year, said amount, so estimated shall be payable as additional rent in
equal monthly installments, in advance, on the first day of each month over the
balance of such calendar year, with the number of installments being equal to
the number of full calendar months remaining in such calendar year.
Upon completion of each calendar year during the term of this Lease or any
renewal or extension thereof. Landlord shall cause its accountants to determine
the actual amount of the Real Estate Taxes and Operating Expenses payable in
such calendar year and Tenant's share thereof and deliver a written
certification of the amounts thereof to Tenant. If Tenant has underpaid its
share of Real Estate Taxes, or Operating Expenses for such calendar year, Tenant
shall pay the balance of its share of same within ten (10) days after the
receipt of such statement. If Tenant has overpaid its share of Real Estate Taxes
or Operating Expenses for such calendar year, Landlord shall either (i) refund
such excess or (ii) credit such excess against the most current monthly
installment or installments due Landlord for its estimate of Tenant's share of
Real Estate Taxes and Operating Expenses for the next following calendar year.
A prorata adjustment shall be made for a fractional calendar year occurring
during the term of this Lease or any renewal or extension thereof based upon the
number of days of the term of the Lease during said calendar year as compared to
three hundred sixty-five (365) days
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<PAGE>
and all additional sums payable by Tenant or credits due Tenant as a result
of the provisions of this Article 3 shall be adjusted accordingly.
COVENANT TO PAY RENT:
4. The covenants of Tenant to pay the Base Rent and the Additional Rent
are each independent of any other covenant condition, provision, or agreement
contained in this Lease. All rents are payable to Landlord at Welsh Companies,
Inc., 11200 W. 78th Street, Eden Prairie, Minnesota 55344.
UTILITIES:
5. Landlord shall provide mains and conduits to supply water, gas,
electricity, and sanitary sewage to the Premises. Tenant shall pay, when due,
all charges for sewer usage or rental, garbage disposal, refuse removal, water,
electricity, gas, fuel oil, LP gas, telephone, and/or other utility services or
energy source furnished to the Demised Premises during the term at this Lease,
or any renewal or extension thereof. If Landlord elects to furnish any of the
foregoing utility services or other services furnished or caused to be furnished
to Tenant, then the rate charged by Landlord shall not exceed the rate Tenant
would be required to pay to a utility company or service company furnishing any
of the foregoing utilities or services. The charges thereof shall be deemed
additional rent in accordance with Articles 3 and 4.
CARE AND REPAIR OF DEMISED PREMISES:
6. Tenant shall, at all times throughout the term of this Lease,
including renewals and extensions, and at its sole expense, keep and maintain
the Demised Premises in a clean, safe, sanitary, and first class condition and
in compliance with all applicable laws, codes, ordinances, rules, and
regulations. Tenant's obligations hereunder shall include but not be limited to
the maintenance, repair and replacement, if necessary, of heating, air
conditioning fixtures, equipment, and systems, all lighting and plumbing
fixtures and equipment, fixtures, motors and machinery, all interior walls,
partitions, doors and windows, including the regular painting thereof, all
exterior entrances, windows, doors, and docks and the replacement of all broken
glass. Landlord agrees to deliver the HVAC, electrical and plumbing systems for
the Demised Premises to the Tenant in good working condition on the scheduled
Lease Commencement Date. When used in this provision, the term "repairs" shall
include replacements and overhauling equipment when necessary, and all such
repairs made by the Tenant shall be equal in quality and class to the original
work. The Tenant shall keep and maintain all portions of the Demised Premises
and the sidewalk and areas adjoining the same in clean and orderly condition,
free of accumulation of dirt, rubbish, snow and ice.
If Tenant fails, refuses or neglects to maintain or repair the Demised
Premises as required in this Lease after notice has been given Tenant, in
accordance with Article 33 of this Lease, Landlord may make such repairs without
liability to Tenant for any loss or damage that may accrue to Tenant's
merchandise, fixtures, or other property or to its business by reason thereof,
and upon completion
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<PAGE>
thereof, Tenant shall pay to Landlord all costs plus 15% for overhead
incurred by Landlord in making such repairs upon presentation to Tenant of
bill therefor.
Landlord shall repair, at its expense, the structural portions of the
Building, provided, however, where structural repairs are required to be made by
reason of the acts of Tenant, the costs thereof shall be borne by Tenant and
payable by Tenant to Landlord upon demand.
The Landlord shall be responsible for all outside maintenance of the
Demised Premises, including grounds and parking areas. All such maintenance
which is the responsibility of the Landlord shall be provided as reasonably
necessary to the comfortable use and occupancy of Demised Premises during
business hours, except Saturdays, Sundays, and holidays, upon the condition that
the Landlord shall not be liable for damages for failure to do so due to causes
beyond its reasonable control.
SIGNS: See Article 49
7. Any sign, lettering, picture, notice, or advertisement installed on or
in any part of the Premises and visible from the exterior of the Building, or
visible from the exterior of the Demised Premises, except for one standard sign
which Landlord shall install and pay for, shall be approved, installed, and
maintained by Landlord, at Tenant's expense. In the event of a violation of the
foregoing by Tenant, Landlord may remove the same without any liability and may
charge the expense incurred by such removal to Tenant.
ALTERATIONS, INSTALLATION, FIXTURES:
8. Except as hereinafter provided, Tenant shall not make any alterations,
additions, or improvements (excluding non-structural improvements of less than
$5,000.00) in or to the Demised Premises or add, disturb, or in any way change
any plumbing or wiring therein without the prior written consent of the
Landlord. In the event alterations are required by any governmental agency by
reason of the use and occupancy of the Demised Premises by Tenant, Tenant shall
make such alterations at its own cost and expense after first obtaining
Landlord's approval of plans and specifications and furnishing such
indemnification as Landlord may reasonably require against liens, costs,
damages, and expenses arising out of such alterations. Alterations or additions
by Tenant must be built in compliance with all laws, ordinances, and
governmental regulations affecting the Premises and Tenant shall warrant to
Landlord that all such alterations, additions, or improvements shall be in
strict compliance with all relevant laws, ordinances, governmental regulations,
and insurance requirements. Construction of such alterations or additions shall
commence only upon Tenant obtaining and exhibiting to Landlord the requisite
approvals, licenses, permits, and indemnification against liens. All
alterations, installations, physical additions, or improvements to the Demised
Premises made by Tenant shall at once become the property of Landlord and shall
be surrendered to Landlord upon the termination of this Lease; provided,
however, this clause shall not apply to movable equipment or furniture owned by
Tenant which may be removed by Tenant at the end of the term of this Lease if
Tenant is not then in default.
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POSSESSION:
9. Except as hereinafter provided, Landlord shall deliver possession of
the Demised Premises to Tenant in the condition required by Exhibit D of this
Lease on or before the Commencement Date, but delivery of possession prior to or
later than such Commencement Date shall not affect the expiration date of this
Lease. The rentals herein reserved shall commence on the date when possession
of the Demised Premises is delivered by Landlord to Tenant. Any occupancy by
Tenant prior to the beginning of the term shall in all respects be the same as
that of a Tenant under this Lease. If Demised Premises are not ready for
occupancy by Commencement Date and possession is later than Commencement Date,
rent shall begin on date of possession.
SECURITY AND DAMAGE DEPOSIT:
10. Tenant, contemporaneously with the execution of this Lease, has
deposited with Landlord the sum of Seven Thousand Seven Hundred Thirty-Two
00/100 Dollars ($7,732.00), receipt of which is acknowledged hereby by Landlord,
which deposit is to be held by Landlord, without liability for interest, as a
security and damage deposit for the faithful performance by Tenant during the
term hereof or any extension hereof. Prior to the time when Tenant shall be
entitled to the return of this security deposit, Landlord may commingle such
deposit with Landlord's own funds and to use such security deposit for such
purpose as Landlord may determine. In the event of the failure of Tenant to
keep and perform any of the terms, covenants, and conditions of this Lease to be
kept and performed by Tenant during the term hereof or any extension hereof,
then Landlord, either with or without terminating this Lease, may (but shall not
be required to) apply such portion of said deposit as may be necessary to
compensate or repay Landlord for all losses or damages sustained or to be
sustained by Landlord due to such breach on the part of Tenant, including, but
not limited to overdue and unpaid rent, any other sum payable by Tenant to
Landlord pursuant to the provisions of this Lease, damages or deficiencies in
the reletting of Demised Premises, and reasonable attorney's fees incurred by
Landlord. Should the entire deposit or any portion thereof, be appropriated and
applied by Landlord, in accordance with the provisions of this paragraph,
Tenant, upon written demand by Landlord, shall remit forthwith to Landlord a
sufficient amount of cash to restore said security deposit to the original sum
deposited, and Tenant's failure to do so within five (5) days after receipt of
such demand shall constitute a breach of this Lease. Said security deposit
shall be returned to Tenant, less any depletion thereof as the result of the
provisions of this paragraph, at the end of the term of this Lease or any
renewal thereof, or upon the earlier termination of this Lease. Tenant shall
have no right to anticipate return of said deposit by withholding any amount
required to be paid pursuant to the provision of this Lease or otherwise.
In the event Landlord shall sell the Premises, or shall otherwise convey or
dispose of its interest in this Lease, Landlord may assign said security deposit
or any balance thereof to Landlord's assignee, whereupon Landlord shall be
released from all liability for the return or repayment of such security deposit
and Tenant shall look solely to the said assignee for the return and repayment
of said security deposit. Said security deposit shall not be assigned or
encumbered by Tenant without such consent of Landlord, and any assignment or
encumbrance without such consent shall not bind
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Landlord. In the event of any rightful and permitted assignment or this
Lease by Tenant, said security deposit shall be deemed to be held by Landlord
as a deposit made by the assignee, and Landlord shall have no further
liability with respect to the return of said security deposit to the Tenant.
USE:
11. The Demised Premises shall be used and occupied by Tenant solely for
the purposes of office, sales, development, production, distribution and service
of capital equipment for the printing industry so long as such use is in
compliance with all applicable laws, ordinances, and governmental regulations
affecting the Building and Premises. The Demised Premises shall not be used in
such manner that, in accordance with any requirement of law or of any public
authority, Landlord shall be obliged on account of the purpose or manner of said
use to make any addition or alteration to or in the Building. Tenant shall be
responsible for compliance with the Americans with Disabilities Act of 1990 as
it applies to the Demised Premises. The Demised Premises shall not be used in
any manner which will increase the rates required to be paid for public
liability or for fire and extended coverage insurance covering the Premises.
Tenant shall occupy the Demised Premises, conduct its business and control its
agents, employees, invitees, and visitors in such a way as is lawful and
reputable and will not permit or create any nuisance, noise, odor, or otherwise
interfere with, annoy, or disturb any other Tenant in the Building in its normal
business operations or Landlord in its management of the Building. Tenant's use
of the Demised Premises shall conform to all the Landlord's rules and
regulations relating to the use of the Premises. Outside storage on the
Premises of any type of equipment, property, or materials owned or used on the
Premises by Tenant or its customers and suppliers shall not be permitted.
ACCESS TO DEMISED PREMISES:
12. The Tenant agrees to permit the Landlord and the authorized
representatives of the Landlord to enter the Demised Premises at all times
during usual business hours for the purpose of inspecting the same and making
any necessary repairs to the Demised Premises and performing any work therein
that may be necessary to comply with any laws, ordinances, rules, regulations or
requirements of any public authority or of the Board of Fire Underwriters or any
similar body or that the Landlord may deem necessary to prevent waste or
deterioration in connection with the Demised Premises.
Nothing herein shall imply any duty upon the part of the Landlord to do any such
work which, under any provision of this Lease, the Tenant may be required to
perform and the performance thereof by the Landlord shall not constitute a
waiver of the Tenant's default in failing to perform the same. The Landlord
may, during the progress of any work in the Demised Premises, keep and store
upon the Demised Premises all necessary materials, tools, and equipment. The
Landlord shall not in any event be liable for inconvenience, annoyance,
disturbance, loss of business, or other damage of the Tenant by reason of making
repairs or the performance or any work in the Demised Premises, or on account of
bringing materials, supplies, and equipment into or through the Demised Premises
during the
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course thereof and the obligations of the Tenant under this Lease shall not
thereby be affected in any manner whatsoever.
Landlord reserves the right to enter upon the Demised Premises at any time in
the event of an emergency and at reasonable hours to exhibit the Demised
Premises to prospective purchasers or others; and to exhibit the Demised
Premises to prospective tenants; and to display "For Rent" or similar signs on
windows or doors in the Demised Premises during the last sixty (60) days of the
term of this Lease, all without hindrance or molestation by Tenant
EMINENT DOMAIN:
13. In the event of any eminent domain or condemnation proceeding or
private sale in lieu thereof in respect to the Premises during the term thereof,
the following provisions shall apply.
a. If the whole of the Premises shall be acquired or condemned by
eminent domain for any public or quasipublic use or purpose, then the term of
this Lease shall cease and terminate as of the date possession shall be taken in
such proceeding and all rentals shall be paid up to that date.
b. If any part constituting less than the whole of the Premises
shall be acquired or condemned as aforesaid and in the event that such partial
taking or condemnation shall materially affect the Demised Premises so as to
render the Demised Premises unsuitable for the business of the Tenant, in the
reasonable opinion of Landlord, then the term of this Lease shall cease and
terminate as of the date possession shall be taken by the condemning authority
and rent shall be paid to the date of termination.
In the event of a partial taking or condemnation of the Premises which
shall not materially affect the Demised Premises so as to render the Demised
Premises unsuitable for the business of the Tenant, in the reasonable opinion of
the Landlord, this Lease shall continue in full force and effect but with a
proportionate abatement of the Base Rent and Additional Rent based on the
portion, if any, of the Demised Premises taken. Landlord reserves the right, at
its option, to restore the Building and the Demised Premises to substantially
the same condition as they were prior to such condemnation. In such event,
Landlord shall give written notice to Tenant, within thirty (30) days following
the date possession shall be taken by the condemning authority, of Landlord's
intention to restore. Upon Landlord's notice of election to restore, Landlord
shall commence restoration and shall restore the Building and the Demised
Premises with reasonable promptness, subject to delays beyond Landlord's control
and delays in the making of condemnation or sale proceeds adjustments by
Landlord; and Tenant shall have no right to terminate this Lease except as
herein provided. Upon completion of such restoration, the rent shall be
adjusted based upon the portion, if any, of the Demised Premises restored.
c. In the event of any condemnation or taking as aforesaid, whether
whole or partial, the Tenant shall not be entitled to any part of the award paid
for such condemnation and
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Landlord is to receive the full amount of award, the Tenant hereby expressly
waiving any right to claim to any part thereof.
d. Although all damages in the event of any condemnation shall
belong to the Landlord whether such damages are awarded as compensation for
diminution in value of the leasehold or to the fee of the Demised Premises,
Tenant shall have the right to claim and recover from the condemning authority,
but not from Landlord, such compensation as may be separately awarded or
recoverable by Tenant in Tenant's own right on account of any and all damage to
Tenant's business by reason of the condemnation and for or an account of any
cost or loss to which Tenant might be put in removing Tenant's merchandise,
furniture, fixtures, leasehold improvements, and equipment. However, Tenant
shall have no claim against Landlord or make any claim with the condemning
authority for the loss of its leasehold estate, any unexpired term or loss of
any possible renewal or extension of said Lease or loss of any possible value of
said Lease, any unexpired term, renewal, or extension of said Lease.
DAMAGE OR DESTRUCTION:
14. In the event of any damage or destruction to the Premises by fire or
other cause during the term hereof, the following provisions shall apply:
a. If the Building is damaged by fire or any other cause to such
extent that the cost of restoration, as reasonably estimated by Landlord, will
equal or exceed thirty percent (30%) of the replacement value of the Building
(exclusive of foundations) just prior to the occurrence of the damage, then
Landlord may, no later than the sixtieth (60th) day following the damage, give
Tenant written notice of Landlord's election to terminate this Lease.
b. If the cost of restoration as estimated by Landlord will equal or
exceed fifty percent (50%) of said replacement value of the Building and if the
Demised Premises are not suitable as a result of said damage for the purposes
for which they are demised hereunder, in the reasonable opinion of Tenant, then
Tenant may, no later than the sixtieth (60th) day following the damage, give
Landlord a written notice of election to terminate this Lease.
c. If the cost of restoration as estimated by Landlord shall amount
to less than thirty percent (30%) of said replacement value of the Building, or
if, despite the cost, Landlord does not elect to terminate this Lease, Landlord
shall restore the Building and the Demised Premises with reasonable promptness,
subject to delays beyond Landlord's control and delays in the making of
insurance adjustments by Landlord; and Tenant shall have no right to terminate
this Lease except as herein provided. Landlord shall not be responsible for
restoring or repairing leasehold improvements of the Tenant.
d. In the event of either of the elections to terminate, this Lease
shall be deemed to terminate on the date of the receipt of the notice of
election and all rentals shall be paid up to that date. Tenant shall have no
claim against Landlord for the value of any unexpired term of this Lease.
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e. In any case where damage to the Building shall materially affect
the Demised Premises so as to render them unsuitable in whole or in part for the
purposes for which they are demised hereunder, then, unless such destruction was
wholly or partially caused by the negligence or breach of the terms of this
Lease by Tenant, its employees, contractors or licensees, a portion of the rent
base upon the amount of the extent to which the Demised Premises are rendered
unsuitable shall be abated until repaired or restored. If the destruction or
damage was wholly or partially caused by negligence or breach of the terms of
this Lease by Tenant as aforesaid and if Landlord shall elect to rebuild, the
rent shall not abate and the Tenant shall remain liable for the same.
CASUALTY INSURANCE:
15. a. Landlord shall at all times during the term of this Lease, at its
expense, maintain a policy or policies of insurance with premiums paid in
advance issued by an insurance company licensed to do business in the State of
Minnesota insuring the Building against loss or damage by fire, explosion, or
other insurable hazards and contingencies for the full replacement value,
provided that Landlord shall not be obligated to insure any furniture,
equipment, machinery, goods, or supplies not covered by this Lease which Tenant
may bring upon the Demised Premises or any additional improvements which Tenant
may construct or install on the Demised Premises.
b. Tenant shall not carry any stock of goods or do anything in or
about the Demised Premises which will in any way impair or invalidate the
obligation of the Insurer under any policy of insurance required by this Lease.
c. Landlord hereby waives and releases all claims, liabilities, and
causes of action against Tenant and its agents, servants, and employees for loss
or damage to, or destruction of, the Premises or any portion thereof, including
the buildings and other improvements situated thereon, resulting from fire,
explosion, and other perils included in standard extended coverage insurance,
whether caused by the negligence of any of said persons or otherwise. Likewise,
Tenant hereby waives and releases all claims, liabilities, and causes of action
against Landlord and its agents, servants, and employees for loss or damage to,
or destruction of, any of the improvements, fixtures, equipment, supplies,
merchandise, and other property, whether that of Tenant or of others in, upon,
or about the Premises resulting from fire, explosion, or the other perils
included in standard extended coverage insurance, whether caused by the
negligence of any of said persons or otherwise. The waiver shall remain in
force whether or not the Tenant's Insurer shall consent thereto.
d. In the event that the use of the Demised Premises by Tenant
increases the premium rate for insurance carried by Landlord on the improvements
of which the Demised Premises are a part, Tenant shall pay Landlord, upon
demand, the amount of such premium increase. If Tenant installs any electrical
equipment that overloads the power lines to the building or its wiring, Tenant
shall, at its own expense, make whatever changes are necessary to comply with
the requirements of the insurance underwriter, insurance rating bureau, and
governmental authorities having jurisdiction.
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PUBLIC LIABILITY INSURANCE:
16. Tenant shall during the term hereof keep in full force and effect at
its expense a policy or policies of public liability insurance with respect to
the Demised Premises and the business of Tenant, on terms and companies approved
in writing by Landlord, in which both Tenant and Landlord shall be covered by
being named as insured parties under reasonable limits of liability not less
than: $1,000,000 combined single limit. Such policy or policies shall provide
that thirty (30) days written notice must be given to Landlord prior to
cancellation thereof. Tenant shall furnish evidence satisfactory to Landlord at
the time this Lease is executed that such coverage is in full force and effect.
DEFAULT:
17. a. In the event of any failure of Tenant to pay any rental due
hereunder within five (5) days after the same shall be due, or any failure to
perform any other of the terms, conditions, or covenants of this Lease to be
observed or performed by Tenant for more than fifteen (15) days after written
notice of such failure shall have been given to Tenant, or if Tenant or an agent
of Tenant shall falsify any report required to be furnished to Landlord pursuant
to the terms of this Lease, or if Tenant or any guarantor of this Lease shall
become bankrupt or insolvent, or file any debtor proceedings or any person shall
take or have against Tenant or any guarantor of this Lease in any court pursuant
to any statute either of the United States or of any state a petition in
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee of all or a portion of Tenant's or any such guarantor's
property, or if Tenant or any such guarantor makes an assignment for the benefit
of creditors, or petitions for or enters into an arrangement, or if Tenant shall
abandon the Demised Premises or suffer this Lease to be taken under any writ of
execution, then in any such event Tenant shall be in default hereunder, and
Landlord, in addition to other rights or remedies it may have, shall have the
immediate right of re-entry and may remove all persons and property from the
Demised Premises and such property may be removed and stored in a public
warehouse or elsewhere at the cost of, and for the account of Tenant, all
without service of notice or resort to legal process and without being guilty of
trespass, or becoming liable for any loss or damage which may be occasioned
thereby.
b. Should Landlord elect to re-enter the Demised Premises, as
herein provided, or should it take possession of the Demised Premises pursuant
to legal proceedings or pursuant to any notice provided for by law, it may
either terminate this Lease or it may from time to time, without terminating
this Lease, make such alterations and repairs as may be necessary in order to
relet the Demised Premises, and relet the Demised Premises or any part thereof
under such term or terms (which may be for a term extending beyond the term of
this Lease) and at such rental or rentals and upon such other terms and
conditions as Landlord in its sole discretion may deem advisable. Upon each
such subletting all rentals received by the Landlord from such reletting shall
be applied first to the payment of any indebtedness other than rent due
hereunder from Tenant to Landlord; second, to the payment of any costs and
expenses of such reletting, including brokerage fees and attorney's fees and
costs of such alterations and repairs; third, to the payment of the rent due and
upon payment of
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future rent as the same may become due and payable hereunder. If such rentals
received from such reletting during any month are less than that to be paid
during that month by Tenant hereunder, Tenant, upon demand, shall pay any
such deficiency to Landlord. No such re-entry or taking possession of the
Demised Premises by Landlord shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any such reletting without termination,
Landlord may at any time after such re-entry and reletting elect to terminate
this Lease for any such breach. In addition to any other remedies it may
have, it may recover from Tenant all damages it may incur by reason of such
breach, including the cost of recovering the Demised Premises, reasonable
attorney's fees, and including the worth at the time of such termination of
the excess, if any, of the amount of rent and charges equivalent to rent
reserved in this Lease for the remainder of the stated term over the then
reasonable rental value of the Demised Premises for the remainder of the
stated term, all of which amounts shall be immediately due and payable from
Tenant to Landlord.
c. Landlord may, at its option, instead of exercising any other
rights or remedies available to it in this Lease or otherwise by law, statute,
or equity, spend such money as is reasonably necessary to cure any default of
Tenant herein and the amount so spent, and costs incurred, including attorney's
fees in curing such default, shall be paid by Tenant, as additional rent, upon
demand.
d. In the event suit shall be brought for recovery of possession of
the Demised Premises, for the recovery of rent or any other amount due under the
provisions of this Lease, or because of the breach of any other covenant herein
contained on the part of Tenant to be kept or performed, and a breach shall be
established, Tenant shall pay to Landlord all expenses incurred therefore,
including a reasonable attorney's fee, together with interest on all such
expenses at the rate of twelve (12%) per annum from the date of such breach of
the covenants of this Lease.
e. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed for any cause, or in the event of Landlord obtaining
possession of the Demised Premises, by reason of the violation by Tenant of any
of the covenants or conditions of this Lease, or otherwise. Tenant also waives
any demand for possession of the Demised Premises, and any demand for payment of
rent and any notice of intent to re-enter the Demised Premises, or of intent to
terminate this Lease, other than the notices above provided in this Article.
f. No remedy herein or elsewhere in this Lease or otherwise by law,
statute, or equity, conferred upon or reserved to Landlord or Tenant shall be
exclusive of any other remedy, but shall be cumulative, and may be exercised
from time to time and as often as the occasion may arise.
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COVENANTS TO HOLD HARMLESS:
18. Unless the liability for damage or loss is caused by the negligence of
Landlord, its agents, or its employees, Tenant shall hold Landlord harmless from
any liability for damages to any person or property in or upon the Demised
Premises and the Premises, including the person and the property of Tenant and
its employees and all persons in the Building at its or their invitation or
sufferance, and from all damages resulting from Tenant's failure to perform the
covenants of this Lease. All property kept, maintained, or stored on the
Demised Premises shall be so kept, maintained, or stored at the sole risk of
Tenant. Tenant agrees to pay all sums of money in respect of any labor,
service, materials, supplies, or equipment furnished or alleged to have been
furnished to Tenant in or about the Premises, and not furnished on order of
Landlord, which may be secured by any mechanics', materialmens', or other lien
to be discharged at the time performance of any obligation secured thereby
matures. However, Tenant may contest such lien, but if such lien is reduced to
final judgment and if such judgment on process thereon is not stayed, or if
stayed and said stay expires, then and in each such event, Tenant shall
forthwith pay and discharge said judgment. Landlord shall have the right to
post and maintain on the Demised Premises, notices of non-responsibility under
the laws of the State of Minnesota.
NON-LIABILITY:
19. Subject to the terms and conditions of Article 14 hereof, Landlord
shall not be liable for damage to any property of Tenant or of others located on
the Premises, nor for the loss of or damage to any property of Tenant or of
others by theft or otherwise. Landlord shall not be liable for any injury or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, rain, snow, or leaks from any part of the
Premises or from the pipes, appliances, or plumbing works or from the roof,
street, or subsurface or from any other place or by dampness or by any other
cause of whatsoever nature.
Landlord shall not be liable for any such damage caused by other Tenants or
persons in the Premises, occupants of adjacent property, of the buildings, or
the public or caused by operations in construction of any private, public, or
quasi-public work. Landlord shall not be liable for any latent defect in the
Demised Premises. All property of Tenant kept or stored on the Demised Premises
shall be so kept or stored at the risk of Tenant only and Tenant shall hold
Landlord harmless from any claims arising out of damage to the same, including
subrogation claims by Tenant's insurance carrier.
SUBORDINATION:
20. This Lease shall be subordinated to any mortgages that may now exist
or that may hereafter be placed upon the Demised Premises and to any and all
advances made thereunder, and to the interest upon the indebtedness evidenced by
such mortgages, and to all renewals, replacements, and extensions thereof. In
the event of execution by Landlord after the date of this Lease of any such
mortgage, renewal, replacement, or extension, Tenant agrees to execute a
subordination agreement with the holder thereof which agreement shall provide
that:
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a. Such holder shall not disturb the possession and other rights of
Tenant under this Lease so long as Tenant is not in default hereunder;
b. In the event of acquisition of title to the Demised Premises by
such holder, such holder shall accept the Tenant as Tenant of the Demised
Premises under the terms and conditions of this Lease and shall perform all the
obligations of Landlord hereunder; and
c. The Tenant shall recognize such holder as Landlord hereunder.
Tenant shall, upon receipt of a request from Landlord, execute and deliver
to Landlord or to any proposed holder of a mortgage or trust deed or to any
proposed purchaser of the Premises, a certificate in recordable form, certifying
that this Lease is in full force and effect, and that there are no offsets
against rent nor defenses to Tenant's performance under this Lease, or setting
forth any such offsets or defenses claimed by Tenant, as the case may be.
ASSIGNMENT OR SUBLETTING:
21. Tenant agrees to use and occupy the Demised Premises throughout the
entire term hereof for the purpose or purposes herein specified and for no other
purposes, in the manner and to substantially the extent now intended, and not to
transfer or assign this Lease or sublet said Demised Premises, or any part
thereof, whether by voluntary act, operation of law, or otherwise, without
obtaining the prior consent of Landlord in each instance. Tenant shall seek
such consent of Landlord by a written request, setting forth such information as
Landlord may deem necessary. Landlord agrees not to withhold consent
unreasonably. Consent by Landlord to any assignment of this Lease or to any
subletting of the Demised Premises shall not be a waiver of Landlord's rights
under this Article as to any subsequent assignment or subletting.
Landlord's rights to assign this Lease as and shall remain unqualified. No such
assignment or subleasing shall relieve the Tenant from any of Tenant's
obligations in this Lease contained, nor shall any assignment or sublease or
other transfer of this Lease be effective unless the assignee, sublessee, or
transferee shall at the time of such assignment, sublease, or transfer, assume
in writing for the benefit of Landlord, its successors or assigns, all of the
terms, covenants, and conditions of this Lease thereafter to be performed by
Tenant and shall agree in writing to be bound thereby. Should Tenant sublease
in accordance with the terms of this Lease, fifty percent (50%) of any increase
in rental received by Tenant over the per square foot rental rate which is being
paid by Tenant shall be forwarded to and retained by Landlord, which increase
shall be in addition to the Base Rent and Additional Rent due Landlord under
this Lease.
ATTORNMENT:
22. In the event of a sale or assignment of Landlord's interest, in the
Premises, or the Building in which the Demised Premises are located, or this
Lease, or if the Premises come into custody or possession of a mortgagee or any
other party whether because of a mortgage foreclosure
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or otherwise, Tenant shall attorn to such assignee or other party and
recognize such party as Landlord hereunder; provided, however, Tenant's
peaceable possession will not be disturbed so long as Tenant faithfully
performs its obligations under this Lease. Tenant shall execute, on demand,
any attornment agreement required by any such party to be executed,
containing such provisions and such other provisions as such party may
require.
NOVATION IN THE EVENT OF SALE:
23. In the event of the sale of the Demised Premises, Landlord shall be
and hereby is relieved of all of the covenants and obligations created hereby
accruing from and after the date of sale, and such sale shall result
automatically in the purchaser assuming and agreeing to carry out all the
covenants and obligations of Landlord herein. Notwithstanding the foregoing
provisions of this Article, Landlord, in the event of a sale of the Demised
Premises, shall cause to be included in this agreement of sale and purchase a
covenant whereby the purchaser of the Demised Premises assumes and agrees to
carry out all of the covenants and obligations of Landlord herein.
The Tenant agrees at any time and from time to time upon not less than ten
(10) days prior written request by the Landlord to execute, acknowledge, and
deliver to the Landlord an Estoppel Certificate substantially in the form of
Exhibit F.
SUCCESSORS AND ASSIGNS:
24. The terms, covenants, and conditions hereof shall be binding upon and
inure to the benefit of the successors and assigns of the parties hereto.
REMOVAL OF FIXTURES:
25. Notwithstanding anything contained in Article 8, 29, or elsewhere in
this Lease, if Landlord requests, Tenant will promptly remove at the sole cost
and expense of Tenant all fixtures, equipment, and alterations made by Tenant
simultaneously with vacating the Demised Premises and Tenant will promptly
restore said Demised Premises to the condition that existed immediately prior to
said fixtures, equipment, and alterations having been made all at the sole cost
and expense of Tenant. Landlord shall have no responsibility or liability for
loss or damage to fixtures, facilities, or equipment installed or left on the
Demised Premises after tenant has vacated.
QUIET ENJOYMENT:
26. Landlord warrants that it has full right to execute and to perform
this Lease and to grant the estate demised, and that Tenant, upon payment of the
rents and other amounts due and the performance of all the terms, conditions,
covenants, and agreements on Tenant's part to be observed and performed under
this Lease, may peaceably and quietly enjoy the Demised Premises for the
business uses permitted hereunder, subject, nevertheless, to the terms and
conditions of this Lease.
15
<PAGE>
RECORDING:
27. Tenant shall not record this Lease without the written consent of
Landlord. However, upon the request of either party hereto, the other party
shall join in the execution of a memorandum lease for the purposes of
recordation. Said memorandum lease shall describe the parties, the Demised
Premises and the term of the Lease and shall incorporate this Lease by
reference.
OVERDUE PAYMENTS:
28. All monies due under this Lease from Tenant to Landlord shall be due
on demand, unless otherwise specified and if not paid within five (5) days of
when due, shall result in the imposition of a service charge for such late
payment in the amount of twelve percent (12%) per annum of the amount due.
SURRENDER:
29. On the Expiration Date or upon the termination hereof upon a day other
than the Expiration Date, Tenant shall peaceably surrender the Demised Premises
broom-clean in good order, condition, and repair, reasonable wear and tear only
excepted. On or before the Expiration Date or upon termination of this Lease on
a day other than the Expiration Date, Tenant shall, at its expense, remove all
trade fixtures, personal property, equipment, and signs from the Demised
Premises and any property not removed shall be deemed to have been abandoned.
Any damage caused in the removal of such items shall be repaired by Tenant and
at its expense. All alterations, additions, improvements, and fixtures (other
than trade fixtures) which shall have been made or installed by Landlord or
Tenant upon the Demised Premises and all floor covering so installed shall
remain upon and be surrendered with the Demised Premises as a part thereof,
without disturbance, molestation, or injury, and without charge, at the
expiration or termination of this Lease. If the Demised Premises are not
surrendered on the Expiration Date or the date of termination, Tenant shall
indemnify Landlord against loss or liability, claims, without limitation, made
by any succeeding Tenant founded on such delay. Tenant shall promptly surrender
all keys for the Demised Premises to Landlord at the place then fixed for
payment of rent and shall inform Landlord of combinations of any locks and safes
on the Demised Premises.
HOLDING OVER:
30. In the event of a holding over by Tenant after expiration or
termination of this Lease without the consent in writing of Landlord (which
consent shall not be unreasonably withheld or delayed). Tenant shall be deemed
a Tenant at sufferance and shall pay rent for such occupancy at the rate of
twice the last-current aggregate Base and Additional Rent, prorated for the
entire holdover period, plus all attorney's fees and expenses incurred by
Landlord in enforcing its rights hereunder, plus any other damages occasioned by
such holding over. Except as otherwise agreed, any holding over with the
written consent of Landlord shall constitute Tenant a month-to-month Tenant.
16
<PAGE>
ABANDONMENT:
31. In the event Tenant shall remove its fixtures, equipment, or machinery
or shall vacate the Demised Premises or any part thereof prior to the Expiration
Date of this Lease, or shall discontinue or suspend the operation of its
business conducted on the Demised Premises for a period of more than thirty (30)
consecutive days (except during any time when the Demised Premises may be
rendered untenantable by reason of fire or other casualty) and Tenant fails to
pay to amounts due to Landlord when due as described in this Lease, then in any
such event Tenant shall be deemed to have abandoned the Demised Premises and
Tenant shall be in default under the terms of this Lease.
CONSENTS BY LANDLORD:
32. Whenever provision is made under this Lease for Tenant securing the
consent or approval by Landlord, such consent or approval shall only be in
writing, and such consent shall not be unreasonably withheld or delayed.
NOTICES:
33. Any notice required or permitted under this Lease shall be deemed
sufficiently given or secured if sent by registered or certified return receipt
mail to Tenant at 1270 Eagan Industrial Road, Eagan, Minnesota 55121, and to
Landlord at the address then fixed for the payment of rent as provided in
Article 4 of this Lease, and either party may be like written notice at any time
designate a different address to which notices shall subsequently be sent or
rent to be paid.
RULES AND REGULATIONS:
34. Tenant shall observe and comply with the rules and regulations
hereinafter set forth in "Exhibit C," and with such further reasonable rules and
regulations as Landlord may prescribe, on written notice to Tenant for the
safety, care, and cleanliness of the Building.
INTENT OF PARTIES:
35. Except as otherwise provided herein, the Tenant covenants and agrees
that if it shall any time fail to pay any such cost or expense, or fail to take
out, pay for, maintain, or deliver any of the insurance policies above required,
or fail to make any other payment or perform any other act on its part to be
made or performed as in this Lease provided, then the Landlord may, but shall
not be obligated so to do, and without notice to or demand upon the Tenant and
without waiving or releasing the Tenant from any obligations of the Tenant in
this Lease contained, pay any such cost or expense, effect any such insurance
coverage and pay premiums therefor, and may make any other payment or perform
any other act on the part of the Tenant to be made and performed as in this
lease provided, in such manner and to such extent as the Landlord may deem
desirable, and in exercising any such right, to also pay all necessary and
incidental costs and expenses, employ counsel, and incur and pay reasonable
attorneys' fees.
17
<PAGE>
All sums so paid by Landlord and all necessary and incidental costs and expenses
in connection with the performance of any such act by the Landlord together with
interest thereon at the rate of twelve percent (12%) per annum from the date of
making of such expenditure, by Landlord, by shall be deemed additional rent
hereunder, and shall be payable to Landlord on demand. Tenant covenants to pay
any such sum or sums with interest as aforesaid and the Landlord shall have the
same rights and remedies in the event of the non-payment thereof by Tenant as in
the case of default by Tenant in the payment of the Base Rent payable under this
Lease.
GENERAL:
36. The Lease does not create the relationship of principal and agent or
of partnership or of joint venture or of any association between Landlord and
Tenant, the sole relationship between the parties hereto being that of landlord
and tenant.
No waiver of any default of Tenant hereunder shall be implied from any
omission by Landlord to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect any default
other than the default specified in the express waiver and that only for the
time and to the extent therein stated. One or more waivers by Landlord shall
not then be construed as a waiver of a subsequent breach of the same covenant,
term, or condition. The consent to or approval by Landlord of any act by Tenant
requiring Landlord's consent or approval shall not waive or render unnecessary
Landlord's consent to or approval of any subsequent similar act by Tenant. No
action required or permitted to be taken by or on behalf of Landlord under the
terms or provisions of this Lease shall be deemed to constitute an eviction or
disturbance of Tenant's possession of the Demised Premises. All preliminary
negotiations are merged into and incorporated in this Lease. The laws of the
State of Minnesota shall govern the validity, performance, and enforcement of
this Lease.
a. This Lease and the exhibits, if any, attached hereto and forming
a part hereof, constitute the entire agreement between Landlord and Tenant
affecting the Demised Premises and there are no other agreements, either oral or
written, between them other than are herein set forth. No subsequent
alteration, amendment, change, or addition to this Lease shall be binding upon
Landlord or Tenant unless reduced to writing and executed in the same form and
manner in which this Lease is executed.
b. If any agreement, covenant, or condition of this Lease or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such agreement, covenant, or condition to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each agreement, covenant, or condition of his Lease shall be valid
and be enforced to the fullest extent permitted by law.
18
<PAGE>
HAZARDOUS MATERIAL:
37. a. The Demised Premises hereby leased shall be used by and/or at the
sufferance of Tenant only for the purpose set forth in Article 11 above and for
no other purposes. Tenant shall not use or permit the use of the Demised
Premises in any manner that will tend to create waste or a nuisance, or will
tend to unreasonably disturb other tenants in the Building. Tenant, its
employees and all persons visiting or doing business with Tenant in the Building
shall be bound by and shall observe the Building Rules and Regulations attached
to this Lease as Exhibit "C," and such further and other reasonable rules and
regulations made hereafter by Landlord relating to the Demised Premises or the
Building of which notice in writing shall be given to the Tenant, and all such
rules and regulations shall be deemed to be incorporated into and form a part of
this Lease.
b. Tenant covenants throughout the Lease Term, at Tenant's sole cost
and expense, promptly to comply with all laws and ordinances and the orders,
rules, and regulations and requirements of all federal, state, and municipal
governments and appropriate departments, commissions, boards, and officers
thereof, and the orders, rules and regulations of the Board of Fire Underwriters
where the Demised Premises are situated, or any other body now or hereafter well
as extraordinary, and whether or not the same require structural repairs or
alterations, which may be applicable to the Demised Premises, or the use or
manner of use of the Demised Premises. Tenant will likewise observe and comply
with the requirements of all policies of public liability, fire, and all other
policies of insurance at any time in force with respect to the buildings and
improvements on the Demised Premises and the equipment thereof.
c. In the event any Hazardous Material (hereinafter defined) is
brought or caused to be brought into or onto the Demised Premises or the
Building by Tenant, Tenant shall handle any such material in compliance with all
applicable federal, state, and/or local regulations. For purposes of this
Article, "Hazardous Material" means and includes any hazardous, toxic, or
dangerous waste, substance or material defined as such in (or for purposes of)
the Comprehensive Environmental Response, Compensation, and Liability Act, any
so-called "Superfund" or Superlien" law, or any federal, state, or local
statute, law, ordinance, code, rule, regulation, order, or decree regulating,
relating to, or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter in effect.
Tenant shall submit to Landlord on an annual basis copies of its approved
hazardous materials communication plan, OSHA monitoring plan, and permits
required by the Resource Recovery and Conservation Act of 1976, if Tenant is
required to prepare, file, or obtain any such plans or permits. Tenant will
indemnify and hold harmless Landlord from any losses, liabilities, damages,
costs, or expenses (including reasonable attorneys' fees) which Landlord may
suffer or incur as a result of Tenant's introduction into or onto the Premises
of any Hazardous Material. This Article shall survive the expiration or sooner
termination of this Lease.
19
<PAGE>
CAPTIONS:
38. The captions are inserted only as a matter of convenience and for
reference, and in no way define, limit, or describe the scope of this Lease nor
the intent or any provision thereof.
EXHIBITS:
39. Reference is made to Exhibits A through G, inclusive, which Exhibits
are attached hereto and made a part hereof.
EXHIBIT DESCRIPTION
------- -----------
Exhibit A Legal Description
Exhibit B Demised Premises
Exhibit C Building Rules and Regulations
Exhibit D Improvements
Exhibit E Sign Criteria
Exhibit F Estoppel Certificate
Exhibit G Items used by Tenant relating to Paragraph 7 in Exhibit "C"
40. Submission of this instrument to Tenant or proposed Tenant or his
agents or attorneys for examination, review, consideration, or signature does
not constitute or imply an offer to lease, reservation of space, or option to
lease, and this instrument shall have no binding legal effect until execution
hereof by both Landlord and Tenant or its agents.
41. It is agreed and understood that Scott Frederiksen, agent or broker
with Welsh Companies, Inc., is representing The Northwestern Mutual Life
Insurance Company, Landlord.
42. Also see rider attached hereto and made a part hereof containing
Articles 43 through 49 inclusive.
20
<PAGE>
IN WITNESS WHEREOF, the Landlord and the Tenant have caused these presents to be
executed in the form and manner sufficient to bind them at law, as of the day
and year first above written.
TENANT: LANDLORD:
Printware, Inc. THE NORTHWESTERN MUTUAL LIFE
(A Minnesota Corporation) INSURANCE COMPANY
By: /s/ Donald V. Mager By: /s/ Joseph E. Fefer
-------------------------------- ---------------------------------
Its: President Its: Senior Real Estate Officer
------------------------------- --------------------------------
By: /s/ Thomas W. Petschauer
--------------------------------
Its: Vice President
-------------------------------
STATE OF )
) ss.
COUNTY OF )
On this __________ day of ______________________________________, 199___,
personally came before me, a Notary Public within and for said County,
______________________________________________, to me well known to be the same
person described in and who executed the foregoing instrument, and acknowledged
that he executed the same as his free act and deed.
Notary Public _________________________________
My Commission _________________________________
STATE OF )
) ss.
COUNTY OF )
On this __________ day of _____________________________________, 199___,
before me appeared _____________________________________________________, and
__________________________________________________________, Vice President
and Assistant Secretary, respectively, of The Northwestern Mutual Life
Insurance Company, who are personally to me known and known to me to be such
Vice President and Assistant Secretary and to be the same persons who, as
such officers, executed the foregoing instrument of writing in the name of
said corporation and duly and severally acknowledged the execution thereof as
the free act and deed of said corporation.
Notary Public _________________________________
My Commission _________________________________
21
<PAGE>
This instrument was prepared for
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
by Steve Martinie, Attorney
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
22
<PAGE>
RIDER TO LEASE
DATED DECEMBER 22, 1992
BY AND BETWEEN
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, LANDLORD
AND
PRINTWARE, INC.
(A MINNESOTA CORPORATION), TENANT
Article 43 - Base Rent:
The following is hereby added to and made a part of Article 2, Base Rent,
of this Lease:
Monthly Total Period
Period Base Rent Base Rent
------ --------- ---------
February 1, 1993 through and
including July 31, 1993 $ 0.00 $ 0.00
August 1, 1993 through and
including July 31, 1998 $7,732.00 $463,920.00
-----------
TOTAL PERIOD BASE RENT LEASE
CONSIDERATION: $463,920.00
All terms and conditions of this Lease including Additional Rent as
outlined in Article 3 and Article 47 of this Rider, shall be in full force
and effect as of February 1, 1993.
Article 44 - Improvements:
The Landlord and Tenant agree that the Base Rents described in this Lease
are based on a total improvement cost of $144,598.00 as described in
Exhibit "D". The Tenant agrees the Landlords contribution toward the
improvements is limited to $56,783.00. The balance of the improvements or
$87,815.00 shall be paid for by the Tenant and shall be payable by Tenant
to the Landlord in the following manner:
A. Forty-Five Thousand and 00/100 ($45,000.00) Dollars shall be paid by
tenant to Landlord upon execution of this Lease Agreement prior to
Landlord commencing construction of the improvements to the Demised
Premises.
B. Fourteen Thousand Eight Hundred Eighty Eight and 00/100 ($14,888.00)
Dollars shall be paid by Tenant to Landlord within fifteen (15) days
of substantial completion of the construction of the improvements to
the Demised Premises.
23
<PAGE>
C. Payment for the electrical work and carpet cleaning shall be the sole
responsibility of the Tenant. These costs are estimated at $27,927.
All improvements excluding those described in Exhibit "D" will be completed
at the sole cost of the Tenant and must receive the Landlords written
approval prior to construction.
Article 45 - Early Occupancy:
In the event the Premises become available and ready for occupancy prior to
the Commencement Date, Landlord may elect to permit Tenant to take
occupancy of all or part of the Premises prior to such date. In such
event, it is agreed that all the terms and conditions of this Lease shall
be in full force and effect except Base Rent and Additional Rent shall be
abated until the Commencement Date.
Article 46 - Fixed Additional Rent:
The Landlord agrees to fix the Tenant's Additional Rent described in
Article 3, of the Lease at the following amounts regardless of the actual
additional rent which is attributable to the Demised Premises
Additional Rent Monthly
Period Per Square Foot Additional Rent
------ --------------- ---------------
February 1, 1993 through and
including January 31, 1994 $2.30 $6,786.92
February 1, 1994 through and
including January 31, 1995 $2.42 $7,141.02
February 1, 1995 through and
including January 31, 1996 $2.54 $7,495.12
February 1, 1996 through and
including January 31, 1997 $2.66 $7,849.22
February 1, 1997 through and
including January 31, 1998 $2.80 $8,262.33
February 1, 1998 through
including July 31, 1998 $2.94 $8,675.45
24
<PAGE>
Article 47 - Option to Extend Lease:
A. Provided Tenant is not in default hereunder and has performed all of
its covenants and obligations hereunder, Tenant shall have the Option
to Extend the Term of this Lease (hereinafter, the "Option") for one
consecutive period of three (3) years upon the same terms and
conditions, except for the Base Rent shall be based on the then
existing market rates of similar buildings in the general area.
B. Tenant shall exercise said Option only by giving written notice to
Landlord not later than January 1, 1998. Thereafter, Landlord shall
advise Tenant, within ten (10) business days, of the Base Rent for the
Option Period, and Tenant shall then have ten (10) business days
within which to revoke in writing its exercise of the Option.
C. It is understood and agreed that this Option is personal to Printware,
Inc., and is not transferable; in the event of any assignment or
subleasing of any or all of the Demised Premises said Option shall be
null and void.
D. If and from the date Tenant exercises the Option, Tenant agrees that
it waives any right it may have to assign or sublet all or any part of
the Demised Premises.
Article 48 - Landlords Penalty for Failure to Complete Improvements:
The Landlord agrees that in the event the improvements described in Exhibit
"D" are not substantially completed prior to February 1, 1993, then the
Landlord shall pay a $250.00 per day penalty to the Tenant for each day the
improvements are not substantially completed for reasons within the
Landlord's control. It is agreed coordination of the electrical work is
not within the Landlord's control. The penalty shall be applied to rent
owed by Tenant to the Landlord as of the Commencement Date. The penalty
described in this paragraph shall only apply in the event the Tenant has
delivered to Landlord an executed acceptable Lease document together with a
check for the security deposit, August 1993 Base Rent and Tenants first
improvement payment as described in Article 44 on or before 5:00 p.m. on
December 23, 1992.
Article 49 - Signage
The Landlord acknowledges the Tenants right to install a monument sign in
the landscaped area between the parking lot immediately to the north of the
Building and Eagan Industrial Road. The Landlord further agrees to allow
Tenant to install up to five (5) reserved parking stalls and up to five (5)
visitor parking signs in the parking area immediately to the north of the
Demised Premises. The Tenant agrees that the Tenant shall be solely
responsible for providing, installing and maintaining such signage. The
Tenant further agrees that all such signage shall be subject to the
Landlords prior approval and must be in compliance with all applicable
City, State and Federal rules and regulations.
25
<PAGE>
TENANT: LANDLORD:
PRINTWARE, INC. THE NORTHWESTERN MUTUAL LIFE
(A MINNESOTA CORPORATION) INSURANCE COMPANY
BY: /s/ Donald V. Mager BY: /s/ Joseph E. Fefer
----------------------------------- ---------------------------------
ITS: President ITS: Senior Real Estate Officer
---------------------------------- --------------------------------
DATE: 12/23/92 DATE: 12/23/92
--------------------------------- -------------------------------
BY: /s/ Thomas W. Petschauer
-----------------------------------
ITS: Vice President
----------------------------------
DATE: 12/23/92
---------------------------------
26
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
Lot 1, 2, 3 and 4, Block 3
Eagandale Center Industrial Park
27
<PAGE>
EXHIBIT "B"
Graphics: Site Plan drawing depicting Demised Premises
28
<PAGE>
EXHIBIT "C"
BUILDING RULES AND REGULATIONS
1. Any sign, lettering, picture, notice or advertisement installed on or in
any part of the Premises and visible from the exterior of the
Office/Showroom Complex, or visible from the exterior of the Premises,
shall be installed at Tenant's sole cost and expense, and in such manner,
character and style as Landlord may approve in writing. In the event of a
violation of the foregoing by Tenant, Landlord may remove the same without
any liability and may charge the expense incurred by such removal to
Tenant.
2. No awning or other projection shall be attached to the outside walls of the
Office/Showroom Complex. No curtains, blinds, shades or screens visible
from the exterior of the Premises, shall be attached to or hung in, or used
in connection with any window or door of the Premises without the prior
written consent of Landlord. Such curtains, blinds, shades, screens or
other fixtures must be of a quality, type, design and color, and attached
in the manner approved by Landlord.
3. Tenant, it's servants, employees, customers, invitees and guests shall not
obstruct sidewalks, entrances, passages, corridors, vestibules, halls, or
stairways in and about the Office/Showroom Complex which are used in common
with other tenants and their servants, employees, customers, guests and
invitees, and which are not a part of the Premises of Tenant. Tenant shall
not place objects against glass partitions or doors or windows which would
be unsightly from the Office/Showroom Complex corridors or from the
exterior of the Office/Showroom Complex and will promptly remove any such
objects upon notice from Landlord.
4. Tenant shall not make excessive noises, cause disturbances or vibrations or
use or operate any electrical or mechanical devices that emit excessive
sound or other waves or disturbances or create obnoxious odors, any of
which may be offensive to the other tenants and occupants of the
Office/Showroom Complex, or that would interfere with the operation of any
device, equipment, radio, television broadcasting or reception from or
within the Office/Showroom Complex or elsewhere and shall not place or
install any projections, antennas, aerials or similar devices inside or
outside of the Premises or on the Office/Showroom Complex without
Landlord's approval.
5. Tenant shall not waste electricity, water or air conditioning and shall
cooperate fully with Landlord to insure the most effective operation of the
Office/Showroom Complex's heating and air conditioning systems and shall
refrain from attempting to adjust any controls other than unlocked room
thermostats, if any, installed for Tenant's use. Tenant shall keep
corridor doors closed.
29
<PAGE>
6. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and other means
of entry to the Premises closed and secured after normal business hours.
7. In no event shall Tenant bring into the Office/Showroom Complex
inflammables, such as gasoline, kerosene, naphtha and benzine, or
explosives or any other article of intrinsically dangerous nature excluded
those items and quantities described in Exhibit "G". If, by reason of the
failure of Tenant to comply with the provisions of this subparagraph, any
insurance premium for all or any part of the Office/Showroom Complex shall
at any time be increased. Tenant shall make immediate payment of the whole
of the increased insurance premium, without waiver of any of Landlord's
other rights at law or in equity for Tenant's breach of this Lease.
8. Tenant shall comply with all applicable federal, state and municipal laws,
ordinances and regulations, and building rules and shall not directly or
indirectly make any use of the Premises which may be prohibited by any of
the foregoing or which may be dangerous to persons or property or may
increase the cost of insurance or require additional insurance coverage.
9. Landlord shall have the right to prohibit any advertising by Tenant which
in Landlord's reasonable opinion tends to impair the reputation of the
Office/Showroom Complex or its desirability as an Office/Showroom Complex
for office use, and upon written notice from Landlord, Tenant shall refrain
from or discontinue such advertising.
10. The Premises shall not be used for lodging, sleeping or for any immoral or
illegal purpose.
11. Tenant and Tenant's servants, employees, agents, visitors, and licensees
shall observe faithfully and comply strictly with the foregoing rules and
regulations and such other and further appropriate rules and regulations as
Landlord or Landlord's agent may from time to time adopt. Reasonable
notice of any additional rules and regulations shall be given in such
manner as Landlord may reasonably elect.
12. Unless expressly permitted by the Landlord, no additional locks or similar
devices shall be attached to any door or window and no keys other than
those provided by the Landlord shall be made for any door. If more than
two keys for one lock are desired by the Tenant, the Landlord may provide
the same upon payment by the Tenant. Upon termination of this Lease or of
the Tenant's possession, the Tenant shall surrender all keys of the
Premises and shall explain to the Landlord all combination locks on safes,
cabinets and vaults. Landlord agrees to provide four (4) keys for all
exterior doors to Tenant at Commencement of Lease.
13. Any carpeting cemented down by Tenant shall be installed with a releasable
adhesive. In the event of a violation of the foregoing by Tenant, Landlord
may charge the expense incurred by such removal to Tenant.
30
<PAGE>
14. The water and wash closets, drinking fountains and other plumbing fixtures
shall not be used for any purpose other than those for which they were
constructed, and no sweepings, rubbish, rags, coffee grounds, or other
substances shall be thrown therein. All damages resulting from any misuse
of the fixtures shall be borne by the Tenant who, or whose servants,
employees, agents, visitors or licensees, shall have caused the same. No
person shall waste water by interfering or tampering with the faucets or
otherwise.
15. No electric circuits for any purpose shall be brought into the leased
premises without Landlord's written permission specifying the manner in
which same may be done.
16. No dogs or other animals shall be allowed in office, halls, corridors, or
elsewhere in the building.
17. Tenant shall not throw anything out of the door or windows, or down any
passageways or elevator shafts.
18. All loading, unloading, receiving or delivery of goods, supplies or
disposal of garbage or refusal shall be made only through entryways and
freight elevators provided for such purposes and indicated by Landlord.
Tenant shall be responsible for any damage to the building or the property
of its employees or to others and injuries sustained by any person
whomsoever resulting from the use of or moving of such articles in or out
of the leased premises, and shall make all repairs and improvements
required by Landlord or governmental authorities in connection with the use
or moving of such articles.
19. All safes, equipment or other heavy articles shall be carried in or out of
the Premises only at such time and in such manner as shall be prescribed in
writing by Landlord, and Landlord shall in all cases have the right to
specify the proper position of any such safe, equipment or other heavy
article, which shall only be used by Tenant in a manner which will not
interfere with or cause damage to the lease premises or the building in
which they are located, or to the other tenants or occupants of said
building. Tenant shall be responsible for any damage to the building or
the property of its employees or other and injuries sustained by any person
whomsoever resulting from the use or moving of such articles in or out of
the leased premises, and shall make all repairs and improvements required
by Landlord or governmental authorities in connection with the use or
moving of such articles.
20. Canvassing, soliciting, and peddling in the building is prohibited and each
Tenant shall cooperate to prevent the same.
21. Vending machines shall not be installed without permission of the Landlord.
22. Wherever in these Building Rules and Regulations the word "Tenant" occurs,
it is understood and agreed that it shall mean Tenant's associates, agents,
clerks, servants, and visitors.
31
<PAGE>
Wherever the word "Landlord" occurs, it is understood and agreed that
it shall mean Landlord's agents, clerks, servants, and visitors.
23. Landlord shall have the right to enter upon the leased premises at all
reasonable hours for the purpose of inspecting the same.
24. Landlord shall have the right to enter the leased premises at hours
convenient to the Tenant for the purpose of exhibiting the same to
prospective tenants within the sixty (60) day period prior to the
expiration of this Lease, and may place signs advertising the leased
premises for rent on the windows and doors of said Premises at any time
within said sixty (60) day period.
25. Tenant, it's servants, employees, customers, invitees and guests shall,
when using the common parking facilities, if any, in and around the
building, observe and obey all signs regarding fire lanes and no parking
zones, and when parking always park between the designated lines. Landlord
reserves the right to tow away, at the expense of the owner, any vehicle
which is improperly parked, or parked in a no parking zone. All vehicles
shall be parked at the sole risk of the owner, and Landlord assumes no
responsibility for any damage to or loss of vehicles. No vehicles shall be
parked over night outside the premises without notice to Landlord or it's
agents. Tenant shall be allowed to park one company vehicle overnight at
the Building at a location acceptable to Landlord.
26. All entrance doors to the Premises shall be locked when the Premises are
not in use. All corridor doors shall also be closed during times when the
air conditioning equipment in the Office/Showroom Complex is operating so
as not to dissipate the effectiveness of the systems or place on overload
thereon.
27. Landlord reserves the right at any time from time to time to rescind, alter
or waive, in whole or in part, any of these Rules and Regulations when it
is deemed necessary, desirable, or proper, in Landlord's judgment, for its
best interest or for the best interest of the tenants of the
Office/Showroom Complex.
32
<PAGE>
EXHIBIT D
IMPROVEMENTS - PRINTWARE
- -------------------------------------------------------------------------------
- General Conditions - supervision, dumpsters, and clean up. Structural
engineer for the dock concrete work.
- Building permit for general construction work.
- Demolition - includes removing 1,685 SY of existing carpet, 416 square
feet of ceiling tile, raised computer floor (approximately 1,800
square feet), interior steel stud sheetrock walls (approximately 340
lineal feet), saw cutting and jackhammering for the new dock levelers
in the interior of the building, removal of two (2) existing knock
outs for the dock area.
- Glue removal, sealing of concrete as denoted on plans. This method
would be to grind the carpet glue from the concrete, apply a standard
commercial floor sealer.
- Excavation for the new dock area and underpinning of the building.
- Concrete work for the dock area. This includes under-pinning of the
new dock, reinforced concrete retaining walls and a 10' x 30' wide 6"
concrete pad for the truck dollie wheels. Forming, pouring dock pit
and reinforced concrete as required.
- Storm sewer work for the new recessed dock area. This includes a
catch basin, approximately 3' deep with a storm sewer line connecting
to the existing catch basin in the center of the dock area,
approximately 70 lineal feet.
- Bituminous patching required at the new recessed dock area and storm
sewer area.
Bituminous to be done late Spring, 1993.
- Exterior concrete for the new entrance into the facility at the top of
the plan at the new reception area.
- Winter Construction Costs
- 4" concrete slab on top of 4" sand cushion in the recessed computer
floor area, approximately 1,800 square feet.
- Roofing - provide roof jacks for the vents for the new unit heater and
exhaust fan.
33
<PAGE>
- Wood doors, frames and finish hardware as outlined in the plan.
- Overhead doors - furnish and install two (2) 8' x 10' overhead doors
with manual lift at the new dock location.
- Architectural glazing entrance doors - this includes existing
glass/aluminum door to remain as is on the north wall.
- Steel stud gypsum wallboard - new demising wall to deck, as noted on
the plan. Remainder of new walls to go to bottom of suspended
ceiling.
Existing demising wall: 112 linear feet requires gypsum board to
deck.
- Existing fire rated corridor wall requires fire caulking penetrations
caused by pipes, conduits etc.
- Acoustical ceiling - Re-installation of existing ceiling tiles in
remainder of existing space to match tile that is in place at areas of
demolition.
- Carpeting - Existing carpet of approximately 18,500 SF, clean and
shampoo. (To be completed at Tenants expense)
- Painting - by tenant. Color approved by Owner.
- Dock equipment - furnish and install one (1) 2000# dock leveler - pit
type, one (1) edge of dock leveler, two (2) foam fit seals, and one
(1) 8' x 10' control strip closure.
- Window treatment - utilize existing window treatment in place.
- Fire protection - modify the existing sprinkler system to meet code.
- Heating, ventilating, air conditioning - included as follows:
1. Install unit heater in warehouse
(1) 50 MBH Reznor
Roofing required
Venting
Gas piping
2. Install exhaust fan in press room
(1) 363 Broan 300 CFM
Venting
Roofing required
34
<PAGE>
3. Install new branch duct work to east entry, relocate four (4)
existing in this area to vacancy.
Install five (5) new branch supplies (4 in east entry area, 1 in
production area 12 x 22 room)
Install aluminum eggcrate throughout space
Install 10 return air transfers
Relocate 13 existing supplies to fit new floor plan
Service and certify roof top units only.
4. Certified engineered drawings required for HVAC permit.
5. Explosion proof exhaust fan.
Install explosion proof exhaust fan in chemical storage room duct
work to within one foot of floor.
Fire damper
NOTE: The above is a minimum of work required for this project.
There is no air balancing included, no re-ducting or zoning of
different areas.
Temperatures for this tenant space will probably be very
inconsistent throughout this space without proper re-ducting and
balancing. This space also has fiberglass ductwork throughout
and we found in other projects in this complex that this ductwork
is coming apart and leaking badly.
Building owner can not be held responsible for temperatures or
other conditions not included in the above scope of work.
- *Electrical - includes the following:
Disconnect wiring for construction
Relocate 2 x 4 fixtures as necessary
Wire and install (9) single pole switches
Wire and install (6) 3-way switches
Wire and install lighting contractors
Furnish and install (4) 8' 2-lamp strips at dock
Furnish and install (7) exit signs with emergency lights
Wire and install (100) duplex general duty receptacles in office area.
Furnish and install (20) power poles
* All electrical work to be provided at Tenant's expense pursuant
to the terms and conditions described in sentences 3, 4 and 5 of
Article 8 by one of the following contractors:
35
<PAGE>
1) Kivel Electric
2) Electric Fire and Security
3) Don Von Electric
Wire (1) 208 V 15 amp air compressor
Wire and install (1) 208 V 30 amp 3-phase receptacle
Wire and install (1) 208 V 20 amp receptacle in image
Install tenants (2) explosion proof incandescent cans
Install tenants (1) explosion proof switch
Wire and install (1) 208 V 20 amp receptacle in engineering lab.
Wire and install (1) 208 V 15 amp receptacle in training
Wire and install (2) 208 V 20 amp junction boxes in training
Wire and install (2) 208 V 20 amp receptacles in demo
Wire (1) new explosion proof exhaust fan in chemical room
Wire (1) unit heater in dock included ($175.00)
Move thermostats
Remove computer room panels
Wire and install a 200 amp panel in production
Re-use existing panel
36
<PAGE>
EXHIBIT E
Graphics: Drawing depicting sign criteria
Text below drawing: Lessor will provide and install and the Lessee
shall maintain in good repair, one standard exterior entry sign at the
Lessee's front entry. No other signage, promotional material of any
type shall be placed in, on, or externally visible from the front
entry, windows, or exterior surface without written consent of Lessor.
37
<PAGE>
EXHIBIT "F"
ESTOPPEL CERTIFICATE
(BY SPACE TENANT)
IRE NO. ____________
Premises: _____________________________________________________________________
Lease dated _________________________ between The Northwestern Mutual Life
Insurance Company, Landlord and, Tenant _______________, commencing ___________,
19__.
The undersigned, the Tenant under the above Lease, hereby certifies to
__________________________, the proposed purchaser (or mortgage) of the above
Premises:
1. that said Lease is presently in full force and effect and unmodified
except as indicated at the end of this certificate*;
2. that the undersigned has accepted possession of said Demised Premises
and that any improvements required by the terms of said Lease to be
made by the Landlord have been completed to the satisfaction of the
undersigned;
3. that no rent under said Lease has been paid more than thirty (30) days
in advance of its due date;
4. that the address for notices to be sent to the undersigned is as set
forth in said Lease, or set forth below; and
5. that the undersigned, as of this date, has no charge, lien or claim of
setoff under said Lease or otherwise, against rents or other charges
due or to become due thereunder.
DATED:_______________, 19__ __________________________________________
Address: _________________________________
__________________________________________
*Lease modifications, if any, to be listed here:
38
<PAGE>
EXHIBIT "G"
Items Used Regarding Paragraph 7 of Exhibit "C"
Item Quantity
---- --------
Isopropyl Alcohol 5 Gallons
Ether 2 Liters
Bottled Propane (For Torch) 1200 Grams (3 Bottles)
Nitromethane 1 Liter
Liquid Toner Finished Goods Inventory
Acetone 5 Gallons
Liquid Dispersant (Isopar) Finished Goods Inventory
Blankrola (Press Blanket Cleaner) 2 Gallons
39
<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
[*CONFIDENTIAL TREATMENT REQUESTED*]
5
<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 . . . . . . . . . . . . . . . . . [**]
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
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.
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
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
[*CONFIDENTIAL TREATMENT REQUESTED*]
<PAGE>
EXHIBIT 10.10
LICENSE AGREEMENT
This Agreement is made and entered into as of the 17th day of May,
1985, by and among MINNESOTA MINING AND MANUFACTURING COMPANY, a Delaware
Corporation, having an office and principal place of business at 3M Center,
Saint Paul, Minnesota 55144-1000 (herein called "3M"), ALLEN L. TAYLOR, Canadian
citizen residing at 1833 Lamplight Drive, Woodbury, Minnesota 55125 (herein
called "ALLEN L. TAYLOR"), and PRINTWARE, INCORPORATED, a Minnesota corporation
having an office and principal place of business at 1833 Lamplight Drive,
Woodbury, Minnesota 55125 (herein called "PRINTWARE").
WITNESSETH:
WHEREAS 3M developed a laser printer, known as the Model 816, that
provides a coated paper output and a laser printer, known as the Model 826, that
provides a plain paper output;
WHEREAS 3M is not manufacturing or selling the Model 816 and model 826
laser printers;
1
<PAGE>
WHEREAS ALLEN L. TAYLOR, an employee of 3M, who was involved with the
design of the Models 816 and 826 laser printers, has requested a license from 3M
to commercially exploit this technology;
WHEREAS 3M is willing to grant such a license to any company in which
ALLEN L. TAYLOR is a substantial shareholder; and
WHEREAS ALLEN L. TAYLOR has caused the formation of PRINTWARE for this
purpose and ALLEN L. TAYLOR currently owns a substantial interest in PRINTWARE.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
have agreed as follows:
ARTICLE I
DEFINITION OF TERMS
When used in this Agreement, the following capitalized terms (when
used in the singular or plural or possessive) shall have the following
meanings, only:
1.1 "LASER PRINTER" means non-impact printers using an image data
controlled laser diode with a self-resonant mirror to direct the laser diode
output and providing an image output only on opaque coated paper or plain paper,
wherein such image is eye readable without magnification.
2
<PAGE>
1.2 "TONER" means a dry monocomponent developing material which is used in
a LASER PRINTER of the type having an opaque coated paper output.
1.3 "INFRARED SENSITIVE PHOTOCONDUCTIVE COPY MATERIAL" means copy output
material which is used in a LASER PRINTER of the type having an opaque coated
paper output.
1.4 "LICENSED PATENTS" means all U.S. patents issuing from the U.S. patent
applications and patents listed below and all non-U.S. counterparts of such
patent applications, including all divisions, reissues, continuations or
extensions thereof.
U.S. Serial
Number Filed Title
- ----------- ----- -----
386,334 June 8, 1982 Infrared Sensitization of
Photoconductive Zinc Oxide
400,639 July 22, 1982 Scanning Device For Laser
Printers
434,189 October 13, 1982 Data Clocking Circuitry
470,489 February 28, 1983 Laser Diode Control Circuitry
574,066 January 26, 1984 Data Clocking Circuitry
586,204 March 5, 1984 Scanner Amplitude Stabilization
System
589,772 March 15, 1984 Compensation Circuitry For a
Laser Printer Using a Self-
resonant Scanner
594,211 March 28, 1984 RAM Clock Switching Circuitry
For a Laser Beam Printer
3
<PAGE>
U.S. Serial
Number Filed Title
- ----------- ----- -----
3,909,258 September 30, 1975 Electrographic Development
Process
4,492,970 January 8, 1985 Laser Diode Printer
1.5 "KNOW-HOW" means and includes the following items owned by 3M to the
extent they were used by 3M prior to December 16, 1983 with respect to Models
816 and 826 LASER PRINTERS designed by 3M and the items specifically identified
in Exhibit "A" attached hereto;
(a) circuit diagrams, including component designations; bills of
materials; detailed drawings and specifications for electromechanical,
mechanical, optical and laser diode components, assemblies and subassemblies for
the 3M Models 816 and 826 LASER PRINTERS; vendor lists, test procedures; quality
control and reliability data; manuals; detailed drawings of all tools, devices
and jigs employed to manufacture the 3M Models 816 and 826 LASER PRINTERS;
(b) "SOFTWARE" (not including application software) is software in
source and object code and all documents therefor used in connection with the
operation of the 3M Models 816 and 826 LASER PRINTERS; and
(c) "FIRMWARE", including programmable read only memories (PROM's) of
the 3M models 816 and 826 LASER PRINTERS loaded with SOFTWARE in object code for
providing machine control, and data input control.
1.6 "LICENSED PRODUCTS" means every LASER PRINTER and every product that
is specially designed for or used with LASER PRINTERS made by or made for
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PRINTWARE that is covered in the jurisdiction of manufacture or sale by a valid
claim of any LICENSED PATENTS or is based in any part upon 3M's KNOW-HOW which
is confidential. Each claim of each of the LICENSED PATENTS shall be presumed
valid in accordance with 35 U.S.C. 282 and no claim shall be considered to be
invalid until it is either:
(a) hold invalid by a court of competent jurisdiction from which no
appeal is or can be taken; or
(b) acknowledged in writing by an officer of 3M to be invalid; or
(c) declared invalid or unpatentable in any proceedings before any
responsible patent office from which no appeal is or can be
taken.
1.7 "NET REVENUES" shall mean the total revenues received, other than from
3M, by PRINTWARE from the lease or sale, as the case may be, of a LICENSED
PRODUCT, or in the case of a lease of a LICENSED PRODUCT, at the option of the
PRINTWARE, the published selling price for such LICENSED PRODUCT. Any of the
following items, or any comparable items, may be deducted from the aforesaid
total revenues or published selling price when they are actually paid by
PRINTWARE and separately stated on the invoice:
(a) packing costs;
(b) actual transportation and insurance costs from place of shipment
to point of installation;
(c) excise, sales and use taxes;
(d) export duties and taxes; and
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(e) actual credit to customers on account of any LICENSED PRODUCT
which is not accepted by the customer.
To the extent that the amounts charged for the above items can be verified by
referring to separate BONA FIDE documentation of such services or products, or
to separate documents as in the case of taxes or duties, such amounts need not
appear on the invoice.
ARTICLE II
GRANT OF NON-EXCLUSIVE LICENSE
2.1 3M hereby grants to PRINTWARE a non-exclusive worldwide license,
without the right to sublicense, under the LICENSED PATENTS and the 3M KNOW-HOW
to make or have made (except in Japan) and to use, lease, sell or otherwise
dispose of LICENSED PRODUCTS in the U.S.A. and throughout the world, except that
the right to sell LASER PRINTERS having a plain paper output to any company or
subsidiary thereof which derives greater than fifty percent (50%) of its gross
revenues from the sale and manufacture of computer printers is not effective
until February 27, 1989.
With respect to LASER PRINTERS of the type covered by U.S. Patent
3,909,258 or patent rights based on U.S. patent application Serial No. 386,334,
3M grants PRINTWARE the right to provide a label license under U.S. Patent
3,909,258 and U.S. patent application Serial No. 386,334 for the use of TONER
and INFRARED SENSITIVE PHOTOCONDUCTIVE COPY MATERIAL supplied by PRINTWARE in
such LASER PRINTERS. PRINTWARE shall provide conspicuously on each such LASER
PRINTER and on the invoice and instruction manual for such LASER PRINTER, to the
extent that it is applicable the following legend:
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PURCHASE OR LEASE OF THIS PRINTER DOES NOT INCLUDE THE RIGHT TO USE
TONER IN THE PRINTER UNDER U.S. PATENT 3,909,258 AND ITS FOREIGN
COUNTERPARTS OR USE OF INFRARED PHOTOCONDUCTIVE COPY MATERIAL UNDER
ANY PATENT ISSUED THAT IS BASED ON U.S. PATENT APPLICATION SERIAL NO.
386,334.
2.2 With respect to the license under KNOW-HOW, as set forth in this
Article II, paragraph 2.1, 3M also grants PRINTWARE a non-exclusive worldwide
right under KNOW-HOW to use, copy and modify SOFTWARE in the form of source and
object code and load object code into FIRMWARE solely in connection with
PRINTWARE's manufacture of LASER PRINTERS and grants PRINTWARE the worldwide
right to sublicense, lease or sell FIRMWARE (as loaded with SOFTWARE) in
connection with PRINTWARE's disposition of LASER PRINTERS.
2.3 3M also grants PRINTWARE a license under its copyrights for SOFTWARE
under the same terms, conditions and limitations as set forth in this Article
II, paragraph 2.2, above.
ARTICLE III
PAYMENT
3.1 PRINTWARE shall pay 3M royalties based upon the NET REVENUES of all
LICENSED PRODUCTS. A credit equal to the amount of purchases (except TONER and
INFRARED SENSITIVE PHOTOCONDUCTIVE COPY MATERIAL) made by PRINTWARE from 3M and
used by PRINTWARE for making LICENSED PRODUCTS can be applied to reduce NET
REVENUES (except NET REVENUES for TONER and INFRARED SENSITIVE PHOTOCONDUCTIVE
COPY MATERIAL) at any time. The royalty (not including TONER and INFRARED
SENSITIVE
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PHOTOCONDUCTIVE COPY MATERIAL-based royalty) shall not exceed four percent
(4%) of the NET REVENUES of LICENSED PRODUCTS. The royalty rate shall be
three percent (3%) for KNOW-HOW used with respect to each LICENSED PRODUCT
used, leased, sold or otherwise transferred by PRINTWARE for a period of
seven (7) years beginning with the first sale of a LASER PRINTER by
PRINTWARE. It shall be presumed that the KNOW-HOW has been or is being used
so long as PRINTWARE produces or offers for sale a LICENSED PRODUCT during
such seven (7) years. Subject to the four percent (4%) royalty limitation
indicated above, the royalty rate for LICENSED PATENTS, except U.S. Patent
3,909,258 and its counterparts and any patent based on U.S. patent
application Serial No. 386,334 and its counterparts, shall be one percent
(1%) for each unexpired patent of LICENSED PATENTS. PRINTWARE shall also pay
3M a royalty of twelve percent (12%) of the NET REVENUES of TONER sold by
PRINTWARE, but not purchased from 3M, for use in LASER PRINTERS covered by
U.S. Patent 3,909,258 or its foreign counterparts. The royalty of twelve
percent (12%) is included in the price of TONER purchased from 3M, such
royalty being based on PRINTWARE's representation that the PRINTWARE average
selling price for such TONER is anticipated to be twice PRINTWARE's TONER
cost. PRINTWARE shall also pay 3M a royalty of twelve percent (12%) of the
NET REVENUES of INFRARED SENSITIVE PHOTOCONDUCTIVE COPY MATERIAL which is
sold by PRINTWARE, but not purchased from 3M, for use in LASER PRINTERS and
which is covered by patent based on U.S. patent application Serial No.
386,334 or its foreign counterparts. The royalty of twelve percent (12%) is
included in the price of INFRARED SENSITIVE PHOTOCONDUCTIVE COPY MATERIAL
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purchased from 3M, such royalty being based on PRINTWARE's representation
that the PRINTWARE average selling price for such INFRARED SENSITIVE
PHOTOCONDUCTIVE COPY MATERIAL is anticipated to be twice PRINTWARE's INFRARED
SENSITIVE PHOTOCONDUCTIVE COPY MATERIAL COST.
3.2 A U.S. patent, if such exists, and any number of foreign counterparts
thereof which may be applicable to the manufacture, sale or use of a LICENSED
PRODUCT shall count as a single patent for computing the royalty rate applicable
(e.g. if a U.S. patent has issued along with three foreign counterparts thereof,
such issued patents shall count as one patent, one or more foreign counterparts
without a U.S. patent shall count as one patent, any foreign patent without
counterparts shall count as one patent and the royalty rate for such patent
shall be applicable). Royalty shall accrue when a LICENSED PRODUCT subject to
royalty is first used, leased, sold or otherwise transferred. With respect to
any LICENSED PRODUCT which PRINTWARE uses, the royalty shall be computed by
treating such use as an ordinary commercial sale at PRINTWARE's average NET
REVENUE for such LICENSED PRODUCT for the quarter for which royalty for such use
is reported.
3.3 The royalties of paragraph 3.1 shall be paid quarterly. Within thirty
(30) days after the close of each calendar quarter from and after the date of
this Agreement, PRINTWARE shall pay 3M the royalties due on LICENSED PRODUCTS
sold during the three (3) months included in such quarter. The royalty payments
shall be accompanied by a statement showing the basis upon which the royalties
were computed. The supporting statement shall be required even if it is
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determined that no royalty is payable to 3M for such calendar quarter.
PRINTWARE shall be under no obligation to meet any minimum royalty.
3.4 As further consideration for the license granted in Article II,
attached hereto is a form of warrant to be issued to 3M by PRINTWARE providing
for the purchase by 3M of a number of shares of PRINTWARE common stock.
(a) For purposes of this paragraph 3.4, the following definitions
shall apply:
INITIAL OFFERING: The sale of approximately 2,300,000 shares of
PRINTWARE common stock to ALLEN L. TAYLOR and six individuals who are or expect
to become employees of PRINTWARE.
SECOND OFFERING: The sale of the first 1,000,000 shares of PRINTWARE
common stock to venture capital firms and/or through one or more private
placements, exclusive of the shares included in the Initial Offering.
INCENTIVE STOCK OPTIONS: Options granted to employees of PRINTWARE
pursuant to the provisions of an incentive stock option plan to be adopted by
PRINTWARE, which plan shall provide for the issuance of approximately 500,000
shares of PRINTWARE common stock upon the exercise of options granted pursuant
to the plan.
(b) The number of shares of common stock to be provided for purchase
by 3M under the Warrant shall be the greater of: (i) 600,000 shares of common
stock; or (ii) twenty percent (20%) of the aggregate number of shares of common
stock sold in the Initial Offering and the Second Offering and issued pursuant
to the exercise of Incentive Stock Options subsequent to
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May 15, 1985, and prior to the end of the Second Offering or December 31,
1986, whichever shall first occur.
(c) The exercise price per share to be contained in the Warrant shall
be fixed at the monetary amount paid per share of common stock for the largest
block of shares included in the Second Offering.
(d) In the event that the Second Offering is fully sold prior to
December 31, 1986, then if any additional offering or offerings of common stock
are made by PRINTWARE prior to December 31, 1986, at a price that is lower than
or substantially the same as the price per share included in the Warrant
pursuant to paragraph 3.4(b), then such additional offering or offerings shall
be considered to be part of the Second Offering and PRINTWARE shall issue to 3M
an additional warrant on the attached form providing for the purchase of
additional shares of PRINTWARE common stock so that the total number of shares
of PRINTWARE common stock purchasable by 3M pursuant to the Warrant and such
additional warrant shall be the same number that would have been covered by the
Warrant if such additional offering or offerings had been included in the Second
Offering, and the exercise price per share to be contained in such additional
warrant shall be fixed at the average monetary amount paid per share of common
stock in such additional offering or offerings.
(e) The Warrant and the additional warrant, if any, shall each be
exercisable at any time within a period of seven years from the date of its
issuance.
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ARTICLE IV
RECORDS
4.1 PRINTWARE agrees to maintain records containing all information
required for the computation and verification of royalties to be paid
hereunder, all in accordance with generally accepted accounting procedures.
PRINTWARE agrees to permit an independent certified public accountant
selected by 3M (except one to whom PRINTWARE has some reasonable objection)
to inspect such records once each year during normal business hours for the
purpose of determining the correctness of any report or payments made under
this Agreement. Such accountants shall only report to 3M their conclusions as
to the proper royalty calculations and royalty payments, and such accountants
shall not transmit to 3M any other business information of PRINTWARE.
ARTICLE V
KNOW-HOW AND CONFIDENTIALITY
5.1 All the existing KNOW-HOW as listed in Exhibit "A" attached hereto
that can be located and assembled by the use of a reasonable effort on the part
of 3M, subject to the provisions of Article I, paragraph 1.5 shall be delivered
to PRINTWARE by 3M within sixty (60) days after the date first appearing above.
To implement the use and conveyance of KNOW-HOW, ALLEN L. TAYLOR is hereby
authorized by 3M to disclose to PRINTWARE all information in his possession,
custody, or control that relates directly to the 3M Models 816 and 826 LASER
PRINTERS. To the extent necessary to permit ALLEN L. TAYLOR to make this
conveyance, and to operate PRINTWARE with respect to the design, manufacture and
sale of
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LICENSED PRODUCTS, ALLEN L. TAYLOR is hereby released by 3M from the
obligations of his Employee Agreement with 3M. However, in all other
respects his Employee Agreement with 3M shall remain in full force and
effect. The KNOW-HOW PRINTWARE receives from 3M and information received
from 3M employees who receive a release from their Employee Agreements with
3M to permit such employees to convey information with respect to Models 816
and 826 LASER PRINTERS to ALLEN L. TAYLOR or PRINTWARE shall, at all times,
be retained as the confidential information of 3M. PRINTWARE and ALLEN L.
TAYLOR agree to retain same in confidence and not disclose it to any third
party or use it in any way other than as permitted by this Agreement.
PRINTWARE shall inform its officers, employees and agents who receive or are
given access to 3M's KNOW-HOW of PRINTWARE's obligations not to disclose same
and that such officers, employees and agents are obligated to provisions of
this Article V not to disclose 3M's KNOW-HOW. PRINTWARE shall not be
obligated to retain 3M's KNOW-HOW in confidence if such information:
(a) is now or hereafter becomes public knowledge or is otherwise
disclosed in such a way as to make it available to the public;
(b) is disclosed to PRINTWARE by a third person or organization on a
non-confidential basis;
(c) is disclosed by 3M to third parties without confidential
restrictions.
All provisions relating to confidential information shall end after seven (7)
years from the date of first sale of a LASER PRINTER by PRINTWARE or three (3)
years from the date of termination of this Agreement, whichever period is the
longer. In the event this Agreement is terminated
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within seven (7) years from the date of first sale of a LASER PRINTER by
PRINTWARE, all KNOW-HOW received by PRINTWARE from 3M shall be returned to 3M
upon 3M's request.
5.2 The KNOW-HOW provided by 3M under this Agreement is KNOW-HOW owned by
3M which was developed or used by 3M in the design by 3M of Models 816 and 826
LASER PRINTERS for the Office Systems Division of 3M. The development work for
such LASER PRINTERS was terminated December 16, 1983 and only prototypes were
made. No commercial production was undertaken by 3M in accordance with such
design. It was contemplated that certain portions of the Models 816 and 826
would be purchased from other entities such as the Japanese firms Toshiba, with
which 3M has had a business relationship. No warranty is given by 3M with
respect to the fitness or performance of any KNOW-HOW, machines or equipment
provided under this Agreement and no representation is made by 3M that any
machine portions which 3M contemplated purchase from other entities will be
available from 3M or such other entities.
ARTICLE VI
EXPORT OF TECHNICAL DATA
6.1 The exportation from the United States of technical data relating to
certain technologies and/or products is permitted only if the U.S. exporter has
received written assurance from the foreign importer that neither the technical
data nor the direct product thereof will be knowingly reexported or exported,
directly or indirectly to any prohibited country as defined in appropriate U.S.
governmental regulations including The Export Regulations of the United States
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Department of Commerce, 15 Code of Federal Regulations, Section 379.4(f),
unless prior authorization is obtained from the U.S. authorities.
Accordingly, in order to enable 3M to furnish the Technical Information under
this Agreement lawfully, PRINTWARE and ALLEN L. TAYLOR, by executing this
Agreement, hereby give 3M such assurance.
ARTICLE VII
TERM AND TERMINATION
7.1 The parties may mutually agree in writing to terminate the entire
Agreement at any time.
7.2 PRINTWARE and ALLEN L. TAYLOR may terminate this Agreement at any time
that PRINTWARE intends to abandon the manufacture, use and sale of LASER
PRINTERS, all upon sixty (60) days written notice to 3M.
7.3 If, five (5) years after the date first appearing above, there is any
period of twenty-four (24) consecutive months during which no LICENSED PRODUCT
is being actively promoted or offered by PRINTWARE, this Agreement shall
terminate.
7.4 If this Agreement is not terminated sooner as herein provided, this
Agreement shall terminate in each country with the expiration of the last to
expire of the patents pertaining to such country which are present in LICENSED
PATENTS.
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7.5 Upon default by either party hereto in the performance of any
obligation hereunder to be performed by such party, the other party may give
notice in writing to the party in default specifying the thing or matter in
default. Unless such default be cured within one (1) month following the giving
of such notice (or if such cure cannot be completed within such one (1) month
period, if the cure thereof be not undertaken promptly upon receipt of such
notice, and diligently pursued thereafter), the party giving such notice may
give further written notice to the other party terminating this Agreement; in
such event, this Agreement shall terminate on the date specified in such further
notice, which date shall be no earlier than one (1) month from the date of such
further notice. Any termination by exercise of such rights shall not relieve
either party of any obligation accrued to the date of termination or relieve the
party in default from liability for damage for breach or a succession of
defaults shall not deprive such party of any right to terminate this Agreements
arising by reason of any subsequent default.
7.6 Termination of this Agreement by either party shall not affect the
warrant for purchase of common stock (Article III, 3.4) or any other rights
accrued or obligations incurred prior to the date of such termination.
7.7 Notwithstanding the termination of this Agreement, PRINTWARE shall be
responsible for the payment of royalties which have become due or payable prior
to the date of termination.
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ARTICLE VIII
MARKING
8.1 PATENT MARKING - PRINTWARE shall suitably and accurately mark LICENSED
PRODUCTS with a notice indicating the extent to which LICENSED PRODUCTS are
patented and are made under license from 3M.
8.2 SOFTWARE MARKING - PRINTWARE will retain all proprietary and/or
copyright notices on any copies of SOFTWARE or FIRMWARE that PRINTWARE develops
in the same form that such notices appear on the SOFTWARE or FIRMWARE furnished
by 3M to PRINTWARE, or alternatively, such notices that 3M will request in
writing.
8.3 TRADEMARKS, ETC. - PRINTWARE is not authorized or licensed by this
Agreement to use any 3M trademark, tradename, trade label, trade dress or
packaging materials either during the term of this Agreement or thereafter
without the prior written consent of 3M.
ARTICLE IX
NOTICE
9.1 Any notice to be given by either party to the other may be given in
person or by telex or telegram or by first class letter sent to the last known
address or place of business of the other party and the notice shall operate and
be deemed to have been given at the earliest of either the time of delivery or
at expiration of one (1) business day from the date of the telex or telegram or
three (3) business days from the date the letter is deposited with the U.S.
Postal Service unless
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actual receipt at an earlier date is established, and proof that the telex or
telegram was sent or that the letter was properly addressed and deposited
shall be sufficient evidence of service. Until further advised, all notices
shall be sent as follows:
3M
--
Minnesota Mining and Manufacturing
Company
3M Center
St. Paul, Minnesota 55144-1000
PRINTWARE, INC. ALLEN L. TAYLOR
--------------- ---------------
1833 Lamplight Drive 1833 Lamplight Drive
Woodbury, Minnesota 55125 Woodbury, Minnesota 55125
ARTICLE X
GOVERNING LAW
10.1 This Agreement is made in the State of Minnesota, U.S.A. and shall be
governed by the laws of the State of Minnesota.
ARTICLE XI
ENTIRE AGREEMENT AND AMENDMENT
11.1 This Agreement constitutes the entire understanding between the
parties hereto with respect to the LASER PRINTERS and replaces all other
agreements relating to the LASER PRINTERS which may have previously existed
between the parties hereto, whether written or oral.
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11.2 Except as provided in paragraph 11.3 of this Article XIII, this
Agreement can be amended or modified only by a written instrument executed by
the parties hereto.
11.3 Until February 27, 1989, this Agreement may be amended by 3M to delete
"or plain paper" in the definition of "LASER PRINTER" as set forth in Article I,
paragraph 1.1 of this Agreement if greater than fifty percent (50%) of
PRINTWARE's gross revenue in any PRINTWARE fiscal year is derived from the sale
and manufacture of computer printers. A determination by PRINTWARE of the
percentage of PRINTWARE's gross revenue that are derived in a PRINTWARE fiscal
year from the sale and manufacture of computer printers shall be made at the end
of each PRINTWARE fiscal year. The results of such determination shall be
submitted to 3M within thirty (30) days of each PRINTWARE fiscal year.
PRINTWARE agrees to permit an independent certified public accountant selected
by 3M (except one to whom PRINTWARE has some reasonable objection) to inspect
such records once each year during normal business hours for the purpose of
determining the correctness of the results submitted to 3M by PRINTWARE under
this paragraph 11.3 of Article XI.
ARTICLE XII
GENERAL PROVISIONS
12.1 PRINTWARE is not an agent of 3M as a result of or in any transaction
under or relating to this Agreement or the licenses herein granted. PRINTWARE
shall not in any way pledge 3M's credit or incur any obligations on behalf of
3M.
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12.2 So long as this Agreement is in force and beginning no later than the
first sale of a LICENSED PRODUCT, PRINTWARE shall obtain and keep in force
liability insurance with reasonable policy limits which shall initially be in
the amount of at least one million dollars ($1,000,000) per occurrence, and
shall have 3M named as an additional insured on each such policy to thereby
protect 3M and PRINTWARE against liability for damages or injury to anyone or
any property resulting in any way from LICENSED PRODUCTS including the
manufacture, use or sale thereof. 3M and PRINTWARE shall jointly review the
policy limits at least annually and the policy limits shall be adjusted, if
necessary, to reflect such factors as the growth of PRINTWARE, the frequency and
size of claims that have been made, and the size of the premiums relative to
PRINTWARE's income. In the event that 3M is ever required by a court of law to
pay damages in excess of the policy limits, PRINTWARE shall promptly increase
the policy limits by an amount at least equal to the excess damages.
12.3 Some of the provisions contained in this Agreement reflect certain
provisions contained in a license agreement with Dataproducts Corporation,
Woodland Hills, California and ALLEN L. TAYLOR is aware generally of the
provisions in agreement with Dataproducts Corporation.
12.4 This Agreement shall enure to the benefit of 3M, its successors and
assigns, including the resultant of any merger, consolidation or
reorganization. It shall not be assigned or transferred by PRINTWARE to any
party without the prior written consent of 3M which consent shall not be
unreasonably withheld.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in triplicate.
3M
/s/ James A. Smith By /s/ Robert M. Adams
- -------------------------------- --------------------------------
(Witness) Robert M. Adams
Title Senior Vice President
----------------------------
PRINTWARE, INC.
/s/ Betty J. Penman By Allen L. Taylor
- -------------------------------- --------------------------------
(Witness)
Title Chairman of the Board
----------------------------
ALLEN L. TAYLOR
/s/ Betty J. Penman By Allen L. Taylor
- -------------------------------- --------------------------------
(Witness)
Title
----------------------------
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EXHIBIT A
SPECIFIC LIST OF 3M KNOW-HOW
SOFTWARE
1. CO PROM assembly code listing (sources and objects files).
2. Bitrate basic program listing.
3. Data files for testing printer.
4. Program listing of font compression.
HARDWARE
1. CO PROM (in printer).
2. Three (3) fonts in PROM (in printer) and listing of font maps.
3. Mechanical drawings regarding stackers.
4. Drawings for custom test equipment.
MANUALS
1. Preliminary service manuals.
2. Standard work procedures regarding manufacturing.
3. Adjustment procedures.
SCHEMATICS
1. Schematics for four (4) circuit boards (control, front panel,
optics and engine I/O).
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VELLUMS
1. Shell construction drawings.
2. Printer base stand drawing.
3. Other 3M vellums related to the Models 816 and 826.
WIRING DIAGRAM
1. Four (4) boards and harness (control, front panel, optics and
engine I/O).
BILL OF MATERIALS SELECTED VENDORS FOR:
1. all boards in printer;
2. all components in printer;
3. base stand;
4. consumables and supplies;
5. fonts;
6. removable prom key;
7. tooling.
TIMING INFORMATION
1. Existing listing of timing for all control functions involving
the print process.
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OTHER DOCUMENTATION
1. Program listing of machine initialization.
2. Drum parameters.
3. Laser parameters.
4. Existing description of theory of scanner portion and Opcon
report.
5. Existing documents pertinent to agency approval (UL, BRH, CSA,
FCC) and quality assurance reports.
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WARRANT FOR PURCHASE OF COMMON STOCK
OF
PRINTWARE INCORPORATED
(A MINNESOTA CORPORATION)
This Certifies that MINNESOTA MINING AND MANUFACTURING the Company (hereinafter
"the Holder"), for value received, is entitled to purchase from PRINTWARE,
INCORPORATED (hereinafter "the Company"), __________________________________
fully paid and nonassessable shares of the common stock of the Company
(hereinafter "the Common Stock") of the par value of $_______________ per
share at a price of $___________________ per share pursuant to the terms and
conditions hereinafter set forth.
1. The rights represented by this Warrant may be exercised by the Holder, in
whole or in part (but not as to a fractional share of the Common Stock), by the
surrender of this Warrant at the principal office of the Company and upon
payment to the Company by certified check or bank draft of the purchase price
for such shares as set forth above. The Holder shall also execute and deliver
such agreements and representations concerning the Holder's intention not to
distribute the Common Stock so obtained and such other matters as the Company
may reasonably request in order to permit issuance to the Holder of the shares
of the Common Stock pursuant to exemptions from registration under federal and
state laws, provided, however, that the unavailability of such exemption shall
not affect the Company's obligation to issue shares of the Common Stock pursuant
hereto. Upon any exercise of the rights represented by this Warrant,
certificates for the shares of stock so purchased shall be delivered to the
Holder within a reasonable time, not exceeding fifteen (15) days, and, unless
this Warrant has expired, a new Warrant representing the number of shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the Holder within such time.
2. The Company covenants and agrees that all shares of the Common Stock which
may be issued upon the exercise of the rights represented by this Warrant will,
upon issuance, be fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof. The Company further covenants
and agrees that during the Period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of the issue upon the exercise of this Warrant, a
sufficient number of shares of the Common Stock to provide for the exercise of
the rights represented by this Warrant.
3. In the event that the Company shall, at any time prior to the expiration
date of this Warrant and prior to the exercise thereof: (i) declare or pay to
the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify the
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially as an entirety
to, any other corporation; then, upon the subsequent exercise of this
THIS WARRANT SUBJECT TO THE TERMS OF THE LEGEND SET FORTH ON THE LAST PAGE
HEREOF.
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Warrant, the Holder shall only pay the exercise price required had the Holder
exercised this Warrant prior to the happening of any of the foregoing events
and shall receive for the exercise price, in addition to or in substitution
for each share of the Common Stock to which the Holder would otherwise be
entitled upon such exercise, such additional shares of stock of the Company,
or such reclassified shares of stock of the Company, or such shares or
securities of the Company or any other entity resulting from the occurrence
of any such event which the Holder would have been entitled to receive had
the Holder exercised this Warrant prior to the happening of any of the
foregoing events.
4. The certificates representing the shares to be issued upon exercise of
the rights represented by this Warrant which have not been registered under
applicable federal and state laws will bear a legend substantially as follows:
"The shares represented by this certificate have not been
registered under the securities Act of 1933 ("the Act") or
under state laws. The shares may not be sold, transferred,
pledged or hypothecated and no transfer of them will be made
by the Corporation or its transfer agent in the absence of
an effective registration statement for the shares under the
Act, as amended, a "no action" letter of the Securities and
Exchange Commission, or an opinion of counsel acceptable to
the Corporation that such registration is not required.
Furthermore, the shares may not be sold, transferred,
pledged or hypothecated and no transfer of them will be made
by the Corporation or its transfer agent in the absence of
an opinion of counsel acceptable to the Corporation that
such transfer does not require compliance with appropriate
state laws or that such compliance has been effected."
By exercise of this warrant the Holder agrees to be bound by the terms of such
legend.
5. If, under state laws, under the Securities Act Of 1933, as amended or any
other similar Federal Statute and the rules and regulations of the Commissioner
thereunder all as the same shall be in effect at the time (hereinafter "the
Act") and after the Holder has exercised this Warrant, the Company proposes to
register any of its securities under the Act either for its own account or for
the account of a security holder or security holders exercising demand
registration rights (except with respect to Registration Statements filed on
Form S-8 or Form S-14 or such other similar form then in effect under the Act),
it will each such time give written notice to the Holder of its intention so to
do and, upon the written request of the Holder given within 20 days after the
Company's giving of such notice (which request shall state the intended method
of disposition by the Holder of stock acquired by the Holder by exercise of this
Warrant), the Company will use its best efforts to cause the stock, as to which
registration shall have been so requested, to be included in the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition of the
Holder's stock so registered in accordance with the written request of the
Holder. Notwithstanding any other provision of this paragraph 5, if the
underwriter determines that the marketing factors require a limitation of the
number of shares to be
2
<PAGE>
underwritten, the underwriter may exclude some or all of the stock of the
type the Holder requested be registered from such registration and
underwriting. In such event, the amount of such stock to be included in the
registration shall be apportioned pro rata among the holders of such stock
requesting registration, according to the total amount of such stock
requested to be registered by such requesters, or in such other proportion as
shall mutually be agreed to by such requesters. In the event that any
registration pursuant to this paragraph 5 shall be, in whole or in part, a
firm commitment underwritten offering of securities of the Company, any
request by the Holder pursuant to this paragraph 5 to register stock must
specify that such shares are to be included in the underwriting (i) on the
same terms and conditions as the shares of the Common Stock, if any,
otherwise being sold through underwriters under such registration or (ii) on
terms and conditions comparable to those normally applicable to offerings of
common stock in reasonably similar circumstances in the event that no shares
of the Common Stock are being sold through underwriters under such
registration. The Holder shall bear its proportionate share of the expenses
of such registration provided, however, that expenses borne by the Holder
shall not include the cost of any financial statements prepared in the normal
course of the Company's business or charges made for the services of any
officers or employees of the Company in connection with such registration.
6. This Warrant shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company.
7. This Warrant shall be exercisable only by the Holder and no transfer of
this Warrant or assignment of any of the Holder's rights hereunder shall be
recognized by the Company.
8. This Warrant is being executed and delivered in the State of Minnesota and
this Warrant shall be construed in accordance with the laws of such State.
9. This Warrant shall be void unless exercised within seven (7) years from the
date of its issuance.
WITNESS the seal of the Company and the signatures of its duly authorized
officers.
Dated: _____________________________ By __________________________________
Title _______________________________
ATTEST:
____________________________________ (SEAL)
Secretary
3
<PAGE>
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 ("THE ACT") OR UNDER STATE LAWS. THE WARRANT MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED AND NO TRANSFER OF IT WILL BE MADE BY
THE CORPORATION OR ITS TRANSFER AGENT IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE WARRANT UNDER THE ACT, AS AMENDED, A "NO ACTION"
LETTER OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
FURTHERMORE, THE WARRANT MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
AND NO TRANSFER OF IT WILL BE MADE BY THE CORPORATION OR ITS TRANSFER AGENT IN
THE ABSENCE OF AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH
TRANSFER DOES NOT REQUIRE COMPLIANCE WITH APPROPRIATE STATE LAWS OR THAT SUCH
COMPLIANCE HAS BEEN EFFECTED.
4
<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 [*CONFIDENTIAL TREATMENT
REQUESTED*] 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.
<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
- ---------------------------------------------------------------------------
[*CONFIDENTIAL TREATMENT REQUESTED*]
<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 11.1
PRINTWARE, INC.
PER SHARE EARNINGS (LOSS) COMPUTATIONS
<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>
PRIMARY EPS:
Weighted average number of
common shares outstanding.......... 3,629,713 3,626,613 3,627,013 3,618,040 3,614,751
Common Stock equivalents from
assumed exercise of options and
warrants........................... 75,690 79,014 78,614 67,540 20,475
--------- --------- ---------- --------- -----------
Total Shares........................... 3,705,403 3,705,627 3,705,627 3,685,580 3,635,226
--------- --------- ---------- --------- -----------
--------- --------- ---------- --------- -----------
Income (loss) before extraordinary
item................................. $ 330,898 $326,483 $1,793,425 $643,102 $(1,204,707)
Extraordinary income................... -- -- -- 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:
Income (loss) before extraordinary
item............................... $ .09 $ .09 $ .48 $ .17 $ (.33)
--------- --------- ---------- --------- -----------
--------- --------- ---------- --------- -----------
Net income (loss).................... $ .09 $ .09 $ .48 $ .21 $ (.33)
--------- --------- ---------- --------- -----------
--------- --------- ---------- --------- -----------
</TABLE>
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 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. 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 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 (loss) per share and is therefore not separately presented.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Printware, Inc.
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.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
May 13, 1996
