SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PRINTWARE, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE RECONVENED AND HELD JUNE 7, 2000
To the Shareholders of Printware, Inc.:
The Annual Meeting of Shareholders was initially convened on April 13, 2000
and will be reconvened to transact business at the Corporate Offices of
Printware, Inc. at 1270 Eagan Industrial Road, St. Paul, Minnesota 55121 on
June 7, 2000, at 3:30 p.m., Central Daylight Time, for the following purposes:
1. To elect Directors to hold office until the next annual meeting of
shareholders; and
2. To take action on any other business that may properly come before the
meeting, including considering a proposal of certain dissident
shareholders to increase the size of the Board of Directors from five
members to six members.
Shareholders of record at the close of business on February 23, 2000 are
entitled to vote at the meeting and at any adjournment thereof.
The Company convened the Annual Meeting as originally scheduled on April
13, 2000 at its headquarters at 1270 Eagan Industrial Road, St. Paul,
Minnesota 55121. No business was conducted at the meeting, and it was
adjourned to reconvene on April 20, 2000 and subsequently adjourned to
reconvene on June 7, 2000, in each case at 3:30 p.m. Central Daylight Time at
the Company's headquarters, to transact business at that time. The Company is
doing this because a committee of dissident shareholders (the "Dissidents")
launched a proxy contest in connection with the Annual Meeting, and the
Company was late in electronically filing with the U.S. Securities and
Exchange Commission ("SEC") its original proxy statement dated March 8, 2000
which did not discuss the potential for a proxy contest. The SEC has asked
the Company to file a revised proxy statement in response to the SEC concerns
that the original proxy materials were not materially complete with regard to
discussion of the potential for a proxy contest. The adjournment and
reconvening of the Annual Meeting will allow the Dissidents and the Company
additional time to solicit proxies for the Annual Meeting.
Whether or not you expect to be present at the meeting, please complete,
sign, and return the enclosed WHITE WITH BLUE STRIPE proxy card as soon as
possible. Because the Company has a new Proxy Statement, votes on the WHITE
proxy card that accompanied the earlier Proxy Statement are invalid. To vote
for Management and the current Board of Directors, you must submit a new
WHITE WITH BLUE STRIPE proxy card. Make sure your vote counts. Please send in
the WHITE WITH BLUE STRIPE proxy card. For your convenience, a return
envelope is enclosed that requires no postage if mailed in the United States.
If you attend the meeting in person, your proxy will be returned to you upon
request.
/s/Brian D. Shiffman
Brian D. Shiffman
Secretary
Dated: May 10, 2000
Whether or not you expect to attend the meeting, please sign and date the
enclosed WHITE WITH BLUE STRIPE proxy card and return it in the enclosed
envelope. Thank you.
<PAGE>
Printware, Inc.
1270 Eagan Industrial Road
St. Paul, Minnesota 55121
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE RECONVENED AND HELD JUNE 7, 2000
The Annual Meeting of Shareholders (the "Meeting") will be reconvened and
held at the Corporate Offices of Printware, Inc. at 1270 Eagan Industrial
Road, St. Paul, Minnesota 55121 on June 7, 2000, at 3:30 p.m., Central
Daylight Time, for the purposes set forth in the Notice of Annual Meeting of
Shareholders.
Your Board of Directors solicits the enclosed WHITE WITH BLUE STRIPE proxy
card. Such solicitation is being made by mail, and may also be made by
directors and officers of Printware by facsimile, telephone, e-mail, in
person, or by advertisements. We have also engaged D. F. King & Co., Inc. to
assist us as is discussed later in this Proxy Statement. Any proxy given may
be revoked by the shareholder at any time prior to the voting thereof by so
notifying the Company in writing at the above address, attention Thomas W.
Petschauer, Executive Vice President and CFO, or by appearing in person at
the Meeting. Shares represented by proxies will be voted as specified in such
proxies, and if no choice is specified, will be voted:
FOR your Board of Directors' nominees named in this Proxy Statement, and
against any other proposals, including the proposal to increase the size of
the Board of Directors from five members to six members, not appearing on
the Company's WHITE WITH BLUE STRIPE proxy card.
Only shareholders of record at the close of business on February 23, 2000,
may vote at the Meeting. As of that date, there were 3,275,557 shares of
common stock, no par value per share, of the Company outstanding. Such shares
constitute the only class of the Company's outstanding equity securities.
Each shareholder of record is entitled to one vote for each share registered
in his or her name on each matter presented at the Meeting. Cumulative voting
is not permitted.
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the materials enclosed herewith shall be paid by the
Company. Printware may reimburse banks, brokerage firms, and other
custodians, nominees, and fiduciaries for reasonable expenses incurred by
them in sending proxy materials to beneficial owners of stock.
THIS PROXY STATEMENT AND ACCOMPANYING FORM OF PROXY ARE BEING MAILED TO
SHAREHOLDERS ON OR ABOUT MAY 10, 2000.
We urge you to vote in favor of the election of your Board-recommended
director nominees for election as directors by voting:
FOR all nominees listed on our WHITE WITH BLUE STRIPE proxy card.
Because the Company has a new Proxy Statement, votes on the WHITE proxy
card that accompanied the earlier Proxy Statement are invalid. To vote for
Management and the current Board of Directors, you must submit a new WHITE
WITH BLUE STRIPE proxy card. Make sure your vote counts. Please send in the
WHITE WITH BLUE STRIPE proxy card.
<PAGE>
BACKGROUND TO THE CURRENT PROXY CONTEST
Recent Purchases of Printware Stock by Dissidents
A group of recent Printware shareholders, consisting of Pyramid Trading
L.P., Daniel B. Asher, Gary S. Kohler, and Andrew J. Redleaf, have formed a
group they call the Shareholders' Committee to Improve Printware Shareholder
Value (the "Dissidents"). The Dissidents have filed proxy material and an
amended schedule 13D with the SEC disclosing that they are proposing an
alternate slate of directors at the Company's Annual Meeting. According to
the Dissidents' SEC filings, the Dissidents did not own any Company stock
until their first purchase on September 27, 1999. The Dissidents began
purchasing more Printware stock in October, 1999 through February, 2000.
The Dissidents' Dutch Auction Proposal
On December 8, 1999, in a meeting between Dr. Daniel A. Baker, president
and chief executive officer of the Company, and Messrs. Kohler and Redleaf,
the Dissidents first approached Management with a proposal that the Company
should repurchase approximately one million shares of its stock in a "Dutch
auction." In a typical Dutch auction, the Company's shareholders would be
invited to tender Company stock for repurchase by the Company (using the
Company's funds) at a specified range of prices per share. If more shares are
tendered than the offer contemplated, only a pro rata portion of the tendered
shares would be repurchased, and the other tendered shares would be returned
to shareholders. A Dutch auction would result in the Company having less cash
and fewer outstanding shares. Specifically, the Dissidents suggested
Management make a tender offer for up to one million shares at an above-
market price that would be fixed in a Dutch auction process. Dr. Baker
expressed skepticism that such a transaction would be in all shareholders'
interest, but agreed to study the proposal and consult with others.
On December 10, 1999, Mr. Kohler sent the following letter to Dr. Baker:
<PAGE>
December 10, 1999
Mr. Dan Baker
C.E.O.
Printware, Inc.
1270 Eagan Industrial Road
St. Paul, MN 55121
Dear Dan:
Andy and I enjoyed our lunch with you, and want to thank you for taking the
time to meet with us.
I'd like to make sure Andy and I were clear about what we are recommending
Printware do to address its seriously overcapitalized balance sheet, which we
believe is an important issue.
We are recommending that Printware attempt to purchase up to one million of
its shares by Dutch auction at a price range of $2.50 to $2.80 per share. We
aren't particularly concerned about the exact price range, so long as it
doesn't exceed 1) the approximate cash and financial assets (lease
receivables) per share, and 2) the total dollars spent on the repurchases
does not leave Printware with less capital than is reasonably necessary to
grow the business over the next few years.
We think this financial restructuring is in the best interest of ALL
shareholders. It allows the investors who choose to tender their shares to
realize significantly more than they would realize by selling into the
market, and it gives the remaining shareholders a significantly greater
return on their investment if you are successful at growing the value of your
computer-to-plate business over the next few years. We think the buy back of
shares is also in the interest in management. Management ought to want to own
a higher percentage of the company if they have confidence in their ability
to succeed in building the computer-to-plate business, and we would have a
hard time understanding why management WOULDN'T want to own more of this
company.
Dan, you raised several objections at lunch that we want to address. You
voiced a concern that if you ever need to raise capital in the future, buying
back shares now would be a mistake. If you were to buy back shares as we
propose, you would still have a very large amount of capital relative to the
size of your business, If you fail to grow the business and lose the capital,
we agree that you will indeed have a difficult time raising more capital.
However, I don't think you are arguing that management should be allowed to
run through all the cash no matter how futile the attempt to build a
computer-to-plate business may become. I think your concern is that as you
build the business, you will have legitimate needs for the capital to fund
the growth. Our belief is that as this happens, you will certainly be able to
attract capital at a cost of capital below your current cost of equity, which
you must realize is excessively high. It does seem to us that if you were to
accelerate your growth rate to the point of needing additional capital, it
will be because of your lease programs or rental programs, and we think
equity capital is not a particularly good source of funds for finance
programs. Debt is more practical and usual source of capital for finance
programs.
You raised a concern that raising money in the future would be a distraction.
If the effect of a buyback were negligible, we would agree that the
distraction would not be worthwhile. However, the effect to shareholders of a
30% stock buyback is quite significant. For example, if over the next two
years, you were able to increase the value of the computer-to-plate business
by $10 million, the effect per share is about $3 without the buyback, and
about $4.35 with the buyback. An additional $1.35 value per share is material
to shareholders.
<PAGE>
You also raised a concern about the company buying back shares at a premium
to market was something you might not be comfortable with. At current market
prices it is our intention to purchase more Printware shares. As of our lunch
meeting, we have already purchased 5% of the company and we continue to
purchase more. However, as much as we like your business and like buying
stock below the cash value per share, our purchase of shares does not address
the over-capitalized balance sheet issue. We think shareholders will be
better served if the company were to buy up the shares of willing sellers
rather than us. However, if the company chooses not to buy back shares in a
Dutch auction, we would consider doing so ourselves.
Dan, we want to emphasize is that we are not looking for the company to do a
Dutch auction so we can increase our percent ownership of the company, which
we can do on our own, or because we want to sell our recently acquired low
priced shares back to the company at a higher price. We are looking to the
Dutch auction to address the over-capitalized balance sheet, which we see as
a key impediment to shareholder value.
The final point we wish to make is that if Printware cares about shareholder
value, the company needs to let shareholders know this to be true. The
company needs to make the statement that management believes the company has
real value - that the worth of the total company is greater than the cash in
the bank, and that Printware will put its assets behind that statement by
buying the shares of any shareholder that wishes to sell back their holdings
in a Dutch auction. Andy and I will be happy to present this concept to any
of your advisors or board members if you feel that would be helpful.
Sincerely,
WHITEBOX Advisors
/s/ Gary S. Kohler
Director of Research
Dr. Baker responded in subsequent telephone conversations with Mr. Kohler
that Management doubted a Dutch auction would help the stock price because
earlier in the year the Company bought back 1,587,000 shares (32.7% of those
then outstanding) from Deluxe Corporation, and there was no discernable
impact on the Company's stock price. Dr. Baker understood that the earlier
private buyback was a different transaction than Mr. Kohler's proposed
public-market transaction because Deluxe was an affiliate of Printware,
whose shares were not trading in the public market, while a Dutch auction
tender offer would immediately reduce the number of publicly trading shares.
Dr. Baker believed that despite these differences, the results of the
previous buyback cast doubt Mr. Kohler's assumption that the public stock
price would go up simply because the Company had fewer outstanding shares and
less cash. Dr. Baker believed that the public market would value the
Company's stock based on the Company's longer-term business prospects.
As to Mr. Kohler's suggestion that Company could raise more money if its
capital demands exceeded the cash remaining after a Dutch auction, Dr. Baker
believed, based on discussions with representatives of R.J. Steichen &
Company (the lead underwriter in the Company's initial public offering) that
it would be difficult, if not impossible, for a company of Printware's size
to place a secondary equity offering in the current equity market.
Mr. Kohler further argued in his December 10 letter that the Company's cost
of capital was excessively high, and that debt was a better source of funds.
Management disagreed that the Company's cost of capital was "excessively
high." The cost of the Company's capital is in the interest income the
Company currently earns on its cash and available-for-sale securities, which
is currently approximately 6%. The cost of financing equipment leases as Mr.
Kohler suggested would typically exceed 12%, based on estimates the Company
received from GE Capital, Cornerstone Capital Corporation, and American
Leasing & Funding Company, companies that were interested in financing such
leases. Thus, Management concluded, the Dissidents' proposal could double the
Company's cost of capital for lease financing, which Management considered
critical to the Company's future growth. Dr. Baker communicated to Mr. Kohler
his concern about a restructuring that replaced "cheap money" (assets
invested in available-for-sale securities) with "expensive money" (debt to
finance leases).
Dr. Baker discussed the Dutch auction with Mr. Kohler the week of December
13, 1999, and January 3, 2000, and also discussed the proposal informally
with several Directors. Dr. Baker continued to voice his skepticism, and felt
no new information to justify a Dutch auction had been provided by Mr. Kohler
in these conversations, but did agree to bring the Dutch auction proposal
before the Company's Board at its next meeting in February, 2000.
<PAGE>
On January 3 Mr. Kohler sent the following letter to Dr. Baker:
January 3, 2000
Mr. Dan Baker
C.E.O.
Printware, Inc.
1270 Eagan Industrial Road
St. Paul, MN 55121
Dear Dan:
I want to follow up with you about our conversation this morning.
I am disappointed that our concerns have not yet been taken to the board, and
further, you seemed to take the position that there may be no need for
"decisive action" now. You seemed to characterize your board as not being
willing to consider our concerns immediately. You also raised some concerns
about our motivation.
Andy and I do know something about the way capital markets work, and the way
capital is efficiently deployed in companies. The undervalued nature of
Printware's stock is an opportunity for us, and it is problem for Printware,
as the lower the stock price, the higher the cost of capital. One can argue
that markets are not always efficient, but they are generally rational. We
think the market is correctly assigning a high cost of capital to Printware
because of your behavior of investing the vast majority of your capital in
unacceptably low return investments.
Dan, you cannot successfully respond to your high cost of capital by hoarding
cash. You may think that if you never have to go to the capital markets
again, you can ignore what the capital markets tell you. We think that is a
mistaken notion, and only perpetuates the vicious cycle that has driven your
cost of capital up so high. (We also do not accept the notion that your cash
hoard is needed as a cushion for failure by management to successfully
execute its business plan). We have told you that the best way to assure
access to capital at an acceptable price is to directly and aggressively act
in shareholders' interests.
As to our motivation, we are in the business of investing capital for a
profit. (You are, too). Effectively, we are in the business of lowering your
cost of capital, and we cannot imagine why you would be against that.
Andy and I would like to meet with Dr. Allan Taylor and you, and would
appreciate it if you would arrange the meeting.
Sincerely,
/s/ Gary S. Kohler
Dr. Baker had a telephone discussion with Mr. Redleaf on January 11. Dr.
Baker expressed his concern that Mr. Kohler's letters distorted Dr. Baker's
positions and thus had a chilling effect on communications. For example, Mr.
Kohler expressed disappointment "that our concerns have not yet been taken to
the Board," when he knew that the Board met quarterly and had not met since
his proposal. Dr. Baker did not oppose "decisive action," but had pointed out
that it was just beginning to implement a new business model that emphasized
after-market supplies sales and thus delayed cash flow. Mr. Kohler continued
to argue that Printware had a high cost of capital, which Management believed
was a seriously flawed assumption as discussed in reference to Mr. Kohler's
December 10 letter. Management did not believe Printware was "hoarding cash."
In 1999, the Company used approximately $4.6 million, or nearly 40% of its
cash. Of the $5.3 million in funds used before received interest, $1.0 million
was used to fund operations, $1.1 million to fund leases, and $3.0 million to
repurchase stock.
<PAGE>
Dr. Baker never suggested that the Company's cash was "needed as a cushion
for failure by management to successfully execute its business plan," and in
fact pointed out that if the Company was successful in placing more units,
that its capital needs would build because of lease financing and building
inventory. Dr. Baker discussed Mr. Kohler's request for a meeting with Dr.
Taylor, and reported to Mr. Redleaf that Dr. Taylor felt the discussions were
more appropriately handled by Management.
On February 1 Dr. Baker had a conference call with Messrs. Kohler and
Redleaf. The Dissidents implied that if a Dutch auction or other means of
distributing cash to the Dissidents and/or other shareholders was not
implemented, the Dissidents might support a breakup of Printware. The parties
discussed the value of Printware's assets including inventory, receivables,
and Printware's NASDAQ "shell." Dr. Baker made it clear he did not support a
breakup because he did not believe it would provide shareholders adequate
valuation for the Company's long-term business.
The Dutch auction proposal was discussed at the Company's February 10 Board
meeting. The Board declined to act on the proposal because of concerns that
it was self-serving on the part of the Dissidents and not in the best
interest of all shareholders since it would deplete the Company's cash,
might leave some shareholders with smaller, more illiquid holdings of the
Company shares due to proration, and might result in the Company being
delisted from the NASDAQ due to insufficient market capitalization of shares
held by non-affiliates or an insufficient number of shareholders. On February
14, Dr. Baker left a voice mail for Mr. Kohler, indicating that the Board had
considered but declined to take any action on a Dutch auction at this time.
Dr. Baker offered to answer any questions, but Mr. Kohler did not return the
call.
On February 28, Mr. Kohler sent the following letter to Printware's Board:
February 28, 2000
Board of Directors
Allen C. Taylor - Chairman
Printware, Inc.
1270 Eagan Industrial Road
St. Paul, MN 55121
Dear Mr. Taylor and Directors:
Mr. Daniel Baker informed us that Printware's Board of Directors, at their
recent meeting, decided against pursuing any action to shrink Printware's
over-capitalized balance sheet, either by Dutch Auction as we had
recommended, or by any other method. We are disappointed that our
recommendation was not accepted, and we are not sure our proposal received a
full and fair hearing.
We are, we believe, Printware's largest shareholder. We are investment
professionals who clearly have experience and expertise in analyzing small
companies. We have attempted to engage Printware's management in a discussion
of the issues relating to its balance sheet, its cost of capital, and its
operations, but we have apparently failed in our attempts. We are, as we have
stated to management, very concerned about Printware's balance sheet and cost
of capital. We are equally concerned about current operations, which are
losing money. Specifically,
- - The simultaneous write-down of inventory and increase in production
troubles us greatly. Mr. Baker's explanation to us as to why he would produce
more product than he could sell in a year's time - " to get better pricing
and margins" and because "we have the money" - is unacceptable to us. We
wonder what purpose higher margins serve if they are accompanied by six
figure write-downs.
<PAGE>
- - The apparent lack of concern by management for the clearly deteriorating
operating performance also troubles us. The statement in Printware's recent
public announcement, "We held our own in a difficult year for the printing
industry", indicates either very low internal standards of performance or an
inability to acknowledge the truth regarding the troubles the business is
facing, which we hardly think can simply be attributed to the loss of the
Deluxe business.
We asked Mr. Baker for a list of shareholders, along with other information
that we, as shareholders are entitled to, and we intend to speak with
Printware's larger shareholders to hear their opinions. Dan told us he didn't
think our request signifies a friendly long-term interest in Printware. We
want to stress that in fact our interest in Printware is friendly and
consistent with our view that an active shareholder can add value to an
investment. We are only interested in seeing the company managed effectively
and profitably, with a proper focus on operations, strategy, and return on
investment, and with oversight by a capable and interested board of
directors. We don't consider it unfriendly for a shareholder to insist that
Printware address its shortcomings so that the long-term value of Printware
stock can be realized for all shareholders. If our views are materially
different than management's or the board's we expect management and the board
will engage in a dialogue with us in an intelligent and thoughtful manner,
rather than ignore us. If we cannot achieve this, we will probably seek
either representation on the Printware Board, or control of the Printware
Board.
We want to meet with the board individually or collectively and hear their
opinions, and be certain that the board hears ours. We have been unable to
engage Mr. Baker in a meaningful dialogue, but we are hopeful that the board
of directors does not share Mr. Baker's unwillingness to address what we
consider extremely important issues.
We would appreciate a response from you within the next few days.
Sincerely,
WHITEBOX ADVISORS
/s/Gary S. Kohler
Portfolio Manager
Cc: Dan Baker
Michael Berg
Brian Shiffman
Victor Weiss
Donald Mager
While the letter offered to engage in further dialogue, Management felt
that sufficient dialog had taken place to understand the Dissidents'
arguments for reducing Printware's capitalization, and that the Dissidents
appeared unwilling to listen to Management's concerns about reducing
Printware's capitalization.
Shortly after that letter, Mr. Kohler requested a meeting with another
Printware Director, Mr. Michael Berg. On March 7, Mr. Berg met with Mr.
Kohler in the presence of a former shareholder who was also the CEO of
Honeywell when Mr. Berg was employed there, and a portfolio manager who
knew both Mr. Kohler and Mr. Berg. The meeting lasted several hours. Mr.
Kohler made the case for reducing Printware's capitalization and pressed for
a Dutch auction. At the conclusion of that meeting, Mr. Berg asked for a two-
page summary of Mr. Kohler's proposal. Such a document was never provided.
<PAGE>
On March 8, Mr. Kohler sent the following letter to Dr. Allen Taylor, a
Director of the Company:
March 8, 2000
Allen C. Taylor
Chairman, Printware, Inc.
212 North Ilwaco Road
River Falls, Wisconsin 54022
Dear Mr. Taylor:
As I told you in my letter of February 28th, I am dissatisfied with
Printware's failure to act positively on our recommendation that the balance
sheet be restructured, and with the Printware Board's failure to engage us in
discussion of that proposal.
Since my letter to you and each of PRTW's board members, I have had no
response from you.
I have had a discussion with Mr. Michael Berg, whom I found to be ill
informed of Printware's financials, and clearly unwilling to address our
concerns as we have presented them. Apparently no amount of conversation with
Mr. Berg will shake him of his belief that we want Printware to buy back
stock is so that we will personally benefit from the cash. Factual evidence
to the contrary, such as my conversations with Mr. Baker and my letter to Mr.
Baker of December 10th telling him that if the company were to engage in a
Dutch auction we would participate or NOT participate, depending upon the
company's wishes, were of little interest to Mr. Berg. I was stunned by Mr.
Berg's lack of understanding of Printware's balance sheet, which he guessed
had "$2-3 million" in cash. This error could not have been made if the board
has had any substantive discussion and analysis of our offer, which signifies
to me that Printware would rather ignore us rather than consider what we have
to say.
Also, since my letter to you, I have read a press release from YARC that
Printware sought them out as a "white knight". Allen, to our way of thinking,
selling the company out is somewhat shorter term thinking than buying back
stock. YARC's press release is unusual, and I question why Printware would
voluntarily put itself into play rather than implement our proposal, which,
if you had carefully analyzed, you would have realized gives management a
greater amount of control over the company, not a lesser amount. Frankly, Mr.
Taylor, I question the fundamental business competence of your team.
As we said in our letter, if we fail to engage the board in a discussion of
our issues, we will consider our options, including board representation or
control of the board. After my highly unsuccessful meeting with Mr. Berg, the
only forum that will be acceptable to me will be a meeting with you and
Printware's corporate counsel, Mr. McNeil, before March 17, 2000, in the
office of my counsel, Robert Montague, of Robins, Kaplan, Miller and Ciresi
for the purpose of discussing 1) a Dutch auction to restructure the balance
sheet and 2) the configuration of the board of directors to be elected at the
next regularly scheduled shareholder meeting, including our representation on
the board.
If this is unacceptable to you, or if I do not hear from you by 1:00 p.m. on
March 14, 2000, I will instruct our counsel to request a special shareholder
meeting for the purpose of electing a new board of directors. I expect that
you have little chance of winning such a contest.
Sincerely,
/s/ Gary S. Kohler
<PAGE>
Dr. Taylor chose not to respond to Mr. Kohler's attack on the Company's
management, and not to respond to the March 14 meeting ultimatum, and the
ultimatum passed with no request for a special meeting.
Contrary to Mr. Kohler's assertion in his March 8 letter, the Company's
Board at its meeting on February 10, 2000 had a detailed discussion of the
Dutch auction proposal and its financial ramifications.
Mr. Kohler's March 8 letter also offered that the Dissidents would NOT
participate, depending upon the company's wishes in a Dutch auction. The
Board found this offer hollow because it was believed to be in exchange for
other considerations such as a contingent stock buyback and representation on
Printware's board.
Mr. Kohler's March 8 letter also "questioned why Printware would
voluntarily put itself in play rather than implement our [Dutch auction]
proposal..." Management and the Board believed that mergers and acquisitions
can be an appropriate avenue of exploration to increase shareholder value,
specifically to enhance the Company's technology base or its distribution.
The Company has sought prudent strategic mergers and acquisitions for a
number of years.
In a March 8 telephone conversation with Dr. Baker, Mr. Berg stated that
when he referred to "$2-3 million" in cash in the Company, he was referring
to the amount Mr. Kohler considered "excess cash," and was fully aware of the
Company's cash position.
On March 10, Dr. Taylor sent a reply to Mr. Kohler's February 28 and March
8 letters, and reinforced Mr. Berg's request for a written proposal to
present to the full Board. Drs. Baker and Taylor agreed to put the issue on
the April 13 Board agenda again. Dr. Taylor felt there was a clear
implication in the letter and from prior telephone conversations that the
proposal would be considered at the next Board meeting.
On March 11, 2000, Mr. Berg sent a letter to Drs. Taylor and Baker,
characterizing Mr. Kohler's March 8 letter as "distorted and misconstrued."
On March 13, Mr. Kohler called Dr. Taylor. Dr. Taylor reinforced Mr. Berg's
request for a written proposal. Dr. Taylor said that he felt the proposal
received a fair hearing at the February Board meeting, but that with more
information and clarification, the Dutch auction would be reconsidered at the
next Board meeting.
On March 15, Mr. Kohler responded to Dr. Taylor's request by sending the
December 10 letter that was addressed to Dr. Baker, which Dr. Taylor had not
previously seen.
Later on March 15, Dr. Taylor sent a reply to Mr. Kohler's correspondence
and asked for more details and clarifications of the December 10 letter so
that a complete proposal could be presented to the Board. Drs. Baker and
Taylor agreed to put the issue on the April 13 Board agenda. Dr. Taylor felt
there was a clear implication in the letter and from the prior telephone
conversation that the proposal would be considered by the Board.
<PAGE>
In a March 17 response, Mr. Kohler declined to provide details on the
mechanics of a Dutch auction. As to the effect on the stock price, Mr. Kohler
predicted that if one-third of the Company's stock was repurchased that the
long-term value would increase by 50%. Management and the Board found this
assumption overly simplistic and overly optimistic based on the repurchase of
approximately one-third of the Company's stock the prior year from Deluxe,
which produced no discernable effect on the stock price. Despite his
disappointment with Mr. Kohler's defense of his Dutch auction proposal, Dr.
Taylor asked Dr. Baker to keep the Dutch auction on the Board's upcoming
meeting agenda, which Dr. Baker did.
On March 29, Mr. Kohler left a message for Dr. Taylor. Dr. Taylor did not
receive the message until he returned from a trip on April 3.
On March 31, the Dissidents filed their first preliminary proxy and related
documents, initiating the current proxy contest.
On April 3, Dr. Taylor called Mr. Kohler, and Mr. Kohler asked for a
meeting. Dr. Taylor initially agreed, then postponed the meeting indefinitely
in light of the proxy contest.
The Dissidents' Claims
The Dissidents' main claims are that the Company is "overcapitalized," that
the Company has had unfavorable financial performance for the last several
years, and that a Dutch auction would benefit all shareholders by alleviating
"overcapitalization." Let us address each of these claims.
1. Printware is Not Overcapitalized
We do not believe that Printware is "overcapitalized." In 1999, the Company
used approximately $4.6 million in cash to fund operations and financing
leases for customers and to repurchase stock. This left only $7.5 million in
cash, cash equivalents and available-for-sale securities. While the Company
cannot precisely estimate its future capital needs, Management believes the
Company needs its capital to execute a new business model, which is starting
to show results by increasing the Company's equipment placements with
customers and increasing the Company's sales of the consumable supplies used
in the operation of that equipment. The Company's revenues increased 37% in
the first quarter of 2000 compared to the first quarter of 1999. In the
first quarter of 2000, equipment revenues were up 35% and supplies revenues
increased 41%, both compared to the first quarter of 1999. The Company had
total revenues of $1.264 million in the first quarter of 2000 compared to
$920,000 in the first quarter of 1999. This revenue increase of $344,000
consisted of 65% in higher equipment sales and 35% in higher supplies
sales.
<PAGE>
Under the Company's historical business model, revenues were realized
virtually entirely from the sale of equipment. Customers purchased supplies
such as plate material from third parties. Because the Company did not have
the potential to obtain revenue from supplies sales to the customer after the
initial equipment sales, the Company was forced to charge more for its
equipment than competitors who had distribution rights to sell supplies. This
resulted in one-time sales to customers rather than longer-term relationships
where the customer continually purchases supplies over a long period of time.
In late 1999, after two years of negotiations, the Company acquired
rights to sell supplies for its newer equipment. These supplies started to
become available in December, 1999 in limited quantities. This has allowed
the Company to initiate a new business model of selling equipment for less,
but capturing the supplies business. The Company believes that this business
model has greater longer-term revenue potential.
The Company's growth plan is to provide customers with affordable equipment
pricing and lease financing to build market share and to gain after-market
sales of supplies. The Company's new lease agreements commit the customer to
purchase minimum quantities of supplies from the Company for the term of the
lease (generally five years), and provide penalties if the customer does not
meet those obligations. Under the new business model, a customer might pay
several thousand dollars down for one of the Company's platesetter products
that cost approximately $30,000 to build. The customer is then obligated to
pay approximately $1,000 per month in lease payments, plus $750 per month or
more in minimum supplies purchases. The Company has promoted its new business
model to prospective customers with direct mail and broadcast-fax promotional
pieces. This new business model consumes significant cash resources with each
equipment lease, but makes it much easier for the customer to obtain the
Company's products and is expected to ultimately be more profitable for the
Company.
Management knows of no reliable formulae to predict the Company's capital
requirements. Capital requirements vary widely depending on the industry and
the business models deployed. It is also difficult to allow for unanticipated
contingencies and opportunities such as acquisitions or bargain (i.e., below
market) stock buybacks, such as the buybacks executed in 1998 and 1999.
Our competition in Internet printing, Collabria, Inc., iPrint.com, and
ImageX.com, are far better capitalized than Printware, yet all are
increasing, not shrinking, their equity bases. ImageX.com announced March 22
that following a recent offering they "have more than $100 million to cover
operating expenses...this is a fast-moving environment, and we will continue
to be very strategic in our financing program." Collabria, Inc. secured $46
million in investment funding in January. iPrint.com recently completed a
public offering to provide pro forma as adjusted $55 million in cash and cash
equivalents. These competitors are raising equity rather repurchasing equity
and relying on debt financing.
<PAGE>
2. Printware's Recent Stock Buyback did not Increase the Stock Price
In 1998 and 1999, the Company bought back a significant number of shares
with little discernible effect on the stock price in the view of Management.
In 1999, the Company bought Deluxe Corporation's entire holding of 1,587,690
shares of Printware. This transaction was completed in one privately
negotiated purchase. The parties agreed to purchase terms on July 22, 1999.
The terms were for a price of $1.90 per share, a discount to the closing
price on NASDAQ on that day of $2.375 per share. The purchase was closed on
July 27, 1999, and was reported in a press release by the Company on that
day. The press release identified the number of shares purchased from Deluxe
and the price of $1.90 per share. It also stated the number of outstanding
shares went from approximately 4.85 million to 3.26 million after the
transaction. In the four weeks following the July 27 press release, and with
no intervening news from the Company, the highest closing price of the
Company's stock was $2.50, ending at $2.25 on August 24. Management noted no
increase in the stock's price after the reduction in the Company's
capitalization from the buyback.
The market price effects of a Dutch auction could vary substantially from
the Deluxe buyback as the Deluxe shares were held by an affiliate and were
not trading regularly in the public market. A Dutch auction tender offer
would immediately reduce the number of the publicly trading shares.
Nevertheless, Management believes that despite these differences, the results
of the previous buyback cast doubt on the Dissidents' assumption that the
public market would value a reduction in the Company's capitalization.
3. Printware is Responding to Loss of Revenues From Deluxe
The decline in operating performance cited in the Dissidents' filings was
due to the loss of what was our largest customer, Deluxe Corporation, in 1998
and 1999. Deluxe shut down most of their printing plants and began buying
from Japan the supplies it had been buying from the Company.
The Company's revenues from Deluxe declined from $4,117,000, or 59% of
total revenues in 1997, to $76,000, or less than 2%, in 1999. Non-Deluxe
revenues increased from $2,869,000, or 41% of total revenues in 1997, to
$4,547,000, or 98% of total revenues, in 1999. Non-Deluxe revenues increased
58% in 1999 over 1997. The Company has effectively diversified its customer
base since 1997, and replaced in 1999 over 40% of the revenues it enjoyed
from Deluxe in 1997.
Furthermore, the Company has acquired rights to sell supplies for its newer
equipment, which provides additional potential to replace lost Deluxe
revenues with supplies sales to other customers.
In sum, after losing its largest customer which accounted for most of its
1997 revenue, the Company has responded, regained a large portion of the lost
revenue, and repositioned itself for growth.
<PAGE>
4. A Dutch Auction is Expensive and Has Significant Risks
We are concerned that a Dutch auction or other share repurchase could
be used by the Dissidents to realize large short-term profits, or by not
participating, significantly increase their percentage ownership in the
Company. If the Dissidents, having proposed a Dutch auction, purposefully
choose not to participate in the auction, the expenditure of the Company's
money will increase their percentage ownership in the Company at no cost
to them. The Dissidents have not given assurances whether or not they
intend to participate in their own proposed Dutch auction. Nor have the
Dissidents adequately explained their inherent conflict of interest
between a Dutch auction and their personal interest in the Company's stock.
A Dutch auction, as admitted in the Dissidents' SEC filings, could result
in the Company's Common Stock becoming ineligible for continued listing on
NASDAQ National Market System as described previously. Delisting could
reduce the liquidity of shareholders' positions, decrease Printware's value
in any potential merger or acquisition transaction, limit the marketability
of the Company's stock to non-institutional investors, and limit the
Company's access to capital markets in the future. Your Board vigorously
opposes any action that has the potential of jeopardizing the Company's
NASDAQ National Market System ("NMS") listing.
Under NASDAQ's NMS continued listing requirements, the market value of the
public float (shares not owned by directors, executive officers, or by
parties that own more than 10% of the outstanding shares) multiplied by the
market price per share, must be a minimum of $5 million. Management is
concerned if a Dutch auction was completed for 1 million shares without the
participation of the Dissidents or other current insiders, only approximately
1.4 million shares would remain in the public float. If the market price did
not increase from the $2.56 per share price on April 14, the market value of
the public float would be only $3,584,000, which is less than the NASDAQ
minimum requirement for continued listing. In fact, the stock price would
have to increase to, and stay above $3.57 per share (a 39% increase from the
$2.56 per share level) to maintain NASDAQ-NMS eligibility, using the same
assumptions as to the number of shares in the public float. Similarly, the
listing might be in jeopardy even with the participation of the Dissidents or
other insiders. The 1999 Deluxe buyback of over 1.5 million shares was at a
price accretive to cash and cash equivalents per share and produced no
discernible increase to the Printware share price in the market. Management
is therefore very concerned about the market reaction to a Dutch auction
buyback, which must be offered in a price range that EXCEEDS current market
conditions in order to be effective, and therefore will undoubtedly be
dilutive to cash and cash equivalents per share.
<PAGE>
NASDAQ NMS also requires a minimum of 400 "round-lot" shareholders,
each holding 100 shares or more. As of the record date for the Annual
Meeting, the Company had approximately 1,000 round-lot shareholders, but only
about 300 hold over 1,000 shares. The Company does not know what the results
of a Dutch auction would be on shareholder quantities, since the price range
that would be offered is unknown, except it would likely be above then-
current market levels in order to be effective. In the professional opinion
of D. F. King, our proxy solicitor, the higher the Dutch auction price range,
the higher the number of shareholders that will participate, and the greater
the likelihood of a proration of shares that reduces the number of round-lot
shareholders to "odd-lot" holders of under 100 shares. Thus a Dutch auction
could significantly reduce the number of round-lot shareholders. Management
is concerned a large proportion of smaller shareholders will reasonably wish
to participate in a Dutch auction at above-market pricing and no selling
commissions. In addition, with the pro rata basis of Dutch auction purchases,
shareholders that end up with fewer than 100 shares do not count towards the
NASDAQ-NMS minimum. Therefore, Management is concerned the Company may not
meet NASDAQ's NMS requirement of 400 round-lot shareholders after a Dutch
auction.
The Dissidents' risky and expensive financial gambit adds absolutely
nothing to the Company's business or revenues. The maneuver will, however,
increase the Company's expenses by requiring it to pay for increased legal,
financial, accounting and other out-of-pocket expenses. To conduct a Dutch
auction, the Company estimates fees of $30,000 for legal fees, $5,000 for
independent accountants fees, $50,000 for dealer manager fees, $10,000 for
information agents, $10,000 for depository fees, $25,000 for dealer solicitor
fees, $25,000 for printing and postage costs, and $25,000 in transfer agent
fees, for a total of $180,000. These fees are not described in the
Dissidents' proposal.
5. Management's Conclusion
The Dissidents offer no concrete plan for the future of your company, or to
increase shareholders' value. They offer only a vague commitment to "perform
a comprehensive review of Printware's operations, capital structure and
management in order to commence a [undefined] course of action..." Such a
review is conducted continuously by your current Board of Directors.
Management is unaware of who would manage the Company should the Dissidents
gain control of the Board, or what, if any, impact that might have on any
continuing business relationships the Company now has with its customers
and/or suppliers.
In summary, for many reasons, we believe strongly that now is not the right
time to offer a Dutch auction, and that the interests of all Printware
shareholders will best be served by the Company's current group of
experienced Directors. Your Board plans to continue its work with Management
to pursue its carefully designed long-term business strategy--a strategy that
will deliver maximum shareholder value for all shareholders, not just short-
term gains that will benefit the Dissidents who have only owned their shares
for a short time.
We urge you to reject the Dissidents' shortsighted answer to increasing
shareholder value. We further urge you to reject their nominees and to vote
FOR your Board's current nominees by signing, dating, and returning the
enclosed WHITE WITH BLUE STRIPE proxy card.
<PAGE>
ITEM 1: ELECTION OF DIRECTORS
Printware Directors are elected to serve until the following annual
meeting. Management believes its current Board of Directors is well-
qualified, committed to Printware's success, and committed to enhancing all
shareholders' value.
The Dissidents are proposing to increase the size of the Company's Board of
Directors from five members to six members. Management recommends that
shareholders vote AGAINST this proposal. The Dissidents do not identify
and discuss why the present board size should be increased. Increasing the
board size provides the Dissidents with one more member for them to exercise
control over the Company. The Dissidents' proposal to increase the board
size is not on our proxy card because Management did not have notice of the
proposal at least 45 days before the mailing date for the 2000 Annual Meeting
materials.
Voting Procedures--How Proxies are to be Tabulated
Shares of Common Stock represented by proxies in the form solicited will be
voted in the manner directed by the holder of such shares. The persons named
as proxies may also vote on any other matter to properly come before the
Meeting. This means that if you vote on the Company's WHITE WITH BLUE STRIPE
proxy card, you will not vote on the board size proposal and the named
proxies will exercise discretion and vote against this proposal. If a signed
proxy is returned and the shareholder who gave it has elected to "withhold
authority" as to the election of directors, the shares represented by that
proxy will be considered present at the Meeting for purposes of determining a
quorum, but will not be considered to have been voted. You should also be
aware that in a contested election, such as the current situation, stock that
is held in street name by a brokerage firm or other nominee cannot be voted
by the brokerage firm or nominee without specific instructions from the
beneficial owner of the stock. Thus if you hold your stock in street name you
must give specific instructions by signing a proxy for your vote to count.
Because the Company has a new Proxy Statement, votes on the WHITE proxy
card that accompanied the earlier Proxy Statement are invalid. To vote for
Management and the current Board of Directors, you must submit a new WHITE
WITH BLUE STRIPE proxy card. Make sure your vote counts. Please send in the
WHITE WITH BLUE STRIPE proxy card.
<PAGE>
The presence, in person or by proxy, of the holders of a majority of the
Company's outstanding shares of Common Stock will constitute a quorum for the
transaction of business at the Meeting. Under Minnesota law, action by the
Company's shareholders to elect directors or take other action requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present at the Meeting, in person or by proxy, and entitled to vote on that
item of business. (However, if the shares present and entitled to vote on
that item of business would not constitute a quorum for the Meeting, then the
item must be approved by a majority of the minimum number of shares that
would constitute a quorum.) Votes cast by proxy or in person at the Meeting
will be tabulated at the Meeting to determine whether or not a quorum is
present. Shares that abstain as to a matter will be treated as shares that
are present and entitled to vote for purposes of determining the presence of
a quorum at the Meeting, but as unvoted for purposes of determining the
approval of that matter. Therefore, abstentions are effectively a vote
against a proposal. If a broker holding shares in street name indicates on a
proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered present and
entitled to vote with respect to that matter.
Our WHITE WITH BLUE STRIPE proxy card does not address increasing the size
of the board of directors. Our WHITE WITH BLUE STRIPE proxy card does,
however, give the named proxies discretion to vote on such other business as
may properly come before the meeting of shareholders. The persons named as
proxies on the Company's WHITE WITH BLUE STRIPE proxy card intend to exercise
discretion and vote against the Dissidents' proposal to increase the size of
the Company's Board. If you vote on our WHITE WITH BLUE STRIPE proxy cards
you will not have the opportunity to vote on the board size proposal. If the
proposal to expand the board is approved, shareholders voting on our WHITE
WITH BLUE STRIPE proxy card will be voting on five of the six seats, since
our slate has only five nominees.
If you hold your shares in the name of one or more brokerage firms, banks
or nominees, only they can exercise voting rights with respect to your shares
and only upon receipt of your specific instructions. So it is critical that
you promptly sign, date and mail the enclosed WHITE WITH BLUE STRIPE proxy
card in the envelope provided or contact the person responsible for your
account and give instructions to sign, date and mail the WHITE WITH BLUE
STRIPE proxy card representing your shares.
<PAGE>
The Company's nominees are listed below, all of whom are currently
directors of the Company:
Daniel A. Baker, Ph.D., age 42, has served as the Company's President and a
Director since 1993, and additionally as Chief Executive Officer since 1995.
Dr. Baker joined the Company in 1990 as Vice President of Engineering and was
later promoted to Vice President of Sales, Marketing, and Product
Development. He has over 20 years of experience in high-tech industry, and
personally holds 15 patents. His previous experience includes executive
positions at Minntech Corporation and Percom Data Corporation. Dr. Baker
holds Ph.D. and M.S. degrees in Engineering from the University of Minnesota,
a B.S. degree in Engineering from Case Western Reserve University, and an
M.B.A. degree in Finance from the University of Minnesota.
Allen L. Taylor, Ph.D., age 64, is a co-founder of the Company and has
served as a Director since the Company's incorporation in 1985. Dr. Taylor
was an employee of Minnesota Mining and Manufacturing Company ("3M") for over
33 years until his retirement in 1996. At 3M, he led the development of a
number of products for the printing industry. In 1985, Dr. Taylor was
instrumental in obtaining for the Company a license from 3M for the key
resonant-galvanometer technology used in the Company's platesetters. Dr.
Taylor holds Ph.D. and M.Sc. degrees in Physics from McGill University, and a
B.Sc. degree in Physics from the University of Alberta.
Brian D. Shiffman, age 60, has served as a Director since the Company's
incorporation in May 1985, when he was instrumental in the formation of the
Company. Mr. Shiffman has over 20 years of experience in the development and
nurturing of early-stage companies. Most recently, Mr. Shiffman served as
president of Northstar Photonics, Inc., a developer of high-speed lasers,
from 1998 to 2000. Previously, Mr. Shiffman was Business Development Director
at Minnesota Project Innovation, Inc., and Vice President at the Minnesota
Cooperation Office as a loaned executive from Control Data Corporation, where
he was employed for over 20 years. Mr. Shiffman holds a B.S. degree in
Mathematics from the University of Illinois.
Michael C. Berg, age 64, was elected a Director in 1998. Mr. Berg is
president of Graphic and Printing Specialists, a Minneapolis-based printing
design firm, and a partner in Paragon Forms, which prints optical-mark
reading forms. He previously owned Hoppe printing in Minneapolis. Mr. Berg
has served on the boards of several public companies, including Intran, NCS,
and Swenko Medical.
Victor H. Weiss, age 72, was elected a Director in 1998. Mr. Weiss is
retired chairman of Hopkins, Minnesota-based MACtac Engineered Products, a
subsidiary of MACtac, a Bemis Company. MACtac supplies pressure-sensitive
materials for graphic products, digital imaging, and printed labels for
specialized end-users. Prior to being appointed chairman of MACtac Engineered
Products, Mr. Weiss held a number of engineering and executive positions, and
has extensive experience with printed products. Mr. Weiss holds a B.S. degree
in Chemical Engineering from New York University.
Although we have no reason to believe that Dr. Baker, Dr. Taylor,
Mr. Shiffman, Mr. Berg or Mr. Weiss will be unable to serve as a Director,
if that contingency should occur, it is intended that the shares represented
by the proxies will be voted, in the absence of contrary indication, for any
substitute nominee designated by the persons named proxies.
<PAGE>
SOLICITATION OF PROXIES
As a result of the Dissidents' proxy contest, the Company has had to retain
its own solicitation and advisory firm, significantly increasing the cost of
the Annual Meeting. The Company has retained D. F. King in connection with
this solicitation, for which D. F. King will receive a fee of approximately
$50,000, together with reimbursement of its reasonable out-of-pocket
expenses, and will be indemnified against certain liabilities and expenses,
including certain liabilities under the federal securities laws. The
estimated fee for D. F. King is $45,000 to $55,000, depending on the
complexities of the solicitation. The Company estimates proxy contest legal
fees at $20,000, financial advisor fees at $5,000, proxy solicitor fees of
$50,000, independent inspector of election fees of $10,000, printing costs of
$5,000, and additional out-of-pocket expenses of $10,000 for postage, long-
distance costs, and travel, totaling $100,000.
D. F. King will solicit proxies from individuals, brokers, banks, bank
nominees, and other institutional holders. We have requested banks, brokerage
houses, and other custodians, nominees, and fiduciaries to forward all
solicitation materials to the beneficial owners of the shares they hold of
record. We will reimburse these record holders for their reasonable out-of-
pocket expenses in so doing. It is anticipated that D. F. King will employ
approximately 20 persons to solicit the Company's shareholders for the
Meeting.
For any questions you may have on proxy voting, please call D. F. KING
at (800) 290-6426.
The entire expense of soliciting proxies for the nominees listed in this
Proxy Statement will be borne by the Company. Costs of this solicitation of
proxies are currently estimated to be approximately $100,000.
A shareholder may revoke his or her proxy at any time before it is voted by
written notice addressed to the Secretary at the offices of the Company, by
filing another proxy bearing a later date with the Secretary or by appearing
at the Meeting and voting in person. Unless revoked, all properly executed
proxies will be voted. This Proxy Statement and enclosed WHITE WITH BLUE
STRIPE proxy cards are being mailed to shareholders on or about May 10, 2000.
Only shareholders of record at the close of business on February 23, 2000,
may vote at the Meeting. As of that date, there were 3,275,557 shares of
Common Stock, no par value per share, of the Company outstanding. Such shares
constitute the only class of the Company's outstanding equity securities.
Each shareholder of record is entitled to one vote for each share registered
in his or her name on each matter presented at the Meeting. Cumulative voting
is not permitted.
Shares of Common Stock represented by proxies in the form solicited will be
voted in the manner directed by the holder of such shares. The persons named
as proxies may also vote on any other matter to properly come before the
Meeting. If an executed proxy is returned and the executing shareholder has
elected to "abstain" from voting on any matter (or to "withhold authority" as
to the election of any Director), the shares represented by such proxy will
be considered present at the Meeting for purposes of determining a quorum,
but will not be considered to have been voted in favor of such matter. The
effect of abstentions is a vote against a proposal and could have the effect
of reducing the number of votes required to pass an item of business.
Because the Company has a new Proxy Statement, votes on the WHITE proxy
card that accompanied the earlier Proxy Statement are invalid. To vote for
Management and the current Board of Directors, you must submit a new WHITE
WITH BLUE STRIPE proxy card. Make sure your vote counts. Please send in the
WHITE WITH BLUE STRIPE proxy card.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 1, 2000, the number of shares
of Common Stock owned by each person who is known by the Company to
beneficially own more than five percent of the Company's outstanding Common
Stock, each Director, each person named in the Summary Compensation Table
that appears elsewhere in this Proxy Statement, and all of the Directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature of Shares Issuable Upon the
beneficial ownership Exercise of Options that
(including shares under- are Currently or Will Percentage
Name and Address of lying the options de- Become Exercisable Within of Outstanding
Beneficial Owner scribed in next column) the Next 60 Days Shares
======================= ======================== ========================= =============
<S> <C> <C> <C>
Daniel A. Baker 324,421 287,337 9.1%
c/o Printware, Inc.
1270 Eagan Industrial Road
St. Paul, MN 55305
Thomas W. Petschauer 208,985 117,489 6.1%
c/o Printware, Inc.
1270 Eagan Industrial Road
St. Paul, MN 55305
Timothy S. Murphy 25,162 20,248 *
c/o Printware, Inc.
1270 Eagan Industrial Road
St. Paul, MN 55305
Allen L. Taylor 334,374(1) 12,000 10.1%
212 Ilwaco Road
River Falls, WI 54022
Brian D. Shiffman 12,500 12,000 *
3656 Robin Lane
Minnetonka, MN 55305
Michael C. Berg 16,000 10,000 *
108 Washington Ave. North
Minneapolis, MN 55401
Victor H. Weiss 10,000 10,000 *
376 Waycliffe Drive
Wayzata, MN 55391
All Directors and 931,442(2) 469,074 24.8%
executive officers
as a group (7 persons)
Pyramid Trading Ltd. Partnership 449,200(3) 0 13.7%
440 South LaSalle Street
Chicago, IL 60605
Donald M. Hall and Dennis Hanish 251,500(4) 0 7.7%
c/o RJ Steichen & Co.
7900 Xerxes Ave. S.
Bloomington, MN 55435
</TABLE>
* Less than one percent
(1) Based on a Schedule 13G/A filed February 10, 2000 with the SEC.
(2) Voting and investment power with respect to the shares described above as
held by a Director or executive officer are held solely by the indicated
Director or executive officer and spouse.
(3) Based on a Schedule 13D filed March 31, 2000 with the SEC by a
group consisting of (i) Pyramid Trading Limited Partnership, Oakmont
Investments, LLC, the general partner of Pyramid Trading and Daniel Asher,
as Manager of Oakmont Investments and individually, as beneficial owners of
333,400 shares; (ii) Gary Kohler, as beneficial owner of 7,500 shares; and
(iii) Andrew Redleaf, as beneficial owner of 108,300 shares.
Messrs. Kohler and Redleaf are limited partners of Pyramid Trading.
(4) Based on a Schedule 13D filed February 10, 2000 with the SEC.
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
<C> <C> <C>
Daniel A. Baker, Ph.D. 42 President, Chief Executive Officer, and Director
Thomas W. Petschauer 60 Executive Vice President and Chief Financial Officer
Timothy S. Murphy 36 Vice President of Marketing and Sales
Joseph F. Dayton 53 Senior Vice President
</TABLE>
Daniel A. Baker, Ph.D. has served as the Company's President and a Director
since 1993, and additionally as Chief Executive Officer since 1995. Dr. Baker
joined the Company in 1990 as Vice President of Engineering and was later
promoted to Vice President of Sales, Marketing, and Product Development. He
has over 20 years of experience in high-tech industry, and personally holds
15 patents. His previous experience includes executive positions at Minntech
Corporation and Percom Data Corporation. Dr. Baker holds Ph.D. and M.S.
degrees in Engineering from the University of Minnesota, a B.S. degree in
Engineering from Case Western Reserve University, and an M.B.A. degree in
Finance from the University of Minnesota.
Thomas W. Petschauer has served as a Vice President of the Company since
1985 and was named Executive Vice President and Chief Financial Officer
in 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. Mr. Petschauer
is a graduate of the University of Minnesota.
Timothy S. Murphy has held increasingly responsible positions in Sales
and Marketing since joining the Company in 1987, and was promoted to Vice
President of Marketing and Sales in 1997. His prior positions included
Director of Marketing and Sales from 1994 through 1997, and Southeast
District Sales Manager, based in Atlanta, from 1992 through 1994. Prior to
1992, he held various sales, marketing, and technical positions with the
Company. Before joining Printware, Mr. Murphy was a Peace Corps volunteer in
Benin, West Africa. Mr. Murphy received a B.A. degree in Quantitative Methods
and attended graduate school at the University of St. Thomas.
Joseph F. Dayton served as Vice President of the Company beginning in
1986 and was named Senior Vice President of Manufacturing and Customer
Service in 1995. Prior to joining Printware he was employed by E. F. Johnson
Company in various program management, quality and manufacturing functions.
Mr. Dayton has a B.S. degree in Engineering from the University of Detroit.
Mr. Dayton's employment with the Company ended on January 10, 2000.
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Annual Compensation =====================
================================= Securities All Other
Name and Other Annual Underlying Compen-
Principal Position Year Salary<F1> Bonus<F2> Compensation Awards Options<F3> sation<F4>
===================== ==== ========= ======== ============ ========= ========== =========
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel A. Baker 1999 $143,000 $ 0 $0 $0 73,000 $ 982
President and Chief 1998 138,930 73,904 0 0 73,000 2,400
Executive Officer 1997 140,205 38,745 0 0 36,000 1,920
Thomas W. Petschauer 1999 116,018 0 0 0 30,000 870
Executive Vice Presi- 1998 112,769 60,080 0 0 30,000 1,784
dent and CFO 1997 114,242 31,750 0 0 15,000 1,738
Timothy S. Murphy<F5> 1999 107,630 0 0 0 14,000 759
Vice President 1998 123,563 13,290 0 0 14,000 1,853
1997 79,957 0 0 0 5,000 800
_________________________
<FN>
<F1>
Based on 26 biweekly paydays in 1999, with 26 in 1998 and 27 in 1997.
<F2>
Consists of bonuses listed according to which year's performance they were
awarded. No bonuses were paid for 1999 performance.
<F3>
Consists of incentive stock options listed according to which year's
performance they were awarded. In February 1999 incentive stock options of
73,000 shares, 30,000 shares, and 14,000 shares were issued to Dr. Baker, Mr.
Petschauer, and Mr. Murphy, respectively, as incentives for 1999 performance.
<F4>
Consists of matching contributions made under the Company's 401(k) Plan,
plus matches of $320 to Dr. Baker and $400 to Mr. Petschauer to support one-
time personal computer purchases in 1997.
<F5>
Mr. Murphy was promoted to Vice President of Marketing and Sales in May
1997. His salary included sales commissions of $32,630 in 1999, $53,571 in
1998, and $20,082 in 1997.
</FN>
</TABLE>
<PAGE>
CHANGE IN CONTROL AGREEMENTS
The Company is a party to change in control agreements ("Agreements") with
two officers, Dr. Baker and Mr. Petschauer. These Agreements provide that in
the event of a change in control of the Company (which is defined to include
an event that would be reported under Item 1 of Form 8-K under the Securities
Exchange Act of 1934) followed by a termination of the executive within one
year of the change in control, the Company must pay certain severance
payments and other benefits as described below.
Under the Agreements, termination of employment includes termination of the
executive by the Company for reasons other than for cause, or termination by
the executive for good reason. Cause includes gross neglect or gross breach
of duties to Printware. The executive can terminate employment for good
reason if the executive does not hold the office he currently holds, his
compensation is reduced, or there is a material reduction in benefits. Dr.
Baker's Agreement provides for the payment of a lump sum equal to 24 months
at 125% of Dr. Baker's monthly base salary as of the termination date, or
approximately $357,000 if the termination occurred today. The Company's
Board recently amended Dr. Baker's Agreement to provide that he may receive
the benefits of the Agreement upon termination for any reason, including
voluntary resignation within one year following a change in control.
Mr. Petschauer's Agreement provides for payment of a lump sum equal to 12
months at 125% of Mr. Petschauer's monthly base salary as of the termination
date, or approximately $145,000 if the termination occurred today. The
Company has also entered into a similar Agreement with Mr. Murphy, whose lump
sum payment in the event of termination within one year after a change in
control will equal 125% of 12 months of Mr. Murphy's monthly base salary as
of the date of the termination, or approximately $94,000, if the termination
occurred today.
The Agreements also provide that all unvested stock options shall vest in
full upon a change in control followed by termination within one year. If
the executive's employment terminated today under the Agreements, Dr. Baker
would vest in options to purchase 146,000 shares of Common Stock, Mr.
Petschauer would vest in options to purchase 60,000 shares of Common Stock,
and Mr. Murphy, if he executes an Agreement, would vest in options to
purchase 67,999 shares of Common Stock. In addition, the Agreements provide
that the terminated executive is entitled to exercise all stock purchase plan
rights and stock option plan rights within 90 days following termination.
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants Potential Realizable
=============================================== Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Price Appreciation
Underlying Granted to for Option Term
Options Employees Exercise or =====================
Granted in Fiscal Base Price Expiration
Name <F1> Year<F2> Per Share Date 5%<F3> 10%<F3>
====================== ========== ========== =========== ========== ========= =========
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Baker 73,000 45.5% $3.13 2/4/09 $143,467 $363,572
Thomas W. Petschauer 30,000 18.7 3.13 2/4/09 58,959 149,413
Timothy S. Murphy 14,000 8.7 3.13 2/4/09 27,514 69,726
_________________________
<FN>
<F1>
The options were incentive stock options granted at the fair market value on
the date of grant, February 4, 1999. All of the officers' options vest one-
third after one year, another one-third after two years, and the last one-
third after three years.
<F2>
Excludes options in the amounts of 5,000 shares exercisable at $2.66 per
share granted on April 15, 1999 to each Independent Director: Dr. Taylor,
Mr. Shiffman, Mr. Berg, and Mr. Weiss.
<F3>
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 dedicated annual rates. The stock price appreciation at
5 and 10% per year are shown for illustrative purposes only.
</FN>
</TABLE>
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Securities Underlying Value of Unexercised
Number of Unexercised In-The-Money
Options at Fiscal Options at Fiscal
Shares Year End Year End<F1>
Acquired Value ========================= =========================
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
==================== =========== ======== =========== ============= =========== =============
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Baker 0 $0 226,671 133,667 $0 $0
Thomas W. Petschauer 0 0 92,489 55,000 0 0
Joseph F. Dayton 0 0 64,390 46,334 0 0
Timothy S. Murphy 0 0 9,248 25,002 0 0
_________________________
<FN>
<F1>
The value of unexercised options at December 31, 1999, the last trading day
of 1999, is determined by multiplying the difference between the exercise
prices of the options and the closing price of the Common Stock on The NASDAQ
Stock Market on December 31, 1999 ($2.25 per share) by the number of shares
underlying the options.
</FN>
</TABLE>
<PAGE>
MEETINGS AND COMPENSATION OF DIRECTORS
There were four meetings of the Board of Directors in 1999.
The Board of Directors has an Audit Committee, a Compensation Committee,
and a Nominating Committee. The Audit Committee, which consists of Dr.
Taylor, Mr. Berg and Mr. Shiffman, reviews the reports of and engages in
direct discussions with the independent auditors. The Audit Committee held
two meetings in 1999. The Compensation Committee consists of Messrs. Berg,
Shiffman and Weiss, and has overall responsibility for compensation actions
affecting the Company's officers. The Compensation Committee held three
meetings in 1999. The Nominating Committee consists of Dr. Taylor, and
Messrs. Berg, Shiffman and Weiss. It reviews the qualifications for election
to the Board of Directors and, in consultation with the Company's management,
identifies prospective nominees. The Nominating Committee met once in 1999.
The Nominating Committee will consider nominees to the Board of Directors
recommended by shareholders. Such recommendations should be submitted by
mail, addressed to the Nominating Committee in care of the Secretary of the
Company.
During 1999 each incumbent Director attended at least 75 percent of the
meetings of the Board of Directors and committees of the Board on which he
served.
Directors who are employees of the Company do not receive compensation for
service on the Board other than their compensation as employees. Independent
Directors receive no cash compensation, with the exception of Mr. Shiffman,
who received $5,000 for his additional services as Secretary in 1999.
Under the Company's 1996 Stock Plan, each new Independent Director receives
a one-time grant of a nonqualified option to purchase 5,000 shares of Common
Stock as of the date of his or her initial election as a Director. These
options have an exercise price equal to the fair market value of the
underlying Common Stock on the date of grant, are fully exercisable upon
the date of grant, and expire on the fifth anniversary of such grant.
Each Independent Director also receives a grant of a nonqualified option
to purchase 5,000 shares of Common Stock under the 1996 Stock Plan as amended
at the fair market price on the date of each annual meeting of the
shareholders of the Company, provided that each such Director continues to
serve as an Independent Director immediately following the annual meeting.
Dr. Taylor, Mr. Shiffman, Mr. Berg, and Mr. Weiss each received such a grant
with an exercise price of $2.66 upon their reelection on April 15, 1999.
Dr. Baker was ineligible for such a grant upon his reelection since he was an
employee of the Company on that date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of three Independent Directors, none
of whom is or has been an officer of the Company. The Company has no
compensation committee interlocks--that is, no officer of the Company serves
as a Director or a compensation committee member of a company that has an
officer or former officer serving on the Company's Board of Directors or the
Compensation Committee.
<PAGE>
INDEPENDENT AUDITORS
Deloitte & Touche has acted as independent auditors of the Company since
1991. A representative of Deloitte & Touche is expected to be present at the
Meeting, will be given the opportunity to make a statement if he desires to
do so, and will be available to answer appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) under the Securities Exchange Act of 1934,
executive officers, directors and 10% shareholders ("insiders") of the
Company are required to file reports on Forms 3, 4, and 5 of their beneficial
holdings and transactions in the Company's securities. To the Company's
knowledge, all insiders of the Company made timely filings of Forms 3, 4, or
5 with respect to transactions or holdings during 1999, except that Dr.
Taylor did not make timely reports of two gifts of 6,800 and 9,400 shares to
his daughter on January 7 and December 31, 1999.
ABSENCE OF DISSENTERS' RIGHTS
The Company's shareholders do not have dissenters' rights in connection
with the Dissidents' proposals.
PARTICIPANTS IN THE SOLICITATION
Under applicable SEC regulations, each member of the Company's Board of
Directors, certain executive officers and other employees of the Printware
and certain other persons may be deemed to be a "participant" as defined in
Schedule 14A promulgated under the Securities Exchange Act of 1934, as
amended, in the Company's solicitation of proxies for the Annual Meeting.
The principal occupations and business addresses of each participant are set
forth on Annex A. Information about present ownership of securities of
certain executive officers of Printware is provided in this Proxy Statement
and the present ownership of Printware securities by other participants, if
any, is listed on Annex A.
SHAREHOLDER PROPOSALS
The rules of the Securities and Exchange Commission permit shareholders of
a company, after timely notice to the company, to present proposals for
shareholder action in the company's proxy statement where such proposals are
consistent with applicable law, pertain to matters appropriate for
shareholder action and are not properly omitted by company action in
accordance with the proxy rules. The Company's 2001 Annual Meeting of
Shareholders is expected to be held on or about April 19, 2001, and proxy
materials in connection with that meeting are expected to be mailed and filed
with the SEC on or about March 13, 2001. The deadline for submission of
shareholder proposals pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934, as amended, for inclusion in the Company's proxy statement for
its 2001 Annual Meeting of Shareholders is November 8, 2000. Additionally, if
the Company receives notice of a shareholder proposal after January 28, 2001,
such proposal will be considered untimely pursuant to Rules 14a-4 and
14a-5(e) and the persons named in proxies solicited by the Board of Directors
of the Company for its 2001 Annual Meeting of Shareholders may exercise
discretionary voting power with respect to such proposal.
<PAGE>
OTHER BUSINESS
The Dissidents are proposing to increase the size of the Company's Board of
Directors from five members to six members. Management recommends that
shareholders vote AGAINST this proposal. The Dissidents do not identify
and discuss why the present board size should be increased. Increasing the
board size provides the Dissidents with one more member for them to exercise
control over the Company. Management recommends a vote AGAINST the
Dissidents' proposal to increase the size of the Company's Board.
Our WHITE WITH BLUE STRIPE proxy card does not address increasing the size
of the Board of Directors. Our WHITE WITH BLUE STRIPE proxy card does,
however, give the named proxies discretion to vote on such other business as
may properly come before the meeting of shareholders. For the reasons
described above, the persons names as proxies on the Company's WHITE WITH
BLUE STRIPE proxy card intend to exercise discretion and vote against the
Dissidents' proposal to increase the size of the Company's Board.
A majority of the shares of Common Stock entitled to vote and present in
person or by proxy at the Meeting voting in favor of increasing the size of
the Board of Directors will be necessary for this proposal to pass, provided
that such majority was a majority of the vote necessary for a quorum.
If an executed proxy is returned and the executing shareholder has elected
to "abstain" from voting on the Dissidents' proposal to increase the Board
size, the shares represented by such proxy will be considered present at the
Meeting for purposes of determining a quorum, but will not be considered to
have been voted in favor of such matter.
If the shareholders vote to approve the Dissidents' proposal to increase
the Board of Directors from five members to six members, Management believes
it entirely likely the Dissident slate of six nominees would also be elected.
The WHITE WITH BLUE STRIPE proxy card does not contain a sixth nominee to
cover this contingency, as Management believes it is unnecessary and
therefore this lack of a sixth nominee does not provide the opportunity for
shareholder disenfranchisement from only voting for five members if six are
approved.
The Board of Directors does not intend to present any business at the
Meeting other than the matters specifically set forth in this Proxy
Statement, and knows only of the Dissidents' proposal to increase the number
of directors to six to as other business scheduled to come before the
Meeting. If any other matters are brought before the Meeting, the persons
named as proxies will vote on such matters in accordance with their judgment
of the best interests of the Company.
The Company's Annual Report to Shareholders for the year ended December 31,
1999 was previously mailed to shareholders with a Proxy Statement dated
March 8, 2000 and a WHITE proxy card. Shareholders may receive, without
charge, a copy of the Company's Annual Report on Form 10-K, including
financial statements and schedules thereto, as filed with the Securities and
Exchange Commission, by writing to: Thomas W. Petschauer, Printware, Inc.,
1270 Eagan Industrial Road, St. Paul, MN 55121, or by accessing the Company's
Internet Web site at: http://PrintwareInc.com.
By order of the Board of Directors:
/s/Brian D. Shiffman
Brian D. Shiffman
Secretary
May 10, 2000
<PAGE>
ANNEX A
INFORMATION CONCERNING THE DIRECTORS AND CERTAIN EXECUTIVE OFFICERS OF
PRINTWARE AND OTHER PARTICIPANTS WHO MAY ALSO SOLICIT PROXIES.
In connection with the Printware's solicitation of proxies for its annual
meeting of shareholders, certain other persons may be deemed to be
participants in the solicitation.
The following table sets forth the name, principal business address and the
present employment or other principal occupation, and the name, principal
business and address of any corporation or other organization in which such
employment is carried on, of the Directors and certain executive officers and
employees of Printware, and other representatives of Printware who may be
deemed to be participants in the solicitation.
DIRECTORS OF PRINTWARE
The principal occupations of Printware's Directors who are deemed
participants in the solicitation are set forth in the section entitled "Item
1 Election of Directors", preceding in this Proxy Statement. The principal
business addresses for the Directors are listed under the section entitled
"Security Ownership of Certain Beneficial Owners and Management" preceding in
this Proxy Statement.
EXECUTIVE OFFICERS OF PRINTWARE
The principal occupations of certain executive officers of Printware who
are deemed participants in the solicitation are set forth below.
Name Occupation
Daniel A. Baker, Ph.D. President and Chief Executive Officer
Thomas W. Petschauer Executive Vice President and Chief Financial Officer
Timothy S. Murphy Vice President of Marketing and Sales
PROXY SOLICITOR
The Company has retained the services of D. F. King, located at 77 Water
Street, New York, N. Y. 10005 to represent the Company in the solicitation
of proxies.
INFORMATION REGARDING OWNERSHIP OF PRINTWARE SECURITIES BY PARTICIPANTS
None of the participants owns any shares of Printware of record but not
beneficially. The number of shares of Common Stock held by Directors and
certain executive officers is set forth under the section entitled "Security
Ownership of Certain Beneficial Owners and Management" preceding in this
Proxy Statement.
<PAGE>
INFORMATION REGARDING TRANSACTIONS IN PRINTWARE SECURITIES BY PARTICIPANTS
The following table sets forth purchases and sales of Printware securities
by the participants listed below during the two years from April 1, 1998 to
May 5, 2000. Unless otherwise indicated all transactions are in the
public market.
Transaction Number of
Directors: Date Shares Acquired or Sold
====================== =========== ========= ================
Daniel A. Baker, Ph.D. 6/30/98 1,371 Acquired (1)
9/30/98 1,529 Acquired (1)
12/31/98 1,519 Acquired (1)
3/31/99 1,497 Acquired (1)
6/30/99 1,907 Acquired (1)
9/30/99 1,679 Acquired (1)
1/03/00 2,013 Acquired (1)
3/31/00 1,774 Acquired (1)
2/04/99 73,000 Acquired (2)
2/10/00 73,000 Acquired (2)
Michael C. Berg 10/08/98 2,000 Acquired (3)
10/15/98 2,000 Acquired (3)
10/26/98 2,000 Acquired (3)
10/22/98 5,000 Acquired (2)
4/15/99 5,000 Acquired (2)
Brian D. Shiffman 4/16/98 5,000 Acquired (2)
4/15/99 5,000 Acquired (2)
Allen L. Taylor, Ph.D. 4/16/98 5,000 Acquired (2)
4/15/99 5,000 Acquired (2)
1/07/99 6,800 Gift (4)
12/31/99 9,400 Gift (4)
Victor H. Weiss 10/22/98 5,000 Acquired (2)
4/15/99 5,000 Acquired (2)
Executive Officers:
======================
Thomas W. Petschauer 6/30/98 1,114 Acquired (1)
9/30/98 1,243 Acquired (1)
12/31/98 1,244 Acquired (1)
3/31/99 1,215 Acquired (1)
6/30/99 1,546 Acquired (1)
9/30/99 1,362 Acquired (1)
1/03/00 1,632 Acquired (1)
3/31/00 1,439 Acquired (1)
2/04/99 30,000 Acquired (2)
2/10/00 30,000 Acquired (2)
Timothy S. Murphy 6/30/98 483 Acquired (1)
9/30/98 770 Acquired (1)
12/31/98 771 Acquired (1)
3/31/99 706 Acquired (1)
1/03/00 549 Acquired (1)
3/31/00 403 Acquired (1)
2/04/99 14,000 Acquired (2)
2/10/00 54,000 Acquired (2)
__________________________
(1) Purchased through Employee Stock Purchase Plan
(2) Stock option grant
(3) Open market purchase
(4) Gift to daughter
<PAGE>
MISCELLANEOUS INFORMATION CONCERNING PARTICIPANTS
Except as described in this Annex A or in the amended and restated
Printware proxy statement, none of the persons who may be deemed
"participants" as defined in Schedule 14A promulgated under the Exchange Act
nor any of their respective affiliates or associates (together, the
"Participant Affiliates"), (1) directly or indirectly beneficially owns any
shares of Printware Common Stock or any securities of any subsidiary of
Printware or (2) has had any relationship with Printware in any capacity
other than as a stockholder, employee, officer, or director. Furthermore,
except as described in this Annex A or in the amended and restated proxy
statement, no Participant Affiliate is either a party to any transaction or
series of transactions since April, 1998, or has knowledge of any
currently proposed transaction or series of transactions, (1) to which
Printware or any of its subsidiaries was or is to be a party, (2) in which
the amount involved exceeds $60,000, and (3) in which any Participant
Affiliate had, or will have, a direct or indirect material interest.
Except for the change in control agreements ("Agreements") described in the
amended and restated proxy statement as otherwise described therein or in
Annex A, no Participant Affiliate has entered into any agreement or
understanding with any person respecting any future employment by Printware,
its affiliates, or any future transactions to which Printware or any of its
affiliates will or may be a party. Except as described in this Annex A, in
the amended and restated Printware proxy statement, or in Annex A thereto,
there are no contracts, arrangements, or understandings by any Participant
Affiliate within the past year with any person with respect to Printware's
securities.
In the event that the Dissidents are successful in its efforts to replace
the Printware Board, a change in control will be deemed to have occurred
under the terms of Printware's Agreements with Messrs. Baker, Petschauer, and
Murphy, and these participants in this solicitation will become eligible for
severance benefits in the event they leave the employ of the Company
following such change in control. See the section of this amended and
restated proxy statement entitled "Change In Control Agreements" for a
further description of these severance benefits.
<PAGE>
IMPORTANT
The Company is sending this revised proxy statement and WHITE WITH BLUE
STRIPE proxy card because a committee of dissident shareholders (the
"Dissidents") launched a proxy contest in connection with the Annual Meeting,
and the Company was late in electronically filing with the U. S. Securities
and Exchange Commission ("SEC") its original proxy statement dated March 8,
2000 which did not discuss the potential for a proxy contest. The SEC asked
the Company to produce a revised proxy statement due to SEC concerns that the
original proxy materials were not materially complete with regard to
discussion of the potential for a proxy contest. As a result, the original
WHITE proxy cards are invalid.
Your vote is important. Please take a moment to sign, date and promptly
mail your WHITE WITH BLUE STRIPE proxy card in the postage paid envelope
provided. Please be certain that your latest dated proxy card is a WHITE WITH
BLUE STRIPE proxy card voting "FOR" Printware's Directors. Remember, do not
return any GREEN proxy card sent to you by the Shareholders' Committee, not
even as a vote of protest.
Because the Company has a new Proxy Statement, votes on the WHITE proxy
card that accompanied the earlier Proxy Statement are invalid. To ensure
your vote counts, you must submit a new WHITE WITH BLUE STRIPE proxy card.
If you hold your shares in the name of one or more brokerage firms, banks
or nominees, only they can exercise voting rights with respect to your shares
and only upon receipt of your specific instructions. So it is critical that
you promptly sign, date and mail the enclosed WHITE WITH BLUE STRIPE proxy
card in the envelope provided or contact the person responsible for your
account and give instructions to sign, date and mail the WHITE WITH BLUE
STRIPE proxy card representing your shares.
If you have any questions or need further assistance in voting, please call:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
(212) 269-5550 (Collect)
Call Toll-Free -- 1-(800) 290-6426
<PAGE>
PRINTWARE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 7, 2000
The undersigned hereby appoints Daniel A. Baker, Ph.D. or Thomas W.
Petschauer, or either of them, as proxies with full powers of substitution,
to vote all shares of common stock of the Company which the undersigned is
entitled to vote at the Annual Meeting of Shareholders (the "Meeting")
originally convened April 13, 2000 and subsequently adjourned to be held
Wednesday, June 7, 2000, at 3:30 p.m. Central Daylight Time, at the corporate
offices of Printware, Inc., at 1270 Eagan Industrial Road, St. Paul, MN 55121,
and at any and all adjournments thereof, hereby revoking all former proxies.
1. The election of directors to serve until the 2001 annual meeting:
/ / FOR all nominees listed below (except as indicated below)
/ / WITHHOLD authority
Daniel A. Baker, Ph.D., Allen L. Taylor, Ph.D., Brian D. Shiffman,
Michael C. Berg, and Victor H. Weiss.
INSTRUCTIONS: To withhold your vote for any individual nominee, strike a
line through the nominee's name.
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON ITEM 1 IN ACCORDANCE
WITH THE SPECIFICATIONS MADE, AND "FOR" SUCH ITEM IF THERE IS NO
SPECIFICATION.
Please date and sign exactly as your name appears on this form of proxy.
When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each shareholder
should sign.
Dated: __________________________, 2000
/ / Please check here if you plan to attend the Meeting.
____________________________________
SIGNATURE OF SHAREHOLDER
____________________________________
SIGNATURE OF SHAREHOLDER (if held jointly)
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
