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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [ ]
Filed by a party other than the registrant [X]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[ ] Definitive proxy statement.
[X] Definitive additional materials.
[ ] Soliciting material under Rule 14a-12.
Printware, Inc.
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(Name of Registrant as Specified in Its Charter)
PYRAMID TRADING LIMITED PARTNERSHIP
OAKMONT INVESTMENTS, LLC
DANIEL B. ASHER
GARY S. KOHLER
ANDREW J. REDLEAF
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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THE SHAREHOLDERS' COMMITTEE TO IMPROVE
PRINTWARE SHAREHOLDER VALUE
(THE "COMMITTEE")
3033 EXCELSIOR BOULEVARD
SUITE 300
MINNEAPOLIS, MN 55416
612-253-6027
May 10, 2000
Dear Fellow Printware Shareholder:
By now you should have received our proxy materials seeking to replace the
current members of the board of directors of Printware, Inc. ("Printware" or the
"Company") with the Committee's nominees at the Annual Meeting of Shareholders
that has been rescheduled to June 7, 2000. The Committee's slate of six new
directors is committed to reversing the dramatic decline in shareholder value
that has occurred in your company under the direction of the current board of
directors. THE REASON FOR OUR SOLICITATION IS SIMPLE -- WE BELIEVE THAT NEW
DIRECTION IS NEEDED AT PRINTWARE AND NEEDED NOW.
The Company has filed a definitive proxy statement and will also be seeking your
vote and support. The Company's filing suggests that because we are "recent
shareholders" of Printware stock, our interests are different from the interests
of other shareholders. We want to assure you that although we are indeed
"recent" Printware shareholders, our interests are the same as every other
shareholder, even long suffering ones. We want you to know that we are long-term
investors in Printware. Although the Company may try to convince you otherwise,
we assure you we are NOT interested in short-term gains. Please look at the
biographies, included in our proxy material, of our nominees. If our interest
was in seeking a quick profit in the stock, we would not need -- nor would we
receive -- the help of such a prominent group of nominees.
HOW LONG CAN WE AFFORD TO WAIT?
During the strongest bull market in history, the shareholders of Printware have
watched helplessly as Printware's stock price eroded from over $6 per share in
1996 to as low as $2 1/4 on 12/31/99. During the same period, sales declined
from $7.4 million in 1996 to $4.6 million in 1999.
MONTHLY STOCK PRICE (HIGH, LOW, CLOSE)
[BAR GRAPH]
<TABLE>
<CAPTION>
HIGH LOW CLOSE
---- --- -----
<S> <C> <C> <C>
7/1/96 5.25 5 5.25
5.5 5 5.5
6.125 5.5 6.0625
6.0625 5.625 5.625
11/1/96 5.625 5 5
5 4.5 4.5
5.75 4.5 5.5
5.5 4.25 4.25
3/1/97 4.5 4 4.1875
4.25 3.875 3.875
4.125 3.75 3.75
3.875 3.125 3.125
7/1/97 3.6875 3.25 3.6875
4.5 3.5 4.5
4.875 4.25 4.25
4.5 4.2969 4.375
11/1/97 4.25 4.125 4.125
4.125 3.25 3.25
3.25 3.1875 3.25
3.3125 3.125 3.1875
3/0/98 3.75 3.1875 3.5
3.7031 3.5 3.7031
3.8125 3.4375 3.4375
3.375 2.75 2.75
7/1/98 3.25 2.875 2.875
3 2.75 2.875
3.0625 2.875 2.875
2.9375 2.8125 2.9375
11/1/98 3.0625 2.875 2.875
3 2.875 2.9375
3.25 2.9375 3.25
3.25 3 3.1562
3/1/99 3.125 2.5 2.5
2.875 2.5 2.5
2.625 2.2812 2.2812
2.375 2.2812 2.375
7/1/99 2.5 2.4062 2.5
2.5 2.3125 2.3125
2.3125 2.3125 2.3125
2.3125 2.0312 2.0312
11/1/99 2.1875 2.0312 2.1875
2.25 2.1562 2.25
2.6875 2.1875 2.5
3.5 2.375 3.375
3/1/00 3.5 2.8125 3.125
3.1875 2.4375 2.4375
</TABLE>
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While shareholders are suffering from this poor performance, management is
profiting. Every year management awards themselves large stock option packages
at the low market price, far below what we think is the intrinsic value of
Printware. According to Annex A of management's proxy materials, in February of
this year, after the most abysmal year in their history as a public company,
after generating $1.0 million of operating losses, the incumbent board awarded
management options on almost 5 percent of the Company. THE CURRENT BOARD HAS
AWARDED CEO DANIEL BAKER 73,000 OPTIONS EVERY YEAR FOR THREE YEARS APPARENTLY
WITHOUT REGARD TO THE COMPANY'S PERFORMANCE. We think this was not deserved, not
effective oversight, irresponsible, and unfair to shareholders. Our view is that
PRINTWARE ANNUAL REVENUES
[BAR GRAPH]
<TABLE>
<S> <C>
1995 8.39
1996 7.42
1997 6.99
1998 7
1999 4.62
</TABLE>
management must have incentives to perform, but should be rewarded for success,
and the incumbent board must be held accountable for this unfair situation.
OUR MOTIVES
Since our first meeting with Printware late last year, the Company has regularly
questioned our motives, and continues to call into question our motives in their
recent proxy filings. Let us be very clear about our motives. We are Printware
shareholders because we want to make money. We want to make money for all
shareholders, and do so fairly, honestly, and in a manner that will protect our
hard-earned reputations in the financial community, and the reputations of our
board nominees. We believe strongly that there is indeed an opportunity for
Printware shareholders to make money, but not with the current board of
directors and the current management strategies. We think it will take time for
us to make money on our investment in Printware and we intend to be shareholders
for as long as it takes to realize full value for our investment. We hope you, a
fellow shareholder, have a similar motive for owning Printware shares.
SOMETHING IS BROKEN AT PRINTWARE
We don't think Printware's current board has any idea what to do to fix the
Company. In fact, they apparently don't even think that there is anything wrong
at the Company. We strongly disagree. We point to the Company's lack of
meaningful operating profits. WE BELIEVE THE STEADY DECLINE IN OPERATING PROFITS
IS A CLEAR INDICATION THAT THE COMPANY IS NOT WINNING IN ITS ATTEMPT TO BE A
LEADER IN THE COMPUTER-TO-PLATE INDUSTRY.
Why are we trying to take control of Printware's board? We think that if we
don't change the Company's course now, they may systematically run through the
$7.5 million cash and available-for-sale securities on the balance sheet without
succeeding in building a profitable computer-to-plate business. We also question
the Company's strategy of offering below market leases to customers to entice
them to buy their product. We were led by management to believe that Printware's
products were competitive in the market place. Now
PRINTWARE OPERATING INCOME
[BAR GRAPH]
<TABLE>
<CAPTION>
MILLIONS ($)
------------
<S> <C>
1995 1.55
1996 1.29
1997 0.967
1998 0.567
1999 -1.05
</TABLE>
management is saying that to sell their plate setters they must bundle them with
cheap financing and supply contracts. We are afraid that either the Company's
products are not as attractive in the market place as we have been led to
believe, or management has no idea how to manage sales and marketing. We want
Printware to develop an effective and profitable way of selling their products.
We want to emphasize concern regarding Printware's leasing strategies. The
Company has been offering below market leases of its equipment to customers
since 1997. Leasing grew considerably in 1999, and as of
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December 31, 1999, the Company had lease receivables outstanding of $2.47
million. Management has stated to us that they consider offering lease financing
to customers attractive as an alternative to investing in government securities
because the nominal interest rates is 7.5% on leases, higher than the 6% or so
they receive on government securities. Major leasing companies, including GE,
have told them that the market rate for lease financing is around 12%. We think
that GE has a lower cost of capital and is better at analyzing lease credit risk
than Printware's management. We consider it extremely risky to undercut GE by a
full 4 1/2 percentage points, and we think it is unlikely that this course of
action will improve shareholder value.
Further, we understand that the equipment leasing business is primarily a spread
business -- that is, leasing companies borrow money at a particular interest
rate, purchase equipment and lease it out at a higher imputed interest rate,
earning the spread between the two rates. If a leasing company were to only use
its equity to make leases, its return on equity would be limited by the rate of
interest imputed in its leases. This would typically be unacceptable to leasing
companies, as their investors would normally demand a return on equity that
would exceed the imputed interest rate that the lease customers would be willing
to pay. Printware's management prefers to invest its shareholder equity in its
leases rather than borrow money and earn a spread. This means that Printware's
long term return on equity will be greatly hindered by the high percentage of
its assets that are invested in below market leases. We will thoroughly analyze
Printware's lease pricing and valuation practices upon our election to the
board.
Current management states in its proxy filing: "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%." We take
issue with this statement. If their concept of cost of capital were taken to its
logical conclusion, they could drive down their cost of capital to ZERO simply
by keeping their cash in a safe deposit box. We subscribe to the widely accepted
definition that the cost of capital is the cost that investors demand on their
money in order to invest in an enterprise. Printware shareholders determine
Printware's cost of capital every day by establishing the price at which they
are willing to invest in Printware's stock. When a company's stock trades at a
very high valuation, the company's cost of capital is very low. When a company's
stock trades at a very low valuation -- such as when Printware's shares trade at
a discount to book value, a company has a very high cost of capital. When a
company's stock trades at a discount to its cash, as Printware's shares were
trading when we proposed to management that they buy back some shares, the
company's cost of capital was astronomical. LET US BE VERY CLEAR ABOUT OUR VIEW:
SHAREHOLDERS DID NOT GIVE MONEY TO PRINTWARE'S MANAGEMENT FOR ANY PURPOSE OTHER
THAN TO GENERATE SIGNIFICANT RETURNS. WE THINK THAT ALL MONEY GIVEN TO PRINTWARE
BY ITS SHAREHOLDERS IS GIVEN UNDER THE EXPECTATION THAT IT WILL EARN THE HIGHEST
POSSIBLE RATE OF RETURN. IF MANAGEMENT WANTS TO GENERATE LOW RETURNS WITH THAT
MONEY, OR EVEN WORSE, WANTS TO RISK LOSING IT IN THE HOPE OF MAKING A LOW
RETURN, THEN SHAREHOLDERS CAN DO SOMETHING ABOUT THAT. WE WILL FIND A WAY TO
RETURN MONEY TO SHAREHOLDERS, IF WE CONTROL THE BOARD, BEFORE WE WILL ALLOW
MANAGEMENT TO SQUANDER IT IN LEASE PROGRAMS FAR BELOW THE MARKET RATE.
OUR PROPOSAL
Our nominees bring to the Company a new outlook. We combine significant
financial experience with years of business experience in running and managing
both public and private companies. Our nominees are committed to revitalizing
Printware and making it a dynamic and growing company. Upon gaining control of
the Board, we will consider strategies to enhance shareholder value, such as
seeking strategic partners to improve distribution, actions to improve
profitability, the redirection of management resources, and should it be
necessary, we will consider a sale or merger, a sale of assets or any other
business combination. Today we do not have all the answers because we have
limited information. We will, upon our election to Printware's board, have the
information we will need to find those answers. Upon our election, we will
thoroughly analyze all aspects of Printware's operations, and we ask you to
trust us to take the best available actions for the benefit of all shareholders.
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OUR PROMISE TO SHAREHOLDERS
We are not attempting to benefit ourselves at the expense of any other
shareholders. Rather, we are seeking to create value for every shareholder.
- We will not undertake wholesale lay-offs for the sake of cutting costs.
Our objective is to fire the board of directors, not the workers.
- We will not increase the pay and benefits of officers or reward them with
undeserved stock options and "golden parachutes" until such time as they
have demonstrated success in creating shareholder value.
- We will conserve the Company's assets as we attempt to find the right
path for the Company to take.
- We will report our findings to shareholders, whether the news is good or
bad, and keep shareholders informed.
PARTICIPATE IN THE COMPANY'S REVITALIZATION
A fundamental tenet of corporate democracy is management and board
accountability. The incumbent directors of a public company do not have the
automatic right to continue to run the company in the face of eroding financial
performance. The directors must answer to you, the owners of the company. This
is why companies hold a shareholder meeting every year. This is the year for
Printware's shareholders to hold the incumbent board accountable.
It is a rare case when an outside shareholder has the financial ability,
courage, and persistence to challenge an incumbent board of directors. This year
you have the opportunity to hold Printware's directors accountable for the
dismal performance and to support a new dynamic group to lead Printware.
If you don't act now, you have no guarantee that in the years to come there will
be another shareholder group willing to challenge the incumbent board if they
continue to perform poorly. We urge you to use your democratic right as a
shareholder to breathe new life into the Company and bring new leadership to
this board of directors. Please vote your GREEN proxy card today.
Sincerely,
/s/ Gary S. Kohler
Gary S. Kohler
/s/ Andrew J. Redleaf
Andrew J. Redleaf
YOUR VOTE IS EXTREMELY IMPORTANT
1. If you have already voted for the Committee's Nominees, we thank you. If
you have not voted or have not voted for the Committee's Nominees, we recommend
that you read our proxy material carefully.
2. Please MARK, SIGN, DATE and MAIL your GREEN proxy card in the enclosed
postage-paid envelope. If you wish to vote for our Nominees, you must submit the
enclosed GREEN proxy card and must NOT submit management's proxy card.
3. IF you have already voted for the current Board, you have every legal
right to change your mind and vote FOR our Nominees on the GREEN proxy card.
Only your latest dated proxy card will count.
4. If your shares are held for you by a bank, brokerage firm or other
nominee, only your bank, broker or nominee can vote your shares and only after
receiving your instructions. Please call your bank, broker or nominee and
instruct your representative to vote FOR our Nominees on the GREEN proxy card,
or sign and return the GREEN proxy card in the return envelope provided by your
broker.
5. Time is short. PLEASE VOTE TODAY!
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