SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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/X/ Soliciting Material Pursuant to Section 240.14a-12
PRINTWARE, INC.
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(Name of Registrant as Specified In Its Charter)
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<PAGE>
Filed by the Company
Pursuant to Section 240.14a-12 of
the Securities Exchange Act of 1934
Subject Company: PRINTWARE, INC.
Commission File Number: 000-20729
May 17, 2000
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Printware, Inc. to be held on June 7, 2000. The meeting will be held at
the Company's headquarters at 1270 Eagan Industrial Road, St. Paul, Minnesota
at 3:30 p.m. Your Board of Directors and Management look forward to greeting
personally those shareholders able to attend.
PROXY CONTEST
This year's annual meeting is particularly important. A small group of
stock traders, arbitrageurs and the entities they control, calling themselves
the Shareholders' Committee to Improve Printware Shareholder Value (the
"Dissidents"), is waging a costly and disruptive proxy fight to take control
of your Company. The only specific proposal advanced by the Dissidents is to
force the Company to repurchase its shares by implementing a complex process
known as a "Dutch auction."
The cost of any Dutch auction and the shares purchased as a result would
be borne by the Company and the proceeds paid out of working capital, thereby
greatly reducing the Company's current level of capitalization. Your Board of
Directors remains committed to maximizing long-term value for ALL Printware
shareholders and is pursuing a course of action to best achieve that
objective. However, your Board feels strongly that a Dutch auction at this
time is ill advised. It will not benefit long-term shareholders, only
arbitrageurs, and it will not improve the Company's business. It could also
jeopardize the Company's operations and the Company's NASDAQ listing status.
YOUR BOARD'S PLAN IS WORKING
Our recently announced first-quarter 2000 revenues were up 37% from the
first quarter of 1999. Net income improved to 3 cents per share in the first
quarter of 2000, versus a 2 cent per share loss in the same period a year
ago.
This was the Company's largest quarterly pretax profit since 1998. We
also have built a broad base of technology, valuable distribution agreements
and a blue-chip customer list with after-market potential and thousands of
potential Internet desktops. We significantly increased our backlog going
into the second quarter of this year.
Most of the revenue declines that Printware experienced in 1998 and 1999
can be attributed to the loss of Deluxe Corporation as a customer. A
lucrative supply contract with Deluxe began in 1995, but Deluxe phased out
its purchases in 1998 when it shut down most of its plants. That one event
cost Printware over half of its 1997 revenue. Other companies might have been
devastated, but our prudent management plan allowed us to weather the storm
and rebuild.
Non-Deluxe revenues have grown 58% from 1997 to 1999. We have
repositioned ourselves in Internet printing, and in late 1999 we instituted a
new business model which makes it easier for customers to acquire Printware
equipment and builds after-market revenues with supplies and Internet clicks.
In the first quarter, we saw that new business model begin to pay off.
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REASONS TO REJECT THE DISSIDENTS
* THE DISSIDENTS HAVE NO CONCRETE PLAN
* THE DISSIDENTS' ONE RECOMMENDATION IS DEAD WRONG
* THE DISSIDENTS HAVE LIMITED INDUSTRY EXPERIENCE
THE DISSIDENTS HAVE NO CONCRETE PLAN
We have a bold plan for Printware--to revolutionize the printing industry
by automating the flow of information to the printing plate directly from the
Internet. If the Dissidents have a new or innovative business plan, it is not
apparent in the many pages of documents they have filed or their many
discussions, meetings, and correspondence with Management and Directors.
Beyond vague platitudes about "increasing shareholders' value," and a "review
of Printware's operations," your Management and Directors can discern no
plan, no direction, no alternative vision to evaluate. THEIR MOST RECENT
FILING STATES "TODAY WE DO NOT HAVE ALL THE ANSWERS..." The group also states
they intend to seek reimbursement for their expenses. To be blunt, our
concern is that the only shareholders' value they want to increase is their
own.
THE DISSIDENTS' ONE RECOMMENDATION IS DEAD WRONG
Printware made significant stock buybacks in 1998 and 1999. We certainly
are not against stock buybacks, either through a Dutch auction process or a
standard tender offer. But your Board demands that buybacks leave the Company
with adequate capital resources to pursue our vision and to continue our
current NASDAQ listing status. The Dissidents have not proposed anything that
meets this standard.
YOUR BOARD BELIEVES THE DISSIDENTS ARE DEAD WRONG:
PRINTWARE IS NOT "OVERCAPITALIZED"
It is difficult to see how a balance sheet can be TOO strong. We are
fortunate to have such a strong balance sheet. It allowed us to invest nearly
$5 million last year to build a direct sales force and invest in R&D, most
notably in Internet printing. We financed well over $1 million in equipment
leases which earn interest income, and facilitate equipment and after-market
sales. We also bought raw materials in higher quantities to take advantage of
price breaks. We were able to buy back Printware stock held by Deluxe for $3
million, at a significant discount to the market price. In the Internet space
where we now compete, companies far better capitalized than Printware are
criticized for being UNDER-capitalized. Our Internet printing competition,
Collabria, Inc., iPrint.com, and ImageX.com all have tens of millions of
dollars of cash reserves, yet all are increasing, not decreasing, their
equity.
YOUR BOARD BELIEVES THE DISSIDENTS ARE DEAD WRONG:
PRINTWARE COULD BE DELISTED
As the Dissidents have admitted in their own filings, the decrease in
capitalization resulting from a Dutch auction or other large buyback could
cause the Company to be de-listed from the NASDAQ National Market. A
delisting of the Company's stock would be likely to reduce the liquidity of
your investment, decrease Printware's value in any potential merger or
acquisition transaction, prevent most institutional investors from owning the
Company's stock, and limit the Company's access to capital markets in the
future.
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THE DISSIDENTS HAVE LIMITED INDUSTRY EXPERIENCE
With one exception, there is nothing in the published biographies of
the nominees proposed by the Dissidents which indicated experience in the
printing business. The Dissidents' leader, Gary Kohler, has had five
investment jobs in the past three years. One constant is his chairmanship of
ChoiceTel Communications, Inc., a company which is losing money and whose
stock is trading at considerably less than its 1997 IPO price.
Your current Board of Directors, all standing for re-election at this
year's annual meeting, have extensive high-tech printing and engineering
backgrounds and hold a combined 45 patents. This technical ability coupled
with sound, prudent finance and business experience is leading Printware to a
future in which all shareholders will benefit.
YOUR BOARD'S STRONG RECORD ON CORPORATE GOVERNANCE
Your Management and Board listen to shareholders. We trust those of you
who have called or visited have found us to be quite accessible. The
Dissidents would have you believe we have ignored them--quite the contrary.
They have had exceptional access and many lengthy discussions with the
President and Chief Executive Officer, Dr. Baker, as well as with other
senior managers and Directors. The Dissidents have provided little in the way
of constructive suggestions or even an alternate vision, just a ruthless
pursuit of Printware's cash.
Your Board and Management are keenly interested in maximizing
shareholders' value. Management is incentivized to increase shareholders'
value and works hard at it. Management salaries are in line with comparable
companies. Officer salaries were frozen this year, and no bonuses were paid.
Management is granted stock options as an incentive to increase shareholders'
value. Most exercisable options held by Management are over $5 per share, and
as reported in our annual report, few have any value at the current stock
price. Except for nominal compensation paid to the Secretary, our Directors
receive only stock options and no cash compensation. We have continued to
pursue a number of avenues to increase shareholders' value, including stock
buybacks, merger and acquisition activities, and proactive investor
relations. Printware does not have a staggered board or any "poison pills,"
which are typical anti-takeover, anti-shareholder provisions. Our interests
are your interests--increased shareholder value.
In summary, we urge you to reject the Dissidents and support your
Board's strategy, which is starting to pay off as evidenced by our strong
first quarter. Please 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. If you have any questions, please call our proxy
solicitor, D.F. King & Co., Inc. at (800) 290-6426.
Thank-you for your continued interest and support.
Sincerely yours,
/s/Daniel A. Baker
/s/Allen L. Taylor
/s/Brian D. Shiffman
/s/Michael C. Berg
/s/Victor H. Weiss
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IMPORTANT
Your vote is important. Please take a moment to sign, date and promptly
mail your new 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 your shares are registered in the name of a broker, only your broker
can execute a proxy and vote your shares and only after receiving your
specific instructions. Please mail your WHITE WITH BLUE STRIPE proxy card at
once in the envelope provided. 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
Statements made in this release concerning the Company's or management's
intentions, expectations, or predictions about future results or events are
"forward-looking statements" within the meaning of the Private Securities
Reform Act of 1995. Such statements are necessarily subject to risks and
uncertainties that could cause actual results to vary from stated
expectations, and such variations could be material and adverse. Additional
information concerning the factors that could cause actual results to differ
materially from the Company's current expectations is contained in the
Company's SEC filings.
