MICROTOUCH SYSTEMS INC, SC 14D9, 2000-11-20

MICROTOUCH SYSTEMS INC
SC 14D9, 2000-11-20
COMPUTER PERIPHERAL EQUIPMENT, NEC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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SCHEDULE 14D-9
Solicitation/Recommendation Statement Under Section 14(d)(4)
of the Securities Exchange Act of 1934

MICROTOUCH SYSTEMS, INC.
(Name of Subject Company)

MICROTOUCH SYSTEMS, INC.
(Name of Person Filing Statement)

Common Stock, $.01 par value per share
(Title of Class of Securities)

595145 10 3
(CUSIP Number of Class of Securities)

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D. Westervelt Davis
President, Chief Executive Officer and Director
MicroTouch Systems Inc.
300 Griffin Brook Park Drive
Methuen, Massachusetts 01844
(978) 659-9000
(Name, address and telephone number of person authorized to receive notices
and communications on behalf of the person(s) filing statement)

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Copies to:

William T. Whelan, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
(617) 542-6000

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[_] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.

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Item 1. Subject Company Information.

The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is MicroTouch
Systems, Inc., a corporation formed under the laws of the Commonwealth of
Massachusetts ("MicroTouch" or the "Company"). The address of the principal
executive offices of the Company is 300 Griffin Brook Park Drive, Methuen,
Massachusetts 01844. The telephone number of the principal executive offices of
the Company is (978) 659-9000.

The title of the class of securities to which this Schedule 14D-9 relates is
the common stock, par value $0.01 per share, of the Company (the "Common
Stock"), including the associated preferred stock purchase rights (the "Company
Rights") issued pursuant to the Rights Agreement dated as of January 19, 1996
(as amended from time to time, the "Company Rights Agreement"). As of November
10, 2000, there were 6,491,823 shares of Common Stock outstanding and 1,755,486
shares of Common Stock issuable upon exercise of outstanding stock options of
the Company.

Item 2. Identity and Background of Filing Person.

This Schedule 14D-9 is being filed by the subject company, MicroTouch
Systems, Inc. The contact information for the Company is listed in Item 1
above.

This Schedule 14D-9 relates to the tender offer by Equinox Acquisition,
Inc., a corporation formed under the laws of the Commonwealth of Massachusetts
(the "Purchaser") and a wholly-owned subsidiary of Minnesota Mining and
Manufacturing Company, a corporation formed under the laws of the State of
Delaware ("3M"), disclosed in a Tender Offer Statement on Schedule TO filed by
the Purchaser and 3M (the "Schedule TO"), dated November 17, 2000, offering to
purchase all outstanding shares of the Common Stock (including the associated
Company Rights) at a purchase price of $21.00 per share, net to the seller in
cash (the "Offer Price"), upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated November 17, 2000 and filed as Exhibit
(a)(1)(A) to the Schedule TO (the "Offer to Purchase"), and the related Letter
of Transmittal (which, as may be amended and supplemented from time to time,
together constitute the "Offer").

The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of November 13, 2000, among 3M, the Purchaser and the Company (as such
agreement may be amended and supplemented from time to time, the "Merger
Agreement"). The Merger Agreement provides, among other things, that, following
the satisfaction or waiver of the conditions set forth in the Merger Agreement,
the Purchaser will be merged with the Company (the "Merger"). Following the
effective time (the "Effective Time") of the Merger, the Merger Agreement
provides that the Company will continue as the surviving corporation (the
"Surviving Corporation") and a wholly-owned subsidiary of 3M. A copy of the
Merger Agreement is filed herewith as Exhibit (e)(1) and is incorporated herein
by reference.

As set forth in the Schedule TO, the principal executive offices of 3M and
the Purchaser are located at 3M Center, St. Paul, Minnesota 55144.

All information contained in this Schedule 14D-9 or incorporated herein by
reference concerning the Purchaser, 3M or their affiliates, or actions or
events with respect to any of them, was provided for inclusion herein by the
Purchaser or 3M or obtained from reports or statements filed by the Purchaser
or 3M with the Commission, including, without limitation, the Schedule TO, and
the Company takes no responsibility for such information.

Item 3. Past Contacts, Transactions, Negotiations and Agreements.

Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Section 14(f) of the Securities Exchange Act of 1934, as amended, and Rule 14f-
1 thereunder (the

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"Information Statement") that is attached as Annex B to this Statement and is
incorporated herein by reference. Except as set forth in the response to this
Item 3 or in Annex B attached hereto or as incorporated by reference herein, to
the knowledge of the Company, there are no material agreements, arrangements or
understandings and no actual or potential conflicts of interest between the
Company or its affiliates and (1) the Company, its executive officers,
directors or affiliates, or (2) the Purchaser or 3M, or their respective
executive officers, directors or affiliates.

The Merger Agreement. 3M, the Purchaser and the Company have entered into the
Merger Agreement. A summary of the terms of the Offer and the Merger Agreement
is incorporated herein by reference to the Introduction and Section 13 of the
Offer to Purchase, which is being mailed to shareholders together with this
Schedule 14D-9 and is filed herewith as Exhibit (a)(4). Such summary and
description are qualified in their entirety by reference to the Merger
Agreement, which is filed as Exhibit (e)(1) and incorporated herein by
reference.

Confidential Disclosure Agreement. The Company and 3M entered into a
Confidential Disclosure Agreement dated September 27, 2000 (the "Confidential
Disclosure Agreement"). Pursuant to the Confidential Disclosure Agreement, 3M
and its representatives agreed to keep confidential certain information
provided by the Company or its representatives. The Merger Agreement provides
that certain information exchanged pursuant to the Merger Agreement will be
subject to the Confidential Disclosure Agreement. The foregoing description is
qualified in its entirety by reference to the Confidential Disclosure
Agreement, which is filed as Exhibit (e)(2) and incorporated herein by
reference.

Stock Option Agreement. The Company and 3M entered into a Stock Option
Agreement, dated as of November 13, 2000 (the "Option Agreement"). Under the
Option Agreement, the Company has granted to Parent an unconditional,
irrevocable option (the "Option") to purchase up to 1,291,873 fully paid and
nonassessable shares of Common Stock, at a price of $21.00 per share, or, if
higher, the highest price offered by Purchaser in the Offer; provided that, in
no event shall the number of Shares for which the Option is exercisable exceed
19.9% of the Company's issued and outstanding shares of Common Stock without
giving effect to any shares subject to or issued pursuant to the option. A
summary of the terms of the Option Agreement is incorporated herein by
reference to the Introduction and Section 13 of the Offer to Purchase, which is
being mailed to shareholders together with this Schedule 14D-9 and is filed
herewith as Exhibit (a)(4). Such summary and description are qualified in their
entirety by reference to the Option Agreement, which is filed as Exhibit (e)(4)
and incorporated herein by reference.

Shareholders Agreement. 3M, the Purchaser, and certain officers and directors
of the Company have entered into a Shareholders Agreement, dated as of November
13, 2000 (the "Shareholders Agreement"). Under the Shareholders Agreement, each
of the officers and directors of the Company identified on Schedule A thereto
agreed to tender all of his respective shares of Common Stock in the Offer, and
not to withdraw such shares from the Offer unless the Offer or the Merger
Agreement is terminated. A summary of the terms of the Shareholders Agreement
is incorporated herein by reference to the Introduction and Section 13 of the
Offer to Purchase, which is being mailed to shareholders together with this
Schedule 14D-9 and is filed herewith as Exhibit (a)(4). Such summary and
description are qualified in their entirety by reference to the Shareholders
Agreement, which is filed as Exhibit (e)(3) and incorporated herein by
reference.

Effects of the Offer and the Merger under Company Stock Plans; Certain Other
Arrangements.

Stock Options. The Merger Agreement provides that the Company will take the
following actions with respect to the options to purchase shares of Common
Stock issuable under its 1992 Equity Incentive Plan, 1994 Directors Stock
Option Plan and 1998 Employee and Consultant Non-Qualified Stock Option Plan
(collectively, the "Company Options"):

. all of such options outstanding as of the date of the Merger Agreement
will become fully vested and immediately exercisable upon the
satisfaction of the Minimum Tender Condition (as defined below),

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. each Company Option still outstanding at the Effective Time of the
Merger will be converted into the right to receive in cash an amount
equal to the Net Gain (as defined below) attributable to such Company
Option, and

. each of the Company's stock option plans and all of the Company Options
outstanding under those plans will be terminated effective as of the
closing date of the Merger, subject to the right of the holders of
Company Options to receive the Net Gains attributable to their Company
Options.

The "Minimum Tender Condition" will be satisfied if there shall have been
validly tendered and not withdrawn prior to the expiration of the Offer that
number of shares of Common Stock, together with shares of Common Stock owned by
3M or Purchaser, if any, which would represent at least a majority of the
outstanding shares of Common Stock (determined on a fully diluted basis for all
outstanding stock options, convertible securities and any other rights to
acquire Common Stock on the date of purchase).

"Net Gain" on a Company Option is the product of (x) the excess of the
merger consideration over the exercise price per share of such Company Option,
and (y) the number of shares subject to such Company Option.

Employee Stock Purchase Plan. The Merger Agreement also provides that the
Company will cause each option in effect under the 1995 Employee Stock Purchase
Plan (the "ESPP") to be exercised as of the closing date of the Merger, and
cause the ESPP and all of the options outstanding under the ESPP to be
terminated effective as of the closing date, subject to the right of the option
holders to receive the merger consideration for the shares of Common Stock they
become entitled to receive upon the exercise of their options.

401(k) Plan. The Company will merge its 401(k) plan (the "401(k) Plan") with
the Minnesota Mining and Manufacturing Company Voluntary Investment Plan and
Employee Stock Ownership Plan (the "VIP"), effective as soon as
administratively practicable, but in any event at a time agreed upon by 3M and
the Surviving Corporation. Employees of the Surviving Corporation will be
allowed to continue their participation in the 401(k) Plan until that Plan is
merged into the VIP.

Indemnification. 3M will maintain the Company's current directors and
officers insurance policies in effect for not less than six years after the
Effective Time, if such insurance is obtainable with respect to acts or
failures to act prior to the Effective Time, including acts relating to the
transactions contemplated by the Merger Agreement. This obligation is subject
to the provision that 3M shall not be required to maintain or obtain coverage
except to the extent such coverage can be provided at an annual cost that is no
greater than two times the most recent annual premium paid by the Company prior
to the date of the Merger Agreement (the "Cap"); and provided, further, that if
equivalent coverage cannot be obtained or can be obtained only by paying an
annual premium greater than the Cap, 3M shall only be required to obtain as
much coverage as can be obtained by paying an annual premium equal to the Cap.

From and after the Effective Time, 3M shall indemnify and hold harmless to
the fullest extent permitted under applicable law, the officers and directors
of the Company or any of its subsidiaries against losses, damages, liabilities,
costs or expenses relating to acts or omissions by them in their capacities as
officers and directors of the Company, which acts or omissions occurred prior
to the Effective Time. In the event of any such claim, action, suit, proceeding
or investigation, 3M shall control the defense of such Action with counsel
selected by 3M, which counsel shall be reasonably acceptable to the Indemnified
Party; provided, however, that the Indemnified Party shall be permitted to
participate in the defense of such Action through counsel selected by the
Indemnified Party, which counsel shall be reasonably acceptable to 3M, at the
Indemnified Party's expense.

The Surviving Corporation in the Merger shall keep in effect all provisions
in its articles of organization and by-laws that provide for exculpation of
director and officer liability and indemnification of the past and present
officers and directors of the Company to the fullest extent permitted by law,
and such provisions may

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not be amended except as either required by applicable law or to make changes
permitted by law that would enhance the rights of past or present officers and
directors to indemnification or advancement of expenses.

If the Surviving Corporation in the Merger or any of its respective
successors or assigns consolidates with or merges into any other corporation or
other entity and is not the continuing or surviving corporation or entity of
the consolidation or merger, or transfers all or substantially all of its
properties and assets to any individual, corporation or other entity, then
provisions will be made so that the successors and assigns of the Surviving
Corporation assumes all of the indemnification obligations described above.

Potential Conflicts of Interest.

Certain directors and executive officers of the Company have interests in
connection with the Offer that present them with actual or potential conflicts
of interest, as summarized below.

The executive officers and directors of the Company who hold options will
receive the Net Gain for their options on the same terms and conditions as are
applicable to all other holders of Company Options. As of October 31, 2000, the
directors and executive officers of the Company held options to acquire an
aggregate of 962,500 options, with exercise prices ranging from $1.75 to $26.50
per share.

Executive officers and directors of the Company who tender their shares in
the Offer will receive the same offer price on the same terms as set forth in
the Offer to Purchase. As of October 31, 2000, the directors and executive
officers of the Company owned an aggregate of 717,876 shares of Common Stock.
Assuming all members of the Board of Directors and all executive officers
tender their shares in the Offer, they would receive an aggregate of
$15,075,396 in exchange for their shares.

The executive officers and directors of the Company are also covered by
indemnification arrangements with the Company and, following the merger, with
3M. See "Indemnification", above.

The Company has also agreed to assist 3M in (i) identifying key employees of
the Company and its subsidiaries, which are expected to include certain of the
current executive officers and directors of the Company, whose continued
employment following the Closing Date should be covered by individual
employment agreements, and (ii) designing the provisions of such agreements;
provided, however, that the surviving corporation of the Merger shall have the
final authority to decide which of the Company's employees will be offered such
employment agreements. The Company will use reasonable commercial efforts to
convince such key employees to enter into such individual employment agreements
on or prior to the Closing Date.

Further, the Company will assist 3M in (i) identifying those key employees
of the Company and its subsidiaries, which are expected to include certain of
the current executive officers and directors of the Company, who should be
eligible for retention bonuses/compensation as an incentive for them to
continue their employment following the Closing Date, and (ii) designing the
terms and conditions of such retention bonuses/compensation; provided, however,
that the surviving corporation of the Merger shall have the final authority to
decide both the employees eligible for such retention bonuses/compensation as
well as the terms and conditions of such bonuses/compensation.

Item 4. The Solicitation or Recommendation.

Position of the Board of Directors.

At a meeting held on November 9, 2000, the Board of Directors of the Company
unanimously:

. determined that the terms of the Offer, the Merger, the Option Agreement
and the Merger Agreement are advisable, fair to, and in the best
interests of, the Company and the shareholders of the Company,

. approved the Merger Agreement, the Option Agreement and the transactions
contemplated thereby, including the Offer and the Merger, and

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. determined to recommend that the Company's shareholders accept the
Offer, tender their Common Stock pursuant thereto, and approve and adopt
the Merger Agreement.

This recommendation is based in part on an opinion of Broadview
International LLC ("Broadview"), an investment banking firm and the Company's
financial advisor in connection with the Offer and the Merger, to the Board of
Directors of the Company to the effect that the consideration to be received by
the Company's shareholders in the Offer and the Merger is fair to such
shareholders from a financial point of view. This opinion was confirmed by a
written opinion by Broadview dated November 13, 2000 (the "Fairness Opinion").
The Fairness Opinion contains a description of the procedures followed, matters
considered, assumptions made and limitations on the review undertaken by
Broadview in rendering its opinion. The full text of the Fairness Opinion is
set forth in Annex A of this Schedule 14D-9 and is attached as Exhibit (a)(2)
to this Schedule 14D-9 and is incorporated herein by reference. Shareholders
are urged to read the Fairness Opinion in its entirety. Broadview has consented
to the inclusion of the Fairness Opinion as an exhibit hereto.

Background; Reasons for the Board of Directors' Recommendation.

The market for the Company's products, touchscreens for computers, is
characterized by rapidly evolving technology and short product lives with
intense price competition. The Company competes against several larger
companies including Tyco Incorporated, Samsung Display Devices, Matsushita
Electric Industrial Co., Ltd. and Nissha Printing Company. Several of the
Company's competitors have greater financial, technical, manufacturing, and
marketing resources than the Company. The Company believes that these market
conditions and other factors have caused the Company to experience volatility
in its financial results from quarter to quarter during the past two fiscal
years. From time to time during 1999, the directors of the Company discussed
the possibility of pursuing joint business arrangements with other touchscreen
companies, including possible business combinations.

As a result of the foregoing market conditions and other factors, in
November 1999, the Company sought to retain a financial advisor to assist
management and the Company's Board of Directors in the analysis of potential
strategic opportunities. On January 16, 2000, the Board of Directors of the
Company approved the retaining of Broadview. Over the following eleven months,
Broadview conducted a review of the opportunities available to the Company and
had discussions with approximately six different potential merger partners.
These contacts included many of the world's leading computer peripheral
companies. The contacts eventually resulted in three indications of interest.

In particular, Broadview made contact with representatives from a third
party in February 2000 to determine that party's possible interest in acquiring
the Company. On March 10, 2000, representatives from the Company, the third
party and Broadview met to discuss a possible combination of the touchscreen
operations of the third party and the Company. In August 2000 the third party
conducted due diligence, and Broadview and the third party commenced
discussions with respect to a possible transaction between the parties.

On September 8, 2000, the third party made a proposal for an acquisition of
the Company and the Company's Board of Directors instructed Broadview to
continue to negotiate specific terms for a potential transaction. This proposal
was later rejected by the Company in light of its discussions with 3M, which
had commenced shortly before the receipt of this proposal.

On August 18, 2000, representatives of Broadview contacted Mr. Andrew Wong,
Division Vice President of the Optical Systems Division at 3M, to discuss 3M's
interest in pursuing an acquisition of MicroTouch. On August 30, 2000,
representatives of 3M, including Mr. Wong, Mr. Terrance Jones, Business
Director--Electronic Display Lighting Division, and Mr. John Barkholtz,
Business Development Manager, visited the Company at its headquarters in
Methuen, Massachusetts. Also attending this meeting were representatives from
the Company, including the Chief Executive Officer, Mr. D. Westervelt Davis;
the Vice President--Engineering, Mr. Robert Becker; and Mr. David Montanari,
the Company's Director of Finance, and representatives from Broadview,
including Mr. Tony Aquilina and Mr. Mickey Commar. The meeting lasted seven
hours and covered the

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backgrounds of both 3M and MicroTouch regarding their operations in
touchscreens. At the end of the meeting, both parties indicated an interest in
further discussions and they agreed that MicroTouch would provide 3M with
various documents in response to 3M's inquiries.

On August 22, 2000, the Company and 3M entered into a confidential
disclosure agreement under which 3M could receive and evaluate confidential
information relating to the financial condition and general business operations
of the Company. This agreement did not govern the disclosure of confidential
technical information.

Starting on August 30, 2000 and continuing through September 14, 2000,
additional documents were sent to 3M by MicroTouch, and 3M began its
preliminary due diligence review of MicroTouch. On Friday, September 15, 2000,
two representatives from the Company, Mr. Davis and Mr. Geoffrey Clear, Vice
President--Finance & Administration, along with Mr. Aquilina from Broadview,
traveled to 3M's headquarters in St. Paul, Minnesota to discuss further the
possible combination of 3M and the Company's touchscreen operations. The three
individuals from MicroTouch met with four individuals from 3M: Mr. Andrew Wong,
Mr. John Barkholtz, Mr. Don Nielsen, Finance Manager, and Ms. Elisabeth
Lemieux, Senior Analyst. Mr. Wong led the discussions for 3M and emphasized the
cultural and strategic synergies between the two companies. Mr. Davis led the
discussions for MicroTouch and emphasized certain aspects of the Company's
operations and technological portfolio that had not been emphasized during the
previous meeting in August. At the end of the day, 3M presented the Company's
representatives with a draft letter including an offer of $18 per share for the
Company's fully diluted shares.

Over the weekend following the meeting in St. Paul, representatives of
Broadview, MicroTouch and 3M held discussions centering on the valuation of
MicroTouch. Broadview proposed that 3M increase its offer from $18 per share to
$21 per share, and include in its offer the additional value to be derived from
potential tax benefits relating to tax loss carryforwards and MicroTouch's
ownership of a building and land in Methuen, Massachusetts. 3M counter-offered
with $21 per share, at which point MicroTouch agreed to take 3M's offer to its
Board of Directors for discussion. On September 20, 2000, Broadview presented
an analysis of this offer and the third party's offer to MicroTouch's Board.
After discussing the analysis, the Board decided to continue negotiations with
3M.

On September 27 and 28, 2000, representatives from the Company, 3M and
financial advisors from both parties met at the offices of the Company's legal
counsel, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., in Boston,
Massachusetts to discuss the Company's operations and to conduct a due
diligence review. The parties also negotiated various aspects of the proposed
business transaction. At the start of the meeting on September 27, the parties
executed a second confidentiality agreement governing the receipt by either
party of any confidential information of the other party, including
confidential technical information. This agreement also contained non-
solicitation covenants by both parties.

The discussions in Boston led to the execution of an exclusivity agreement
on October 6, 2000 pursuant to which, subject to certain exceptions, the
Company agreed to refrain from negotiating a business combination with any
party other than 3M until October 25, 2000. The term of this exclusivity
agreement was subsequently extended through November 3, 2000.

From October 2, 2000 through October 19, 2000, 3M's representatives and
advisors met with various representatives and advisors of the Company to review
the Company's business plans and operations. In addition, from October 2, 2000
through November 3, 2000, 3M and its advisors conducted legal, environmental,
business and financial due diligence.

On October 19 and 20, 2000, representatives of 3M and the Company and their
respective legal and financial advisors met at 3M's offices in St. Paul,
Minnesota to negotiate the Merger Agreement, Option Agreement and Shareholders
Agreement. These negotiations continued telephonically until November 3, 2000,
at which time the documents were finalized, subject to minor revisions over the
next several days.

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On November 9, 2000, the Company's Board of Directors approved the Offer,
the Merger, the Merger Agreement, the Option Agreement, and the other
transactions contemplated thereby.

On November 13, 2000, 3M's Board of Directors approved the Offer, the
Merger, the Merger Agreement, the Option Agreement, the Shareholders Agreement,
and the other transactions contemplated thereby.

On November 13, 2000, 3M, Purchaser and the Company executed the Merger
Agreement, 3M and the Company executed the Option Agreement, and 3M, Purchaser
and certain officers and directors of the Company executed the Shareholders
Agreement.

On November 13, 2000, 3M and the Company issued a joint press release
announcing the execution of the Merger Agreement and the related agreements.

On November 17, 2000, in accordance with the Merger Agreement, 3M commenced
the Offer. During the Offer, the Company intends to have ongoing contacts with
3M and its employees and advisors.

Reasons for the Company Board's Recommendations; Factors Considered

In approving the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, and recommending that all holders of Common
Stock accept the Offer and tender their shares of Common Stock pursuant to the
Offer, approve the Merger and approve and adopt the Merger Agreement, the Board
of Directors considered a number of factors including, but not limited to, the
following:

1. The historical market prices, price to earnings ratios and other
multiples, recent trading activity and trading range of the Common Stock,
including the fact that the Offer Price represents (i) a premium of
approximately 56% over the $13.4375 closing price of the Common Stock on NASDAQ
on November 8, 2000, the last full trading day prior to the Board's meeting to
approve the Offer and the Merger and (ii) a premium of approximately 250% over
the $6.00 closing price of the Common Stock on NASDAQ on October 6, 2000, the
date in the last twelve months on which the shares of the Common Stock had
their lowest closing price.

2. The existence of complementary products and the perceived cultural and
strategic fit among the Company, 3M, and other recently acquired divisions of
3M, including Dynapro and the Polaroid KE polarizer business. Management of the
Company and the Board expect these factors will ease integration of the Company
into 3M following the Merger.

3. The ability of the Company to take advantage of 3M's well-regarded
manufacturing capabilities and relationships with component manufacturers,
depth of research and development, and resources.

4. The Fairness Opinion of Broadview delivered at the meeting of the Board
of Directors held on November 9, 2000. The full text of the written opinion
dated as of November 13, 2000 of Broadview which sets forth the assumptions
made, matters considered and limitations on the review undertaken, is attached
to this Schedule 14D-9 and is filed as Exhibit (a)(2) hereto and is
incorporated herein by reference. Holders of shares of Common Stock are urged
to read such opinion carefully and in its entirety.

5. The need to respond to changes in the touchscreen market, as described by
management of the Company, that would make it more difficult for an independent
company with fewer resources than its competitors to succeed, including the
increasing expense of necessary capital equipment, risks of investing in new
technologies, and the demands of sophisticated OEM customers.

6. The fact that no other party had presented the Company with an
acquisition proposal that would be more favorable to the Company and its
shareholders than the Offer and the Merger.

7. The fact that the Offer and the Merger provide for a cash tender offer
for all shares of Common Stock, to be followed by the Merger for the same
consideration, thereby enabling the Company's shareholders

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promptly to obtain the benefits of the transaction in the form of cash in
exchange for their shares of Common Stock.

8. The fact that 3M's and the Purchaser's obligations under the Offer are
not subject to any financing condition, and the financial strength of 3M.

9. The terms and conditions of the Merger Agreement, including the parties'
representations, warranties and covenants, the conditions to their respective
obligations, and the limited ability of 3M and the Purchaser to terminate the
Offer or the Merger Agreement.

10. The extensive arms-length negotiations between the Company and 3M
that resulted in the $21.00 per share price.

11. The ability of the Board under the Merger Agreement, in order to comply
with its fiduciary duties, to furnish information and enter into discussions
and negotiations, in connection with an unsolicited acquisition proposal that
is reasonably likely to result in a superior proposal and to withdraw its
recommendation of the Merger in favor of a superior unsolicited acquisition
proposal.

12. The Merger Agreement permits the Company Board, in the exercise of
its fiduciary duties, to terminate the Merger Agreement in favor of a superior
acquisition proposal, provided that, prior to such termination, the Company
must have paid 3M a fee of $9 million.

13. The parties' agreement to accelerate the vesting of all options held
by the Company's employees prior to the closing of the Offer, and to allow
optionholders to receive the Net Gain in exchange for their options.

14. The expressed intention of 3M to retain substantially all of the
employees of the Company in their present or equivalent positions after the
merger.

15. The availability of dissenters' appraisal rights under Massachusetts
law in connection with the Merger for shareholders who do not tender their
shares in the Offer or vote in favor of the Merger.

The foregoing discussion of information and factors considered and given
weight by the Board of Directors is not intended to be exhaustive, but is
believed to include all of the material factors considered by the Board of
Directors. In view of the variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board of Directors did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determinations and
recommendations. In addition, individual members of the Board of Directors may
have given different weights to different factors.

Intent to Tender.

To the Company's knowledge after reasonable inquiry, all of the Company's
executive officers, directors and affiliates currently intend to tender all
shares of Common Stock held of record or beneficially by them pursuant to the
Offer. The foregoing does not include any shares over which, or with respect to
which, any such executive officer, director or affiliate acts in a fiduciary or
representative capacity or is subject to the instructions of a third party with
respect to such tender or vote.

Opinion of Financial Advisor.

Pursuant to a letter agreement dated as of January 16, 2000, Broadview was
engaged to act as financial advisor to the MicroTouch board and to render an
opinion to the MicroTouch board regarding the fairness of the Offer Price, from
a financial point of view, to MicroTouch stockholders. The MicroTouch board
selected Broadview to act as financial advisor based on Broadview's reputation
and experience in the information technology, communication and media sectors
and the peripheral and sub-system industry in particular. At the meeting of the
MicroTouch board on November 9, 2000, Broadview rendered its oral opinion that,
as of

9
<PAGE>

November 9, 2000, based upon and subject to the various factors and
assumptions, the Offer Price was fair, from a financial point of view, to
MicroTouch stockholders. Broadview sent written confirmation on November 13,
2000, that as of such date, based upon and subject to the various factors and
assumptions, the Offer Price was fair from a financial point of view, to
MicroTouch stockholders.

Broadview's opinion, which describes the assumptions made, matters
considered and limitations on the review undertaken by Broadview, is attached
as Annex A to this Schedule 14D-9. MicroTouch stockholders are urged to, and
should, read the Broadview opinion carefully and in its entirety. The Broadview
opinion is directed to the MicroTouch board and addresses only the fairness of
the Offer Price from a financial point of view to the holders of shares of
MicroTouch common stock as of the date of the opinion. The Broadview opinion
does not address any other aspect of the Merger and does not constitute a
recommendation to any holder of MicroTouch common stock as to whether or not to
tender their shares to 3M. The summary of the Broadview opinion set forth in
this proxy statement, although materially complete, is qualified in its
entirety by reference to the full text of such opinion.

In connection with rendering its opinion, Broadview, among other things:

-- reviewed the terms of the Agreement;

-- reviewed certain publicly available financial statements and other
information of MicroTouch, respectively;

-- reviewed certain internal financial and operating information (including
certain preliminary financial results and projections) for MicroTouch
prepared for and provided to Broadview by MicroTouch management;

-- participated in discussions with MicroTouch management concerning the
operations, business strategy, current financial performance and
prospects for MicroTouch;

-- discussed with MicroTouch management its view of the strategic rationale
for the Merger;

-- reviewed the reported closing prices and trading activity for MicroTouch
common stock;

-- compared certain aspects of the financial performance of MicroTouch with
public companies Broadview deemed comparable;

-- analyzed available information, both public and private, concerning
other mergers and acquisitions Broadview believed to be comparable in
whole or in part to the Merger;

-- participated in negotiations and discussions related to the Merger with
MicroTouch, 3M and their respective financial and legal advisors; and

-- conducted other financial studies, analyses and investigations as
Broadview deemed appropriate for purposes of its opinion.

In rendering its opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all the financial and other
information, including without limitation the representations and warranties
contained in the Agreement, that was publicly available or furnished to
Broadview by MicroTouch. With respect to the financial projections examined by
Broadview, Broadview assumed that they were reasonably prepared and reflected
the best available estimates and good faith judgments of the management of
MicroTouch as to the future performance of MicroTouch. Broadview also assumed
that MicroTouch was not currently involved in any material transaction as of
the date of Broadview's opinion other than the Merger, other publicly announced
transactions and those activities undertaken in the ordinary course of
conducting their respective businesses.

Broadview did not make or obtain any independent appraisal or valuation of
any of MicroTouch's assets. Broadview's opinion is necessarily based upon
market, economic, financial and other conditions as they existed and could be
evaluated as of November 13, 2000, and any change in such conditions since that
date would require a reevaluation of Broadview's opinion.

10
<PAGE>

The following is a brief summary of the sources of information and valuation
methodologies employed by Broadview in rendering Broadview's opinion. These
analyses were presented to the MicroTouch board at its meeting on November 9,
2000, and were presented to the board in written form on November 13, 2000.
This summary includes the financial analyses used by Broadview and deemed to be
material, but does not purport to be a complete description of analyses
performed by Broadview in arriving at its opinion. This summary of financial
analyses includes information presented in tabular format. In order to fully
understand the financial analyses used by Broadview, the tables must be read
together with the text of each summary. The tables alone do not constitute a
complete description of the financial analyses.

MicroTouch Stock Performance Analysis -- Broadview compared the recent stock
performance of MicroTouch with that of the S&P 500 and the "MicroTouch Public
Company Comparables Index". The MicroTouch Public Company Comparables Index is
comprised of North American public companies that Broadview deemed comparable
to MicroTouch's business. Broadview selected companies competing in the
hardware peripheral and sub-system industry with revenues between $25 million
and $250 million and revenue growth less than 10% for the last reported twelve
months. The MicroTouch Public Company Comparables Index consists of the
following companies: MTI Technology Corporation; Pacific Aerospace &
Electronics, Inc.; TransAct Technologies, Inc.; Video Display Corporation;
Boundless Corporation; OSI Systems, Inc.; PSC, Inc.; Exabyte Corporation; Key
Tronic Corporation; and Printronix, Inc.

Public Company Comparables Analysis -- Broadview considered ratios of share
price and market capitalization, adjusted for cash and debt when necessary, to
selected historical operating results in order to derive multiples placed on a
company in a particular market segment. In order to perform this analysis,
Broadview compared financial information of MicroTouch's business with publicly
available information for the companies comprising the MicroTouch Public
Company Comparables Index. While earnings-based multiples are metrics often
used to value public companies, they were not used in this analysis since
neither MicroTouch's business nor the majority of the public company
comparables is currently profitable. For this analysis, as well as other
analyses, Broadview examined publicly available information, as well as a range
of estimates based on securities research analyst reports and financial
projections prepared by MicroTouch management.

In analyzing the MicroTouch business, trailing multiples for MicroTouch's
public company comparables were derived from public filings. These multiples
were then applied to MicroTouch's own trailing twelve month revenue metrics.

The following table presents, as of November 13, 2000, the median multiples
and the range of multiples for the MicroTouch Public Company Comparables Index
of total market capitalization (defined as equity market capitalization plus
total debt minus cash and cash equivalents) divided by selected operating
metrics:

<TABLE>
<CAPTION>
Median Multiple Range of Multiples
--------------- ------------------
<S> <C> <C>
Total Market Capitalization to Last
Twelve Months Revenue.................. 0.64x 0.26x - 0.98x
Total Market Capitalization to Last
Twelve Months Gross Profit............. 2.66x 0.85x - 5.61x
</TABLE>

The following table presents, as of November 13, 2000, the median implied
per share values and the range of implied per share values of MicroTouch's
common stock, calculated by using the multiples shown above and the appropriate
MicroTouch operating metric:
<TABLE>
<CAPTION>
Median Implied Range of
Value Implied Values
-------------- --------------
<S> <C> <C>
Total Market Capitalization to Last Twelve
Months Revenue.............................. $16.86 $7.64 - $25.36
Total Market Capitalization to Last Twelve
Months Gross Profit......................... $18.51 $6.87 - $37.62
</TABLE>

No company utilized in the public company comparables analysis as a
comparison is identical to MicroTouch. In evaluating the comparables, Broadview
made numerous assumptions with respect to the peripheral and sub-system
hardware industry performance and general economic conditions, many of which
are

11
<PAGE>

beyond the control of MicroTouch. Mathematical analysis, such as determining
the median, average, or range, is not in itself a meaningful method of using
comparable company data.

Transaction Comparables Analysis -- Broadview considered ratios of equity
purchase price, adjusted for the seller's cash and debt when appropriate, to
selected historical operating results in order to indicate multiples strategic
and financial acquirers have been willing to pay for companies in a particular
market segment. In order to perform this analysis, Broadview reviewed a number
of transactions that they considered similar to the Merger. Broadview selected
these transactions by choosing recent transactions involving sellers in the
peripheral and sub-system hardware industry with equity considerations greater
than $25 million and less than $250 million. For this analysis, as well as
other analyses, Broadview examined publicly available information, as well as
information from Broadview's proprietary database of published and confidential
merger and acquisition transactions in the information technology,
communication and media industries. These transactions consisted of the
acquisition of:

[_]Integrated Sensor Solutions, Inc. [_]Control Devices, Inc. by First
by Texas Instruments, Inc.; Technology Plc;

[_]Percon, Inc. by PSC, Inc.; [_]Advanced Input Devices
Corporation by Esterline
Technologies Corporation;

[_]Zing Technologies, Inc. by
International Rectifier
Corporation;

[_]Dexter Corporation (PCB Business)
by Cookson Group Plc;

[_]Aureal, Inc. by Creative
Technology Ltd.; [_]Acme Electric Corporation by Key
Components, LLC;

[_]BI Technologies Corporation
(subsidiary of Emerson Electric
Company) by TT Group Plc; and

[_]ADFlex Solutions, Inc. by
Innovex, Inc.

The following table presents, as of November 13, 2000, the median multiple
and the range of multiples of Adjusted Price (defined as equity price plus
total debt minus cash and cash equivalents) divided by the seller's revenue in
the last reported twelve months prior to acquisition for the transactions
listed above:

<TABLE>
<CAPTION>
Median Multiple Range of Multiples
--------------- ------------------
<S> <C> <C>
Adjusted Price to Last Reported Twelve
Months Revenue........................ 1.00x 0.48x - 2.36x
</TABLE>

The following table presents, as of November 13, 2000, the median implied
per share value and the range of implied per share values of MicroTouch's
common stock, calculated by multiplying the multiples shown above by the
appropriate MicroTouch operating metric for the twelve months ended September
30, 2000:

<TABLE>
<CAPTION>
Median Implied Range of
Value Implied Values
-------------- ---------------
<S> <C> <C>
Adjusted Price to Last Reported Twelve
Months Revenue............................ $23.28 $11.68 - $53.05
</TABLE>

No transaction utilized as a comparable in the transaction comparables
analysis is identical to the Merger. In evaluating the comparables, Broadview
made numerous assumptions with respect to the peripheral and sub-system
hardware industry's performance and general economic conditions, many of which
are beyond the control of MicroTouch or 3M. Mathematical analysis, such as
determining the average, median, or range, is not in itself a meaningful method
of using comparable transaction data.

Transaction Premiums Paid Analysis -- Broadview considered the premiums paid
above a seller's share price in order to determine the additional value
strategic and financial acquirers, when compared to public stockholders, are
willing to pay for companies in a particular market segment. In order to
perform this analysis, Broadview reviewed a number of transactions involving
publicly-held hardware companies. Broadview selected

12
<PAGE>

these transactions from its proprietary database by choosing recent
transactions with an equity purchase price between $25 million and $250
million. These transactions consisted of the acquisition of:

[_]CFM Technologies, Inc. by Mattson [_]SEEQ Technology, Inc. by LSI
Technology, Inc.; Logic Corporation;

[_]AmeriLink Corporation by Tandy [_]Artecon, Inc. by Box Hill Systems
Corporation; Corporation;

[_]Mylex Corporation by International [_]Teltrend Corporation by Westell
Business Machines Corporation; Technologies, Inc.;

[_]Milltronics Ltd. by Siemens Canada [_]Integrated Sensor Solutions, Inc.
Ltd.; by Texas Instruments, Inc.;

[_]ACT Networks, Inc. by Clarent [_]Faroudja, Inc. by Sage, Inc.;
Corporation;

[_]Loronix Information Systems, Inc.
[_]Nogatech, Inc. by Zoran by Comverse Technology, Inc.;
Corporation;

[_]Equinox Systems, Inc. by Avocent
[_]Trident International, Inc. by Corporation;
Illinois Tool Works, Inc.;

[_]Vertex Communications Corporation
[_]Moore Products Co. by Siemens by TriPoint Global
Energy and Automation, Inc. Communications, Inc.;
(subsidiary of Siemens AG);

[_]Align-Rite International, Inc. by
[_]Texas Micro, Inc. by RadiSys Photronics, Inc.;
Corporation;

[_]Brite Voice Systems, Inc. by
[_]TriStar Aerospace Co. by InterVoice, Inc.;
AlliedSignal, Inc.;

[_]Digital Origin, Inc. by Media
[_]Centigram Communications 100, Inc.;
Corporation by ADC
Telecommunications, Inc.;

[_]Plasma-Therm, Inc. by Oerlikon-
Buhrle Holding AG;

[_]Ferrofluidics Corporation by
Ferrotec Corporation;

[_]Hello Direct, Inc. by GN Great
Nordic Ltd.;

[_]Powerhouse Technologies, Inc. by
Anchor Gaming, Inc.;

[_]Percon, Inc. by PSC, Inc.;

[_]Splash Technology Holdings, Inc. [_]Cerprobe Corporation by Kulicke &
by Electronics for Imaging, Inc.; Soffa Industries, Inc.;

[_]AG Associates, Inc. by STEAG [_]Aydin Corporation by L-3
Electronic Systems GmbH; Communications Holdings, Inc.;

[_]Kofax Image Products, Inc. by [_]Acme Electric Corporation by Key
Dicom Group Plc; Components, LLC;

[_]Instron Corporation by Kirkland [_]Microwave Power Devices, Inc. by
Capital Partners; Ericsson;

[_]Zing Technologies, Inc. by [_]Control Devices, Inc. by First
International Rectifier Technology Plc;
Corporation;

[_]OpenROUTE Networks, Inc. by
[_]Robinson Nugent, Inc. by Minnesota NETRIX Corporation;
Mining & Manufacturing Co.;

[_]Diamond Multimedia Systems, Inc.
[_]Intek Global Corporation by by S3, Inc.;
Securicor Group Plc;

[_]Able Telcom Holding Corporation
[_]SpecTran Corporation by Lucent by Bracknell Corporation; and
Technologies, Inc.;

[_]ADFlex Solutions, Inc. by Innovex,
Inc.;

[_]HMT Technology Corporation by
Komag, Inc.;

13
<PAGE>

The following table presents, as of November 13, 2000, the median premium
and the range of premiums for these transactions calculated by dividing:

(1) the offer price per share minus the closing share price of the seller's
common stock twenty trading days or one trading day prior to the public
announcement of the transaction, by

(2) the closing share price of the seller's common stock twenty trading
days or one trading day prior to the public announcement of the
transaction:

<TABLE>
<CAPTION>
Median Premium Range of Premiums
-------------- -----------------
<S> <C> <C>
Premium Paid to Seller's Share Price
1 Trading Day Prior to Announcement ....... 36.0% (25.6)% - 78.4%
Premium Paid to Seller's Share Price
20 Trading Days Prior to Announcement...... 57.6% (18.3)% - 161.5%
</TABLE>

The following table presents the median implied value and the range of
implied values of MicroTouch's stock, calculated by using the premiums shown
above and MicroTouch's share price 20 trading days and one trading day prior to
November 13, 2000:

<TABLE>
<CAPTION>
Median Implied Range of
Value Implied Values
-------------- ---------------
<S> <C> <C>
Premium Paid to Seller's Share Price
1 Trading Day Prior to Announcement......... $23.63 $12.93 - $31.00
Premium Paid to Seller's Share Price
20 Trading Days Prior to Announcement....... $11.42 $ 5.92 - $18.96
</TABLE>

No transaction utilized as a comparable in the transaction premiums paid
analysis is identical to the Merger. In evaluating the comparables, Broadview
made numerous assumptions with respect to hardware industry performance and
general economic conditions, many of which are beyond the control of MicroTouch
or 3M. Mathematical analysis, such as determining the average, median, or range
is not in itself a meaningful method of using comparable transaction data.

Discounted Cash Flow Analysis -- Broadview examined the value of MicroTouch
based on projected free cash flow estimates for MicroTouch on a standalone
basis. A discounted cash flow analysis is most appropriate for companies which
exhibit relatively steady or somewhat predictable streams of future cash flow.
The free cash flow estimates were generated from financial projections from
December 31, 2000 through December 31, 2004, which were prepared by Broadview
and approved by MicroTouch Management. A preponderance of the value in a
valuation based on discounted cash flow will be in the terminal value of the
entity, which is extremely sensitive to assumptions about the sustainable long-
term growth rate of the company. A range of terminal values at December 31,
2004 was determined by ascribing long-term growth rates, which ranged from
2.00% to 5.00%, to the annual free cash flow for the twelve months ending
December 31, 2004. Broadview calculated a discount rate of 20.00% based on the
Capital Asset Pricing Model ("CAPM") using MicroTouch's capital-structure
adjusted beta, and then adjusting for the risk inherent in Management's
internal projections.

The following table presents the median implied value and the range of
implied values of MicroTouch's stock, as of November 13, 2000, calculated by
using the discounted cash flow analysis described above:

<TABLE>
<CAPTION>
Median Implied Range of
Value Implied Values
-------------- ---------------
<S> <C> <C>
Discounted Cash Flow Analysis
Using a 20% Discount Rate................... $18.85 $17.72 - $20.18
</TABLE>

In connection with the review of the Merger by the MicroTouch board,
Broadview performed a variety of financial and comparative analyses. The
summary set forth above does not purport to be a complete description of the
analyses performed by Broadview in connection with the Merger.

14
<PAGE>

The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Broadview considered the results of all of its analyses as a
whole and did not attribute any particular weight to any analysis or factor
considered by it. Furthermore, Broadview believes that selecting any portion of
its analyses, without considering all analyses, would create an incomplete view
of the process underlying its opinion.

In performing its analyses, Broadview made numerous assumptions with respect
to industry performance and general business and economic conditions and other
matters, many of which are beyond the control of MicroTouch. The analyses
performed by Broadview are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. The Offer Price pursuant to the Agreement and other
terms of the Agreement were determined through arm's length negotiations
between MicroTouch and 3M, and were approved by the MicroTouch board. Broadview
provided advice to the MicroTouch board during such negotiations; however,
Broadview did not recommend any specific consideration to the MicroTouch board
or that any specific consideration constituted the only appropriate
consideration for the Merger. In addition, Broadview's opinion and presentation
to the MicroTouch board was one of many factors taken into consideration by the
MicroTouch board in making its decision to approve the Merger. Consequently,
the Broadview analyses as described above should not be viewed as determinative
of the opinion of the MicroTouch board with respect to the value of MicroTouch
or of whether the MicroTouch board would have been willing to agree to a
different consideration.

Upon consummation of the Merger, MicroTouch will be obligated to pay
Broadview a transaction fee of approximately $2,138,159. Broadview is also
entitled to receive from MicroTouch a fairness opinion fee equal to up to 20%
of the transaction fee. The fairness opinion fee will be credited against the
transaction fee payable by MicroTouch upon completion of the Merger. In
addition, MicroTouch has agreed to reimburse Broadview for its reasonable
expenses, including fees and expenses of its counsel, and to indemnify
Broadview and its affiliates against certain liabilities and expenses related
to their engagement, including liabilities under the federal securities laws.
The terms of the fee arrangement with Broadview, which MicroTouch and Broadview
believe are customary in transactions of this nature, were negotiated at arm's
length between MicroTouch and Broadview, and the MicroTouch Board was aware of
the nature of the fee arrangement, including the fact that a significant
portion of the fees payable to Broadview is contingent upon completion of the
Merger.

Item 5. Persons/Assets, Retained, Employed, Compensated or Used.

Pursuant to a letter agreement dated as of January 16, 2000, the Company
retained Broadview to evaluate strategic alternatives for the Company. The
Company instructed Broadview to study its existing corporate strategy and to
consider all possible alternatives, including a sale of capital stock or
assets, merger, consolidation, recapitalization, strategic joint venture,
partnership or similar transaction. The Board of Directors retained Broadview
based upon Broadview's qualifications, experience and expertise. Broadview is
an internationally recognized mergers and acquisitions advisor and private
equity investor. Broadview, as part of its advisory business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions.

Pursuant to the Company's letter agreement with Broadview, the Company paid
Broadview a commitment fee of $50,000. Upon consummation of a change in control
of the Company, the Company also agreed to pay to Broadview a fee at the
closing equal to 1.35% of all consideration up to $250 million and 1.0% of the
consideration in excess of $250 million, with a minimum fee payable of
$500,000. Up to 20% of the total fee payable as described in the prior sentence
was due upon delivery of the fairness opinion, which amount is credited against
the total fee payable by the Company at closing. The Company has also agreed to
reimburse Broadview for its reasonable out of pocket costs and expenses,
including, without limitation, the fees of its counsel, in connection with its
engagement. In addition, the Company has also agreed to indemnify Broadview
against certain liabilities and expenses arising out of its engagement.

Except as described above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to shareholders on its behalf concerning
the Offer or the Merger.

15
<PAGE>

Item 6. Interest in Securities of the Subject Company.

No transactions in shares of Common Stock have been effected during the past
60 days by the Company or any subsidiary of the Company or, to the best of the
Company's knowledge after a review of Form 4 filings, by any executive officer,
director or affiliate of the Company.

Item 7. Purposes of the Transaction and Plans or Proposals.

Except as set forth in this Schedule 14D-9, the Company is not currently
undertaking or engaged in any negotiations in response to the Offer that relate
to (1) a tender offer for or other acquisition of the Company's securities by
the Company, any subsidiary of the Company or any other person; (2) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company; (3) a purchase, sale,
or transfer of a material amount of assets of the Company or any subsidiary of
the Company; or (4) any material change in the present dividend rate or policy,
or indebtedness or capitalization of the Company.

Except as set forth in this Schedule 14D-9, there are no transactions,
resolutions of the Board of Directors, agreements in principle, or signed
contracts in response to the Offer that relate to one or more of the events
referred to in the preceding paragraph.

Item 8. Additional Information.

The Company Rights Agreement.

Each Company Right issued pursuant to the Company Rights Agreement entitles
the registered holder thereof to purchase one one-hundredth of a share of
Preferred Stock at an exercise price of $75.00 per share, subject to
adjustment. Until the earlier of (a) the close of business on the tenth day
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired beneficial ownership of
20% or more of the outstanding Common Stock or (b) the close of business on the
tenth business day after the day that a tender offer or exchange offer is first
published, sent or given to stockholders if, upon consummation of the tender or
exchange offer, that person would be an Acquiring Person (the later of such
dates being the "Distribution Date"), the Company Rights will be evidenced by
the certificates for the Common Stock, and not by separate certificates. After
the Distribution Date, each holder of Company Rights (other than the Acquiring
Person) will thereafter have the right to receive, in lieu of shares of
Preferred Stock, such number of shares of Common Stock as shall equal the
result obtained by multiplying the then current purchase price by the number of
one one-hundredths of a Preferred Share for which a Company Right was
exercisable immediately prior to the first occurrence of any such event, and
dividing that product by 50% of the current market price per share of the
Common Stock. The Company Rights may be redeemed at a price of $.01 per Company
Right at any time prior to a person becoming an Acquiring Person.

The Company and The First National Bank of Boston, as rights agent under the
Company Rights Agreement, amended the Company Rights Agreement as of November
9, 2000 to provide, among other things, that (i) 3M and its affiliates will not
be considered an Acquiring Person under the Company Rights Agreement by reason
of the consummation of the transactions contemplated by the Merger Agreement,
the Shareholders Agreement or the Option Agreement and (ii) a Stock Acquisition
Date, Triggering Event or Distribution Date, as those terms are defined in the
Company Rights Agreement, shall not be deemed to have occurred by reason of the
consummation of the transactions contemplated by the Merger Agreement, the
Shareholders Agreement or the Option Agreement.

Section 14(f) Information Statement. The Information Statement attached as
Annex B hereto is being furnished in connection with the possible designation
by 3M, pursuant to the Merger Agreement, of certain persons to be appointed to
the Board of Directors other than at a meeting of the Company's shareholders.

In addition, the information contained in the Exhibits referred to in Item 9
below is incorporated herein by reference.

16
<PAGE>

Item 9. Exhibits.

The following Exhibits are filed herewith:

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Exhibit No. Description
-------------------------------------------------------------------------------
<C> <S>
(a)(1) Letter to Shareholders of the Company, dated November 20, 2000.
-------------------------------------------------------------------------------
(a)(2) Opinion of Broadview International LLC, dated November 13, 2000
(included as Annex A to this Schedule 14D-9).
-------------------------------------------------------------------------------
(a)(3) Joint Press Release issued by 3M and the Company on November 13,
2000 (incorporated by reference to the Schedule 14D-9 filed by the
Company on November 13, 2000).
-------------------------------------------------------------------------------
(a)(4) The Introduction and Section 13 of the Offer to Purchase dated
November 17, 2000 (incorporated by reference to Exhibit (a)(1)(A)
of the Schedule TO filed by 3M and the Purchaser on November 17,
2000).
-------------------------------------------------------------------------------
(e)(1) Agreement and Plan of Merger, dated as of November 13, 2000, among
3M the Purchaser and the Company (incorporated by reference to
Exhibit (d)(1) of the Schedule TO filed by 3M and the Purchaser on
November 17, 2000).
-------------------------------------------------------------------------------
(e)(2) Confidential Disclosure Agreement, dated as of September 27, 2000,
among the Company and 3M.
-------------------------------------------------------------------------------
(e)(3) Shareholders Agreement, dated as of November 13, 2000, among 3M,
the Purchaser and the parties identified on Schedule A thereto
(incorporated by reference to Exhibit (d)(3) of the Schedule TO
filed by 3M and the Purchaser on November 17, 2000).
-------------------------------------------------------------------------------
(e)(4) Stock Option Agreement, dated as of November 13, 2000, between the
Company and 3M (incorporated by reference to Exhibit (d)(4) of the
Schedule TO filed by 3M and the Purchaser on November 17, 2000).
-------------------------------------------------------------------------------
(e)(5) The Information Statement of the Company, dated November 20, 2000
(included as Annex B to this Schedule 14D-9).
-------------------------------------------------------------------------------
</TABLE>

17
<PAGE>

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Schedule 14D-9 is true, complete and correct.

MICROTOUCH SYSTEMS, INC.

By: /s/ D. Westervelt Davis

Name:D. Westervelt Davis
Title:Chief Executive Officer and
President

Dated: November 20, 2000

18
<PAGE>

ANNEX A

November 13, 2000

CONFIDENTIAL

Board of Directors
MicroTouch Systems, Inc.
300 Griffin Brook Park Drive
Methuen, MA 01844

Dear Members of the Board:

We understand that MicroTouch Systems, Inc. ("MicroTouch" or the "Company"),
Minnesota Mining and Manufacturing Company ("3M" or the "Parent") and Equinox
Acquisition, Inc., a wholly-owned subsidiary of Parent ("Merger Sub"), propose
to enter into an Agreement and Plan of Merger (the "Agreement") pursuant to
which Parent will cause Merger Sub to make a tender offer (the "Offer") to
purchase all of the issued and outstanding shares of common stock of MicroTouch
(the "Company Common Shares") at a price per share of $21.00 (the "Offer
Price") in cash, and subsequently merge with and into MicroTouch (the
"Merger"). Pursuant to the Merger, each issued and outstanding Common Share not
acquired in the Offer will be converted into the right to receive the highest
per share cash consideration paid pursuant to the Offer. The terms and
conditions of the above described Offer and Merger (together, the
"Transaction") are more fully detailed in the Agreement.

You have requested our opinion as to whether the Offer Price is fair, from a
financial point of view, to MicroTouch shareholders.

Broadview International LLC ("Broadview") focuses on providing merger and
acquisition advisory services to information technology ("IT"), communications
and media companies. In this capacity, we are continually engaged in valuing
such businesses, and we maintain an extensive database of IT, communications
and media mergers and acquisitions for comparative purposes. We are currently
acting as financial advisor to MicroTouch's Board of Directors and will receive
a fee from MicroTouch upon the successful conclusion of the Transaction.

In rendering our opinion, we have, among other things:

1.) reviewed the terms of the Agreement in the form of the draft dated November
9, 2000 furnished to us by 3M's legal counsel on November 9, 2000 (which,
for the purposes of this opinion, we have assumed, with your permission, to
be identical in all material respects to the agreement to be executed,
except that, we have assumed with your permission, that the Offer Price is
as defined above);

2.) reviewed MicroTouch's annual report on Form 10-K for the fiscal year ended
December 31, 1999, including the audited financial statements included
therein, and MicroTouch's quarterly report on Form 10-Q for the quarter
ended September 30, 2000, including the unaudited financial statements
included therein;

3.) reviewed certain internal financial and operating information relating to
MicroTouch, including quarterly projections through December 31, 2001 and
annual projections through December 31, 2002, prepared and furnished to us
by MicroTouch management;

4.) participated in discussions with MicroTouch management concerning the
operations, business strategy, current financial performance and prospects
for MicroTouch;

5.) discussed with MicroTouch management its view of the strategic rationale
for the Transaction;

19
<PAGE>

6.) reviewed the recent reported closing prices and trading activity for
Company Common Shares;

7.) compared certain aspects of the financial performance of MicroTouch with
public companies we deemed comparable;

8.) analyzed available information, both public and private, concerning other
mergers and acquisitions we believe to be comparable in whole or in part to
the Transaction;

9.) assisted in negotiations and discussions related to the Transaction among
MicroTouch, 3M and their respective financial and legal advisors; and

10.) conducted other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.

In rendering our opinion, we have relied, without independent verification, on
the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by MicroTouch.
With respect to the financial projections examined by us, we have assumed that
they were reasonably prepared, and reflected the best available estimates and
good faith judgments of the management of MicroTouch as to the future
performance of MicroTouch. We have neither made nor obtained an independent
appraisal or valuation of any of MicroTouch's assets.

Based upon and subject to the foregoing, we are of the opinion that the Offer
Price is fair, from a financial point of view, to MicroTouch shareholders.

For purposes of this opinion, we have assumed that MicroTouch is not currently
involved in any material transaction other than the Transaction, other publicly
announced transactions, and those activities undertaken in the ordinary course
of conducting its business. Our opinion is necessarily based upon market,
economic, financial and other conditions as they exist and can be evaluated as
of the date of this opinion, and any change in such conditions would require a
reevaluation of this opinion.

This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of MicroTouch in
connection with its consideration of the Transaction and does not constitute a
recommendation to any MicroTouch shareholder as to whether such shareholder
should tender its shares in the Offer or as to how such shareholder should vote
on the Merger. This opinion may not be published or referred to, in whole or
part, without our prior written permission, which shall not be unreasonably
withheld. Broadview hereby consents to references to and the inclusion of this
opinion in its entirety in the Solicitation/Recommendation Statement on
Schedule 14D-9 and, if required, the Proxy Statement, in each case to be
distributed to MicroTouch shareholders in connection with the Transaction.

Sincerely,

/s/ Broadview International LLC

Broadview International LLC

20
<PAGE>

ANNEX B

MICROTOUCH SYSTEMS, INC.
300 Griffin Brook Park Drive
Methuen, Massachusetts 01844

INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14f-1 THEREUNDER

This Information Statement is being mailed on or about November 21, 2000 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of MicroTouch Systems, Inc. (the "Company"). You are
receiving this Information Statement in connection with the possible election
of persons designated by Minnesota Mining and Manufacturing Company ("3M"), a
corporation formed under the laws of the State of Delaware, to a majority of
seats on the Board of Directors (the "Board of Directors") of the Company.

On November 13, 2000, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with 3M and Equinox Acquisition, Inc. (the
"Purchaser"), a corporation formed under the laws of The Commonwealth of
Massachusetts and a wholly-owned subsidiary of 3M, pursuant to which the
Purchaser is required to commence a tender offer to purchase all outstanding
shares of the common stock, par value $.01 per share, of the Company (the
"Common Stock"), including the associated share purchase rights (the "Company
Rights," and together with the Common Stock, the "Shares") issued pursuant to
the Rights Agreement, dated as of January 19, 1996, as amended from time to
time, at a price per Share of $21.00, net to the seller in cash (the "Offer
Price"), upon the terms and conditions set forth in the Purchaser's Offer to
Purchase, dated November 17, 2000, and in the related Letter of Transmittal
(which, together with any amendments and supplements thereto, collectively
constitute the "Offer"). Copies of the Offer to Purchase and the Letter of
Transmittal have been mailed to shareholders of the Company and are filed as
Exhibits (a)(1)(A) and (a)(1)(B) respectively, to the Tender Offer Statement on
Schedule TO (as amended from time to time, the "Schedule TO") filed by the
Purchaser and 3M with the Securities and Exchange Commission (the "Commission")
on November 17, 2000.

The Merger Agreement provides that, subject to the satisfaction or waiver of
certain conditions, following completion of the Offer, and in accordance with
the Massachusetts Business Corporation Law (the "MBCL"), the Purchaser will be
merged with the Company (the "Merger"). Following consummation of the Merger,
the Merger Agreement provides that the Company will continue as the surviving
corporation (the "Surviving Corporation") and will be a wholly-owned subsidiary
of 3M. At the effective time (the "Effective Time"), each issued and
outstanding Share (other than Shares that are owned by 3M, the Purchaser, any
of their respective subsidiaries, the Company or any of its subsidiaries, and
Shares held by shareholders of the Company who did not vote in favor of the
Merger Agreement and who comply with all of the relevant provisions of Sections
86 through 98 of the MBCL) will be converted into the right to receive $21.00
in cash or any greater amount per Share paid pursuant to the Offer.

The Offer, the Merger, and the Merger Agreement are more fully described in
the Schedule 14D-9 to which this Information Statement forms Annex B, which was
filed by the Company with the Commission on November 17, 2000 and which is
being mailed to shareholders of the Company along with this Information
Statement.

This Information Statement is being mailed to you in accordance with Section
14(f) of the Securities Exchange Act and Rule 14f-l promulgated thereunder. The
information set forth herein supplements certain information set forth in the
Statement. Information set forth herein related to 3M, the Purchaser or the 3M
Designees (as defined herein) has been provided by 3M. You are urged to read
this Information Statement carefully. You are not, however, required to take
any action in connection with the matters set forth herein.

Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
November 17, 2000. The Offer is currently scheduled to expire at 12:00
midnight, Boston time, on January 3, 2001, unless the Purchaser extends it.

21
<PAGE>

GENERAL

The Common Stock is the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of the shareholders of the
Company. Holders of Common Stock are entitled to cast one vote per share on
matters presented for a vote at such meetings. As of November 10, 2000, there
were 6,491,823 shares of Common Stock outstanding, of which 3M and the
Purchaser own no shares as of the date hereof.

RIGHTS TO DESIGNATE DIRECTORS AND 3M DESIGNEES

The Merger Agreement provides that, promptly upon the satisfaction of the
Minimum Tender Condition (as defined below) and the acceptance for payment of,
and payment by the Purchaser for, any Shares pursuant to the Offer, the
Purchaser will be entitled to designate a number of the members (the "3M
Designees") of the Board of Directors equal to that number of directors,
rounded down to the nearest whole number, which is the product of (a) the total
number of directors on the Board (giving effect to the directors elected
pursuant to this sentence) multiplied by (b) a fraction, the numerator of which
is the number of shares of Common Stock accepted for payment and paid for by
the Purchaser and the denominator of which is the number of shares of Common
Stock outstanding at the time of the Purchaser's acceptance for payment of
tendered shares of Common Stock by the Purchaser.

Notwithstanding the foregoing, if Shares are purchased pursuant to the
Offer, there will be until the Effective Time at least two members of the Board
who were directors on the date of the Merger Agreement and who are not officers
of the Company or representatives of any affiliates of the Company.

The 3M Designees will be selected by 3M from among the individuals listed
below. Each of the following individuals has consented to serve as a director
of the Company if appointed or elected. None of the 3M Designees currently is a
director of, or holds any positions with, the Company. 3M has advised the
Company that, to the best of 3M's knowledge, except as set forth below, none of
the 3M Designees or any of their affiliates beneficially owns any equity
securities or rights to acquire any such securities of the Company nor has any
such person been involved in any transaction with the Company or any of its
directors, executive officers or affiliates that is required to be disclosed
pursuant to the rules and regulations of the Commission other than with respect
to transactions between 3M and the Company that have been described in the
Schedule TO or the Schedule 14D-9.

The name, age, present principal occupation or employment and five-year
employment history of each of the individuals who may be selected as 3M
Designees are set forth below. Unless otherwise indicated, each such individual
has held his or her present position as set forth below for the past five
years. Unless otherwise indicated, each such person is a citizen of the United
States and the business address of each person listed below is 3M Center, St.
Paul, Minnesota 55144.

Name, Age, Principal Occupation and Employment History

Ronald A. Weber Age: 58; Mr. Weber has been Executive Vice President,
Transportation, Graphics and Safety Markets of 3M since May 2000. Mr. Weber
previously held the following positions at 3M: Division Vice President,
Automotive Division from August 1996 until May 2000; and Division Vice
President, Automotive Engineered Systems from April 1995 until August 1996.

22
<PAGE>

Andrew H. Wong Age: 50; Mr. Wong has been Division Vice President, Optical
Systems Division, of 3M since October 1999. Mr. Wong previously held the
following positions at 3M: General Manager, Optical Systems Division, from
March 1998 until October 1999; Business Department Manager, Optical Systems,
Safety and Security Systems Division, from 1996 until March 1998; and Business
Project Manager, Optical Systems, Safety and Security Systems Division, from
1994 until 1996.

Peggy Kubicz Hall Age: 45; Ms. Hall has been Senior Counsel of 3M since
1999, and was Counsel of 3M from 1995 until 1999.

STOCK OWNERSHIP

Security Ownership of Certain Beneficial Owners and Management

Except as set forth below, no person or group, to the knowledge of the
Company, owns five percent or more of the Common Stock.

The following table sets forth information as of October 31, 2000 with
respect to the amount of the Company's Common Stock held by each director,
Named Executive Officer (as defined below), and all directors and executive
officers as a group. Information is given as of September 30, 2000 for each
holder of 5% or more of the Company's Common Stock, with the exception of
Cardinal Investment Company, Inc., for which information is given as of October
11, 2000. In each case, the beneficial owner of the shares shown has sole
voting and sole investment power:

<TABLE>
<CAPTION>
Common Shares Percentage
Name and Address (1) Owned Owned
-------------------- ------------- ----------
<S> <C> <C>
Lord, Abbett & Co..................................... 961,640 14.8%
90 Hudson Street
Jersey City, NJ 07302
State of Wisconsin Investment Board................... 650,000 10.0%
P.O. Box 7842
Madison, WI 53707
Dimensional Fund Advisors Inc......................... 564,200 8.7%
1299 Ocean Avenue
Santa Monica, CA 90401
Cardinal Investment Company, Inc...................... 460,300 7.1%
500 Crescent Court, Suite 250
Dallas, Texas 75201
James D. Logan (2).................................... 162,598 2.5%
Peter Brumme (3)...................................... 10,000 0.2%
D. Westervelt Davis (4)............................... 229,500 3.4%
Frank Manning (5)..................................... 36,000 0.6%
Edward J. Stewart, III (6)............................ 43,000 0.7%
Geoffrey P. Clear (7)................................. 101,812 1.5%
Janet M. Muto (8)..................................... 0 0.0%
Robert J. Senior (9).................................. 56,700 0.9%
Jeffrey E. Shaw (10).................................. 0 0.0%
Directors and Current Executive Officers as a group... 717,876 10.2%
(11 individuals; includes options to acquire 554,718
shares which are exercisable within 60 days of
10/31/00)
</TABLE>
--------
(1) The address for all officers and directors of the Company is c/o MicroTouch
Systems, Inc., 300 Griffin Brook Park Drive, Methuen, Massachusetts 01844.

23
<PAGE>

(2) Consists of 120,598 shares owned directly by Mr. Logan and options to
acquire 42,000 shares that are exercisable within 60 days of 10/31/00.
(3) Consists of options to acquire 10,000 shares that are exercisable within 60
days of 10/31/00.
(4) Consists of 12,000 shares owned directly by Mr. Davis and options to
acquire 217,500 shares that are exercisable within 60 days of 10/31/00.
(5) Consists of options to acquire 36,000 shares that are exercisable within 60
days of 10/31/00.
(6) Consists of 22,000 shares owned directly by Mr. Stewart and options to
acquire 21,000 shares that are exercisable within 60 days of 10/31/00. Mr.
Stewart disclaims beneficial ownership of an additional 9,000 shares owned
by family members.
(7) Consists of 5,222 shares owned directly by Mr. Clear and options to acquire
96,590 shares that are exercisable within 60 days of 10/31/00.
(8) Ms. Muto resigned as an officer of the Company as of April 25, 2000.
(9) Consists of options to acquire 56,700 shares that are exercisable within 60
days of 10/31/00.
(10) Mr. Shaw resigned as an officer of the Company as of June 9, 2000.

BOARD OF DIRECTORS

Terms of Directors

The board of directors is divided into three classes. At each annual
meeting, the term of one class expires. Directors in each class serve three-
year terms.

Directors and Executive Officers

The directors and executive officers of the Company are as follows:

James D. Logan Age: 47; Mr. Logan founded MicroTouch in 1983. He has served
as Chairman of the Board (Class III Director) since April 1992. In April 1996,
he stepped down as President and Chief Executive Officer, roles he had held
since 1983 and 1992, respectively, to pursue other business interests and is
currently the Chief Executive Officer and President of Gotuit Media, Inc., a
privately held high technology company. Mr. Logan continues to serve as the
Company's Chairman of the Board. Mr. Logan received an M.B.A. from the Amos
Tuck School of Business Administration at Dartmouth College, where he was an
Edward Tuck Scholar, and a B.A. from Hamilton College.

D. Westervelt Davis Age: 52; Since April 1996, Mr. Davis has served as
President and Chief Executive Officer of the Company and has been a director of
the Company (Class I) since 1991. Previously, Mr. Davis was the President of
Lasertron, a Division of Oak Industries, a manufacturer of semiconductor
components for fiber optic communications, from November 1994 to March 1996.
From April 1992 to November 1994, Mr. Davis was a principal with Rand Griffin,
a strategy consulting firm. Mr. Davis received an M.B.A. from the Harvard
Graduate School of Business Administration and a B.S.E. from Princeton
University.

Edward J. Stewart, III Age: 54; Mr. Stewart has been a director of the
Company (Class II) since 1983. Mr. Stewart is a retired partner of Kestrel
Venture Management. From 1983 to 1999, Mr. Stewart was the General Partner of
Kestrel Venture Management, a venture capital firm, and its predecessor, and a
series of affiliated venture capital partnerships. Mr. Stewart is a director of
nine privately held companies. Mr. Stewart received an M.B.A. from the Harvard
Graduate School of Business Administration and a B.S. from Yale University.

Frank Manning Age: 51; Mr. Manning has been a director of the Company (Class
I) since 1993. He is President, Chief Executive Officer and Chairman of the
Board, and a co-founder of Zoom Telephonics, Inc., a publicly held manufacturer
of analog and broadband modems, wireless local area network products, and other
data communication products. In 1998, Mr. Manning became a director of
Massachusetts Technology Development Corporation, which invests in seed and
early-stage technology companies in Massachusetts. Mr. Manning received his
B.S., M.S., and Ph.D. in Electrical Engineering from the Massachusetts
Institute of Technology, where he was a National Science Foundation fellow.

24
<PAGE>

Peter Brumme Age: 50; Mr. Brumme has been a director of the Company (Class
III) since 1998. Since January 2000, Mr. Brumme has served as Vice President of
Marketing & Business Development of SilverStream Software, Inc., a producer of
Internet application development software. During 1999, he served as Executive
Vice President of Sales & Marketing and in 1998 and 1997 as Chief Operating
Officer of SilverStream. From March 1993 to December 1996, Mr. Brumme served as
Senior Vice President of Sales & Marketing and Chief Operating Officer of
Watermark Software, Inc., a provider of Windows-based imaging software acquired
by FileNet Corporation. Mr. Brumme also serves as an advisor to several venture
capital firms. Mr. Brumme received a Master of Science in Operations Research
from Cornell University and a B.S. in Applied Mathematics from MIT.

Robert J. Senior Age: 44; Mr. Senior has been Vice President and General
Manager--European Operations since January 1995. Before that, he was Vice
President--Sales from March 1993 until December 1994. He was General Manager of
the Company's U.K. subsidiary from January 1991 until March 1993. Mr. Senior
received a B. Ed. in Physics from Exeter University.

Barry Waxman Age: 46; Mr. Waxman has been Vice President Worldwide Sales
since November 1999. Previously he was Vice President Worldwide Sales and
Marketing for Pixel Magic, a wholly owned subsidiary of Oak Technology, a
manufacturer of high performance image processing semiconductors and systems.
Prior to that, he was Vice President--Sales at Mylex Corporation, a publicly
held manufacturer of RAID controllers and subsystems. Mr. Waxman holds a B.Sc.
degree in Electronics and Electrical Engineering from Paisley College of
Technology, Scotland & King's College, London.

Geoffrey P. Clear Age: 50; Mr. Clear has been Vice President--Finance &
Administration, Chief Financial Officer and Treasurer of the Company since
February 1992. Mr. Clear is a Certified Public Accountant and a member of the
Financial Executives Institute. Mr. Clear received an M.B.A. from the Amos Tuck
School of Business Administration at Dartmouth College, where he was an Edward
Tuck Scholar, and a B.A. from Dartmouth College.

Robert Becker Age: 40; Mr. Becker has been Vice President--Engineering since
July 1998. Previously he was Vice President-Engineering at PictureTel
Corporation where he was responsible for the videoconferencing company's Client
Products and Peripherals. Earlier positions at PictureTel included Engineering
Group Products Director and several Program Management positions. Mr. Becker
has 10 patents to his credit for work in computer architectures. Mr. Becker
received a B.S. degree in Computer Science from the University of Connecticut
and a B.A. degree in Liberal Arts from Fairfield University.

James Ragonese Age: 47; Mr. Ragonese has been Vice President--Business
Development and Product Management since September 2000. Previously he was
Director of Worldwide Business Development from January 2000 to August 2000.
From July 1996 to December 1999 he held other director level positions
including Director of US Vertical Marketing and Director of Sales, Worldwide
Gaming, Australia and Asia Pacific. Mr. Ragonese has a B.S. degree in
Psychology from Assumption College and a M.B.A. in Marketing and Finance from
Northeastern University.

James Ellis Age: 39; Mr. Ellis has been Vice President--Customer
Satisfaction and Quality since January 2000. From August 1998 to December 1999
he held other director level positions including Director of Quality and
Director of Customer Satisfaction and Quality. Prior to that he held various
director level positions at C&M Corporation, a wire and cable assembly
manufacturer, from 1995 to 1998. Mr. Ellis has a B.S. degree in Industrial
Engineering from the University of Massachusetts--Amherst and a M.B.A. in
Business Economics from Bentley College.

Director Liability

The Company's restated articles of organization, as amended, provide that
directors will not be liable for monetary damages for breach of fiduciary duty
except in the case of breaches of the director's duty of loyalty,

25
<PAGE>

acts or omissions taken in bad faith or involving intentional misconduct or
knowing violations of law, improper distributions to shareholders or loans to
officers or directors or transactions from which a director derived an improper
personal benefit.

The Company maintains a director's and officer's liability insurance policy
on behalf of its directors and officers.

Indemnification of Directors and Officers

The Company's by-laws require the Company to indemnify its officers,
directors, employees and agents against all liabilities and expenses they may
incur on account of all actions threatened or brought against them by reason of
their services to the Company. No indemnification is provided for any person
with respect to any matter as to which such person has been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the Company's best interests.

Director Compensation

For serving the Company as directors, directors receive a fee of $1,000 for
each board and $750 for each committee meeting attended. Additionally, upon
election to the Board of Directors, each new non-employee director shall
receive options to purchase 10,000 shares of Common Stock. Immediately
following the Annual Shareholders' Meeting each year, each non-employee
director shall automatically receive options to purchase 5,000 shares of Common
Stock. The options have a term of 5 years and are priced at the last sale price
of the Company's Common Stock for the day previous to the date of the grant.

Meetings of the Board of Directors in 1999

Six meetings of the Board of Directors were held during 1999. The Board has
three committees: Compensation, which met once during 1999; Audit, which met
twice during 1999; and Nominating, which did not meet in 1999. Each incumbent
director attended at least 75% of the aggregate of the total number of meetings
of the Board of Directors and the total number of meetings held by all
committees of the Board on which he served during 1999.

Board Committees of the Board of Directors

Audit Committee. The Audit Committee, which currently consists of Messrs.
Stewart and Manning, nominates the Company's independent auditing firm, reviews
the scope of the audit and approves in advance reviews by the independent
auditors, their activities and recommendations regarding internal control, and
meets with the independent auditors and management, each of whom had direct and
open access to the Audit Committee.

Compensation Committee. The Compensation Committee, which currently consists
of Messrs. Brumme and Stewart, determines the compensation of officers other
than employee directors (as to whom the Committee makes recommendations to the
Board of Directors which then determines their compensation).

Nominating Committee. The Nominating Committee, which currently consists of
Messrs. Manning and Logan, nominates persons to serve as members of the
Company's Board of Directors, recommends directors to serve on the various
Board Committees and recommends a successor to the chief executive officer
whenever a vacancy occurs for any reason. The Nominating Committee does not
consider for nomination to the Board of Directors candidates suggested by the
stockholders.

Compensation Committee Interlocks and Insider Participation

Messrs. Brumme and Stewart, each an outside director, are the members of the
Company's Compensation Committee. In 1997 Mr. Brumme served as a consultant to
the Company. Neither member of the Compensation

26
<PAGE>

Committee has at any time been an officer or employee of the Company or any of
its subsidiaries. No executive officer of the Company served as a member of the
compensation committee or board of directors of any other entity which has an
executive officer serving as a member of the Company's Board of Directors or
Compensation Committee.

Section 16(a) Beneficial Ownership Reporting Compliance

The Company's executive officers and directors are required, under Section
16(a) of the Securities Exchange Act of 1934, as amended, to file reports of
ownership and changes in ownership of securities of the Company with the
Securities and Exchange Commission. Copies of those reports must also be
furnished to the Company.

Based solely on a review of (i) Forms 3, 4 and 5 relating to the fiscal year
ended December 31, 1999, and amendments thereto, furnished to the Company, and
(ii) written representations that no Form 5 was required, the Company believes
that, during 1999, the executive officers and directors of the Company complied
with all applicable Section 16(a) filing requirements, except as follows: Mr.
Waxman inadvertently failed to file a Form 3 upon his employment as an officer
of the Company but included the required information in a timely filed Form 5;
Messrs. Davis, Fisher and Logan each inadvertently failed to file one Form 4
covering one, two and five transactions, respectively, but included such
transactions in timely filed Forms 5; Joel Blenner, a former officer of the
Company, inadvertently failed to file three Forms 4 covering 22 transactions,
but included such transactions in a timely filed Form 5; and Mr. Senior
inadvertently failed to file three Forms 4 covering eight transactions, but
included such transactions in a late-filed amended Form 5.

EXECUTIVE COMPENSATION

The following table shows, for the fiscal years indicated, the annual
compensation paid by the Company, together with long-term and other
compensation, for the Chief Executive Officer and the next four most highly
compensated executive officers in 1999 (the "Named Executive Officers") of the
Company.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Compensation
Awards
------------
Annual
Compensation Securities
----------------- Underlying
Year Salary Bonus(1) Options
---- -------- -------- ------------
<S> <C> <C> <C> <C>
D. Westervelt Davis....... 1999 $233,077 -- 50,000
President, Chief
Executive Officer and 1998 $207,692 $100,000 50,000
Director 1997 $200,000 -- 50,000
Janet Muto................ 1999 $192,061 -- 8,000
Vice President--
Marketing (2) 1998 $163,558 $ 57,500 8,000
1997 $107,221 $ 65,000 50,000
Robert J. Senior.......... 1999 $170,489 -- 8,000
Vice President & General
Manager-- 1998 $154,340 $116,170 23,000
European Operations 1997 $152,137 $107,941 8,000
Jeffrey E. Shaw........... 1999 $166,539 -- 8,000
Vice President--Quality
and Operations (3) 1998 $155,769 $ 53,500 17,000
1997 $135,577 $ 55,000 45,000
Geoffrey P. Clear......... 1999 $160,000 -- 8,000
Vice President--Finance
& Administration, 1998 $161,923 $ 53,500 25,000
Chief Financial Officer
& Treasurer 1997 $138,308 $ 54,000 8,000
</TABLE>
--------
(1) Reflects amounts awarded for performance in the respective fiscal year,
even though the compensation may not have actually been paid until a later
date.

27
<PAGE>

(2) Ms. Muto became Vice President--Marketing in April 1997. She resigned as an
officer of the Company as of April 25, 2000.
(3) Mr. Shaw became Vice President--Quality and Operations in January 1997. He
resigned as an officer of the Company as of June 9, 2000.

OPTION GRANTS IN LAST FISCAL YEAR

The following table contains information concerning the grant of stock
options to the Company's Named Executive Officers during the last completed
fiscal year.

<TABLE>
<CAPTION>
Percentage
Number of of Total
Securities Options Grant
Underlying Granted to Date
Options Employees Exercise Expiration Present
Name Granted(1) in 1999 Price Date Value(2)
---- ---------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
D. Westervelt Davis.......... 50,000 13.0% $12.81 4/14/2004 $373,000
Janet Muto................... 8,000 2.1% $12.81 4/14/2004 $ 60,000
Robert J. Senior............. 8,000 2.1% $12.81 4/14/2004 $ 60,000
Jeffrey E. Shaw.............. 8,000 2.1% $12.81 4/14/2004 $ 60,000
Geoffrey P. Clear............ 8,000 2.1% $12.81 4/14/2004 $ 60,000
</TABLE>
--------
(1) Options granted become exercisable in variable installments over 3 years.
(2) Based on the Black-Scholes option pricing model adapted for use in valuing
stock options. The actual value, if any, that an executive may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised and there is no assurance the value realized by an
executive will be at or near the value estimated by the Black-Scholes
model. The estimated values under that model are based on arbitrary
assumptions (as required by the Black-Scholes methodology) as to variables
such as interest rates (a weighted average of 5.1%) and stock price
volatility (.64). Amounts indicated are not intended to be a forecast of
possible future appreciation, if any, in the price of the Company's Common
Stock.

28
<PAGE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES

The following table sets forth information with respect to the Named
Executive Officers' option exercises during the last completed fiscal year and
unexercised options held as of the end of the last completed fiscal year.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options Held at 12/31/99 12/31/99(1)
------------------------- -------------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. Westervelt Davis..... 5,000 $63,750 167,500 200,000 $ 96,563 0
Janet Muto.............. 0 0 27,000 39,000 0 0
Robert J. Senior........ 0 0 44,750 30,250 $187,938 0
Jeffrey E. Shaw......... 0 0 26,250 43,750 0 0
Geoffrey P. Clear....... 0 0 84,029 31,971 $647,625 0
</TABLE>

--------
(1) Based on the difference between the closing price of the Company's Common
Stock as reported on the Nasdaq Stock Market as of 12/31/99 ($12.63) and
the exercise price of the respective options. Dollar values are rounded to
the nearest thousand.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On September 25, 1997, Mr. Peter Brumme, a Class III Director of the
Company, received an option to purchase 5,000 shares of Common Stock as
consideration for consulting services. The option exercise price was $26.50 per
share and the option by its terms vests in its entirety on September 25, 2003.
However, pursuant to the Merger Agreement, this option will fully vest when the
Minimum Tender Condition is satisfied.