SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
COMMISSION FILE NO. 0-20887
TELIDENT, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction
applies:______________________________________________________
2) Aggregate number of securities to which transaction
applies:______________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):______________________________________________
4) Proposed maximum aggregate value of
transaction:__________________________________________________
5) Total fee paid:_______________________________________________
[ ] Fee paid previously with preliminary materials:________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________
2) Form, Schedule or Registration Statement No.:_________________
3) Filing Party:_________________________________________________
4) Date Filed:___________________________________________________
<PAGE>
TELIDENT, INC.
TEN SECOND STREET, N.E., SUITE 212
MINNEAPOLIS, MINNESOTA 55413
October 1, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Telident, Inc. (the "Company"), to be held in the Mississippi River North
Room of the Marquette Hotel, located at 710 Marquette Avenue, Minneapolis,
Minnesota, on Tuesday, November 2, 1999, at 1:00 p.m. local time.
At the meeting you will be asked to vote for the election of seven
directors and to ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as the Company's independent public accountants for the fiscal year
ending June 30, 2000. The accompanying material contains the Notice of Annual
Meeting, the Proxy Statement, which includes information about the matters to be
acted upon at the meeting, and the related proxy card.
Whether or not you are able to attend the meeting in person, I urge you
to sign and date the enclosed proxy card and return it promptly in the enclosed
envelope.
Very truly yours,
TELIDENT, INC.
/s/ Bruce H. Senske
Bruce H. Senske
Interim Chief Executive Officer
<PAGE>
TELIDENT, INC.
TEN SECOND STREET, N.E., SUITE 212
MINNEAPOLIS, MINNESOTA 55413
-------------
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
NOVEMBER 2, 1999
--------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Telident, Inc., a Minnesota corporation (the "Company"), will be held in the
Mississippi River North Room of the Marquette Hotel, located at 710 Marquette
Avenue, Minneapolis, Minnesota, on Tuesday, November 2, 1999, at 1:00 p.m. local
time, for the following purposes, as more fully described in the accompanying
Proxy Statement:
1. To elect seven directors for the ensuing year and until their
successors have been elected and duly qualified;
2. To ratify the appointment of Deloitte & Touche LLP as the
Company's independent public accountants for the fiscal year
ending June 30, 2000; and
3. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting or
any adjournment or postponement thereof.
Only shareholders of record at the close of business on September 8,
1999, are entitled to notice of and to vote at the meeting. Whether or not you
expect to attend the meeting in person, please mark, date and sign the enclosed
proxy exactly as your name appears thereon and promptly return it in the
envelope provided, which requires no postage if mailed in the United States.
Proxies may be revoked at any time before they are exercised and, if you attend
the meeting in person, you may withdraw your proxy and vote personally on any
matter brought properly before the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Brian D. Wenger
Brian D. Wenger
Secretary
Minneapolis, Minnesota
October 1, 1999
<PAGE>
TELIDENT, INC.
TEN SECOND STREET, N.E., SUITE 212
MINNEAPOLIS, MINNESOTA 55413
-------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
NOVEMBER 2, 1999
--------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Telident, Inc. (the "Company") for use
at the Annual Meeting of Shareholders to be held in the Mississippi River North
Room of the Marquette Hotel, located at 710 Marquette Avenue, Minneapolis,
Minnesota, on Tuesday, November 2, 1999, at 1:00 p.m. local time, or at any
adjournment or postponement thereof. All shares of common stock and Series III
convertible preferred stock represented by properly executed and returned
proxies, unless such proxies have previously been revoked, will be voted at the
meeting and, where the manner of voting is specified on the proxy, will be voted
in accordance with such specifications. Shares represented by properly executed
and returned proxies on which no specification has been made will be voted for
the election of the nominees for director listed herein and for ratification of
the appointment of the independent public accountants for the fiscal year ending
June 30, 2000. If any other matters are properly presented at the meeting for
action, including a question of adjourning or postponing the meeting from time
to time, the persons named in the proxies and acting thereunder will have
discretion to vote on such matters in accordance with their best judgment.
The Notice of Annual Meeting, this Proxy Statement and the related
proxy card are first being mailed to shareholders of the Company on or about
October 1, 1999.
RECORD DATE AND OUTSTANDING VOTING STOCK
The Board of Directors has fixed the close of business on September 8,
1999, as the record date for determining the holders of the Company's
outstanding voting shares entitled to notice of, and to vote at, the meeting. On
that date, there were 3,037,657 shares of common stock and 400,000 shares of
Series III convertible preferred stock issued, outstanding and entitled to vote.
REVOCABILITY OF PROXIES
Any shareholder who executes and returns a proxy may revoke it at any
time before it is voted by giving written notice to the Secretary of the
Company, by executing a later-dated proxy and delivering it to the Secretary of
the Company, or by attending the meeting and giving oral notice to the Secretary
of the Company. Any written notice delivered to the Secretary of the Company
should be sent to Brian D. Wenger, Secretary, Telident, Inc., Ten Second Street,
N.E., Suite 212, Minneapolis, Minnesota 55413.
<PAGE>
VOTING AND SOLICITATION
Each shareholder is entitled to one vote, exercisable in person or by
proxy, for each share of common stock and each share of Series III convertible
preferred stock held of record on the record date.
Expenses incurred in connection with the solicitation of proxies will
be paid by the Company. The proxies are being solicited principally by mail. In
addition, directors, officers and regular employees of the Company may solicit
proxies personally or by telephone, for which they will receive no consideration
other than their regular compensation. The Company will also request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to
the beneficial owners of voting shares of the Company and will reimburse such
persons for their reasonable expenses so incurred.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The presence, in person or by proxy, of the holders of at least a
majority of the voting shares outstanding and entitled to vote is necessary to
constitute a quorum for the transaction of business at the meeting. All votes
will be tabulated by the inspector of election for the meeting, who will
separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
If a properly executed proxy is returned and the shareholder has
abstained from voting on any matter, the shares represented by such proxy will
be considered present at the meeting for purposes of determining a quorum and
for purposes of calculating the vote, but will not be considered to have been
voted in favor of such matter.
If a properly executed proxy is returned by a broker holding shares in
street name which indicates that the broker does not have discretionary
authority as to certain shares to vote on one or more matters, such shares will
be considered present at the meeting for purposes of determining a quorum, but
will not be considered to be represented at the meeting for purposes of
calculating the vote with respect to such matter.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of August 31, 1999, by (a) each
person known to the Company to own beneficially more than five percent of its
common stock, (b) each of the Company's directors and nominees for director, (c)
the executive officers named in the "Summary Compensation Table" below, and (d)
the directors and executive officers as a group. Unless otherwise noted, each
person identified below has sole voting and investment power as to the shares
shown. Except as otherwise noted below, the Company knows of no agreements among
its shareholders which relate to voting or investment power with respect to its
common stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP (1) (2) (1) (2)
- --------------------------------------- ----------------- ----------------
<S> <C> <C>
John D. Wunsch(3) .............................................. 1,719,368 46.4%
FAMCO III, Limited Liability Company(4) ........................ 1,717,253 46.4%
Interchange Tower, Suite 850
600 S. Highway 169
Minneapolis, MN 55426
Special Situations Private Equity Fund, L.P.(5) ................ 836,942 21.6%
153 East 53rd Street
New York, NY 10022
Willis K. Drake(6) ............................................. 150,849 5.0%
Mark W. Sheffert(7) ............................................ 24,225 *
W. Edward McConaghay(8) ........................................ 11,250 *
Scott R. Anderson(9) ........................................... 4,297 *
David F. Durenberger(10) ....................................... 3,951 *
Mack V. Traynor(11) ............................................ 1,189 *
All directors and executive officers as a group (7 persons) (12) 1,915,129 51.2%
</TABLE>
- -------------------
* Less than 1%.
(1) The securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the SEC and, accordingly, may include securities owned by
or for, among others, the spouse, children or certain other relatives of
such person as well as other securities as to which the person has or
shares voting or investment power or has the right to acquire within 60
days. The same shares may be beneficially owned by more than one person.
Unless otherwise indicated, the address for each listed shareholder is c/o
Telident, Inc., Ten Second Street, N.E., Suite 212, Minneapolis, Minnesota
55413.
(2) Percentage of beneficial ownership is based on 3,037,657 shares of common
stock outstanding as of August 31, 1999. Shares issuable pursuant to the
conversion of Series III convertible preferred stock and the exercise of
warrants and stock options are deemed outstanding for computing the
percentage of the person holding such securities but are not deemed
outstanding for computing the percentage of any other person. Certain
warrants reported herein contain antidilution rights which may be
triggered upon exercise. The table reflects (a) a conversion ratio of
approximately 2.33 shares of common stock for each share of Series III
convertible preferred stock held by FAMCO III, Limited Liability Company
("FAMCO"), based on the 10-day average closing price ending August 31,
1999, and (b) a conversion ratio of approximately 3.18 shares of common
stock for each share of Series III convertible preferred stock held by
Special Situations Private Equity Fund, L.P. ("Special Situations"), based
on the conversion formula applicable to shares held by Special Situations
during the special conversion period. See "- Conversion Terms of Series
III Convertible Preferred Stock."
(3) John D. Wunsch is the President and Chief Executive Officer of Family
Financial Strategies, Inc. ("FFS"), which is an affiliate of FAMCO. As a
result, FAMCO's shares are included in the beneficial ownership of Mr.
Wunsch and the beneficial ownership of all directors and executive
officers as a group. Mr. Wunsch's beneficial ownership also includes 2,115
shares purchasable by Mr. Wunsch pursuant to the exercise of stock
options.
3
<PAGE>
(4) Represents 465,064 shares purchasable pursuant to the conversion of
200,000 shares of Series III convertible preferred stock, 200,000 shares
purchasable pursuant to the exercise of warrants and 1,052,189 shares of
common stock. John D. Wunsch and Greg Nelson are the natural persons who
exercise control over FAMCO.
(5) Represents 636,942 shares purchasable pursuant to the conversion of
200,000 shares of Series III convertible preferred stock and 200,000
shares purchasable pursuant to the exercise of warrants. MG Advisers
L.L.C. is the general partner of and investment adviser to Special
Situations. Austin W. Marxe and David M. Greenhouse are the natural
persons who exercise control over Special Situations through MG Advisers
L.L.C.
(6) Represents 3,546 shares purchasable pursuant to the exercise of stock
options and 147,303 shares of common stock.
(7) Mr. Sheffert is President and Chief Executive Officer of Manchester
Companies, Inc. ("Manchester Companies") and its wholly owned subsidiary,
Manchester Financial Group, Inc. ("Manchester Financial"). As a result,
the 10,000 shares of common stock held by Manchester Financial are
included in the beneficial ownership of Mr. Sheffert and in the beneficial
ownership of all directors and executive officers as a group. Mr.
Sheffert's beneficial ownership also includes 11,187 shares purchasable
pursuant to the exercise of stock options and 3,038 shares of common
stock.
(8) Represents 10,000 shares purchasable pursuant to the exercise of stock
options and 1,250 shares of common stock.
(9) Represents 4,297 shares purchasable pursuant to the exercise of stock
options.
(10) Represents 3,764 shares purchasable pursuant to the exercise of stock
options and 187 shares of common stock.
(11) Represents 1,189 shares purchasable pursuant to the exercise of stock
options.
(12) Represents 465,064 shares purchasable pursuant to the conversion of
200,000 shares of Series III convertible preferred stock, 36,098 shares
purchasable pursuant to the exercise of stock options, 200,000 shares
purchasable pursuant to the exercise of warrants and 1,213,967 shares of
common stock.
CONVERSION TERMS OF SERIES III CONVERTIBLE PREFERRED STOCK
In general, the 400,000 outstanding shares of Series III convertible
preferred stock are convertible at a floating rate which depends on the 10-day
average closing bid price of the common stock at the time of conversion.
The following conversion formula applies to the preferred stock:
$2.50
----------------------------------------------------
The lesser of (a) $2.50 or (b) if the 10-day average
closing bid price of the common stock is less
than $2.50, then 80% of such average price
The preferred stock also contains antidilution rights which provide
that the number of shares issuable upon conversion will be increased if Telident
issues new securities at a price less than $2.50 per share.
Based on a 10-day average closing price for the period ending August
31, 1999, FAMCO and Special Situations would have been entitled to convert each
share of their Series III convertible preferred stock into approximately 2.33
shares of common stock.
Pursuant to a modification agreement, Telident amended the conversion
terms that apply to Special Situations, the owner of 200,000 shares of Series
III convertible preferred stock. The modification agreement only applies to
those shares of common stock which Special Situations receives upon conversion
and sells before the last date that the closing bid price of the common shares
exceeds $1.75 for a period of 10 consecutive trading days.
During this special conversion period, the phrase "80% of such average
price" in the conversion formula shall not exceed $0.785. In other words, as to
those shares which Special Situations is able to sell during the special
conversion period, the conversion rate will be approximately 3.18 shares of
common stock, as opposed to
4
<PAGE>
approximately 2.33 shares of common stock which would otherwise be received upon
conversion, for each share of Series III convertible preferred stock. Depending
upon the 10-day average closing price at the time of conversion, Telident's
average daily trading volume may prevent Special Situations from converting all
of its Series III convertible preferred stock during the special conversion
period. At the end of the special conversion period, the conversion rate set
forth in the modification agreement will no longer apply to the shares of Series
III convertible preferred stock then owned by Special Situations.
The actual number of shares of common stock issuable upon conversion of
the shares of Series III convertible preferred stock is subject to adjustment
depending on factors that cannot be predicted at this time, such as the future
market price of the common stock.
5
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Board of Directors currently consists of seven members serving
one-year terms. Seven persons, all of whom currently serve as directors, have
been nominated for election as directors to serve one-year terms expiring in
2000 and until their successors have been elected and duly qualified. There are
no family relationships between any director or officer.
The persons named in the accompanying proxy will vote for the election
of the above named nominees, unless authority to vote is withheld. The Board is
informed that the nominees are willing to serve as directors; however, if any
nominee is unable to serve or for good cause will not serve, the proxy may be
voted for such other person as the proxies shall, in their discretion,
determine. Shareholders do not have cumulative voting rights with respect to the
election of directors, and proxies cannot be voted for a greater number of
directors than the number of nominees.
VOTE REQUIRED
The seven nominees receiving the highest number of affirmative votes of
the shares entitled to vote at the meeting shall be elected to the Board of
Directors as directors. An abstention will have the same effect as a vote
withheld for the election of directors and a broker non-vote will not be treated
as voting in person or by proxy on the proposal. Set forth below is certain
information concerning the seven nominees for election as directors. THE BOARD
OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES LISTED BELOW.
<TABLE>
<CAPTION>
Director
Name Age Principal Occupation Position with Telident Since
- ---- --- -------------------- ---------------------- -----
<S> <C> <C> <C> <C>
Mark W. Sheffert 52 President and Chief Executive Chairman of the Board 1990
Officer of Manchester
Companies, Inc.
W. Edward McConaghay 50 Chief Executive Officer of ViA, Director 1997
Inc.
Scott R. Anderson(1) 59 Chief Executive Officer of North Director 1995
Memorial Health Care
Willis K. Drake(1) 76 Private Investor Director 1988
David F. Durenberger(2) 65 President of Public Policy Director 1996
Partners, LLC
Mack V. Traynor(2) 41 President and Chief Executive Director 1998
Officer of Neo Networks and
President of Manitou
Investments, Inc.
John D. Wunsch(1) 51 President and Chief Executive Director 1997
Officer of Family Financial
Strategies, Inc.
</TABLE>
- -------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
MARK W. SHEFFERT has been Chairman of the Board of the Company since
May 1994. Mr. Sheffert has been a member of the Board of Directors since 1990.
He is President and Chief Executive Officer of Manchester Companies, a private
investment and management consulting firm formed in 1993, which provides certain
financial
6
<PAGE>
advisory services to the Company. From 1990 to 1993, he served as managing
partner of Sheffert & Wein, Inc., a management consulting firm. From September
1982 to October 1989, Mr. Sheffert served in various executive positions with
First Bank System, Minneapolis, Minnesota, including Chairman and CEO, First
Trust Company, FBS Mortgage Company, FBS Card Services, Inc., and FBS Insurance.
Mr. Sheffert currently serves on the boards of directors of Fourth Shift Corp.,
a developer and marketer of client/server based application software for
industrial planning and management processes, LifeRate Systems, Inc., a company
founded to develop a computer system that could assist physicians in handling
the discount demands of managed care organizations, Benedictine Health
Dimensions, a provider of management services to long-term care facilities, and
Medical Graphics Corporation, a designer and provider of solutions for
innovative and non-invasive medical diagnostic systems.
W. EDWARD MCCONAGHAY has been a member of the Board of Directors of the
Company since April 1997. He served as President and Chief Executive Officer of
the Company from April 1997 through September 1999. Upon resigning from the
Company, Mr. McConaghay became the Chief Executive Officer of ViA, Inc., a
wearable personal computing technology company. He was President and Chief
Executive Officer of Digital Technics, a telecommunications firm, from 1996 to
1997. During 1995, he was a principal in Key Indicators, a consulting firm
specializing in new product and market development for information and
technology based businesses. He was Senior Vice President of Sales and Marketing
for Deluxe Corporation, a Minnesota check and business forms printing company,
from December 1993 to January 1995. From 1983 to 1993, he served in various
executive positions at Northern Telecom, Ltd. Mr. McConaghay currently serves on
the board of directors of Medical Graphics Corporation.
SCOTT R. ANDERSON joined the Board of Directors in July 1995. Mr.
Anderson is Chief Executive Officer of North Memorial Health Care in
Robbinsdale, Minnesota. He has been associated with North Memorial since August
1964, serving 17 years as Executive Vice President, and since 1981 in the
position of President and Chief Executive Officer. During his career he has
served as a member of many committees and boards, both locally and nationally,
and has served as chairman of the board of the following organizations:
Metropolitan Healthcare Council (Council of Hospital Corporations), Health
Employers, Inc., Healthcare Education and Research Foundation and Medical Alley.
He currently serves as a director of EMPI, Inc., a rehabilitative medical device
company.
WILLIS K. DRAKE has been a member of the Board of Directors since 1988.
Mr. Drake has been a private investor over the last ten years. He served as
Chairman of the Board of the Company from 1989 to August 1993. Mr. Drake spent
the early years of his career with Univac in a sales and marketing capacity. He
later became a founder of Control Data Corporation. In 1969, he became founder,
Chairman and President of Data Card Corporation, a manufacturer of
high-performance embossing/encoding equipment for the plastic card industry.
When he retired in 1983, Data Card had sales in excess of $100 million. Since
his retirement, Mr. Drake has used his entrepreneurial, management, marketing
and technical experiences to assist a variety of companies. He serves as a
director of Analysts International Corporation, a provider of computer software
services, Digi International, a provider of data communications products, and
Innovex, Inc., a fabricator of flexible circuit applications for the disk drive
industry.
DAVID F. DURENBERGER has been a member of the Board of Directors since
October 1996. Mr. Durenberger is President of a health care consultant firm,
Public Policy Partners, LLC, a Senior Fellow for the University of St. Thomas
Graduate School of Business, and Chairman of the National Institute of Health
Policy, a partnership between the University of Minnesota and the University of
St. Thomas. Previously he served as a United States Senator for the state of
Minnesota from 1978 to 1995. Mr. Durenberger has over 20 years of public
service, and while a U.S. Senator, served on several committees including the
Finance, Select Intelligence, and Office of Technology committees. In addition,
he has chaired or been the executive director of numerous committees on both a
state and national level. In November 1995, Mr. Durenberger plead guilty to
misdemeanor charges of falsifying a statement for reimbursement of $425.
7
<PAGE>
MACK V. TRAYNOR has been a member of the Board of Directors since March
1998. Mr. Traynor is a private investor and President and Chief Executive
Officer of Neo Networks, a private development stage company designing high
speed data communications equipment, and President of Manitou Investments, Inc.,
a private investment and business management firm. He served as President, Chief
Operating Officer, and as a director of Eltrax, a nationwide provider of
networking products and managed services from 1995 to 1997. Mr. Traynor was the
chief architect for that company's shift in strategy and dramatic growth through
acquisition. He continues to serve on the Eltrax board of directors. Prior to
joining Eltrax, Mr. Traynor served as President and Chief Operating Officer of
Military Communications Center, Inc., a company which provided
telecommunications services to U.S. military personnel and which was acquired by
WorldCom, Inc. in October 1994. Prior to joining Military Communications Center,
Inc., Mr. Traynor served in executive positions with US West, most recently as
President of US West Enterprises Technologies Division. Mr. Traynor is on the
board of directors of HEI, Inc., a designer and manufacturer of ultraminiature
microelectronic devices and high technology products incorporating such devices.
JOHN D. WUNSCH has been a member of the Board of Directors since July
1997. Mr. Wunsch has been President and Chief Executive Officer of Family
Financial Strategies, Inc., a registered investment advisory firm, since January
1997. Family Financial Strategies, Inc. specializes in services to high net
worth families and manages a diversified investment strategy, including several
equity pools and direct investments in real estate, venture capital, energy and
other non-traditional investments throughout the country. From 1990 to January
1997, he served as President of Perrybell Investments, a registered investment
advisory firm. Mr. Wunsch is a director of ADC Telecommunications, Inc., a
provider of hardware and software systems and integrated solutions that enable
the building and upgrading of communications networks, and Medical Graphics
Corporation.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of five meetings and took action by
written consent once during the fiscal year ended June 30, 1999. No director
attended fewer than 75% of the total number of meetings of the Board of
Directors or committees of the Board of Directors held in fiscal year 1999,
except that Mr. Durenberger attended 60% of the total number of meetings of the
Board of Directors held in fiscal year 1999. The Board of Directors has
established Audit and Compensation Committees, both of which consist of only
non-employee directors.
The Audit Committee, which consists of Messrs. Durenberger and Traynor,
held one meeting during fiscal year 1999. This committee makes recommendations
to the Board of Directors regarding the appointment of independent accountants,
reviews the results and scope of audit and other services provided by the
Company's independent accountants and reviews and evaluates the Company's audit
and control functions.
The Compensation Committee, which consists of Messrs. Anderson, Drake
and Wunsch, held one meeting during fiscal year 1999. This committee reviews and
recommends to the Board of Directors the compensation guidelines for executive
officers and other key employees. This committee also makes recommendations
regarding the Company's 1998 Stock Option Plan, administers such plan and makes
decisions concerning salaries and incentive compensation for employees and
consultants of the Company.
DIRECTOR COMPENSATION
Directors currently do not receive any cash compensation from the
Company for their service as members of the Board of Directors, although members
are reimbursed for certain expenses in connection with attendance at Board of
Directors and committee meetings. Non-employee directors receive periodic option
grants under the Company's 1998 Stock Option Plan.
On the first day of each quarter during the last two fiscal years, each
non-employee director was granted an option to purchase 188 shares of common
stock at exercise prices ranging from $2.00 to $4.50 as a quarterly
8
<PAGE>
retainer. For each Board meeting attended during such fiscal years, each
non-employee director was granted an option to purchase 125 shares of common
stock at exercise prices ranging from $1.563 to $5.00 (other than the Chairman
of the Board who received an option to purchase 250 shares of common stock at
exercise prices ranging from $1.563 to $5.00 for each Board meeting attended).
Each non-employee director was also granted an option to purchase 63 shares of
common stock at exercise prices ranging from $2.50 to $5.00 for each committee
meeting personally attended, not to exceed options to purchase 188 shares per
committee member for the year. In addition to the quarterly grant given to
non-employee directors, the Chairman of the Board also received an option to
purchase 250 shares of common stock at exercise prices ranging from $2.00 to
$5.372 as a monthly retainer.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Deloitte & Touche LLP as
independent public accountants for the Company for the fiscal year ending June
30, 2000. A proposal to ratify that appointment will be presented to
shareholders at the meeting. If the shareholders do not ratify such appointment,
another firm of independent public accountants will be selected by the Board of
Directors. Representatives of Deloitte & Touche LLP are expected to be present
at the meeting, will have an opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions from
shareholders in attendance.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation
earned by the Company's President and Chief Executive Officer (the "Named
Executive Officer") for the fiscal years ended June 1997, 1998 and 1999. The
Company has no formalized employment agreement with its executive officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------------------------
ANNUAL
COMPENSATION AWARDS
----------------------- ----------------------------------
SECURITIES ALL OTHER
SALARY BONUS UNDERLYING COMPENSATION
YEAR ($) ($) OPTIONS (#) ($)
------ ---------- ---------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
W. Edward McConaghay(1).................... 1999 165,000 32,400 - -
President and Chief Executive Officer 1998 165,000 - - -
1997 41,250 - 25,000 -
</TABLE>
- ---------------
(1) Mr. McConaghay's employment with the Company commenced on April 1, 1997
and terminated on September 24, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options during the
fiscal year ended June 1999 to the Named Executive Officer. No SARs were granted
during such fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED TO
UNDERLYING EMPLOYEES IN FISCAL EXERCISE PRICE EXPIRATION
NAME OPTIONS GRANTED YEAR ($/SHARE) DATE
- ----------------------- ------------------- ----------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
W. Edward McConaghay... 0 0 N/A N/A
</TABLE>
9
<PAGE>
OPTION VALUES
The following table sets forth information concerning the unexercised
options held by the Named Executive Officer as of the end of fiscal year 1999.
No options were exercised by the Named Executive Officer during fiscal year
1999. No SARs were exercised by the Named Executive Officer during fiscal year
1999 or were outstanding at the end of that fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END AT FY-END ($) (1)
--------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
W. Edward McConaghay... 10,000 15,000 0 0
</TABLE>
- ---------------
(1) Value is based on the June 30, 1999 closing price of $1.75 per share of
common stock as listed on the Nasdaq SmallCap Market less the option
exercise price.
EXECUTIVE COMPENSATION PLAN
The Board of Directors adopted an executive compensation plan for
fiscal year 1999, which was based on the Company's profitability for the year.
The plan provided for cash bonuses to be paid from a bonus pool consisting of up
to 30% of the Company's annual profits. The Company paid bonuses in the
aggregate of $48,900 pursuant to the plan during fiscal year 1999, of which
$32,400 was paid to W. Edward McConaghay, the Company's President and Chief
Executive Officer during such fiscal year.
10
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 28, 1997, the Board of Directors offered more favorable
conversion terms on its 10% Subordinated Convertible Debentures to avoid
default, conserve cash and contribute to the Company's net tangible assets.
Conversion of such securities was offered at a conversion price of $4.50 per
share. Additionally, for every two shares of common stock issued in conjunction
with the conversion, the Company agreed to issue a two-year warrant to purchase
one share of common stock at an exercise price of $5.64 per share. During fiscal
year 1997, Willis K. Drake and John Sagan, both directors, converted all of
their individual debenture holdings into 29,167 and 11,667 shares, respectively.
In connection with such conversion, Messrs. Drake and Sagan obtained warrants to
purchase 14,583 and 5,833 shares of common stock, respectively. As of July 15,
1998, all of the principal and accrued interest on the debentures had been
converted into shares of common stock or paid in full.
On July 23, 1997, the Company concluded a $1,250,000 equity private
placement for which FAMCO was issued 277,778 shares of Series II convertible
preferred stock. FAMCO subsequently converted all of its Series II Convertible
Preferred Stock into 1,052,189 shares of common stock, representing
approximately 60.6% of the Company's common stock, at a conversion price of
$1.188 per share, the per share market price of the common stock at the time of
conversion. FAMCO also was issued a warrant to purchase up to 364,907 shares of
common stock (as adjusted pursuant to previously triggered antidilution rights)
at an exercise price of $4.83 per share. The warrant expired unexercised in July
1999. John D. Wunsch, President and Chief Executive Officer of Family Financial
Strategies, an affiliate of FAMCO, became a director of the Company in
connection with such private placement.
On April 8, 1998, the Board of Directors approved a consulting
agreement by and between the Company and Mack V. Traynor, a member of the Board
of Directors (the "Consulting Agreement"). The services provided by Mr. Traynor
to the Company under the Consulting Agreement include (a) reviewing and refining
the Company's strategic growth plan, (b) assisting the Company in strategy
implementation and business growth, and (c) developing investment banking and
financial markets relationships for the Company. As compensation for his
consulting services, the Company issued a warrant to Mr. Traynor, entitling him
to purchase 100,000 shares of Common Stock at $1.188 per share. The following
terms of the warrant were amended in March 1999. The warrant will vest to the
extent of 100% of the shares purchasable thereunder upon the sale of
substantially all of the assets of the Company to a non-affiliated entity or the
merger or consolidation of the Company with a non-affiliated entity where the
Company is not the surviving entity. The warrant will vest to the extent of 40%
of the shares purchasable thereunder upon the closing of any merger or
consolidation of the Company with a non-affiliated entity where the Company is
the surviving entity or the closing of an acquisition of all of the stock or
substantially all of the assets of a non-affiliated entity by the Company.
Depending upon the consideration paid or payable in connection with a merger,
consolidation or acquisition in which the Company is the surviving entity, the
warrant may vest to the extent of an additional 20%, 40% or 60% of the shares
purchasable thereunder. Unless extended as provided in the warrant, the warrant
will expire upon the earlier of (a) the second anniversary of the date on which
any portion of the warrant becomes exercisable, or (b) the date on which the
Consulting Agreement is terminated, if prior to the occurrence of an event which
prompts the vesting of all or a portion of the warrant.
On June 13, 1998, the Company entered into an engagement agreement by
and between the Company and Manchester Financial (the "Engagement Agreement")
under which Manchester Financial agreed to assist the Company with the
acquisition of certain target companies. Under the terms of the Engagement
Agreement, Manchester Financial is entitled to receive $6,500 as a monthly
retainer and reimbursement of out-of-pocket expenses incurred on behalf of the
Company. In addition, Manchester Financial is entitled to receive an
accomplishment fee upon the closing of the Company's acquisition of a target
company. This fee consists of a cash payment equal to 3% of the total
acquisition consideration and a five-year warrant to purchase 100,000 shares of
the Company's common stock. Pursuant to the Engagement Agreement, the Company
issued a warrant to Manchester Financial entitling it to purchase 25,000 shares
of common stock at $2.688 per share effective June 13, 1998. The Company also
issued a warrant to Kenneth W. Hager pursuant to the Engagement Agreement
11
<PAGE>
entitling him to purchase 25,000 shares of common stock at $2.688 per share
effective June 13, 1998. These warrants were exercisable through their fifth
anniversary. The terms of these warrants were finalized in October 1998.
Effective December 31, 1998, Manchester Financial and Kenneth W. Hager agreed to
the cancellation of such warrants. Mark W. Sheffert, a member of the Board of
Directors, is President and Chief Executive Officer of Manchester Companies and
Manchester Financial. Bruce H. Senske, the Company's Interim Chief Executive
Officer, is a Vice President at Manchester Companies. Kenneth W. Hager is an
employee and Managing Director of Manchester Financial.
In August 1998, the Company concluded a private placement of equity in
which it issued 400,000 shares of Series III convertible preferred stock to two
institutional investors, FAMCO and Special Situations, in exchange for
$1,000,000. As of August 31, 1999, each share of the Series III convertible
preferred stock was convertible at the option of the holder into common stock at
a floating rate which depended on the 10-day average closing bid price of the
common stock at the time of conversion. Based on the 10-day average closing
price ending August 31, 1999, $1.3439 per share, the conversion ratio on the
Series III convertible preferred stock was approximately 2.33 for 1. Telident
subsequently amended the conversion terms applicable to Special Situations. See
"Security Ownership of Certain Beneficial Owners and Management." The investors
in this private placement also received, in the aggregate, warrants to purchase
400,000 shares of common stock. The warrants are exercisable at $3.125 per share
and expire in October 2000. The warrants also contain antidilution rights which
provide that the number of shares issuable upon exercise will be increased if
the Company issues new securities at a price less than $2.50 per share. The
Company may call the warrants if the bid price of the common stock equals or
exceeds $4.375 per share for at least 10 consecutive trading days immediately
before the call. The Company may not call the warrants during any period in
which the registration of the shares underlying the warrants is not effective.
The funds, which were placed into escrow accounts during April 1998, were
released to the Company and the shares and warrants, which were also placed into
escrow accounts during April 1998, were released to the investors in August 1998
upon the Company's certification to the investors that it complied with the
continued listing requirements of the Nasdaq SmallCap Market. As the President
and Chief Executive Officer of Family Financial Strategies, an affiliate of
FAMCO, John D. Wunsch was an interested party to this transaction.
On March 1, 1999, the Company entered into a one-year consulting
agreement with Manchester Financial. Pursuant to the consulting agreement,
Manchester Financial agreed to provide consulting services to the Company
regarding financial and capitalization matters. The fee under this agreement was
$25,000 or 10,000 shares of Telident common stock. In March 1999, the Company
issued 10,000 shares of its common stock to Manchester Financial in connection
with the consulting agreement. Mark W. Sheffert, a member of the Board of
Directors, is President and Chief Executive Officer of Manchester Companies and
Manchester Financial. Bruce H. Senske, the Company's Interim Chief Executive
Officer, is a Vice President at Manchester Companies.
On the first day of each quarter during each of the last two fiscal
years, each non-employee director was granted an option at or above fair market
value on date of grant to purchase 188 shares of common stock at exercise prices
ranging from $2.00 to $4.50 as a quarterly retainer. For each Board meeting
attended during such fiscal years, each non-employee director was granted an
option at or above fair market value on date of grant to purchase 125 shares of
common stock at exercise prices ranging from $1.563 to $5.00 (other than the
Chairman of the Board who received an option to purchase 250 shares of common
stock at exercise prices ranging from $1.563 to $5.00 for each Board meeting
attended). Each non-employee director was also granted an option at or above
fair market value on date of grant to purchase 63 shares of common stock at
exercise prices ranging from $2.50 to $5.00 for each committee meeting
personally attended, not to exceed options to purchase 188 shares per committee
member for the year. In addition to the quarterly grant given to non-employee
directors, the Chairman of the Board also received an option to purchase 250
shares of common stock at exercise prices ranging from $2.00 to $5.372 as a
monthly retainer.
The Company believes that all of the transactions set forth herein were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. All future transactions, including loans, if
any, between the Company and its officers, directors, and principal shareholders
and their affiliates will
12
<PAGE>
be approved by a majority of the Board of Directors, including a majority of the
independent and disinterested non-employee directors, and will be on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties.
INDEMNIFICATION
The Company's Articles of Incorporation limit the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the Minnesota Business
Corporations Act. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
MANAGEMENT OF THE COMPANY
The following table provides information with respect to the Company's
executive officer. Such executive officer has been appointed to serve until his
successor is duly appointed by the Board of Directors or his earlier removal or
resignation from office.
NAME AGE POSITION
---- --- --------
Bruce H. Senske 44 Interim Chief Executive Officer
BRUCE H. SENSKE has been a Vice President at Manchester Companies since
June 1998. Mr. Senske served as the President, Chief Executive Officer, Chief
Financial Officer and Treasurer of U-Ship, Inc. from January 1993 to June 1998,
with the exception of June and July 1997. From 1988 to 1992, Mr. Senske was Vice
President of Strategic Marketing and Product Planning at Vocam Systems, Inc.,
which became a division of the Pitney Bowes Company, a manufacturer of
transportation management software systems, in 1990.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the SEC and to provide the Company with copies of
all such reports. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons that
no Forms 5 were required for those persons, the Company believes that, during
the past fiscal year, its officers, directors and greater than ten percent
shareholders complied with applicable filing requirements, except that seven
reports on Form 5 setting forth the issuances during fiscal year 1999 of options
to purchase an aggregate of 11,827 shares of common stock by Messrs. Wunsch,
Drake, Traynor, Sheffert, McConaghay, Anderson and Durenberger were not filed on
a timely basis.
SHAREHOLDER PROPOSALS
FOR THE 2000 ANNUAL MEETING
If a shareholder of the Company wishes to present a proposal for
consideration for inclusion in the proxy materials for the 2000 Annual Meeting
of Shareholders, the proposal must be sent by certified mail, return receipt
requested, and must be received at the executive offices of the Company, Ten
Second Street, N.E., Suite 212, Minneapolis, Minnesota 55413, Attn: Secretary,
no later than June 3, 2000. All proposals must conform to the rules and
regulations of the SEC. Under SEC rules, if a shareholder notifies the Company
of his or her intent to present a proposal for consideration at the 2000 Annual
Meeting of Shareholders after August 17, 2000, the Company, acting through the
persons named as proxies in the proxy materials for such meeting, may exercise
discretionary authority with respect to such proposal without including
information regarding such proposal in its proxy materials.
13
<PAGE>
ANNUAL REPORT ON FORM 10-KSB
A copy of the Company's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 1999, as filed with the SEC, including the financial
statements and the financial statement schedules thereto, accompanies this
Notice of Annual Meeting, Proxy Statement and related proxy card. The Company
will furnish to any person whose proxy is being solicited any exhibit described
in the exhibit index accompanying the Form 10-KSB, upon the payment, in advance,
of fees based on the Company's reasonable expenses in furnishing such
exhibit(s). Requests for copies of such exhibit(s) should be directed to Bruce
H. Senske, Interim Chief Executive Officer, at the Company's principal address.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Bruce H. Senske
Bruce H. Senske
Interim Chief Executive Officer
Minneapolis, Minnesota
October 1, 1999
14
<PAGE>
TELIDENT, INC.
TELIDENT, INC.
TEN SECOND STREET N.E., SUITE 212 PROXY
MINNEAPOLIS, MINNESOTA 55413
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder of Telident, Inc., a Minnesota corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated October 1, 1999, and hereby
appoints Bruce H. Senske and Mark W. Sheffert, or either of them, proxies and
attorneys-in-fact, with full power to each of substitution and revocation, on
behalf and in the name of the undersigned, to represent the undersigned at the
Annual Meeting of Shareholders of the Company to be held in the Mississippi
River North Room of the Marquette Hotel, located at 710 Marquette Avenue,
Minneapolis, Minnesota, on Tuesday, November 2, 1999, at 1:00 p.m. local time,
or at any adjournment or postponement thereof, and to vote, as designated below,
all shares of common stock of the Company which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
below.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
PLEASE DETACH HERE
<TABLE>
<S> <C>
[ ] FOR all nominees [ ] WITHHOLD
1. To elect seven directors for the ensuing year and until listed at left AUTHORITY
their successors have been elected and duly qualified. (except as marked to vote for
to the contrary all nominees
below) listed at left
01 Mark W. Sheffert 04 Willis K. Drake 07 John D. Wunsch
02 W. Edward McConaghay 05 David F. Durenberger
03 Scott R. Anderson 06 Mack V. Traynor
-------------------------------------------------
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, | |
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) | |
-------------------------------------------------
2. To ratify the appointment of Deloitte & Touche LLP as the Company's [ ] For [ ] Against [ ] Abstain
independent public accountants for the fiscal year ending June 30,
2000.
3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before
the meeting or any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THE PROXY BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2. ABSTENTIONS WILL BE COUNTED TOWARDS THE EXISTENCE OF A
QUORUM.
Address Change? Mark Box [ ] Date:
Indicate changes below:
-----------------------------------------------------
Signature(s) in Box
(If there are co-owners, both must sign.)
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD
SIGN. IF SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN
IN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME BY AN AUTHORIZED PERSON.
</TABLE>
