<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box: / / Confidential, for Use of the
/X/ Preliminary Proxy Statement Commission Only (as permitted
/ / Definitive Proxy Statement by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to / / Rule 240.14a-11(c) or
/ / Rule 240.14a-12
Sheldahl, 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):
/ / No fee required
/X/ $125 per Exchange Act Rule o-11(c)(1)(ii), 14a-6(i)(1) or Item 22(a)(2)
of Schedule 14A
/ / 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 transactions 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>
[SHELDAHL, INC. LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 13, 1999
Notice is hereby given that the Annual Meeting of Shareholders of
Sheldahl, Inc. will be held at the Raintree Plaza Hotel, 1900 Ken Pratt Blvd.,
Longmont, Colorado on Wednesday, January 13, 1999 at 11:00 a.m.,
Mountain Standard Time, for the following purposes:
1. To approve the issuance of Common Stock upon conversion of shares of
the Company's Series B Convertible Preferred Stock in compliance with
rules of the Nasdaq National Market.
2. To approve an amendment to the Company's Amended and Restated Articles
of Incorporation to increase the Company's authorized shares of Common
Stock from 20,000,000 to 50,000,000.
3. To elect nine directors to hold office until the next Annual Meeting
of Shareholders or until their successors are elected.
4. To ratify and approve the selection of independent public accountants
for the Company for the current fiscal year.
5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on November 18,
1998 as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting.
By Order of the Board of Directors
Gerald E. Magnuson, SECRETARY
Northfield, Minnesota
December 8, 1998
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR
PROXIES AND VOTE IN PERSON IF THEY SO DESIRE. THIS PROXY IS SOLICITED ON
BEHALF OF THE COMPANY.
<PAGE>
[SHELDAHL, INC. LOGO]
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Sheldahl, Inc.
(the "Company") in connection with the solicitation of proxies by the Board
of Directors of the Company to be voted at the Annual Meeting of Shareholders
to be held on January 13, 1999 or any adjournment or adjournments thereof.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, officers, directors and employees of the Company may
solicit proxies by telephone, telegraph or in person. The Company may also
request banks and brokers to solicit their customers who have a beneficial
interest in the Company's Common Stock registered in the names of nominees
and will reimburse such banks and brokers for their reasonable out-of-pocket
expenses.
Any proxy may be revoked at any time before it is voted by receipt of a
proxy properly signed and dated subsequent to an earlier proxy, or by
revocation of a written proxy by request in person at the Annual Meeting; if
not so revoked, the shares represented by such proxy will be voted. The
Company's principal offices are located at 1150 Sheldahl Road, Northfield,
Minnesota 55057, and its telephone number is (507) 663-8000. The mailing of
this proxy statement to shareholders of the Company commenced on or about
December 8, 1998.
The total number of shares outstanding and entitled to vote at the
meeting as of November 18, 1998 consisted of 10,890,792 shares of $0.25 par
value Common Stock. Each share of Common Stock is entitled to one vote.
Shareholders have cumulative voting rights in connection with the election of
directors by giving written notice of intent to cumulate votes to any officer
of the Company before the meeting or to the presiding officer at the meeting.
A shareholder may cumulate votes for the election of directors by multiplying
the number of votes to which the shareholder may be entitled by nine (the
number of directors to be elected) and casting all such votes for one nominee
or distributing them among any two or more nominees. Only shareholders of
record at the close of business on November 18, 1998 will be entitled to vote
at the meeting. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at the Annual Meeting of Shareholders
constitutes a quorum for the transaction of business.
Under Minnesota law, each item of business properly presented at a
meeting of shareholders generally must be approved by the affirmative vote of
the holders of a majority of the voting power of the shares present, in
person or by proxy, and entitled to vote on that item of business. However,
if the shares present and entitled to vote on that item of business would not
constitute a quorum for the transaction of business at the meeting, then the
item must be approved by a majority of the voting power of the minimum number
of shares that would constitute such a quorum. Votes cast by proxy or in
person at the Annual Meeting of Shareholders will determine whether or not a
quorum is present. Abstentions will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum, but as
unvoted for purposes of determining the approval of the matter submitted to
the shareholders for a vote. If a broker indicates on the proxy that it does
not have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote
with respect to that matter.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table includes information as of November 18, 1998
concerning the beneficial ownership of Common Stock of the Company by (i) the
only shareholders known to the Company to hold more than five percent of the
Common Stock of the Company, (ii) each of the directors of the Company,
(iii) each executive officer named in the table on page 6, and (iv) all
officers and directors of the Company as a group. Unless otherwise
indicated, all beneficial owners have sole voting and investment power over
the shares held.
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT OF CLASS
------------------------------------ ------ --------
<S> <C> <C>
Molex Incorporated 2,411,220 (1) 18.60%
2222 Wellington Court
Lisle, IL 60532
Mellon Bank Corporation 881,245 (1) 8.09%
One Mellon Center
Pittsburgh, PA 15258
Trust Company of the West 759,800 (1) 6.98%
865 S. Figero St., 21st Floor
Los Angeles, CA 90017
James E. Donaghy(2)(3) 235,647 (4)(5) 2.13%
James S. Womack(2) 80,944 (4) *
John G. Kassakian(2) 36,924 (4)(6) *
Gerald E. Magnuson(2) 26,425 (4) *
Dennis M. Mathisen(2) 535,683 (4)(6) 4.78%
William B. Miller(2) 28,667 (4) *
Kenneth J. Roering(2) 70,687 (4)(6) *
Raymond C. Wieser(2)(7) -0- *
Beekman Winthrop(2) 482,269 (4) 4.36%
Keith L. Casson(3) 60,717 (4) *
Edward L. Lundstrom(3)(8) 92,110 (4)(6) *
John V. McManus(3) 69,425 (4) *
Roger D. Quam(3) 94,346 (4)(6) *
Greg D. Closser(3) 67,504 (4) *
2
<PAGE>
All Officers and Directors 1,936,637 (4)(6) 16.04%
as a Group (17 persons)
</TABLE>
___________________________
* Less than one percent.
(1) Based upon information filed with the Securities and Exchange Commission on
Schedules 13G and 13D.
(2) Serves as a director of the Company and, except for Mr. Womack, has been
nominated for re-election.
(3) Serves as an executive officer of the Company, except for Mr. Casson who
retired from the Company on August 28, 1998, and appears in the table on
page 10 hereof.
(4) Includes shares which may be purchased within sixty days from the date
hereof upon exercise of outstanding stock options in the amount of 182,390
shares for Mr. Donaghy, 16,429 shares for Mr. Womack, 60,717 shares for
Mr. Casson, 75,153 shares for Mr. Lundstrom, 55,969 shares for Mr. McManus,
65,397 shares for Mr. Quam, 62,517 shares for Mr. Closser, 11,667 shares
for each of Messrs. Kassakian, Magnuson, Miller and Roering and 9,667
shares for Mr. Winthrop, and 630,196 shares for all officers and directors
as a group.
(5) Includes 44,701 shares held by the Donaghy Limited Partnership, of which
Mr. Donaghy is the General Partner and 8,556 shares held by the Donaghy
Living Trust, of which Mr. Donaghy is the trustee.
(6) Includes shares which may be issued upon conversion of the Company's
Series D Convertible Preferred Stock in the amount of 16,260 shares for
Mr. Kassakian, 292,683 shares for Mr. Mathisen, 32,520 shares for
Mr. Roering, 162,602 shares for Mr. Winthrop, 8,130 shares for
Mr. Lundstrom, and 8,130 shares for Mr. Quam and shares which may be issued
upon the exercise of warrants in the amount of 1,000 shares for
Mr. Kassakian, 18,000 shares for Mr. Mathisen, 2,000 shares for
Mr. Roering, 10,000 shares for Mr. Winthrop, 500 shares for Mr. Lundstrom,
and 500 shares for Mr. Quam. The shares issuable to Mr. Winthrop are held
indirectly and Mr. Winthrop disclaims beneficial ownership to such shares.
(7) Mr. Wieser is an officer of Molex Incorporated and disclaims beneficial
ownership of any shares held by Molex Incorporated. See "Certain
Transactions."
(8) Has been nominated for election as a director of the Company.
APPROVAL OF ISSUANCE OF COMMON STOCK
OF THE COMPANY IN COMPLIANCE WITH NASDAQ RULES
(PROPOSAL 1)
BACKGROUND
On August 29, 1997, the Company issued to a group of investors (the
"Investors") 15,000 shares of Series B Convertible Preferred Stock (the
"Series B Preferred Stock") resulting in gross proceeds to the Company of
$15,000,000. The Board of Directors authorized the sale of the Series B
Preferred Stock in order to raise proceeds which were applied principally
towards the development of the Longmont Facility for the Company's
MicroProducts Business. The Series B Preferred Stock may be converted into
shares of Common Stock from time to time at a conversion price equal to the
LESSER OF (i) 110% of the average closing bid price for the five consecutive
trading days immediately preceding August 29, 1997 (which was $25.34)
3
<PAGE>
AND (ii) 101% of the average of the lowest closing bid prices for five
consecutive trading days during the 30 consecutive trading days immediately
preceding the date of conversion of the Series B Preferred Stock. In
addition, the shares of Series B Preferred Stock accrue dividends at an
annual rate of 5% which, at the Company's option, may be paid either in cash
or in shares of Common Stock. Copies of the relevant documents for the sale
of the Series B Preferred Stock were filed as exhibits to the Company's
Report on Form 8-K on September 10, 1997. Shareholders desiring a more
complete understanding of the shares of Series B Preferred Stock are urged to
refer to such exhibits.
NASDAQ RULE 4460(i)
Rule 4460(i) of the Nasdaq Stock Market, Inc. (the "Nasdaq Rule")
requires shareholder approval of the sale or issuance by a company listed on
the Nasdaq National Market "of common stock (or securities convertible into
or exercisable for common stock) equal to 20% or more of the common stock or
20% or more of the voting power outstanding before the issuance for less than
the greater of book or market value of the stock." On August 29, 1997, the
date the Series B Preferred Stock was issued (the "Closing Date"), there were
9,026,682 shares of the Company's Common Stock outstanding and one share less
than 20% of such number of shares is 1,805,335. On the Closing Date, the
Series B Preferred Stock was convertible into 651,155 shares of common stock,
which was equal to 7.2% of the Company's then outstanding shares. Given the
initial conversion price of the Series B Preferred Stock and the then current
trading price of the Common Stock, the Company was not required to obtain
shareholder approval for the issuance of the Series B Preferred Stock.
Because the conversion price was a floating price, however, the conversion
right of the Investors was structured so that at any time a conversion would
comply with the Nasdaq Rule.
Accordingly, the Certificate of Designation (the "Certificate")
governing the rights and preferences of the Series B Preferred Stock
prohibits any conversion if the conversion price then in effect is such that
the aggregate number of shares of Common Stock that would then be issuable
upon conversion of all outstanding shares of the Series B Preferred Stock,
not just those submitted for conversion by an Investor, when aggregated with
all prior or concurrent conversions, would result in the issuance to all
Investors of shares of Common Stock equal to 20% or more of the shares of the
Company's Common Stock outstanding on the Closing Date. In other words, the
Certificate requires the Company to look at any conversion as if all
remaining shares of the Series B Preferred Stock are being converted and only
then may the Company determine whether shareholder approval under the Nasdaq
Rule is required. For this reason, one Investor could submit a conversion
notice for a small number of shares and yet still trigger the overall 20%
limitation of the Nasdaq Rule. In such an event, the terms of the
Certificate provide that the Company may issue to any Investor submitting a
conversion notice only its pro rata portion of the shares allowed to be
issued pursuant to the Nasdaq Rule. With respect to any shares not issuable
to an Investor submitting a conversion notice, the terms of the Certificate
provide that the Company is obligated, at the option of the Investors, to
either (i) obtain shareholder approval for the remaining unconverted shares
of Series B Preferred Stock as contemplated by the Nasdaq Rule or (ii) redeem
for cash that portion of the Series B Preferred Stock that could not be
converted because of the limitation.
CONVERSIONS
During February 1998, the Investors collectively converted 7,350 shares
of Series B Preferred Stock into 575,149 shares of Common Stock, including
dividends payable in Common Stock. These conversions left 1,230,186 shares
of Common Stock available for future conversions of the remaining 7,650 shares
of the Series B Preferred Stock in compliance with the Nasdaq Rule. During
September and October 1998, the
4
<PAGE>
Company received additional notices from all four of the remaining Investors
requesting conversion of 6,114 shares of the Series B Preferred Stock in the
aggregate. Because of substantial declines in the market price of the
Company's Common Stock, the applicable conversion price for such conversions
was reduced to approximately $4.91. Pursuant to the terms of the Certificate
described above, in order to determine whether it could satisfy the
conversions, the Company was required to calculate how many shares were
issuable upon conversion (at the $4.91 conversion price) of all of the
remaining 7,650 shares of the Series B Preferred Stock, not just of the 6,114
shares for which it received conversion notices. On September 23, 1998, the
day the Company received the first conversion notice since February, this
calculation showed that the Company would need to issue to the Investors
1,642,063 additional shares in the aggregate to cover conversions of the
remaining Series B shares, including dividends payable in Common Stock, which
would exceed the 1,230,186 shares available. Because of the limits of the
Nasdaq Rule, the Company issued to the Investors only a portion of the shares
for which they requested conversion. Three of the four Investors have
requested that the Company seek and obtain shareholder approval to issue the
78,918 additional shares issuable from their conversion notices. In the
event that the shareholders do not approve the issuance of such shares, the
Company will be obligated to redeem such shares and pay interest on the
redemption amount at an annual rate of 12%, dating back to the dates of any
original conversion notices. The fourth Investor decided on October 20, 1998
to ask the Company to redeem its 623 inconvertible shares of the Series B
Preferred Stock resulting in a cash payment by the Company to such Investor
of $836,997 on October 28, 1998. Since this payment would have resulted in a
default of the financial covenants the Company has with its senior lender,
the Company was required to and did obtain a waiver for the redemption.
REDEMPTION
The redemption price for any inconvertible shares of the Series B
Preferred Stock is a cash amount equal to (i) the highest average closing bid
price for any five consecutive trading days during the period commencing on
the date of conversion and ending on the date of payment by the Company of
the full redemption price, multiplied by (ii) the ratio of the stated value
of any shares of Series B Preferred Stock, including dividends accrued
thereon, to the conversion price on the date notice of conversion is given.
In the event that the Company fails for any reason to pay the redemption
price on the conversion date, the Company will pay interest on such amount at
an annual rate of 12%. Because the redemption price depends on the date on
which the Company pays the redemption amount in full and such date is not
known, the Company cannot determine at this time the amount it may have to
pay to redeem any inconvertible shares of the Series B Preferred Stock.
Under the redemption price calculation, however, any redemptions may be at a
premium to the prevailing market price of the Company's Common Stock. Were it
to use any of its available liquidity to redeem the inconvertible shares of
the Series B Preferred Stock, the Company would not only take cash away from
Company operations, but unless a second waiver was obtained, another
redemption would violate the covenants under the terms of the agreements the
Company has with its senior lender. Such violation of covenants could result
in a technical default ultimately resulting in the Company's lender calling
its note. If the Company had redeemed the remaining inconvertible shares on
October 30, 1998, the Company would have paid the remaining Investors
approximately $2,000,000.
REASONS FOR THE PROPOSAL
The Board of Directors of the Company believes that the right of the
Investors to require the Company to redeem the inconvertible shares of Series
B Preferred Stock has the potential to severely diminish the Company's
existing working capital. Alternatively, if the Company does not obtain
shareholder approval necessary to issue the shares in excess of the limits of
the Nasdaq Rule, and the Company
5
<PAGE>
nevertheless issues such shares, the Company would be delisted from the
Nasdaq National Market. While the quotation of the Company's Common Stock
could be included on the Nasdaq SmallCap Market if the requirements for that
market are met, shareholders may find it more difficult to dispose of the
Company's Common Stock. Therefore, in order to protect the Company's working
capital and preserve the liquidity of the investment of its shareholders in
the Company's Common Stock, the Board of Directors has determined that
authorizing under the Nasdaq Rule the issuance to the Investors of 20% or
more of the Company's outstanding Common Stock at less than the greater of
market or book value is advisable and in the best interests of the Company
and its shareholders.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Common Stock of
the Company, voting at the meeting in person or by proxy, is required for the
approval of the issuance of the shares pursuant to the Nasdaq Rule.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ADOPTION OF THIS
PROPOSAL 1.
INCREASE IN AUTHORIZED SHARES
(PROPOSAL 2)
In October 1998, the Board of Directors of the Company adopted a
resolution, subject to shareholder approval and ratification, approving an
amendment to the Company's Amended and Restated Articles of Incorporation, to
increase the aggregate number of shares of Common Stock authorized for
issuance from 20,000,000 to 50,000,000.
The following resolution will be presented to the shareholders for
approval.
RESOLVED, that the FIRST SENTENCE of Article III of the Amended
and Restated Articles Incorporation of this corporation be amended to
read as follows:
"The authorized capital stock of this corporation shall by
Fifty Million (50,000,000) shares of Common Stock of the par
value of twenty-five cents ($.25) per share (the "Common
Stock") and Five Hundred Thousand (500,000) shares of
Preferred Stock of the par value of One Dollar ($1.00) per
share (the "Preferred Stock")."
As of December 1, 1998, of the 20,000,000 shares currently authorized,
the Company had (i) 10,890,792 shares outstanding, (ii) 8,307,649 shares
reserved for issuance pursuant to options, warrants, convertible securities
and other arrangements, and (iii) 801,622 shares authorized and available for
future issuance. If this proposal is adopted to increase the Company's
authorized shares to 50,000,000, the Company will have 30,801,622 shares
authorized and available for future issuance.
The proposed increase in the number of shares of Common Stock authorized
for issuance by the Company is designed to ensure that shares of Common Stock
will be available, if needed, for various corporate purposes including, but
not limited to, stock splits, stock dividends and other distributions.
Although the Company plans to seek additional equity capital by the end of
February 1999, it currently has no arrangements, commitments or
understandings with respect to the issuance of any of the additional shares
that would be authorized by the proposed amendment; however, the Board
believes it is desirable to have the authorized capital of the Company
sufficiently flexible so that future business needs and corporate
opportunities may be dealt with by the Board of Directors without undue delay
or the necessity of holding a special shareholders' meeting. Additionally,
the increased authorized shares could be used by the Company to make a
takeover attempt by a third party more difficult, such as by using the shares
to make a
6
<PAGE>
counter-offer for the shares of the bidder or by selling shares to dilute the
voting power of the bidder. As of the date of this Proxy Statement, the
Board is unaware of any effort to accumulate the Company's shares of Common
Stock or to obtain control of the Company by means of a merger, tender offer,
solicitation in opposition to management or otherwise.
If adopted by the shareholders, the proposed amendment will be
accomplished by the filing of Articles of Amendment with the Secretary of
State of the State of Minnesota, which would be expected to be accomplished
promptly following shareholder approval.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Common Stock of
the Company, voting at the meeting in person or by proxy, is required for the
approval of the increase in authorized shares of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ADOPTION OF THIS
PROPOSAL 2.
ELECTION OF DIRECTORS
(PROPOSAL 3)
Nine directors will be elected at the Annual Meeting to serve until the
next Annual Meeting of Shareholders or until their successors are elected.
The Board of Directors has nominated for election the nine persons named
below. All of the nominees, except for Mr. Lundstrom, are currently
directors and all, except for Messrs. Lundstrom, Mathisen and Wieser, were
elected by the shareholders. Mr. Wieser was originally appointed to the
Board as a nominee of Molex Incorporated ("Molex") pursuant to the terms of
an Agreement the Company has with Molex. See "Certain Transactions." It is
intended that proxies will be voted for the named nominees. Unless otherwise
indicated, each nominee has been engaged in his present occupation as set
forth below, or has been an officer with the organization indicated, for more
than the past five years. The Board of Directors believes that each nominee
named below will be able to serve, but should any nominee be unable to serve
as a director, the persons named in the proxies have advised that they will
vote for the election of such substitute nominee as the Board of Directors
may propose.
The names of the nominees, their principal occupations and other
information is set forth below, based upon information furnished to the
Company by the nominees.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE
------------ ----------------------- --------
<S> <C> <C>
James E. Donaghy (64) Chief Executive Officer of the 1988
Company; prior to 1988,
Director of Planning and
Development for Dupont
Electronics, Wilmington,
Delaware (electronics
manufacturer); Director of
Hutchinson Technology, Inc.
7
<PAGE>
John G. Kassakian (55) Professor of Electrical 1985
Engineering and Director,
Laboratory for Electromagnetic
and Electronic Systems,
Massachusetts Institute of
Technology, Cambridge,
Massachusetts; Director of Ault
Incorporated and ISO New
England.
Edward L. Lundstrom (48) President of the Company since ____
September 1997; since 1976,
held various management
positions with the Company;
Director of Research,
Incorporated.
Gerald E. Magnuson (68) Retired Partner, Lindquist & 1975
Vennum P.L.L.P., Minneapolis,
Minnesota (law firm); Partner
of Lindquist & Vennum P.L.L.P.
until December 1994; Secretary
of the Company; Director of
PremiumWear, Inc., Research,
Incorporated and Washington
Scientific Industries, Inc.
Dennis M. Mathisen (58) Chairman of the Board of 1998
Governors of Marshall Ventures, LLC;
Chief Executive Officer of
Marshall Financial Partners, L.P.
(investment fund);
President, Director and 100%
owner of Marshall Financial
Group, Inc.; prior to 1997,
President, Chairman of the
Board and Chief Executive
Officer of Mountain Parks
Financial Corp.; Director of
Community First Bancshares, Inc.,
and IPI, Inc.
William B. Miller (66) Partner, Miller & Company, Ayr, 1991
Scotland (business consulting);
prior to 1991, Managing
Director and Chairman,
Prestwick Holdings plc, Ayr,
Scotland (electronic component
manufacturer); Director of
Magnum Power plc, Prestwick
Aviation Holdings Ltd., and
Stathclyde University Incubator Ltd.
8
<PAGE>
Kenneth J. Roering (56) Professor, School of 1988
Management, University of
Minnesota, Minneapolis,
Minnesota; Director of TSI, Inc.,
Transport Corporation of
America, Inc. and Arctic Cat, Inc.
Raymond C. Wieser (60) Corporate Vice President of 1998
Molex Incorporated (connector
manufacturer)
Beekman Winthrop (57) Private Investor; President of 1992
Woodwin Management, Inc.
(investment advisor); President
and Director of Central Coal &
Coke Corporation, Kansas City,
Missouri (management of
interests in coal, gas and oil
properties).
</TABLE>
The Board of Directors met 20 times during fiscal year 1998. Each
director attended more than 75% of the meetings of the Board of Directors and
Board committees on which he served.
The Compensation Committee, which is currently comprised of Messrs.
Roering (Chairman), Magnuson and Womack, met six times during fiscal year
1998. The Compensation Committee reviews and makes recommendations to the
Board of Directors regarding salaries, compensation and benefits of officers
and key employees.
The Audit Committee, which is currently comprised of Messrs. Winthrop
(Chairman), Kassakian, Magnuson, Miller, Roering and Womack, met once during
fiscal year 1998. Among other duties, the Committee reviews and evaluates
significant matters relating to the audit and internal controls of the
Company, reviews the scope and results of audits by, and the recommendations
of, the Company's independent auditors and approves additional services to be
provided by the auditors. The Committee reviews the activities of the
Company's internal audit staff and reviews audited financial statements of
the Company.
The Nominating Committee, which is currently comprised of Messrs.
Kassakian (Chairman), Winthrop and Roering, met six times during fiscal 1998.
The Nominating Committee was established at the end of fiscal 1995 to
consider nominees for election to the Board of Directors and to evaluate the
performance of the Board of Directors and individual directors. The
Nominating Committee will consider a nomination by a shareholder of a
candidate for election as a director of the Company. The Company's Bylaws
provide that a notice of proposed shareholder nominations for the election of
directors must be timely given in writing to the Secretary of the Company
prior to the meeting at which directors are to be elected. To be timely, the
notice must be given by such shareholder to the Secretary of the Company not
less than 45 days nor more than 60 days prior to a meeting date corresponding
to the previous year's Annual Meeting. The Company's Bylaws provide that the
Annual Meeting shall be held on the second Wednesday in January of each year.
The notice to the Company from a shareholder who intends to nominate a
person at the meeting for election as a director must contain certain
information about such shareholder and the person(s) nominated by such
shareholder, including, among other things, the name and address of record of
such shareholder, a representation that the shareholder is entitled to vote
at such meeting and intends to
9
<PAGE>
appear in person or by proxy at the meeting, the name, age, business and
residence addresses and principal occupation of each nominee, such other
information as would be required to be included in a proxy statement
soliciting proxies for the election of the proposed nominee(s), and the
consent of each nominee to serve as a director if so elected. The Company
may also require any proposed nominee to furnish other information reasonably
required by the Company to determine the proposed nominee's eligibility to
serve as director. If the presiding officer of a meeting of shareholders
determines that a person was not nominated in accordance with the foregoing
procedure, such person will not be eligible for election as a director.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending August 28, 1998,
August 29, 1997 and August 30, 1996, the cash compensation paid by the
Company, as well as certain other compensation paid or accrued for those
years, to James E. Donaghy, the Company's Chief Executive Officer, and to
each of the four other most highly compensated executive officers of the
Company in office at the end of fiscal year 1998, whose total cash
compensation exceeded $100,000 during fiscal year 1998 (together with
Mr. Donaghy, the "Named Executive Officers") in all capacities in which they
served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation Awards
-------------------------------------------------------------------------
Other
Annual Securities All Other
Name and Compensa- Underlying Compensa-
Principal Position Year Salary ($) Bonus ($) tion($)(1) Options(2) tion($)(2)
------------------ ---- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James E. Donaghy 1998 298,941 0 0 0 5,340
Chief Executive 1997 280,556 0 0 29,733 5,539
Officer 1996 261,620 0 0 40,000 11,939
Edward L. Lundstrom 1998 199,953 0 63,924 10,654 3,691
President 1997 171,862 0 0 58,693 3,756
1996 159,812 0 0 35,000 8,286
John V. McManus 1998 155,447 0 147,246 9,456 2,324
Vice President-Finance 1997 146,739 0 0 18,182 2,589
1996 134,458 0 0 30,000 5,743
Keith L. Casson(3) 1998 162,073 0 0 0 2,910
Vice President-Micro 1997 145,148 0 0 31,318 3,063
Products 1996 118,433 0 0 30,000 6,420
10
<PAGE>
Roger D. Quam 1997 150,129 0 0 0 2,693
Vice President- 1996 138,430 0 0 13,332 2,999
Composite Materials 1995 132,985 0 0 30,000 6,805
Greg D. Closser 1998 136,906 0 0 0 2,481
Vice President- 1997 126,464 0 0 17,181 2,767
Interconnect 1996 120,018 0 0 30,000 6,309
Operations
</TABLE>
___________________________
(1) With respect to Messrs. Lundstrom and McManus, these amounts represent
taxable gain related to option exercises during fiscal 1998.
(2) These amounts represent the Company's basic and matching contributions to
the Company's 401(k) plan on behalf of such employees.
(3) Mr. Casson retired from the Company on August 28, 1998.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's stock option plans to the Named Executive
Officers during the last fiscal year:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
NUMBER VALUE AT ASSUMED
OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDER- GRANTED TO APPRECIATION
LYING EMPLOYEES EXERCISE FOR OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED YEAR PER SHARE DATE 5% 10%
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James E. Donaghy 0 0% $0 --- $--- $---
Edward L. Lundstrom 10,654(2) 3.4 11.00 04/06/08 73,703 186,777
John V. McManus 9,456(2) 3.0 20.38 10/21/07 121,167 307,060
Keith L. Casson 0 0 0 --- --- ---
Roger D. Quam 0 0 0 --- --- ---
Greg D. Closser 0 0 0 --- --- ---
</TABLE>
___________________________
(1) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock, overall stock
market conditions, as well as the option holder's continued employment
through the vesting period. The amounts reflected in this table may not
necessarily be achieved.
(2) Represents options automatically granted to such individuals upon exercise
of existing options under the Company's Target Grant Program.
11
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers, concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of fiscal year 1998:
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-the-Money
Underlying Options at
Unexercised Options at Fiscal Year-End
Fiscal Year-End
------------------------------ ------------------------------------
Shares
Acquired on Value
Name Exercise Realized(1) Exercisable Unexercisable Exercisable(2) Unexercisable(2)
- ---- -------- ----------- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James E. Donaghy 0 $0 174,056 25,944 $0 $0
Edward L. Lundstrom 10,654(3) 63,924 68,487 56,513 0 0
John V. McManus 9,456(3) 147,246 47,817 27,183 0 0
Keith L. Casson 0 0 60,717 0 0 0
Roger D. Quam 0 0 60,397 14,603 1,369 0
Greg D. Closser 0 0 57,517 17,483 1,204 0
</TABLE>
___________________________
(1) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(2) Based on a per share price of $5.125 which is the average of the high and
low prices for the Company's Common Stock on August 28, 1998. Value is
calculated on the difference between the option exercise price and $5.125
multiplied by the number of shares of Common Stock underlying the options,
but before taxes associated with exercise.
(3) Upon exercise of options, such individual was automatically granted a new
option for a like number of shares under the Company's Target Grant
Program. Such options vest over three years and have an exercise price
equal to the fair market value on the date of grant.
BOARD COMPENSATION COMMITTEE REPORT
Decisions on compensation of the Company's executives are generally made
by the three member Compensation Committee of the Board consisting of Messrs.
Roering (Chairman), Womack and Magnuson. All decisions by the Compensation
Committee relating to the compensation of the Company's executive officers
are reviewed by the full Board. Pursuant to rules designed to enhance
disclosure of companies' policies toward executive compensation, set forth
below is a report submitted by Messrs. Roering, Womack and Magnuson in their
capacity as the Board's Compensation Committee addressing the Company's
compensation policies for fiscal year 1997 as they affected the executive
officers. The following report shall not be deemed incorporated by reference
by any general statement incorporating by reference this proxy statement into
any filing under the Securities Act of 1933 (the "1933 Act") or the
Securities Exchange Act of 1934 (the "1934 Act"), except to the extent that
the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under the 1933 Act or the 1934 Act.
COMPENSATION PHILOSOPHY. The Company's primary objective is to enhance
long-term shareholder value by safely and profitably providing products of
the highest value and quality for key markets. In furtherance of this
objective, the Company is committed to a strong, positive link between its
business and strategic goals and its compensation programs. The financial
goals for compensation plans are reviewed and approved by the Board in
conjunction with its approval of the Company's strategic and operating plans.
12
<PAGE>
The Company's total compensation philosophy is designed to support its
overall objective of creating value for its shareholders. Key objectives of
this philosophy are:
- Attract and retain key executives critical to the long-term success of
the Company.
- Support a performance-oriented environment that rewards performance
with respect to the Company's short and long-term financial goals.
- Emphasize pay for performance by having a significant portion of
compensation "at-risk," particularly for senior executives.
- Encourage maximum performance through the use of appropriate incentive
programs.
- Encourage employee stock ownership to enhance a mutuality of interest
with other shareholders.
The Company has designed its executive compensation programs around
these objectives. The Compensation Committee believes the Company's programs
consistently meet these goals. Following is a description of the Company's
current programs and how each design element relates to the objectives
outlined above.
BASE SALARY. The Compensation Committee annually reviews each officer's
salary, including those of the Named Executive Officers. In determining
appropriate salary levels, the Compensation Committee considers level of
responsibility, experience, individual performance, internal equity, as well
as external pay practices.
ANNUAL INCENTIVES. Annual incentive (performance bonus) award
opportunities are made to managerial and executive employees to recognize and
reward corporate and individual performance. Each year, the Compensation
Committee will approve the performance measures selected, as well as specific
financial targets used. The Compensation Committee believes these goals
drive the future success of the Company's business and enhance shareholder
value.
The amount individual executives may earn is directly dependent upon the
individual's position, responsibility and ability to impact the Company's
financial success. Additionally, external market data is reviewed annually
to determine competitive incentive opportunities. Awarded amounts are
related to performance.
The short-term incentive plan is dependent on measured financial
performance. Every payout depends on results, not on efforts. Bonuses are
paid based upon attainment of financial goals for earnings growth. No bonuses
were paid to management in fiscal year 1998.
LONG-TERM INCENTIVES. The Company's overall long-term compensation
philosophy is that long-term incentives should be related to improvement in
the creation of long-term shareholder value. In furtherance of this
objective, the Company awards to its executive officers stock options.
STOCK OPTIONS. Stock options encourage and reward effective management
that results in long-term corporate financial success, as measured by stock
price appreciation. Stock options only have value for the executive officers
if the price of the Company's stock appreciates in value from the date the
stock options are granted. Shareholders also benefit from such stock price
appreciation.
13
<PAGE>
In August 1997, the Committee approved, and in January 1998 the
shareholders approved, the Company's Target Grant Program under the 1994
Stock Plan (the "Plan") and established specific levels ("Target Levels") of
options to be held by officers and key employees (the "Participants"). Those
levels were established based on the individual's position, level of
responsibility and ability to impact the Company's financial success.
Options were granted in August 1997 to bring the number of options held by
Participants in the Plan to their respective Target Level. Upon exercise of
these options by the Participants, new options will automatically be granted
in order to maintain the established Target Level. The Target Grant Program
(the "Program") is intended to increase the number of shares owned by the
Company's executive officers and key employees. The Program encourages
option exercises by permitting an optionee to exercise an option and be
restored with a new option which replaces the opportunity for future
appreciation which that optionee would otherwise lose. The Committee feels
that this Program will more adequately align the interests of officers and
key employees with those of the shareholders and will place greater emphasis
on shareholder value creation and continued growth and performance of the
Company.
Under the terms of the Program, it is not intended that additional stock
options will be granted by the Board to the Participants except for changes
in responsibilities which may increase a Participant's Target Level or as
otherwise determined by the Board. Rather, new options (the "Replacement
Options") will be granted automatically up to an individual's Target Level as
current options are exercised. The Replacement Options will vest over three
years and will have an option exercise price equal to the fair market value
on the date of grant. The Committee believes this Program is consistent with
the Company's objectives to more heavily direct total compensation toward a
long-term equity interest for officers and key employees, with greater
opportunity for reward if long-term performance is sustained.
CHIEF EXECUTIVE OFFICER COMPENSATION. The salary and bonus of the Chief
Executive Officer is set by and subject to the discretion of the Compensation
Committee with Board approval. The compensation for James E. Donaghy, the
Chief Executive Officer, was determined by using the same process and
philosophy as that used for all executives of the Company, as described
above. For fiscal year 1998, Mr. Donaghy received no bonus and was awarded
no options under the Company's Target Grant Program thereby maintaining his
Target Level at 200,000 options.
Submitted by the Compensation Committee of the
Company's Board of Directors
Kenneth J. Roering Gerald E. Magnuson James S. Womack
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Magnuson, a Director and a member of the Compensation Committee and
the Company's Secretary, is a retired partner of the law firm of Lindquist &
Vennum P.L.L.P. which was paid for legal services rendered to the Company
during the last fiscal year. Mr. Magnuson receives no financial benefit on
account of amounts paid by the Company to Lindquist & Vennum P.L.L.P. for
such services. It is anticipated that Lindquist & Vennum P.L.L.P. will
continue to perform legal services for the Company during the current fiscal
year. Mr. Womack, Chairman of the Board and a member of the Compensation
Committee, served as an employee and the Chief Executive Officer of the
Company prior to his resignation in January 1992.
14
<PAGE>
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company include
in this Proxy Statement a line graph presentation comparing cumulative,
five-year shareholder returns on an indexed basis with a broad market index
and either a nationally-recognized industry standard or an index of peer
companies selected by the Company. The Company has chosen the use of the
Nasdaq Stock Market (U.S. Companies) Index as its broad market index and the
Nasdaq Electronic Component Stock Index as its peer group index. The table
below compares the cumulative total return as of the end of each of the
Company's last five fiscal years on $100 invested as of August 27, 1993 in
the Common Stock of the Company, the Nasdaq Stock Market Index and the Nasdaq
Electronic Component Stock Index, assuming the reinvestment of all dividends.
The performance graph is not necessarily indicative of future investment
performance.
[GRAPH]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Aug. 27, 1993 Sept. 2, 1994 Sept. 1, 1995 Aug. 30, 1996 Aug. 29, 1997 Aug. 28, 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sheldahl, Inc. 100 146.88 237.50 233.20 291.41 64.06
- ----------------------------------------------------------------------------------------------------------------------
Nasdaq
Electronic
Component 100 105.16 209.67 212.81 431.93 298.09
Stocks Index
- ----------------------------------------------------------------------------------------------------------------------
Nasdaq Stock
Market Index
(U.S.) 100 104.10 140.21 158.07 220.54 209.71
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
DIRECTOR COMPENSATION
Directors who are not employees of the Company (currently all directors
except Mr. Donaghy) were paid during fiscal year 1998 an annual retainer of
$12,000 and a fee of $800 for each day of meetings of the Board of Directors
or any committee and Committee Chairmen were paid an additional $2,000 during
fiscal 1998. Pursuant to the terms of the Company's Target Grant Program,
each non-employee director has
15
<PAGE>
received options to purchase 25,000 shares (the "Target Level"). Upon
exercise of such options, each non-employee director will automatically
receive replacement options to maintain his Target Level. The replacement
options will vest over three years and will have an option exercise price
equal to the fair market value on the date of grant.
Mr. Womack, received, in addition to the director fees and stock options
noted above, a $10,000 annual retainer for serving as the Chairman of the
Board. In addition, the Company and Mr. Womack entered into a Consulting
Agreement during fiscal year 1988 which provides that the Company will retain
Mr. Womack as an independent consultant from the date immediately following
his termination of employment until his 75th birthday, unless another date is
agreed upon by the parties. This Agreement is currently in effect and
Mr. Womack receives as annual compensation under the Consulting Agreement
$66,000, equaling 50% of the average of his annual cash compensation for the
five calendar years preceding termination of employment (but not less than
$125,000), less an amount equal to an annual annuity that could be purchased
with the principal in his retirement accounts at the date of retirement
provided from all retirement contributions by the Company. The Consulting
Agreement also restricts Mr. Womack from competitive employment and
disclosure of trade secrets and confidential information.
Mr. Miller received $5,952 during fiscal year 1998 representing fees
relating to international consulting work performed on behalf of the Company.
Mr. Magnuson received $5,000 during fiscal year 1998 for his services as
Secretary of the Company.
In fiscal year 1982, the Company established a retirement program for
directors not covered by another retirement plan of the Company which
provides for the payment of an annual benefit equal to the annual retainer
paid to directors during the full fiscal year preceding retirement. The
retirement benefit, which is payable to directors who have served five years
or more, will commence at the later of the time of retirement or when the
director becomes 65 years old and will be subject to proportionate reduction
if the director has served the Company less than 15 years. The maximum
number of years that the benefit is payable is ten years.
EMPLOYMENT AND OTHER AGREEMENTS
The Company has entered into employment agreements with all of its
executive officers. The employment agreements provide, among other things,
for a lump sum cash severance payment to such individuals equal to
approximately three times the individual's average annual compensation over
the preceding five years plus certain fringe benefits under certain
circumstances following a change in control of the Company if the change in
control is not formally approved by the Board of Directors and 1.5 times that
compensation amount if the change in control is approved by the Board of
Directors and the officer continues in the employ of the Company for a period
of at least one year following the change in control. In general, a "change
in control" would include a change resulting from the acquisition of 20% or
more of the Company's outstanding voting stock by any person, except by Molex
Incorporated for which the acquisition threshold is 22%, a change in the
current members of the Board of Directors or their successors elected or
nominated by such members whereby they cease to be a majority of the Board of
Directors, or the Company disposing of 75% or more of its assets, other than
to an entity owned 50% or more by the Company or one of its subsidiaries.
The employment agreement with Mr. Donaghy also requires the Company to pay
Mr. Donaghy a salary of not less than $185,600 annually, certain portions of
which may be deferred. If a change in control which was not approved by the
Board of Directors had occurred at the end of fiscal year 1998, the following
individuals would have received the approximate payment indicated pursuant to
the employment agreements: Mr. Donaghy, $800,303; Mr. Lundstrom, $468,886;
Mr. Closser, $361,353; Mr. Quam, $400,279; Mr. McManus, $397,300; and all
current executive officers as a group, $3,733,169.
16
<PAGE>
The Company and Mr. Donaghy entered into a Supplementary Executive
Retirement Plan Agreement during fiscal year 1997 which provides Mr. Donaghy
upon his retirement or other termination of his employment with an annual
retirement pension benefit equal to $137,500, less an amount equal to the sum
of (i) the aggregate of twelve monthly payments received by Mr. Donaghy
and/or his spouse under pension or deferred compensation plans established by
Mr. Donaghy's former employer; and (ii) an amount which equals an annual
joint and survivor annuity that could be purchased with the principal in
Mr. Donaghy's retirement accounts at the date of retirement provided from all
retirement contributions by the Company. Based on the above formula, the
Company expects its obligations under the Agreement to be approximately
$50,000 per annum increasing to approximately $80,000 per annum in the event
Mr. Donaghy predeceases his spouse. All benefits are payable for Mr.
Donaghy's life and, after his death, if he is survived by his spouse, his
spouse shall continue to receive such benefits for the duration of her life.
The Agreement also restricts Mr. Donaghy from competitive employment and
disclosure of trade secrets and confidential information.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10%
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. These insiders are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms
they file, including Forms 3, 4 and 5.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended August 28, 1998, all
Section 16(a) filing requirements applicable to its insiders were complied
with.
APPROVAL OF AUDITORS
(PROPOSAL 4)
Arthur Andersen LLP, independent public accountants, have been auditors
for the Company since 1955. They have been reappointed by the Board of
Directors, upon recommendation of its Audit Committee, as the Company's
auditors for the current fiscal year, and shareholder approval of the
appointment is requested. In the event the appointment of Arthur Andersen LLP
is not approved by the shareholders, the Board of Directors will make another
appointment to be effective at the earliest feasible time.
A representative of Arthur Andersen LLP will be present at the Annual
Meeting of Shareholders, will have an opportunity to make a statement if he
or she desires to do so, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF
ARTHUR ANDERSEN LLP.
CERTAIN TRANSACTIONS
Molex Incorporated ("Molex") is a customer of the Company's with
purchases in fiscal 1998 of approximately $8,000,000, representing 6.8% of
the Company's gross revenues. On July 28, 1998, Company
17
<PAGE>
and Molex formed a joint venture to design, market and assemble modular
interconnect systems to replace wiring harnesses in primarily the automotive
market (the "Joint Venture"). The new company was named Modular Interconnect
Systems, L.L.C. and it is a Delaware limited liability company ("Modular
Interconnect"). Modular Interconnect will utilize proprietary flexible
products developed by the Company and proprietary connectors developed by
Molex in the development of the new modular interconnect system as an
alternative to conventional automotive wiring harnesses and flex circuit
assemblies. The Company and Molex will supply their respective products to
Modular Interconnect pursuant to long-term supply contracts. Modular
Interconnect is managed by five managers, three of whom are designated by
Molex and two by Sheldahl. Certain transactions require the approval of the
majority of managers designated by each party.
On July 30, 1998, the Company closed on a private placement of shares of
its Series D Convertible Preferred Stock (the "Series D Stock"). This private
offering resulted in gross proceeds to the Company of $32,917,000 and the
issuance to accredited investors of 32,917 shares of the Series D Stock at a
price of $1,000 per share. As one of the investors in the Series D offering,
Molex purchased from the Company $12,000,000 of the total shares of the
Series D Stock. Given the conversion price of $6.15 per share, Molex's
Series D Stock is convertible into 1,951,220 shares of the Company's Common
Stock and carries warrants to purchase an additional 120,000 shares of Common
Stock. As of the date of the closing of the Series D offering, Molex also
owned 340,000 shares of the Company's Common Stock.
In connection with the formation of the Joint Venture and the investment
by Molex in the Series D offering, Molex was granted the right to nominate
one person to the Sheldahl Board of Directors, a right of first refusal in
the event of a sale of Sheldahl, and certain preemptive rights. On October 20,
1998 the Board of Directors of Sheldahl appointed Raymond C. Wieser, a
Corporate Vice President of Molex, to the Board. Mr. Wieser is also being
nominated for election at the Company's Annual Meeting of Shareholders to
which this proxy statement relates.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
The proxy rules of the Securities and Exchange Commission permit
shareholders of the Company, after timely notice to the Company, to present
proposals for shareholder action in the Company's proxy statement where such
proposals are consistent with applicable law, pertain to matters appropriate
for shareholder action and are not properly omitted by Company action in
accordance with the Commission's proxy rules. The next annual meeting of the
shareholders of Sheldahl, Inc. is expected to be held on or about January 12,
2000 and proxy materials in connection with that meeting are expected to be
mailed on or about December 1, 1999. Shareholder proposals prepared in
accordance with the Commission's proxy rules must be received at the
Company's corporate office on or before August 2, 1999, in order to be
considered for inclusion in the Board of Directors' Proxy Statement and proxy
card for the 2000 Annual Meeting of Shareholders. Any such proposals must be
in writing and signed by the shareholder.
The Bylaws of the Company establish an advance notice procedure with
regard to (i) certain business to be brought before an annual meeting of
shareholders of the Company and (ii) the nomination by shareholders of
candidates for election as directors.
PROPERLY BROUGHT BUSINESS. The Bylaws provide that at the annual
meeting only such business may be conducted as is of a nature that is
appropriate for consideration at an annual meeting and has been either
specified in the notice of the meeting, otherwise properly brought before the
meeting by or at the direction of the Board of Directors, or otherwise
properly brought before the meeting by a shareholder who has given timely
written notice to the Secretary of the Company of such shareholder's
intention to bring such business before the meeting. To be timely, the
notice must be given by such shareholder to the Secretary of the
18
<PAGE>
Company not less than 45 days nor more than 60 days prior to a meeting date
corresponding to the previous year's annual meeting. Notice relating to the
conduct of such business at an annual meeting must contain certain
information as described in the Company's Bylaws, which are available for
inspection by shareholders at the Company's principal executive offices
pursuant to Section 302A.461, subd. 4 of the Minnesota Statutes. Nothing in
the Bylaws precludes discussion by any shareholder of any business properly
brought before the annual meeting in accordance with the Company's Bylaws.
SHAREHOLDER NOMINATIONS. The Bylaws provide that a notice of proposed
shareholder nominations for the election of directors must be timely given in
writing to the Secretary of the Company prior to the meeting at which
directors are to be elected. To be timely, the notice must be given by such
shareholder to the Secretary of the Company not less than 45 days nor more
than 60 days prior to a meeting date corresponding to the previous year's
annual meeting. The notice to the Company from a shareholder who intends to
nominate a person at the meeting for election as a director must contain
certain information as described in the Company's Bylaws, which are available
for inspection by shareholders as described above. If the presiding officer
of a meeting of shareholders determines that a person was not nominated in
accordance with the foregoing procedure, such person will not be eligible for
election as a director.
GENERAL
The Board of Directors of the Company knows of no matters other than the
foregoing to be brought before the meeting. However, the enclosed proxy
gives discretionary authority in the event that any additional matters should
be presented.
The Company's Annual Report to Shareholders for the fiscal year ended
August 28, 1998 is being mailed to shareholders with this Proxy Statement.
Shareholders may receive without charge a copy of the Company's Annual Report
on Form 10-K, including financial statements and schedules thereto, as filed
with the Securities and Exchange Commission, by writing to: Sheldahl, Inc.,
1150 Sheldahl Road, Northfield, Minnesota 55057, Attention: John V. McManus,
or by calling the Company at: (507) 663-8210.
By the Order of the Board of Directors
Gerald E. Magnuson, SECRETARY
19
<PAGE>
[SHELDAHL, INC. LOGO]
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
JANUARY 13, 1999
The undersigned hereby appoints James E. Donaghy, Gerald E. Magnuson and
Ed Lundstrom, or any one or more of them, proxies with full power of
substitution to vote in their discretion cumulatively all shares of stock of
Sheldahl, Inc. of record in the name of the undersigned at the close of
business on November 18, 1998, at the Annual Meeting of Shareholders to be
held in Longmont, Colorado on January 13, 1999, or at any adjournment or
adjournments, hereby revoking all former proxies.
1. PROPOSAL TO APPROVE ISSUANCE OF COMMON STOCK IN COMPLIANCE WITH NASDAQ RULES:
/ / FOR / / AGAINST / / ABSTAIN
2. AMENDMENT OF ARTICLES TO INCREASE AUTHORIZED SHARES TO 50,000,000:
/ / FOR / / AGAINST / / ABSTAIN
3. ELECTION OF DIRECTORS.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as indicated to the contrary) to vote for all nominees
listed below
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
MARK THE FOR BOX AND STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
James E. Donaghy, John G. Kassakian, Edward L. Lundstrom,
Gerald E. Magnuson, Dennis M. Mathisen, William B. Miller, Kenneth J. Roering,
Raymond C. Wieser, Beekman Winthrop
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS.
/ / FOR / / AGAINST / / ABSTAIN
5. IN THEIR DISCRETION UPON ANY OTHER MATTERS COMING BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1), (2),
(3) AND (4) IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSALS
IF THERE IS NO SPECIFICATION.
Dated:________________________________, 19___
_____________________________________________
_____________________________________________
Please sign name(s) exactly as shown at left.
When signing as executor, administrator,
trustee or guardian, give full title as such;
when shares have been issued in names of two
or more persons, all should sign.
