<PAGE> 1
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 [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SHELDAHL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
[COMPANY NAME]
- --------------------------------------------------------------------------------
(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> 2
[SHELDAHL, INC. LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 12, 2000
Notice is hereby given that the Annual Meeting of Shareholders of
Sheldahl, Inc. will be held at the Radisson Plaza Hotel, 35 South Seventh
Street, Minneapolis, Minnesota on Wednesday, January 12, 2000 at 3:00 p.m.,
local time, for the following purposes:
1. To approve a proposal to amend the Company's Bylaws to reduce
the number of directors to eight.
2. To elect eight directors to hold office until the next Annual
Meeting of Shareholders or until their successors are elected.
3. To ratify and approve the selection of independent public
accountants for the Company for the current fiscal year.
4. 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 17,
1999 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 10, 1999
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> 3
[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 12, 2000 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 10,
1999.
The total number of shares outstanding and entitled to vote at the
meeting as of November 17, 1999 consisted of 11,613,020 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 eight (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 17, 1999 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> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table includes information as of November 24, 1999
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.
AMOUNT PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER ------ OF CLASS
- ------------------------------------ --------
Molex Incorporated(1) 2,411,220 (2) 17.62%
2222 Wellington Court
Lisle, IL 60532
Dennis M. Mathisen(3) 706,466 (4)(5) 5.89%
903 North Third Street
Suite 300
Minneapolis, MN 55401
James E. Donaghy(6)(7) 248,167 (4) 2.10%
John G. Kassakian(6) 46,841 (2)(4)(5) *
Gerald E. Magnuson(6) 32,092 (4) *
William B. Miller(6) 34,334 (4) *
Kenneth J. Roering(6) 84,854 (2)(4)(5) *
Raymond C. Wieser(6)(8) 11,333 (4) *
Beekman Winthrop(6) 547,636 (2)(4)(5) 4.63%
Edward L. Lundstrom(6)(9) 143,436 (2)(4) 1.22%
Jill D. Burchill(9) 0 *
John V. McManus(9) 82,539 (4) *
Greg D. Closser (9) 77,911 (4) *
James Havener(9) 52,679 (4) *
All Officers and Directors 1,439,075 (2)(4)(5) 11.45%
as a Group (14 persons)
- ---------------------------
* Less than one percent.
(1) Based upon information filed with the Securities and Exchange Commission
on Schedule 13D on July 30, 1998.
(2) Includes shares which may be issued upon conversion of the Company's
Series D Convertible Preferred Stock in the amount of 1,951,220 shares
for Molex, Incorporated, 292,683 shares for Mr. Mathisen, 16,260 shares
for Mr. Kassakian, 32,520 shares for Mr. Roering, 162,602 shares for
Mr. Winthrop, 8,130 shares
2
<PAGE> 5
for Mr. Lundstrom, and 219,512 shares for all officers and directors as
a group, and shares which may be issued upon the exercise of warrants
in the amount of 120,000 shares for Molex, Incorporated, 18,000 shares
for Mr. Mathisen, 1,000 shares for Mr. Kassakian, 2,000 shares for Mr.
Roering, 10,000 shares for Mr. Winthrop, 500 shares for Mr. Lundstrom,
and 13,500 shares for all officers and directors as a group. The shares
issuable to Mr. Winthrop are held indirectly and Mr. Winthrop disclaims
beneficial ownership to such shares.
(3) Based upon information available to the Company.
(4) Includes shares which may be purchased within sixty days from the date
hereof upon exercise of outstanding stock options in the amount of
8,333 shares for Mr. Mathisen, 193,070 shares for Mr. Donaghy, 17,334
shares for each of Messrs. Kassakian, Magnuson, Miller and Roering,
8,333 shares for Mr. Weiser, 17,334 shares for Mr. Winthrop, 125,175
shares for Mr. Lundstrom, no shares for Ms. Burchill, 67,360 shares for
Mr. McManus, 70,634 shares for Mr. Closser, 50,000 shares for Mr.
Havener, and 672,314 shares for all officers and directors as a group.
(5) Includes shares which may be issued upon conversion of the Company's
Series E Convertible Preferred Stock in the amount of 60,000 shares for
Mr. Mathisen; 4,000 shares for Mr. Kassasian; 8,000 shares for Mr.
Roering; 32,000 shares for Mr. Winthrop; and 44,000 shares for all
officers and directors as a group, and shares which may be issued upon
the exercise of Warrants in the amount of 3,750 shares for Mr.
Mathisen; 250 shares for Mr. Kassasian; 500 shares for Mr. Roering;
2,000 shares for Mr. Winthrop; and 2,750 shares for all officers and
directors as a group. The shares issuable to Mr. Winthrop are held
indirectly and Mr. Winthrop disclaims beneficial ownership of such
shares.
(6) Serves as a director of the Company and has been nominated for
re-election.
(7) Includes ______ shares held by the Donaghy Limited Partnership, of
which Mr. Donaghy is the General Partner and ______ shares held by the
Donaghy Living Trust, of which Mr. Donaghy is the trustee.
(8) Mr. Wieser is an officer of Molex Incorporated and disclaims beneficial
ownership of any shares held by Molex Incorporated.
(9) Serves as an executive officer of the Company.
REDUCTION OF THE NUMBER OF DIRECTORS
(PROPOSAL 1)
The present size of the Board of Directors is fixed at nine persons.
Mr. Dennis M. Mathisen, a director since 1998, resigned on November 19, 1999.
Consequently, the Board has determined that it would be in the best interests of
the Company to reduce the size of the Board to eight persons. Under provisions
of the Company's Bylaws and Minnesota law, the size of the Board may only be
reduce by a vote of the shareholders.
The following resolution will be presented to the shareholders for
approval:
RESOLVED, that Article II, Section 2 of the Bylaws of this
Company be amended to read as follows:
"The Board of Directors of this Corporation shall consist of
eight (8) directors and a majority of the directors then
holding office shall constitute a quorum."
Approval of this resolution requires the affirmative vote of a majority
of the shareholders present in person or by proxy at the Annual Meeting.
3
<PAGE> 6
ELECTION OF DIRECTORS
(PROPOSAL 2)
Eight 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 eight persons named below.
All of the nominees are currently directors and all were elected by the
shareholders. 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.
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE
------------ ----------------------- --------
James E. Donaghy (65) Chairman of the Board of the Company; 1988
Chief Executive Officer of the Company from
1988 until December 1998; prior to 1988,
Director of Planning and Development for
Dupont Electronics, Wilmington, Delaware
(electronics manufacturer).
John G. Kassakian (56) Professor of Electrical Engineering and 1985
Director, Laboratory for Electromagnetic
and Electronic Systems, Massachusetts
Institute of Technology, Cambridge,
Massachusetts; Director of Ault
Incorporated and ISO New England.
Edward L. Lundstrom (49) Chief Executive Officer of the Company 1999
since January 1999; President of the
Company since September 1997; since
1976, held various management
positions with the Company; Director of
Research, Incorporated.
Gerald E. Magnuson (69) Retired Partner, Lindquist & Vennum 1975
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 WSI Industries, Inc.
4
<PAGE> 7
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE
------------ ----------------------- --------
William B. Miller (67) 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 and
Stathclyde University Incubator Ltd.
Kenneth J. Roering (57) Professor, School of Management, 1988
University of Minnesota, Minneapolis,
Minnesota; Director of TSI, Inc.,
Transport Corporation of America, Inc.
and Arctic Cat, Inc.
Raymond C. Wieser (61) Corporate Vice President of Molex 1998
Incorporated (connector manufacturer).
Beekman Winthrop (58) Private Investor; President of Woodwin 1992
Management, Inc. (investment advisor).
The Board of Directors met __ times during fiscal year 1999. 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.
Magnuson (Chairman), Roering and Donaghy, met ___ times during fiscal year 1999.
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 during the last fiscal year consisted of
Messrs. Winthrop (Chairman), Mathisen and Miller (currently comprised of Messrs.
Winthrop and Miller), met _____ during fiscal year 1999. 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 ___ times during fiscal 1999.
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
5
<PAGE> 8
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 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 27, 1999,
August 28, 1998 and August 29, 1997, the cash compensation paid by the Company,
as well as certain other compensation paid or accrued for those years, to Edward
Lundstrom, 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 1999, whose total cash compensation exceeded $100,000 during
fiscal year 1999 (together with Mr. Lundstrom, the "Named Executive Officers")
in all capacities in which they served:
6
<PAGE> 9
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Long Term
Compensation
----------------
Annual Compensation Awards
---------------------------------------- ---------------- --------------
Other
Annual Securities All Other
Name and Compensa- Underlying Compensa-
Principal Position Year Salary ($) Bonus ($) tion($)(1) Options tion($) (2)
------------------ ---- ---------- --------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Edward L. Lundstrom 1999 200,176 0 0 75,000 3,687
President and Chief 1998 199,953 0 63,924 10,654 3,691
Executive Officer 1997 171,862 0 0 58,693 3,756
Jill D. Burchill(3) 1999 94,432 50,000 0 75,000 0
Vice President
Chief Financial
Officer
John V. McManus 1999 165,767 0 0 0 2,653
Vice President-Finance 1998 155,447 0 147,246 9,456 2,324
1997 146,739 0 0 18,182 2,226
James Havener 1999 175,001 0 0 0 3,500
Vice President- Micro 1998 111,745 0 0 75,000 2,221
Products Business Unit
Greg D. Closser 1999 137,345 0 0 0 2,581
Vice President- 1998 136,906 0 0 0 2,481
Interconnect 1997 126,464 0 0 17,181 2,380
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) Ms. Burchill became Chief Financial Officer on March 13, 1999.
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:
7
<PAGE> 10
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
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>
Edward L. Lundstrom 75,000 23.9% $5.13 9/16/08 $241,731 $612,595
Jill Burchill 75,000 23.9% $6.69 3/10/09 $315,430 $799,361
John V. McManus -- -- -- -- -- --
James Havener -- -- -- -- -- --
Greg D. Closser -- -- -- -- -- --
</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 optionholder's continued
employment through the vesting period. The amounts reflected in this
table may not necessarily be achieved.
8
<PAGE> 11
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 1999:
<TABLE>
<CAPTION>
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
----------------------------------------------------------------------
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>
Edward L. Lundstrom 0 $0 100,175 99,825 $0 $ 112,500
Jill Burchill 0 0 0 75,000 0 0
John V. McManus 0 0 64,208 10,792 0 0
James Havener 0 0 50,000 25,000 0 0
Greg D. Closser 0 0 70,634 4,366 15,654 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 $6.8125 which is the average of the high
and low prices for the Company's Common Stock on August 27, 1999. Value
is calculated on the difference between the option exercise price and
$6.8125 multiplied by the number of shares of Common Stock underlying
the options, but before taxes associated with exercise.
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. Magnuson (Chairman), Donaghy and Roering . 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. Magnuson, Donaghy and Roering in their capacity
as the Board's Compensation Committee addressing the Company's compensation
policies for fiscal year 1999 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.
9
<PAGE> 12
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. Jill Burchill,
Chief Financial Officer, received a signing bonus of $50,000 under the terms of
a Letter Agreement with the Company entered into in connection with her
employment with the Company. Michelle Edwards, Vice President, received a bonus
of $1,500 during fiscal 1999. No other bonuses were paid to management in fiscal
year 1999.
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.
10
<PAGE> 13
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.
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 Edward L.
Lundstrom, the Chief Executive Officer, is set by and subject to the discretion
of the Compensation Committee with Board approval. Mr. Lundstrom's base salary
for fiscal 2000 is $250,000. Mr. Lundstrom participates in an incentive plan of
up to 150% of his base salary based on the attainment of financial goals and
earnings growth. Payments to Mr. Lundstrom under the incentive plan are made
only if the Company is profitable. During fiscal year 1999, Mr. Lundstrom
received no bonus. Mr. Lundstrom was awarded options for 75,000 shares under the
Company's Target Grant Program to increase his Target Level to 200,000 options.
This level was previously established for the position of Chief Executive
Officer based upon level of responsibility and ability to impact the Company's
financial success. In determining Mr. Lundstrom's compensation, the Committee
reviewed comparable compensation levels for chief executive officers in
similarly situated companies as well as Mr. Lundstrom's experience,
responsibilities and individual performance.
Submitted by the Compensation Committee of the
Company's Board of Directors
Gerald E. Magnuson Kenneth J. Roering James E. Donaghy
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<PAGE> 14
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.
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 September 2, 1994 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.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[BAR GRAPH]
12
<PAGE> 15
<TABLE>
<CAPTION>
=========================================================================================================================
SEP. 2, 1994 SEPT. 1, 1995 AUG. 30, 1996 AUG. 29, 1997 AUG. 28, 1998 AUG. 27, 1999
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sheldahl, Inc. 100 171 167 209 44 57
- -------------------------------------------------------------------------------------------------------------------------
Nasdaq
Electronic
Component 100 138 152 212 200 371
Stocks Index
- -------------------------------------------------------------------------------------------------------------------------
Nasdaq Stock
Market Index
(U.S.) 100 199 202 411 283 722
=========================================================================================================================
</TABLE>
DIRECTOR COMPENSATION
During fiscal year 1999, directors who are not employees of the Company
(currently all directors except Mr. Lundstrom) were paid an annual retainer of
$12,000 and a fee of $800 for each day of meetings of the Board of Directors or
any committee. Effective September 1, 1999, the Board fixed the compensation
paid to Mr. Donaghy for acting as Chairman of the Board at $2,000 per month. In
addition to the annual retainer and meeting fee, Board members serving as
Committee Chairmen received an extra $2,000 during fiscal 1999 for their
services. Pursuant to the terms of the Company's Target Grant Program, each
non-employee director has 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.
On December 17, 1998, the Board of Directors of the Company established
an Oversight Committee consisting of Kenneth J. Roering (Chairman), Dennis M.
Mathisen and Raymond C. Wieser. Mr. Mathisen has resigned from the Board of
Directors. Messrs. Roering and Wieser are currently directors of the Company.
The Committee was appointed to assist in the management of the Company and to
monitor management's performance in achieving goals and objectives established
from time to time by the committee, its Chairman or the Board of Directors. The
Committee exists until further action by the Board of Directors. In addition to
establishing the Committee, the Board also elected Kenneth J. Roering to be Vice
Chairman of the Company. In connection with his serving as Chairman of the
Oversight Committee and Special Committee (described below) and Vice Chairman of
the Company, Mr. Roering receives an aggregate of $10,000 per month.
On October 21, 1999, the Board of Directors of the Company established
a Special Committee consisting of Kenneth J. Roering (Chairman), Dennis M.
Mathisen and Gerald E. Magnuson to assist management and the Company's financial
advisors in evaluating strategic alternatives available to the Company. Mr.
Mathisen has resigned from the Board of Directors. Messrs. Roering and Magnuson
are currently directors of the Company.
On December 31, 1999, the Company and Mr. Donaghy entered into a
Consulting Agreement which provided that the Company would retain Mr. Donaghy as
an independent consultant as of January 1, 1999 through August 27, 1999, unless
the parties agreed in writing to an earlier or later date of termination. During
the term of the Agreement, the Company agreed to pay Mr. Donaghy at an annual
rate of $175,000, payable in pro rata installments twice a month through the
Agreement's term. The Consulting Agreement also restricts Mr. Donaghy from
competitive employment and disclosure of trade
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<PAGE> 16
secrets and confidential information. This Agreement terminated on August 27,
1999 and was not renewed.
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.
Mr. Miller received no fees relating to international consulting work
performed on behalf of the Company during fiscal year 1999. Mr. Magnuson
received $5,000 during fiscal year 1999 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 (or
substantially all of the assets of a division or business unit if the executive
officer's employment is terminated as a result of such sale), other than to an
entity owned 50% or more by the Company or one of its subsidiaries. If a change
in control which was not approved by the Board of Directors had occurred at the
end of fiscal year 1999, the following individuals would have received the
approximate payment indicated pursuant to the employment agreements: Mr.
Lundstrom, $515,441; Ms. Burchill, $598,012; Mr McManus, $432, 280; Mr. Havener,
523,250; Mr. Closser, $378,805; and all current executive officers as a group,
$2,992,977.
14
<PAGE> 17
In connection with her hiring as the Company's Chief Financial Officer,
Ms. Burchill entered into a Letter Agreement with the Company establishing her
base salary and granting a $50,000 signing bonus, and a $50,000 retention bonus
provided she remains employed with the Company through September 1, 2000. In
addition, the Letter Agreement provides for the award of a Target Option at a
75,000 share level and Ms. Burchill's participation in the Company's incentive
compensation and severance plans. The Letter Agreement provides that any fiscal
year 2000 incentive pay will be reduced by the retention bonus.
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 31, 1999, all Section
16(a) filing requirements applicable to its insiders were complied with.
APPROVAL OF AUDITORS
(PROPOSAL 3)
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 1999 of approximately $________, representing _____% of the
Company's gross revenues. On July 28, 1998, Company 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
15
<PAGE> 18
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 2001 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 10, 2001 and proxy
materials in connection with that meeting are expected to be mailed on or about
December 1, 2000. 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, 2000, in order to be considered for inclusion in the Board
of Directors' Proxy Statement and proxy card for the 2001 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 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,
16
<PAGE> 19
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 27, 1999 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
17
<PAGE> 20
[SHELDAHL, INC. LOGO]
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
JANUARY 12, 2000
The undersigned hereby appoints Gerald E. Magnuson, James E. Donaghy
and Edward L. 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 17, 1999, at the Annual Meeting of Shareholders to be held in
Minneapolis, Minnesota on January 12, 2000, or at any adjournment or
adjournments, hereby revoking all former proxies.
1. AMENDMENT OF BYLAWS TO REDUCE THE NUMBER OF DIRECTORS TO EIGHT.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. 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, William B. Miller, Kenneth J. Roering, Raymond C. Wieser,
Beekman Winthrop
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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: ,
----------------------------- --------
---------------------------------------------
---------------------------------------------
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.
