<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GUNTHER INTERNATIONAL, LTD.
(Name of Registrant as Specified in its Charter)
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:
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GUNTHER INTERNATIONAL, LTD.
ONE WINNENDEN ROAD
NORWICH, CONNECTICUT 06360
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 12, 1999
------------------------
Notice is hereby given that the 1998 Annual Meeting of Stockholders of
Gunther International, Ltd. will be held at The Regency, 540 Park Avenue at 61st
Street, New York, New York 10021, on Monday, April 12, 1999 at 10:30 a.m., local
time, for the following purposes:
(1) To elect a Board of seven Directors to serve until the next Annual
Meeting of Stockholders or until their respective successors shall be
elected and qualified;
(2) To ratify the appointment of Arthur Andersen LLP as the Company's
independent accountants for the fiscal year ended March 31, 1999; and
(3) To act upon such other matters as may properly come before the meeting
or any postponements or adjournments thereof.
The Annual Meeting previously had been scheduled to be held on Wednesday,
September 9, 1998, but was postponed pending the preparation of restated
financial results.
The Board of Directors has fixed the close of business on March 22, 1999 as
the record date for the determination of the stockholders entitled to notice of
and to vote at the Annual Meeting. For ten days prior to the Annual Meeting, a
complete list of stockholders entitled to vote at the Annual Meeting will be
available for examination by any stockholder for any purpose germane to the
Annual Meeting during ordinary business hours at the Company's principal
executive offices located at One Winnenden Road, Norwich, Connecticut 06360. All
stockholders are invited to attend the Annual Meeting in person.
By order of the Board of Directors
Michael M. Vehlies
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
March 26, 1999
Norwich, Connecticut
YOUR VOTE IS IMPORTANT!
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE MARK, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE SO
THAT YOUR STOCK MAY BE REPRESENTED AT THE ANNUAL MEETING.
<PAGE> 3
GUNTHER INTERNATIONAL, LTD.
ONE WINNENDEN ROAD
NORWICH, CONNECTICUT 06360
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors and management of Gunther International, Ltd., a Delaware
corporation (the "Company"), of proxies for use at the 1998 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at The Regency,
540 Park Avenue at 61st Street, New York, New York 10021, on Monday, April 12,
1999 at 10:30 a.m., local time, and at any and all postponements or adjournments
thereof, for the purposes set forth in the accompanying Notice of Meeting.
The Annual Meeting previously had been scheduled to be held on Wednesday,
September 9, 1998, but was postponed pending the preparation of restated
financial results.
This Proxy Statement, Notice of Meeting and accompanying proxy card are
first being mailed to stockholders on or about March 26, 1999.
GENERAL
Only holders of record of the Company's common stock, par value $.001 per
share ("Common Stock"), issued and outstanding at the close of business on March
22, 1999 (the "Record Date") are entitled to notice of and to vote at the Annual
Meeting. On the Record Date, 4,291,769 shares of Common Stock were issued and
outstanding. Each holder of shares of Common Stock is entitled to one vote for
each share of Common Stock held as of the Record Date.
The presence at the Annual Meeting of the holders of a majority of the
outstanding shares of the Common Stock of the Company, either in person or by
properly executed proxy, shall constitute a quorum. In the event that there are
not sufficient votes for a quorum, the Annual Meeting may be adjourned from time
to time until a quorum is obtained.
The individuals nominated for election to the Board of Directors, as
described in Item 1 below, each must be elected by the affirmative vote of a
plurality of the votes cast at the Annual Meeting. The ratification of Arthur
Andersen LLP as the Company's independent accountants for the current fiscal
year, as described in Item 2 below, and any other matters presented for
consideration at the Annual Meeting must be approved by the affirmative vote of
a majority of the votes cast at the Annual Meeting.
For purposes of determining the number of affirmative votes cast with
respect to a particular matter, only those votes cast "FOR" the matter are
counted. Abstentions will be treated as shares present and entitled to vote for
purposes of determining the presence of a quorum, but will be counted separately
(as neither a vote for nor a vote against) in the tabulation of the votes cast
on proposals presented to stockholders. If a broker or other record holder or
nominee indicates on a proxy that it does not have 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. As a result, these
so-called "broker non-votes" will have no effect on the outcome of the voting
for a particular matter.
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the proxy card will vote FOR the slate of
nominees proposed by the Board of Directors, FOR ratification of the appointment
of Arthur Andersen LLP as the Company's independent accountants for the fiscal
year ending March 31, 1999 and as recommended by the Board of Directors with
regard to all other matters or, if no such recommendation is given, in their own
discretion. Each stockholder may revoke a previously granted proxy at any time
before it is exercised by filing with the Secretary of the Company a revoking
instrument or a duly executed proxy bearing a later date. The powers of the
proxy holders will be suspended if the person executing the proxy attends the
Annual Meeting in person
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and so requests. Attendance at the Annual Meeting will not, in itself,
constitute the revocation of a previously granted proxy.
ITEM 1.
ELECTION OF DIRECTORS
Seven directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting to hold office until the next Annual Meeting of
Stockholders or until their respective successors have been elected and
qualified. The Board of Directors' nominees are the seven individuals named
below. It is the intention of the persons named in the enclosed proxy to vote
the shares covered by each proxy for the election of all persons nominated for
election by the holders of shares of Common Stock. Although the Board of
Directors does not anticipate that such nominees will be unavailable for
election, in the event of such occurrence the proxies will be voted for such
substitute, if any, as the Board of Directors may designate.
As discussed in more detail below, the Company consummated a $5.7 million
comprehensive financing transaction on October 2, 1998. See "Certain
Relationships and Related Transactions." In connection with this financing
transaction, the Company and certain stockholders entered into a separate voting
agreement (the "Voting Agreement"), pursuant to which the stockholders agreed to
vote all shares of Common Stock held by them in favor of one or more persons
nominated by the parties to the Voting Agreement. The parties to the Voting
Agreement have advised the Company that they intend to vote all shares of Common
Stock held by them in favor of (i) Messrs. Perkins, Spiegel, Snelling and
Steinberg, who are the nominees of Gunther Partners, LLC, (ii) Mr. Newman, who
is the nominee of Park Investment Partners, Inc., and (iii) Mr. Kirkpatrick, who
is the nominee of the Estate of Harold S. Geneen. Mr. Hickman is an independent
director, who is not the nominee or representative of any party to the Voting
Agreement. As of March 23, 1999, the Company believes that the original parties
to the Voting Agreement, together with any subsequent transferees (who are also
subject to the Voting Agreement), held approximately 2,240,204 shares or Common
Stock, or approximately 52.2% of the issued and outstanding shares of Common
Stock (excluding any shares of Common Stock issuable upon the exercise of
outstanding options, warrants or other similar rights).
The following table sets forth certain information with respect to all
nominees for election as directors of the Company, including those persons who
currently serve in such capacity:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ---- --- -------------------- --------
<S> <C> <C> <C>
J. Kenneth Hickman............ 70 Independent Business and Financial 1994
Consultant
Steven S. Kirkpatrick......... 43 Vice President, United States Trust Company (1)
of New York
Gerald H. Newman.............. 57 Private Investor 1993
Marc I. Perkins............... 53 Vice Chairman and Chief Executive Officer of 1998
the Company
Robert Spiegel................ 62 Private Investor 1998
George A. Snelling............ 69 Independent Business Consultant (1)
Thomas M. Steinberg........... 42 President, Tisch Family Interests 1998
</TABLE>
- ---------------
(1) Nominee for director; not presently serving as a member of the Board of
Directors.
J. KENNETH HICKMAN. Mr. Hickman is a certified public accountant. He has
been an independent business consultant since January 1991. For twenty-seven
years prior to that, he was a partner of Arthur Andersen LLP and its
predecessors, with various responsibilities including managing partner of the
firm's New Jersey office and director of its international business practice
program. He is a trustee of Fordham University and has served as a director and
officer of a number of not-for-profit organizations, primarily those concerned
with international trade and foreign affairs.
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STEVEN S. KIRKPATRICK. Mr. Kirkpatrick is a Vice President of the United
States Trust Company of New York, where he is the manager of the Real Estate,
Closely Held Business and Oil & Gas Departments. He joined the United States
Trust Company of New York in 1986. Prior to that, he was a financial analyst for
Schupak & Company, a merchant banking firm specializing in private placements of
debt and equity securities for the leisure and hospitality industries. Mr.
Kirkpatrick is a member of the American Society of Appraisers in the discipline
of Business Valuation.
GERALD H. NEWMAN. Mr. Newman has been a private investor and consultant to
various high technology companies since 1971. Following the death of Harold S.
Geneen in November of 1997, he served as Chairman of the Board of Directors of
the Company until Mr. Steinberg was elected to that position on October 2, 1998.
From 1969 to 1971, Mr. Newman was a registered representative of Eastman Dillon
Union Securities. From 1962 to 1969, Mr. Newman was a certified public
accountant at the accounting firm of Hertz Herson & Co.
MARC I. PERKINS. Mr. Perkins has been the Vice Chairman, President and
Chief Executive Officer of the Company since October 2, 1998. Since 1995, he has
also served as a principal of PMK Securities and Research, Inc., a securities
broker-dealer and a member of the National Association of Securities Dealers
Inc. He served as the Chairman and Chief Executive Officer of Perkins Capital
Advisers, Inc., a registered investment adviser, from 1992 to 1998, and the
President of Crown Financial Associates, Inc., a securities broker-dealer, from
1992 to 1995. From 1987-1992, he was a Vice President and shareholder of Private
Capital Management, Inc., a registered investment adviser. He also serves as a
director of HealthPlan Services, Inc., a third-party administrator of health
care plans, the shares of which are listed on the New York Stock Exchange.
ROBERT SPIEGEL. Mr. Spiegel has been a private investor since May 1995.
Prior to that, he was the Chairman and President of RJR Drug Distributors, a
pharmaceutical distribution company, from May 1985 to May 1995. He also serves
as a director of Hoenig Group, Inc., a NASDAQ listed company whose subsidiaries
engage in asset management and brokerage activities.
GEORGE A. SNELLING. Mr. Snelling has been an independent business
consultant since 1991. Prior to that, he served as the Executive Vice
President-Corporate Development of SunTrust Banks, Inc., a bank holding company,
from 1980 to 1991. From 1976 through 1980, he served as the Chief Operating
Officer of Gulfstream Banks and Florida National Banks. From 1966 through 1976,
he served as the Chief Financial Officer of Barnett Banks, Inc. and, from 1956
through 1966, he served as a partner of Smoak, Davis, Nixon & Snelling, a
certified public accounting firm.
THOMAS M. STEINBERG. Mr. Steinberg is the President of Tisch Family
Interests, a position he has held since 1997. In this capacity, he manages and
supervises investments for members of the Laurence A. Tisch and Preston R. Tisch
families. From 1991 to 1997, he was the Managing Director of Tisch Family
Interests. He is also a director of Catellus Development Corporation, a Delaware
corporation engaged in investment activities which is listed on the New York
Stock Exchange. Mr. Steinberg has been Chairman of the Board of the Company
since October 1998.
DIRECTORS' REMUNERATION; ATTENDANCE
Members of the Board of Directors of the Company currently receive no
compensation for their service as directors, although the Company has a policy
of reimbursing all directors for any reasonable travel expenses incurred in
connection with their attendance at meetings. During the fiscal year ended March
31, 1998, the Company made no such payments to any of its Directors.
The Board of Directors met one time during the fiscal year ended March 31,
1998 and acted by the unanimous written consent of its members on five
occasions. No director attended fewer than 75% of the total number of meetings
of the Board and the Committees on which such director served.
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COMMITTEES OF THE BOARD
The standing committees of the Board of Directors are the Executive
Committee, the Audit Committee and the Executive Compensation/Stock Option
Committee.
The Executive Committee of the Board of Directors consists of Messrs.
Perkins, Spiegel and Steinberg. Mr. Steinberg serves as Chairman of the
Executive Committee. The Executive Committee is vested with all powers and
authorities of the full Board of Directors, except to the extent that the
Delaware General Corporation Law prohibits such powers and authorities from
being delegated to, or exercised by, a committee of the full Board. The
Executive Committee is authorized to act for the full Board in the management of
the business and affairs of the Company. The Executive Committee was not created
and constituted until October 20, 1998. Thus, the Executive Committee did not
have any meetings during the fiscal year ended March 31, 1998.
The Audit Committee of the Board of Directors consists of Messrs. Hickman,
Newman, Spiegel and Steinberg. Mr. Steinberg serves as Chairman of the Audit
Committee. The function of the Audit Committee is to review and report to the
Board of Directors with respect to the selection and the terms of engagement of
the Company's independent public accountants, and to maintain communications
among the Board of Directors, such independent public accountants, and the
Company's internal accounting staff with respect to accounting and audit
procedures, the implementation of recommendations by such independent public
accountants, the adequacy of the Company's internal controls and related
matters. The Audit Committee also reviews certain related-party transactions and
any potential conflict-of-interest situations involving officers, directors or
stockholders beneficially owning more than 10% of any class of equity security
of the Company. During the fiscal year ended March 31, 1998, the Audit Committee
met one time.
The Executive Compensation/Stock Option Committee of the Board of Directors
consists of Messrs. Hickman, Newman, Spiegel and Steinberg. Mr. Spiegel serves
as Chairman of the Executive Compensation/Stock Option Committee. The function
of the Executive Compensation/Stock Option Committee is to review the
performance of and to fix and determine the compensation of all officers of the
Company and all other employees of the Company whose annual salary level is
$100,000 or more or who might be reasonably anticipated to receive compensation
from the Company at an annual rate of $100,000 or more. During the fiscal year
ended March 31, 1998, the Executive Compensation/Stock Option Committee did not
meet.
EXECUTIVE OFFICERS
The current executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
- ---- --- --------------------------
<S> <C> <C>
Marc I. Perkins........................... 53 Vice Chairman and Chief Executive Officer
Michael M. Vehlies........................ 38 Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
</TABLE>
For the biography of Mr. Perkins, see the previous section entitled
"Election of Directors."
MICHAEL M. VEHLIES. Mr. Vehlies has held the positions of Senior Vice
President, Chief Financial Officer, Treasurer and Secretary since he rejoined
the Company in October 1998. Prior to that, he was the Controller of SS&C
Technologies, Inc., a computer software company, from June 1995 to October 1998.
He was the Controller of Digital Graphix, Inc. from February 1995 to June 1995.
He was previously a Vice President and the Chief Financial Officer of the
Company from September 1992 to February 1995. He is a Certified Public
Accountant and was employed by Arthur Andersen & Co. from 1988 to 1992.
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EXECUTIVE COMPENSATION AND OTHER MATTERS
The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities to the Company or subsidiaries of
the Company for the fiscal year ended March 31, 1998 of (i) the former chief
executive officer of the Company and (ii) the other most highly compensated
executive officers of the Company whose total salary and bonus for the year
ended March 31, 1998 exceeded $100,000, for services in all capacities to the
Company during such fiscal year (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
----------------------
ANNUAL COMPENSATION(1) RESTRICTED OPTIONS/ ALL OTHER
----------------------------- STOCK SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) (#) ($)
- --------------------------- ---- --------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
James H. Whitney.............. 1998 120,000 30,000 0 0 0
President and Chief 1997 120,000 30,000 0 0 0
Executive Officer(2) 1996 120,000 30,000 0 0 0
Alan W. Morton................ 1998 100,000 40,000 0 0 0
Vice President and Chief 1997 100,000 40,000 0 0 0
Operating Officer(3) 1996 100,000 40,000 0 0 0
Frederick W. Kolling III...... 1998 85,000 25,000 0 0 0
Vice President and Chief 1997 85,000 26,981 0 0 0
Financial Officer(4) 1996 50,116 22,750 0 35,000 0
</TABLE>
- ---------------
(1) Perquisites and other personal benefits are not included because they do not
exceed the lesser of $50,000 or 10% of the total of base salary and annual
bonus for each of the Named Executive Officers.
(2) Mr. Whitney left the employ of the Company effective as of November 2, 1998.
(3) Mr. Morton left the employ of the Company effective as of August 31, 1998.
(4) Mr. Kolling joined the Company during fiscal 1996. He left the employ of the
Company effective as of October 6, 1998.
Option Exercises and Fiscal Year-End Values. The following table sets
forth certain information with respect to option exercises in fiscal year 1998
and unexercised options to purchase the Company's Common Stock and Common Stock
granted in fiscal year 1998 under the Company's 1993 Stock Option Plan to the
individuals listed.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS
SHARES OPTIONS/SAR AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE ----------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James H. Whitney.......... 0 0 75,000 0 70,313 0
Alan W. Morton............ 0 0 50,000 0 46,875 0
Frederick W. Kolling
III..................... 0 0 23,333 11,667 13,125 6,562
</TABLE>
- ---------------
(1) Represents the difference between the fair market value of the Common Stock
on March 31, 1998 and the exercise price. All three individuals listed in
this table have left the employ of the Company and all of the stock options
reflected in the table have expired without having been exercised.
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EMPLOYMENT AGREEMENTS
The Company did not have employment agreements with any of the Named
Executive Officers listed in the Summary Compensation Table.
The Company has entered into separate employment agreements with Messrs.
Perkins and Vehlies. The employment agreement entered into between the Company
and Mr. Perkins provides for him to be employed as the Chief Executive Officer
of the Company at an initial base salary of $156,000 per annum. The employment
agreement also provides for the grant of a non-qualified stock option affording
Mr. Perkins the right and option to purchase up to 150,000 shares of Common
Stock at an exercise price of $1.50 per share. The stock option granted to Mr.
Perkins pursuant to the terms of his employment agreement has a term of five
years, commencing as of October 5, 1998, and vests at the rate of 25,000 shares
every three months until the stock option is fully vested as of January 5, 2000.
The vesting of any unvested portion of the stock option immediately accelerates
upon the occurrence of a change of control of the Company. The employment
agreement may be terminated by either party, with or without cause, on ninety
days' prior written notice. The employment agreement may be terminated
immediately by the Company for "cause" and by Mr. Perkins for "good reason," as
those terms are defined in the employment agreement. In the event that the
employment agreement is terminated by the Company for "cause," Mr. Perkins will
not be entitled to any additional compensation. In the event that the employment
agreement is terminated by Mr. Perkins for "good reason," the Company generally
must pay Mr. Perkins his base salary for the remainder of the calendar month
during which the termination is effective and for six consecutive calendar
months thereafter.
The employment agreement entered into between the Company and Mr. Vehlies
is substantially identical to the employment agreement entered into between the
Company and Mr. Perkins, except that Mr. Vehlies' employment agreement provides
that Mr. Vehlies will be employed as a Senior Vice President and the Chief
Financial Officer of the Company at an initial base salary of $100,000. In
addition, Mr. Vehlies' employment agreement provides for the grant a
non-qualified stock option affording Mr. Vehlies the right and option to
purchase up to 35,000 shares of Common Stock at an exercise price of $1.50 per
share. The stock option has a term of five years, commencing as of October 29,
1998, and vests in equal annual installments over a three-year period commencing
as of the date of grant until the stock option is fully vested as of October 29,
2001. The vesting of any unvested portion of the stock option immediately
accelerates upon the occurrence of a change of control of the Company.
STOCK OPTION PLANS
In December 1993, the Company adopted a Stock Option Plan, which authorizes
the Executive Compensation/Stock Option Committee of the Board of Directors to
grant to key employees and directors of the Company and subsidiaries of the
Company incentive or non-qualified stock options. Currently, options to purchase
up to 215,000 shares of Common Stock may be granted under the plan. The
Executive Compensation/Stock Option Committee determines the prices and terms at
which options may be granted. Options may be exercisable in installments over
the option period, but no options may be exercised before six months or after
ten years from the date of grant.
The purpose of the Plan is to encourage stock ownership by persons
instrumental to the success of the Company, in order to give them a greater
personal interest in the Company's business. The exercise price of any incentive
stock option granted to an eligible employee may not be less than 100% of the
fair market value of the shares underlying such option on the date of grant,
unless such employee owns more than 10% of the outstanding Common Stock or stock
of any subsidiary or parent of the Company, in which case the exercise price of
any incentive stock option may not be less than 110% of such fair market value.
No option may be exercisable more than ten years after the date of grant and, in
the case of an incentive stock option granted to an eligible employee owning
more than 10% of the Common Stock or stock of any subsidiary or parent of the
Company, no more than five years from its date of grant. Payment for shares
purchased upon exercise of any option may be in cash or in shares of the
Company's Common Stock. Options are not transferable, except upon the death of
the optionee. In general, upon termination of employment of an optionee, all
options granted to such person which are not exercisable on the date of such
termination immediately expire, and any options
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<PAGE> 9
that are exercisable expire 30 days following termination of employment, if such
termination is not the result of death or retirement, and one year following
such termination if such termination was because of death or retirement under
the provisions of any retirement plan that may be established by the Company, or
with the consent of the Company. As of March 23, 1999, options covering an
aggregate of 120,000 shares of Common Stock were outstanding under this plan.
Pursuant to that certain recapitalization agreement by and between the
Company and its then current stockholders, dated September 4, 1992 (the
"Recapitalization Agreement"), an option plan was established for certain
persons who were then key executives of the Company (the "Founders Option
Plan"). The Recapitalization Agreement contemplated an initial grant under such
plan of options to purchase 95,000 shares of Common Stock at an exercise price
of $1.88 per share. The Recapitalization Agreement specified that options would
vest 25% on each of the first, second, third and fourth anniversaries of the
date of grant. As of March 23, 1999, options covering an aggregate of 95,000
shares of Common Stock were outstanding under this plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of beneficial ownership and
reports of changes in beneficial ownership with the Securities and Exchange
Commission (the "SEC"). Such persons are required by the SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by such
persons. Based solely on its copies of forms received by it, or written
representations from certain reporting persons that no Form 5 were required for
those persons, the Company believes that during the fiscal year ended March 31,
1998, its executive officers, directors, and greater than 10% beneficial owners
complied with all applicable filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 4, 1996, the Company and the Bank of Boston Connecticut, N.A. (the
"Bank") entered into a Revolving Loan and Security Agreement (as amended, the
"Revolving Credit Facility"), with an aggregate borrowing capacity of
$2,250,000. The Revolving Credit Facility was bifurcated into two separate
subfacilities (hereinafter referred to as "Facility A" and "Facility B").
Facility A had a maximum borrowing capacity of $1,750,000 and Facility B had a
maximum borrowing capacity of $500,000.
In order to induce the Bank to enter into the Revolving Credit Facility,
Mr. Harold S. Geneen, then the Chairman of the Board and a stockholder of the
Company, agreed to provide the Bank with sufficient cash collateral to secure
all borrowings outstanding under Facility A. The borrowings under Facility B
were secured by all of the tangible and intangible assets of the Company. Mr.
Geneen passed away on November 21, 1997, and his death constituted a technical
event of default under the Revolving Credit Facility. Subsequent to Mr. Geneen's
death, the Executors of Mr. Geneen's estate affirmed Mr. Geneen's obligations to
the Bank with respect to the Revolving Credit Facility, and the Bank waived the
technical event of default. The Bank also extended the maturity date of the
Revolving Credit Facility to April 1, 1999.
The Revolving Credit Facility contained several affirmative and negative
covenants pursuant to which the Company, among other things, was required to
have Operating Profits (as defined in the Revolving Credit Facility). The net
loss reported by the Company for the fiscal year ended March 31, 1998 violated
these covenants and constituted an event of default under the Revolving Credit
Facility.
On October 2, 1998, the Company entered into a $5.7 million comprehensive
financing transaction with the Bank, the Estate of Harold S. Geneen (the
"Estate") and Gunther Partners LLC (the "New Lender"), the proceeds of which
have been utilized to restructure and replace the Revolving Credit Facility,
fund a full settlement with the Company's third-party service provider and
provide additional working capital to fund the Company's ongoing business
operations.
Under the terms of the transaction, the New Lender loaned an aggregate of
$4.0 million to the Company. At the same time, the Bank reached an agreement
with the Estate, pursuant to which the Estate consented to
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<PAGE> 10
the liquidation of approximately $1.7 million of collateral and the application
of the proceeds of such collateral to satisfy and repay in full a like amount of
indebtedness outstanding under the Revolving Credit Facility. The balance of the
indebtedness outstanding under the Revolving Credit Facility, approximately
$350,000, was repaid in full from the proceeds of the new financing. The Company
executed a new promissory note in favor of the Estate evidencing the Company's
obligation to repay the amount of the collateral that was liquidated by the
Bank. The Company's obligations to the Estate are subordinated to the Company's
obligations to the New Lender.
The principal balance of the $4.0 million loan to the New Lender is to be
repaid in monthly installments of $100,000 from November 1, 1998 through
September 1, 1999, a $400,000 payment due on October 1, 1999 and the balance
shall be due on October 1, 2003. Interest shall be paid quarterly, at the rate
of 8% per annum, beginning January 1, 1999 and continuing until the principal
and interest due is paid in full. The debt is secured by a first priority
interest in all tangible and intangible (excluding patents and trademarks)
personal property and a secondary interest in patents and trademarks.
To induce the New Lender to enter into the financing transaction, the
Company granted the New Lender a stock purchase warrant entitling the New
Lender, at any time during the period commencing on January 1, 1999 and ending
on the fifth anniversary of the transaction, to purchase up to 35% of the pro
forma, fully diluted number of shares of the Common Stock of the Company,
determined as of the date of exercise. The exercise price of the warrant is
$1.50 per share. On or about November 17, 1998, New Lender distributed all of
its rights under the warrant to its members in proportion to their ownership
interests in New Lender. Thus, the warrants are now held by the members of New
Lender (and their transferees) in proportion to their ownership interests in New
Lender. As of March 23, 1999, the Company believes the warrants are exercisable
for an aggregate of 2,616,116 shares of Common Stock.
In addition, the Company, the New Lender, the Estate and certain
shareholders (Park Investment Partners, Gerald H. Newman, Four Partners and
Robert Spiegel) entered into the Voting Agreement, pursuant to which they each
agreed to vote all shares of Common Stock held by them in favor of (i) that
number of persons nominated by the New Lender constituting a majority of the
Board of Directors, (ii) one person nominated by the Estate and (iii) one person
nominated by Park Investment Partners. As of March 23, 1999, the Company
believes that the original parties to the Voting Agreement, together with any
subsequent transferees (who are also subject to the Voting Agreement), held an
aggregate of approximately 2,240,204 shares, or approximately 52.2% of the
outstanding shares, of Common Stock (excluding any shares of Common Stock
issuable upon the exercise of options, warrants or other similar rights).
The promissory note in favor of the Estate for approximately $1.7 million
is to be repaid at the earlier of one year after the Company's obligations to
the New Lender are paid in full or on October 2, 2004. Interest, at 5.44% per
annum, shall accrue on principal and unpaid interest, which is added to the
outstanding balance and is due at the time of principal payments. The
indebtedness is secured by a second priority interest in all tangible and
intangible personal property of the Company (excluding patents and trademarks)
and a third priority interest in patents and trademarks. Another entity,
Connecticut Innovations, Inc. ("CII"), has a first priority security interest in
certain specified patents and trademarks of the Company dating back to an
earlier financing transaction. The security interests of both the New Lender and
the Estate in the Company's patents and trademarks are subordinate to the
security interest of CII in this specified collateral. The security interest of
the Estate is subordinate to all rights of the New Lender.
In connection with the consummation of these financing transactions, James
H. Whitney and Frederick W. Kolling III resigned from the Board of Directors of
the Company and, pursuant to the provisions of the Voting Agreement, Messrs.
Steinberg and Spiegel were elected to fill the vacancies that were created by
the resignations of Messrs. Whitney and Kolling.
Prior to his death Mr. Geneen also loaned the Company $150,000 for working
capital purposes. The loan is an unsecured demand loan. As of the date of this
Proxy Statement, no portion of the loan has been repaid.
8
<PAGE> 11
STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 23, 1999, with the exception of the persons listed below and
the persons listed under "Stock Ownership of Directors and Executive Officers"
below, no person was known by the Company to own more than 5% of the outstanding
Common Stock.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
SHARES(1)(2) OF CLASS
------------ --------
<S> <C> <C>
Gunther Partners, LLC(3).................................... 1,801,916 42.0%
c/o Thomas J. Tisch
667 Madison Avenue
New York, NY 10021
Executors of the Estate of Harold S. Geneen(4).............. 1,613,313 37.6%
c/o United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Four-Fourteen Partners, LLC(5).............................. 2,619,783 40.8%
c/o Thomas J. Tisch
667 Madison Avenue
New York, NY 10021
Park Investment Partners, Inc.(6)........................... 1,387,489 32.3%
c/o Gerald H. Newman
17161 Coral Cove Way
Boca Raton, FL 33496
</TABLE>
- ---------------
(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock owned by them.
(2) Assumes that shares which the named person or group has a contractual right
to acquire within 60 days have been acquired and are outstanding.
(3) Based on information set forth in Amendment No. 6 to Schedule 13D, dated
December 10, 1998 ("Amendment No. 6"), filed under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), by Gunther Partners, LLC, Four
Partners, Robert Spiegel, the Richard Spiegel 1987 Trust and Thomas M.
Steinberg. The shares shown in the table represent the number of shares
which the filing persons believed were held by persons other than the filing
persons and were covered by the Voting Agreement as of the date of filing
(including 105,734 shares of Common Stock issuable upon the exercise of
outstanding stock purchase warrants). As noted above, the Company believes
that, as of March 23, 1999, the parties to the Voting Agreement, including
such filing persons, held an aggregate of 2,240,204 shares, or 52.2 % of the
outstanding shares, of Common Stock. See "Certain Relationships and Related
Transactions."
(4) Based on information set forth in Amendment No. 1 to Schedule 13D, dated
January 20, 1999, filed under the Exchange Act by June H. Geneen, Phil E.
Gilbert, Jr., Thomas W. Keesee, Jr. and the United States Trust Company of
New York, as co-executors of the Estate of Harold S. Geneen, the former
Chairman and a significant stockholder of the Company. The shares shown in
the table include 1,387,489 shares of Common Stock held by Park Investment
Partners, Inc., a Delaware corporation which is 50% owned by the Estate. The
shares shown in the table exclude the shares of Common Stock held by the
other parties to the Voting Agreement. See note 3 above and "Certain
Relationships and Related Transactions."
(5) Based on information set forth in Amendment No. 6, updated to reflect the
Company's belief that the stock purchase warrants issued in connection with
the November 2, 1998 financing transactions described above are currently
exercisable for an aggregate of 2,616,116 shares of Common Stock. See
"Certain Relationships and Related Transactions." Accordingly, the shares
shown in the table include an aggregate
9
<PAGE> 12
of 2,125,594 shares of Common Stock that may be acquired upon the exercise
of the stock purchase warrants which have been distributed to Four-Fourteen
Partners, LLC. The shares shown in the table exclude the shares of Common
Stock beneficially owned by Gunther Partners, LLC and the shares of Common
Stock held by the other parties to the Voting Agreement. See note 3 above
and "Certain Relationships and Related Transactions."
(6) Based on information set forth in the Schedule 13D, dated January 7, 1999,
filed under the Exchange Act by Park Investment Partners, Inc. and Gerald H.
Newman. The shares shown in the table exclude the shares of Common Stock
held by the other parties to the Voting Agreement. See note 3 above and
"Certain Relationships and Related Transactions."
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table reflects shares of Common Stock beneficially owned (or
deemed to be beneficially owned pursuant to the rules of the Securities and
Exchange Commission) as of March 23, 1999 by each director of the Company, each
of the Named Executive Officers and the current directors and executive officers
of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL PERCENTAGE OF
NAME(1) OWNERSHIP(2)(3) SHARES
- ------- --------------- -------------
<S> <C> <C>
J. Kenneth Hickman.......................................... 10,000 *
Steven S. Kirkpatrick(4).................................... 0 *
Frederick W. Kolling, III................................... 1,000 *
Alan W. Morton.............................................. 1,000 *
Gerald H. Newman(5)......................................... 1,460,191 34.0%
Marc I. Perkins(6).......................................... 76,000 1.8%
George A. Snelling.......................................... 0 *
Robert Spiegel(7)........................................... 509,417 10.9%
Thomas M. Steinberg(8)...................................... 32,701 *
Michael M. Vehlies.......................................... 0 *
James H. Whitney............................................ 1,000 *
All Directors and Executive Officers as a group(9).......... 2,091,309 43.6%
</TABLE>
- ---------------
* Less than 1%.
(1) The address of each of the directors and executive officers of the Company
is c/o Gunther International, Ltd., One Winnenden Road, Norwich, Connecticut
06360.
(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock owned by them.
(3) Assumes that shares which the named person or group has a contractual right
to acquire within 60 days have been acquired and are outstanding.
(4) Mr. Kirkpatrick is a Vice President of the United States Trust Company of
New York, which is the beneficial owner of 1,613,313 shares of Common Stock.
See "Stock Ownership of Certain Beneficial Owners."
(5) Based on information set forth in the Schedule 13D, dated January 7, 1999,
filed under the Exchange Act by Park Investment Partners, Inc. and Gerald H.
Newman. The shares shown in the table include 1,387,489 shares held by Park
Investment Partners, Inc., a Delaware corporation which is 50% owned by Mr.
Newman. See "Stock Ownership of Certain Beneficial Owners." The shares shown
in the table exclude the shares of Common Stock held by the other parties to
the Voting Agreement. See note 3 to the preceding table and "Certain
Relationships and Related Transactions."
10
<PAGE> 13
(6) Represents the exercisable portion of stock options exercisable within 60
days of March 23, 1999. Also includes 1,000 shares of Common Stock held by a
trust established for the benefit of Mr. Perkins children, as to which Mr.
Perkins disclaims beneficial ownership.
(7) Based on information set forth in Amendment No. 5 to Schedule 13D, dated
October 7, 1998 ("Amendment No. 5"), filed under the Exchange Act by Gunther
Partners, LLC, Four Partners, Robert Spiegel, the Richard Spiegel 1987 Trust
and Thomas M. Steinberg, updated to reflect the Company's belief that the
stock purchase warrants issued in connection with the November 2, 1998
financing transactions described above are currently exercisable for an
aggregate of 2,616,116 shares of Common Stock. See "Certain Relationships
and Related Transactions." Accordingly, the shares shown as beneficially
owned by Mr. Spiegel include 392,417 shares of Common Stock that may be
acquired pursuant to the exercise of the stock purchase warrants which have
been distributed to Mr. Spiegel. The shares shown in the table also include
40,000 shares of Common Stock held by Mr. Spiegel's wife, with respect to
which Mr. Spiegel disclaims beneficial ownership, and exclude 15,000 shares
of Common Stock and warrants to purchase 65,403 shares of Common Stock held
by a trust of which Mr. Spiegel is a trustee. Mr. Spiegel may be deemed to
be the beneficial owner of the shares of Common Stock that are beneficially
owned by such trust. The shares shown in the table exclude the shares of
Common Stock beneficially owned by Gunther Partners, LLC and the shares of
Common Stock held by the other parties to the Voting Agreement. See note 3
to the preceding table and "Certain Relationships and Related Transactions."
(8) Based on information set forth in Amendment No. 5, updated to reflect the
Company's belief that the stock purchase warrants issued in connection with
the November 2, 1998 financing transactions described above are currently
exercisable for an aggregate of 2,616,116 shares of Common Stock.
Accordingly, the shares shown as beneficially owned by Mr. Steinberg
represent the 32,701 shares of Common Stock that may be acquired by him
pursuant to the exercise of the stock purchase warrants which have been
distributed to him.
(9) Includes an aggregate of 500,118 shares issuable upon the exercise of
outstanding options, warrants or other similar rights exercisable within 60
days of March 23, 1999 and excludes any shares of Common Stock held by the
other parties to the Voting Agrement. If the shares held by other parties to
the Voting Agreement are included in the calculation, the directors and
executive officers of the Company would be deemed to beneficially own an
aggregate of 2,810,322 shares, or approximately 58.6% of the outstanding
shares, of Common Stock.
ITEM 2.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company has appointed Arthur Andersen LLP as the Company's independent
accountants for the fiscal year ended March 31, 1999. Arthur Andersen LLP has
served as the Company's independent accountants for nine years. A representative
of Arthur Andersen LLP will be present at the Annual Meeting to respond to
appropriate questions and to make such statements as they may desire.
The Company has followed a practice of asking its stockholders to ratify
the appointment of its independent accountants. The Company intends to continue
this custom at the Annual Meeting notwithstanding the fact that the fiscal year
ended March 31, 1999 will have been completed prior to the date on which the
Annual Meeting will be held. Ratification of the appointment of Arthur Andersen
LLP as the Company's independent accountants for the fiscal year ended March 31,
1999 will require the affirmative vote of a majority of the votes cast at the
Annual Meeting by the holders the Common Stock. In the event stockholders do not
ratify the appointment of Arthur Andersen LLP as the Company's independent
accountants for the fiscal year ended March 31, 1999, such appointment will be
reconsidered by the Audit Committee and the Board of Directors.
11
<PAGE> 14
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDED MARCH 31, 1999.
ITEM 3.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than the
items referred to above. Proxies in the enclosed form will be voted in respect
of any other business that is properly brought before the Annual Meeting in
accordance with the judgment of the person or persons voting the proxies.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
The Company currently expects to convene the 1999 Annual Meeting of
Stockholders during August of 1999 (the "1999 Annual Meeting"), after the
announcement of the financial results for the fiscal year ended March 31, 1999.
Any proposal of a stockholder intended to be presented at the 1999 Annual
Meeting must be received by the Secretary of the Company, for inclusion in the
Company's proxy, notice of meeting and proxy statement relating to the 1999
Annual Meeting, on or before June 1, 1999.
THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED MARCH
31, 1998, AS AMENDED FOR AMENDMENT NO. 1 THERETO, FILED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
COMPANY'S OFFICES, ONE WINNENDEN ROAD, NORWICH, CONNECTICUT 06360; ATTENTION:
MICHAEL M. VEHLIES.
ADDITIONAL INFORMATION
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Officers and regular employees of the Company may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex or facsimile. The
Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial owners
of stock.
By order of the Board of Directors,
Michael M. Vehlies
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
March 26, 1999
Norwich, Connecticut
12
<PAGE> 15
[X] Please mark your
votes as in this
example.
ELECTION
OF FOR WITHHELD
DIRECTORS [ ] [ ]
1. except vote withheld from the following nominees(s)
Nominees: J. Kenneth Hickman
Steven S. Kirkpatrick
Gerald H. Newman
Marc I. Perkins
Robert Spiegel
George A. Snelling
Thomas M. Steinberg
2. Arthur Andersen LLP as independent auditors of the Company for the Fiscal
Year ending March 31, 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To vote with discretionary authority upon any other business which may
properly come before the meeting or any adjournment thereof.
The shares represented by this Proxy will be voted as specified. IF NO CHOICE
IS SPECIFIED, THE PROXY WILL BE VOTED IN FAVOR OF THE SPECIFIED NOMINEES AND
FOR THE APPROVAL OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT AUDITORS OF THE
COMPANY FOR THE CURRENT YEAR AND THE PROXIES ARE GIVEN DISCRETIONARY AUTHORITY
TO VOTE ON ANY OTHER MATTERS UPON WHICH THE UNDERSIGNED IS ENTITLED TO VOTE AND
WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF. THIS PROXY CARD MUST BE PROPERLY COMPLETED, SIGNED,
DATED AND RETURNED IN ORDER TO HAVE YOUR SHARES VOTED.
SIGNATURE(S) ________________________________________________ DATE ____________
IMPORTANT: Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee, etc.,
indicate title if the signer is a corporation, sign in corporate name by a duly
authorized officer.
<PAGE> 16
GUNTHER INTERNATIONAL, LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of common stock, par value $.001 per share
("Common Stock"), of GUNTHER INTERNATIONAL, LTD., a Delaware corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
MARC I. PERKINS and MICHAEL M. VEHLIES, or any of them, as proxies, with full
power to act without the other and with full power of substitution, to represent
the undersigned at the Annual Meeting of Stockholders of the Company to be held
on April 12, 1999, at 10:30 a.m., local time, at The Regency, 540 Park Avenue at
61st Street, New York, N.Y., and at any adjournments or postponements thereof,
and to vote all shares of Common Stock of the Company which the undersigned is
entitled to vote on all matters coming before said meeting. The undersigned
hereby acknowledges receipt of the Notice of Annual Meeting and the Proxy
Statement, dated March 26, 1999, and instructs its attorneys and proxies to vote
as set forth on this Proxy. (To be Signed on Reverse Side)
