<PAGE>
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 Section 240.14a-11(c) or Section
240.14a-12
UFP Technologies, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
UFP TECHNOLOGIES, INC.
172 EAST MAIN STREET
GEORGETOWN, MASSACHUSETTS 01833-2107
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
UFP TECHNOLOGIES, INC.
TO BE HELD ON JUNE 3, 1998
---------------------
The Annual Meeting of Stockholders of UFP Technologies, Inc. will be held on
June 3, 1998 at 10:00 a.m., local time, at the Ferncroft Tara Hotel, 50
Ferncroft Road, Danvers, Massachusetts 01923, for the following purposes:
1. To elect seven (7) directors to serve for the ensuing year and until
their successors are duly elected.
2. To consider and act upon a proposal to adopt the UFP Technologies, Inc.
1998 Employee Stock Purchase Plan.
3. To consider and act upon any matters incidental to the foregoing purposes
and any other matters which may properly come before the Meeting or any
adjourned session thereof.
The Board of Directors has fixed April 27, 1998 as the record date for
determining the stockholders entitled to notice of, and to vote at, the Meeting.
You are cordially invited to attend the Meeting.
By Order of the Board Of Directors
RICHARD L. BAILLY,
SECRETARY
Boston, Massachusetts
May 5, 1998
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO VOTE, SIGN, DATE AND RETURN THE ACCOMPANYING ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE.
EVEN IF YOU HAVE GIVEN YOUR PROXY, THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
THE EXERCISE BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION,
BY EXECUTING A PROXY WITH A LATER DATE, OR BY ATTENDING AND VOTING AT THE
MEETING.
<PAGE>
UFP TECHNOLOGIES, INC.
172 EAST MAIN STREET
GEORGETOWN, MASSACHUSETTS 01833-2107
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1998
------------------------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of UFP Technologies, Inc., a Delaware
Corporation (the "Company") with its principal executive offices at 172 East
Main Street, Georgetown, Massachusetts 01833, for use at the Annual Meeting of
Stockholders to be held on June 3, 1998, and at any adjournment or adjournments
thereof (the "Meeting"). The enclosed proxy relating to the Meeting is solicited
on behalf of the Board of Directors of the Company and the cost of such
solicitation will be borne by the Company. It is expected that this proxy
statement and the accompanying proxy will be mailed to stockholders on or about
May 5, 1998. Certain of the officers and regular employees of the Company may
solicit proxies by correspondence, telephone or in person, without extra
compensation. The Company may also pay to banks, brokers, nominees and certain
other fiduciaries their reasonable expenses incurred in forwarding proxy
material to the beneficial owners of securities held by them.
Only stockholders of record at the close of business on April 27, 1998 will
be entitled to receive notice of, and to vote at, the Meeting. As of that date,
there were outstanding and entitled to vote 4,677,354 shares of Common Stock,
$.01 par value (the "Common Stock"), of the Company. Each such stockholder is
entitled to one vote for each share of Common Stock so held and may vote such
shares either in person or by proxy.
The enclosed proxy, if executed and returned, will be voted as directed on
the proxy or, in the absence of such direction, for the election of the nominees
as directors and for the proposal to adopt the 1998 Stock Purchase Plan. If any
other matters shall properly come before the Meeting, the enclosed proxy will be
voted by the proxies in accordance with their best judgment. The proxy may be
revoked at any time prior to exercise by filing with the Secretary of the
Company a written revocation, by executing a proxy with a later date, or by
attending and voting at the Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Meeting, seven directors are to be elected to serve until the 1999
Annual Meeting of Stockholders and until their respective successors have been
duly elected and qualified. The persons listed below in the following table have
been nominated by the Board of Directors for election as directors.
All nominees are currently directors of the Company. It is the intention of
the persons named as proxies to vote for the election of the nominees. In the
unanticipated event that any such nominee should be unable to serve, the persons
named as proxies will vote the proxy for such substitutes, if any, as the
present Board of Directors may designate. The nominees have not been nominated
pursuant to any arrangement or understanding with any person.
1
<PAGE>
The following table sets forth certain information with respect to the
nominees. When used below, positions held with the Company include positions
held with the Company's predecessors and subsidiaries.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- --------------------------------------------- --- --------------------------------------------- ---------------
<S> <C> <C> <C>
R. Jeffrey Bailly............................ 36 President, Chief Executive Officer and 1995
Director
William H. Shaw(1)........................... 70 Chairman of the Board of Directors 1963
Richard L. Bailly............................ 64 Executive Vice President, Secretary and 1963
Director
William C. Curry(1)(2)....................... 64 Director 1990
T. Gordon Roddick............................ 56 Director 1994
Kenneth L. Gestal............................ 49 Director 1996
Peter R. Worrell(2).......................... 41 Director 1997
</TABLE>
- ------------------------
(1) Member of the Company's Audit Committee.
(2) Member of the Company's Compensation Committee.
Mr. R. Jeffrey Bailly has served as the President, Chief Executive Officer
and a director of the Company since January 1, 1995. He joined the Company in
1988 and served as a Division Manager from 1989 to 1992, General Manager
Northeast Operations from 1992 to 1994 and as its Vice President of Operations
from 1994 to 1995. From 1984 through 1988, Mr. Bailly, a certified public
accountant, was employed by Coopers & Lybrand. Mr. Bailly is the son of Richard
L. Bailly, a cofounder and a director of the Company.
Mr. Shaw, a cofounder of the Company and its Chairman of the Board, served
as the Chief Executive Officer, President and Treasurer of the Company from its
organization in 1963 through his retirement at the end of 1994. Mr. Shaw has
also served as a director of the Company since 1963. Mr. Shaw is a member of the
Board of directors of Re-Source America, Inc., a package recycling company.
Mr. Richard Bailly, a cofounder of the Company, has served as its Executive
Vice President and a director since its organization in 1963. Mr. Bailly is the
author of many of the Company's patents, including patents covering the forming
and lamination of foam plastics, packaging, conversion technology and moisture
transmission. Mr. Bailly is a member of the Board of Directors of the Family
Bank of Haverhill.
Mr. Curry has served as a director of the Company since 1990. From 1986 to
March 1994, Mr. Curry, now semiretired, was the president, chief executive
officer and a director of Discom, Inc., which was acquired by TDK USA Corp. in
1988 and has been a wholly owned subsidiary of TDK since that date.
Mr. Roddick has served as a director of the Company since January 25, 1994.
He served as a director of MFT from 1991 until the MFT Acquisition in December,
1993. Mr. Roddick is a cofounder and chairman of The Body Shop International
PLC, a cosmetic manufacturer and retailer, and has served as its chairman since
its formation in 1976.
Mr. Gestal has served as a director of the Company since 1996. Mr. Gestal is
Chairman of Institutional Global Finance Corp., a money management firm. From
1991 to 1995, Mr. Gestal served Swiss Bank Corporation, a securities firm, first
as president of SBCI Futures, then as president of SBC Government Securities
Inc. and as a director of both firms. Prior to joining Swiss Bank Corporation,
Mr. Gestal served as the president of Sanwa-BGK, a securities firm, and as
chairman of its futures operations. Mr. Gestal is the brother-in-law of R.
Jeffrey Bailly, the President, Chief Executive Officer and a director of the
Company.
Mr. Worrell has served as a director of the Company since 1997. Mr. Worrell
is the Managing Director of The Bigelow Company, LLC, a private investment bank
with offices in Portsmouth, NH and Seattle, WA. Mr. Worrell is a director of
several privately owned companies.
2
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held six meetings during 1997. Each
current director attended at least 75% of the aggregate number of all meetings
of the Board of Directors and committees of which he was a member during such
fiscal year, except for Messrs. Friedman and Roddick. Mr. David Friedman is
retiring from the Board of Directors following the Meeting.
The Board of Directors has an Audit Committee which met twice in 1997 and is
currently composed of Messrs. Curry and Shaw. The functions performed by this
Committee include recommending to the Board of Directors the engagement of the
independent auditors, reviewing the scope of internal controls and reviewing the
implementation by management of recommendations made by the independent
auditors.
The Board of Directors has a Compensation Committee which met on two
occasions in 1997 and is currently composed of Messrs. Curry and Worrell. The
functions of the Compensation Committee include determining salaries,
individuals to whom stock options are granted and the terms upon which option
grants are made, incentive plans, benefits and overall compensation.
The Board of Directors does not have a nominating committee. Nominations of
directors are considered by the whole Board of Directors.
COMPENSATION OF DIRECTORS
In 1997, nonemployee directors of the Company received (i) an annual $5,000
fee, (ii) if applicable, an annual committee membership fee of $1,500 per year
(with a maximum fee of $3,000) and (iii) a fee of $500 plus reimbursement of
expenses for each meeting physically attended. Mr. Shaw received $12,000 for his
services as Chairman of the Board and $50,000 for his services to the Company as
a consultant pursuant to a letter agreement with the Company dated January 1,
1995 and an agreement with the Company dated September 1993. See "Consulting
Contract." In addition, each nonemployee director is eligible to receive stock
options pursuant to the 1993 Nonemployee Director Stock Option Plan. See "1993
Nonemployee Director Stock Option Plan." Employee directors may be granted
options under the 1993 Stock Option Plan.
1993 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN. In October, 1993, the Company
adopted the 1993 Nonemployee Director Stock Option Plan (the "Director Plan") to
promote the Company's interests by attracting and obtaining highly skilled,
experienced and knowledgeable independent directors. Only nonemployee directors
are eligible to receive options under the Director Plan. The Director Plan
provides for options for the issuance of up to 110,000 shares of Common Stock.
Commencing July 1, 1994 and on July 1 each year thereafter, each individual who
at the time is serving as a nonemployee director of the Company receives an
automatic grant of options to purchase 2,500 shares of Common Stock. These
options become exercisable in full six months after the date of grant and expire
ten years from the date of grant. The exercise price is the fair market value of
the Common Stock on the date of grant. Options may not be exercised after three
months following the date the holder ceases to be a member of the Board of
Directors of the Company, except in the event of termination by reason of death
or permanent disability, in which event the options may be exercised for up to
one year after the date of death or permanent disability, but in any event not
later than ten years after the date the option was granted. In 1997, Mr.
Friedman and each of the Company's five continuing nonemployee directors,
Messrs. Curry, Roddick, Shaw, Worrell and Gestal received options to purchase
2,500 shares of Common Stock with an exercise price of $4.125 per share.
CONSULTING CONTRACT. William H. Shaw retired as the Company's President,
Chief Executive Officer and Treasurer on December 31, 1994. Pursuant to an
agreement between the Company and Mr. Shaw entered into in September 1993, Mr.
Shaw is entitled to an automobile and has agreed to serve as a consultant to the
Company for three years for $50,000 per year beginning January 1, 1995.
Thereafter,
3
<PAGE>
Mr. Shaw, or his heirs or beneficiaries, will receive a retirement benefit of
$50,000 per year for an additional 12 years. Mr. Shaw has agreed that he will
not compete with the Company while he is receiving any of these payments.
INDEMNIFICATION AGREEMENTS. The Company has entered into indemnification
agreements with each of its directors and anticipates that it will enter into
similar agreements with any future directors. Generally, the indemnification
agreements attempt to provide the maximum protection permitted by Delaware law
with respect to indemnification of directors.
The indemnification agreements provide that the Company will pay certain
amounts incurred by a director in connection with any civil or criminal action
or proceeding and specifically including actions by or in the name of the
Company (derivative suits) where the individual's involvement is by reason of
the fact that he is or was a director. Such amounts include, to the maximum
extent permitted by law, attorney's fees, judgments, civil or criminal fines,
settlement amounts, and other expenses customarily incurred in connection with
legal proceedings. Under the indemnification agreements, a director will not
receive indemnification if he is found not to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company.
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of April 15, 1998,
with respect to the beneficial ownership of the Company's Common Stock by each
director, each nominee for director, each named executive officer in the Summary
Compensation Table under "Executive Compensation" below, all executive officers
and directors as a group, and each person known by the Company to be the
beneficial owner of 5% or more of the Company's Common Stock. This information
is based upon information received from or on behalf of the named individuals.
4
<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF
NAME OWNED (1) BENEFICIALLY CLASS
- ----------------------------------------------------------------------------- ----------------------- -------------
<S> <C> <C>
William H. Shaw(2)(5)........................................................ 627,364 13.4%
c/o UFP Technologies, Inc.
172 East Main Street
Georgetown, MA 01833
Richard L. Bailly(3)(4)...................................................... 455,992 9.7
c/o UFP Technologies, Inc.
172 East Main Street
Georgetown, MA 01833
R. Jeffrey Bailly(3)(10)..................................................... 480,577 9.6%
c/o UFP Technologies, Inc.
172 East Main Street
Georgetown, MA 01833
David L. Friedman(5)(6)...................................................... 224,378 4.7%
Paul Greenler (3)(10)........................................................ 193,745 4.1%
T. Gordon Roddick(5)(7)...................................................... 164,001 3.5%
Charles W. Casey(3).......................................................... 73,508 1.6%
Wayne G. Williams(3)......................................................... 64,521 1.4%
William C. Curry(5)(8)....................................................... 53,672 1.1%
Kenneth L. Gestal(5)......................................................... 45,200 *
Peter R. Worrell(5)(11)...................................................... 22,500 *
James J. Cramer(9)........................................................... 992,900 21.2%
56 Beaver Street
New York, NY 10004
Eliot H. Sherman............................................................. 299,684 6.4%
28 Rockland Street
Wellesley Hills, MA 02181
All executive officers and directors as a 2,290,868 43.5%
group(12 persons)(2)(3)(4)(5)(6)(7)(8)(10)(11).............................
</TABLE>
- ------------------------
* Less than one percent.
(1) Unless otherwise noted, each person identified possesses sole voting and
investment power with respect to the shares listed.
(2) Includes 87,003 shares owned by the wife of Mr. Shaw and 17,500 shares owned
by a trust for the benefit of Mr. Shaw's children as to both of which Mr.
Shaw disclaims beneficial ownership.
(3) Includes shares issuable pursuant to currently exercisable stock options
under the 1993 Plan as follows: 43,000 for Mr. Richard Bailly, 310,000 for
Mr. Jeffrey Bailly, 43,000 for Mr. Greenler, 33,000 for Mr. Charles W.
Casey, and 33,000 for Wayne Williams.
(4) Includes 175,924 shares owned by the wife of Mr. Bailly as to which Mr.
Bailly disclaims beneficial ownership. Excludes 480,577 shares attributable
to R. Jeffrey Bailly, a son of Richard Bailly, as to which he disclaims
beneficial ownership.
(5) Includes shares issuable pursuant to currently exercisable stock options
under the Nonemployee Director Stock Option Plan as follows: 2,500 for Mr.
Shaw, 10,000 for Mr. Friedman, 10,000 for Mr. Roddick, 10,000 for Mr. Curry,
5,000 for Mr. Gestal and 2,500 for Mr. Worrell.
(6) Includes warrants to purchase 44,703 shares held by Mr. Friedman. Mr.
Friedman is retiring from the Board of Directors following the Meeting.
5
<PAGE>
(7) Includes warrants to purchase 33,178 shares held by Mr. Roddick.
(8) Includes 38,920 shares owned by the wife of Mr. Curry, as to which he
disclaims beneficial ownership.
(9) Represents an investment group consisting of Mr. Cramer, Karen L. Cramer and
J.J. Cramer & Co.
(10) Includes 120,090 shares owned by the Company's Profit Sharing Trust as to
which Messrs. Bailly and Greenler disclaim beneficial interest in excess of
their respective pecuniary interests in the trust. Messrs. Bailly and
Greenler are co-trustees of the trust.
(11) Includes 10,000 shares owned by the Bigelow Company, LLC Profit Sharing
Plan as to which Mr. Worrell disclaims beneficial interest in excess of his
pecuniary interest in the Plan. Mr. Worrell is one of two trustees of the
Plan.
MANAGEMENT
The names of the Company's executive officers and significant employees who
are not directors of the Company, and certain biographical information furnished
by them, are set forth below:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Paul J. Greenler..................................... 52 Vice President and Controller
Charles W. Casey..................................... 58 Vice President
Ron J. Lataille...................................... 36 Vice President and Chief Financial Officer
Wayne G. Williams.................................... 55 Vice President
</TABLE>
Mr. Greenler has served as the Controller of the Company since 1997 and from
1977 to 1993. Mr. Greenler served as the Company's Chief Financial Officer from
1993 to 1997. Prior to joining the Company, Mr. Greenler was division controller
of EG&G, Inc. from 1968 through 1977.
Mr. Casey joined the Company in 1981 and has served as a Vice President
since 1992. Prior thereto, Mr. Casey served as division manager from 1985
through 1994 and as plant manager from 1981 through 1985.
Mr. Lataille joined the Company in November 1997 as its Chief Financial
Officer. Prior thereto, Mr. Lataille served as Vice President, Treasurer and
Chief Financial Officer of Little Switzerland, Inc. from 1991 through October
1997. He also served as interim President and Chief Executive Officer of Little
Switzerland from October 1994 through October 1995.
Mr. Williams initially joined the Company in 1981 and served as sales
manager, division manager and more recently as Vice President of Technology from
1992 through October 1993. From 1993 through 1994 Mr. Williams served as an
executive officer of Re-Source America. Mr. Williams rejoined the Company as a
Vice President in January 1994. Prior to joining the Company, Mr. Williams was
employed by The Dow Chemical Company (1966-1981) where he held various
technical, sales and project management positions.
Executive officers are chosen by and serve at the discretion of the Board of
Directors of the Company.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation during
the last three fiscal years of each of the executive officers of the Company
whose annual salary and bonus, if any, exceeded $100,000 during the last fiscal
year.
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ -------------
OTHER ANNUAL SECURITIES ALL OTHER
FISCAL YEAR SALARY BONUS COMPEN- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION ENDED ($) ($) SATION($)(2) OPTIONS (#) ($)(3)
- ----------------------------------------- ----------- ---------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Jeffrey Bailly........................ 12/31/97 $ 150,000 $ 95,000 $ 23,750 0 $ 7,317
President and Chief 12/31/96 140,000 75,000 16,875 0 6,367
Executive Officer (1) 12/31/95 125,000 67,435 16,250 200,000 7,095
Richard L. Bailly........................ 12/31/97 132,000 15,000 0 0 6,746
Executive Vice President (1) 12/31/96 127,400 10,000 0 5,000 6,051
12/31/95 122,408 10,000 0 0 4,500
Paul J. Greenler......................... 12/31/97 95,000 20,000 0 0 5,084
Chief Financial Officer 12/31/96 96,338 15,000 0 5,000 4,853
12/31/95 89,846 18,000 0 0 3,820
Wayne G. Williams........................ 12/31/97 95,000 15,000 0 0 4,891
Vice President 12/31/96 96,616 10,000 0 5,000 4,525
12/31/95 86,252 10,000 0 0 3,740
</TABLE>
- ------------------------
(1) See "Employment Contracts" below.
(2) The Company granted R. Jeffrey Bailly 5,000 shares Common Stock in April
1995, 1996 and 1997 at a market price of $3.25 per share, $3.38 per share
and $4.75 per share, respectively, in each case based on the closing price
of the Company's Common Stock on the Nasdaq Market on the date of grant. See
"Employment Contracts."
(3) Represents Company contributions to the above-named employees' accounts
under the Company's Profit Sharing Retirement Plan and Trust.
EMPLOYMENT CONTRACTS
In April 1995 the Company entered into an employment agreement with R.
Jeffrey Bailly, its President and Chief Executive Officer, which is terminable
by either party at any time, except as provided below. The Agreement provides
that Mr. Bailly will receive a minimum annual salary of $125,000 and
consideration for discretionary bonuses. Mr. Bailly's agreement contains
nondisclosure provisions and prohibits him from competing with the Company
during the term of his employment and for a period of eighteen months
thereafter. Pursuant to the agreement, the Company agreed to grant Mr. Bailly
25,000 shares of its Common Stock at the rate of 5,000 shares per year
commencing April 4, 1995 provided that Mr. Bailly remains employed with the
Company. The employment agreement provides Mr. Bailly with certain other
benefits, including the opportunity to participate in the Company's stock option
plans, insurance plans and other employment benefits as may be generally
available to senior executives of the Company.
Under the terms of the employment agreement, if Mr. Bailly's employment with
the Company is terminated by the Company without cause, or if Mr. Bailly
terminates his employment with the Company for good reason (a reduction in his
base salary, removal from his position as president or chief executive officer,
required relocation outside the greater Boston, Massachusetts area or a material
reduction in his overall level of responsibility) or due to a change in control
of the Company, (i) the Company is required to continue to pay Mr. Bailly a
monthly amount for a period of eighteen months equal to Mr. Bailly's average
monthly salary (including bonus) for the preceding two years, (ii) all of Mr.
Bailly's shares and
7
<PAGE>
options granted pursuant to the employment agreement will vest in full and (iii)
the Company will continue to pay Mr. Bailly's health insurance.
In September 1993, the Company entered into an agreement with Richard L.
Bailly that provides that should Mr. Bailly's employment with the Company be
terminated by the Company for any reason other than for cause, or should Mr.
Bailly terminate his employment for good reason (either a reduction in his
salary below $122,400 or a material reduction in his overall level of
responsibility), Mr. Bailly will receive an automobile and compensation of
$122,400 per year for three years or until he reaches age 65, whichever is
shorter. During this period, he will serve as a consultant to the Company. After
the end of this initial consulting period, or upon Mr. Bailly's retirement, Mr.
Bailly will continue as a consultant to the Company for three additional years
for $45,000 per year. Thereafter, Mr. Bailly, or his heirs or beneficiaries,
will receive a retirement benefit of $40,000 per year for an additional 12
years. Mr. Bailly has agreed that he will not compete with the Company while he
is receiving any of these payments.
SEVERANCE PLANS
In September 1993, the Company adopted a policy that all executive officers
of the Company not otherwise a party to an employment arrangement with the
Company will receive a severance benefit should the employee's employment with
the Company be terminated by the Company other than for cause in connection with
a change in control of the Company, in the form of a base salary continuation
for a period equal to the sum of (i) four months plus (ii) one month for each
year of service with the Company.
STOCK OPTIONS
The following table sets forth certain information with respect to the
aggregate number and value of options exercisable and unexercisable by the named
executive officers at December 31, 1997. No options were granted to any of the
named executive officers in 1997 and no options were exercised by any of the
named executive officers in 1997.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/97 12/31/97(1)
----------------- ----------------
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
NAME (#) ($)
- ----------------------------------------------------------------------------- ----------------- ----------------
<S> <C> <C>
R. Jeffrey Bailly............................................................ 260,000/50,000 433,125/71,375
Richard L. Bailly............................................................ 42,000/3,000 56,430/3,195
Paul J. Greenler............................................................. 42,000/3,000 56,430/3,195
Wayne G. Williams............................................................ 32,000/3,000 38,330/3,195
</TABLE>
- ------------------------
(1) Based upon the closing price of the Company's Common Stock on December 31,
1997 on the Nasdaq National Market of $4.19 minus the respective option
exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions regarding executive compensation are made by the Compensation
Committee of the Board of Directors, which in 1997 was composed of Messrs. Curry
and Worrell. Neither Mr. Curry nor Mr. Worrell is a former or current officer or
employee of the Company.
8
<PAGE>
COMPENSATION COMMITTEE AND BOARD OF DIRECTORS REPORT
The primary objectives of the Compensation Committee in developing executive
compensation policies are to attract, motivate and retain superior talent to
enable the Company to achieve its business objectives and to align the financial
interests of its executive officers with the stockholders of the Company.
The compensation of executive officers consists of base compensation, bonus,
the grant of options and participation in benefit plans generally available to
employees. In setting compensation, the Compensation Committee strives to
maintain base compensation for the Company's executive officers at levels which
the Compensation Committee believes are competitive with the compensation of
comparable executive officers in similarly situated companies, while relying
upon stock options and the bonus plan to provide significant performance
incentives.
Executive officers are eligible to participate in the bonus plan which is
administered by the Compensation Committee. Under the plan, executive officers
may receive bonuses derived from a formula tied to the Company's income. In
addition, executive officers, including Jeffrey Bailly, may receive
discretionary bonuses based upon a subjective evaluation of the performance of
the Company and their contributions to the Company.
Each of the executive officers and all key employees are eligible to receive
grants of options under the 1993 Plan. The 1993 Plan is used to align a portion
of the officer's compensation with the stockholders' interests and the long term
success of the Company. In determining the number of options to be granted to
each executive officer, the Compensation Committee reviews recommendations
provided by R. Jeffrey Bailly and makes a subjective determination regarding
those recommendations based upon the following criteria: (i) the individual
performance and position of responsibility of the executive officer, (ii) the
number of options held by the executive officer, and (iii) the financial
performance of the Company. No particular weight is given to any of these
factors, rather each executive officer's total compensation package is reviewed
as a whole. During the fiscal year ended December 31, 1997, the Company granted
options to purchase 20,000 shares to executive officers as a group under the
1993 Plan. See "Stock Option Plans."
In 1997, R. Jeffrey Bailly received a salary of $150,000, a bonus of $95,000
and 5,000 shares of Common Stock. This compensation was based upon the
employment agreement negotiated with Mr. Bailly in conjunction with his
promotion to Chief Executive Officer and President of the Company in January
1995. The Board has conducted a survey of salaries of chief executive officers.
Based upon that information and its experience, the Company believes that Mr.
Bailly's cash compensation was comparable to the compensation of chief executive
officers of similar companies.
<TABLE>
<CAPTION>
COMPENSATION BOARD OF DIRECTORS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
WILLIAM C. CURRY
PETER R. WORRELL WILLIAM H. SHAW
R. JEFFREY BAILLY
RICHARD L. BAILLY
WILLIAM C. CURRY
T. GORDON RODDICK
KENNETH L. GESTAL
PETER R. WORRELL
</TABLE>
PERFORMANCE GRAPH
The following graph compares the semi-annual change in the Company's
cumulative total shareholder return from December 16, 1993, when the Company's
Common Stock became publicly traded to December 31, 1997 based upon the market
price of the Company's Common Stock with the cumulative total
9
<PAGE>
return on the CRSP Index for the Nasdaq Stock Market (U.S. companies) and the
CRSP Index for NYSE/ AMEX/Nasdaq (SIC 3080-3089 U.S.) Miscellaneous Plastics
Products for that period.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
UFP TECHNOLOGIES, INC.
<S> <C>
12/17/93 $100.0
12/31/93 95.7
12/31/94 52.2
12/29/95 69.6
12/31/96 89.1
12/31/97 72.8
Notes:
A. The lines represent monthly levels derived from compounded daily returns that include all
dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading
day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding
day is used.
D. The index level for all series was set to $100.0 on 12/17/93.
<CAPTION>
NASDAQ STOCK MARKET (US COMPANIES) NYSE/AMEX/NASDAQ STOCKS (SIC 3080-3089 US COMPANIES)
<S> <C> <C>
Miscellaneous Plastics Products
12/17/93 $100.0 $100.0
12/31/93 102.4 101.1
12/31/94 100.0 101.4
12/29/95 141.5 111.2
12/31/96 174.0 153.9
12/31/97 213.6 156.5
Notes:
</TABLE>
Assumes $100 invested on December 16, 1993 in the Company's Common Stock,
the CRSP Index for the Nasdaq Stock Market (U.S. companies) and the CRSP Index
for NYSE/AMEX/Nasdaq (SIC 3080-3089 U.S.) Miscellaneous Plastics Products, and
the reinvestment of any and all dividends.
10
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
UNITED DEVELOPMENT COMPANY LIMITED
The Company owns an approximate 26.3% limited partnership interest in United
Development Company Limited, a real estate limited partnership ("United
Development"), which owns and leases to the Company the Kissimmee, Florida and
Decatur, Alabama properties. William H. Shaw and Richard L. Bailly, both
principals and stockholders of the Company, each owns an approximately 21%
general partnership interest in United Development. Each of Paul J. Greenler,
Charles W. Casey and Wayne G. Williams who are officers and/or stockholders of
the Company, owns an approximately 5.3% limited partnership interest in this
entity.
The Company made a series of loans to United Development from time to time
prior to September 30, 1993 in the total principal amount of approximately
$210,000 of which $140,000 remained outstanding as of December 31, 1997. As of
September 30, 1993, these loans were consolidated into one term note bearing
interest at the prime rate of interest as announced by The First National Bank
of Boston, plus 2%. The principal amount of the note amortizes on a ten year
basis with the outstanding principal amount repayable on September 30, 1998.
KISSIMMEE, FLORIDA PROPERTY. The Company leases its Kissimmee, Florida
manufacturing facility from United Development on a month-to-month basis.
Monthly rent for the lease is $10,000 plus the payment of certain expenses and
taxes. The Company chose not to exercise its option to purchase the land and
building at a formula price based upon the appraised value of the land and
building multiplied by a discount rate following the recent expiration of its
previous lease for the premises. However, the Company believes that the terms of
its month-to-month lease are comparable to those available in the market for
real estate in Kissimmee, Florida. The Kissimmee, Florida property is subject to
$1,500,000 Osceola County Industrial Development Authority Industrial
Development Revenue Bonds, Series 1985 (United Development Company Limited
Project) dated April 1, 1985, which as of December 31, 1997 had an aggregate
outstanding principal balance of $303,756. Interest on these bonds accrues at
the prime rate of interest as announced by Barnett Bank of Florida and is
payable monthly commencing on June 1, 1986 and ending on May 1, 2000.
In addition to other security for the bonds, including a mortgage on the
property in favor of Barnett Bank and Trust Company, N.A., as trustee, the
Company, William H. Shaw and Richard L. Bailly jointly and severally
unconditionally guaranteed the payment of all principal, interest and premium,
if any, payable on the bonds. The Company, William H. Shaw and Richard L. Bailly
also jointly and severally indemnified the Trustee and Osceola County Industrial
Development Authority, as issuer of the bonds, for all costs, fees and expenses
incurred by them in connection with the bonds.
DECATUR, ALABAMA PROPERTY. The Company leases its Decatur, Alabama
manufacturing facility from United Development for an annual rent of $90,000
plus the payment of certain expenses and taxes. The Company believes that the
terms of this lease are comparable to those available in the market for real
estate in Decatur, Alabama. In June, 1990, United Development acquired from MCP
Industries, Inc. the land on which the Decatur, Alabama property is located,
together with the related leasehold interest. This leasehold interest was
acquired subject to an existing leasehold mortgage in the amount of $227,482.
The acquisition of the property was financed by a $130,000 mortgage loan from
First American Bank $95,000 of which was outstanding as of December 31, 1997.
This mortgage loan is guaranteed by the Company.
PROPOSAL NO. 2
PROPOSAL TO ADOPT THE COMPANY'S
1998 EMPLOYEE STOCK PURCHASE PLAN
In April 1998, the Board of Directors adopted, subject to stockholder
approval, the Company's 1998 Employee Stock Purchase Plan (the "Stock Purchase
Plan"). The Stock Purchase Plan is intended to
11
<PAGE>
provide employees of the Company with additional incentives by permitting them
to acquire a proprietary interest in the Company through the purchase of shares
of the Company's Common Stock. The Stock Purchase Plan will be administered by
the Compensation Committee. The following is a summary description of the Stock
Purchase Plan and is qualified in its entirety by reference to the full text of
the Stock Purchase Plan, which is set forth as Exhibit A to this Proxy
Statement.
The Stock Purchase Plan provides that all employees of the Company
(including officers and directors) who work more than twenty hours per week and
more than five months in any calendar year and who are employees of the Company
on or before the first day of the applicable offering period are eligible to
participate. However, no employee who holds five percent (5%) or more of the
Company's Common Stock will be eligible to participate. Further, no employee may
be granted an option pursuant to which the employee's right to purchase Common
Stock under the Stock Purchase Plan accrues at a rate which exceeds $25,000 of
fair market value of such stock per year. Approximately 415 employees would
currently be eligible to participate in the Stock Purchase Plan.
Eligible employees of the Company elect to participate in the Stock Purchase
Plan by giving notice to the Company and instructing the Company to withhold a
specified dollar amount from the employee's salary during the following
six-month period (the periods run from January 1 to June 30 and July 1 to
December 31, and each is referred to as an "Offering Period"). On the last
business day of that Offering Period, the amount withheld is used to purchase
Common Stock at a price equal to the lesser of 85% of the fair market value of
the Common Stock on either the first day of the Offering Period or on the last
day of the Offering Period, whichever is less (the "Option Exercise Price").
(For this purpose, fair market value is the average of the high and low sales
prices as reported on the Nasdaq National Market System.) If no shares are
traded on those days, the average of the fair market values on the immediately
preceding and the next following business day on which shares are traded is used
instead. The Company technically grants an option to each participant, on the
first day of the Offering Period, to purchase, on the last day of the Offering
Period, at the Option Exercise Price, that number of shares of Common Stock that
his or her accumulated payroll deductions on the last day of the Offering Period
will pay for at such price. The option is automatically deemed to be exercised
if the employee is still a participant on the last day of the Offering Period.
Participation ends automatically on termination of employment with the Company.
A participating employee may authorize a payroll deduction of any even
dollar amount, equal to not more than ten percent (10%) of his or her base pay
(including commissions, if applicable), but not less than $5.00 per payroll
period. Deductions from any employee's compensation may not be increased or
decreased during an Offering Period. Under the Stock Purchase Plan, the number
of shares purchased at the end of the Offering Period may not be more than 1,500
shares on any such date.
An employee may withdraw from the Stock Purchase Plan, and withdraw all of
the payroll deductions credited to his or her account under the Stock Purchase
Plan, at any time prior to the last business day of any Offering Period. Upon
such a withdrawal, the Company will refund without interest the entire remaining
balance of the employee's deductions.
The maximum number of shares of Common Stock which may be purchased by
employees under the Stock Purchase Plan is 150,000 shares, subject to
adjustments for stock splits, stock dividends and similar transactions. Such
shares may be authorized but unissued shares of Common Stock or shares of Common
Stock reacquired by the Company, including shares purchased in the open market.
The Stock Purchase Plan may be amended by the Board of Directors from time
to time in any respect; provided, however, that no amendment shall be effective
without stockholder approval if the amendment would (a) materially increase the
number of shares of Common Stock which may be issued under the Stock Purchase
Plan, (b) materially increase the benefits accruing to participants in the Stock
Purchase Plan or (c) materially modify the requirements as to eligibility for
participation in the Stock Purchase Plan.
12
<PAGE>
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). An employee will not recognize income on the grant or
exercise of an option under the Stock Purchase Plan, and the Company will not
have a deduction. If the employee does not dispose of the shares of Common Stock
for at least two years from the grant of an option under the Stock Purchase
Plan, the employee will realize ordinary income upon disposition (including by
sale, gift or death) in an amount equal to the lesser of: (i) the excess of the
fair market value of the Common Stock at the time of disposition over the Option
Exercise Price, or (ii) 15% of the fair market value of the Common Stock on the
first day of the Offering Period. Gain in excess of this amount, if any, will be
taxed as long-term capital gain. If the sale price is less than the price paid,
the employee will not recognize any ordinary income, and any loss that he
suffers on the sale will be a capital loss. The Company will not have a
deductible compensation expense as a result of the purchase of stock under the
Stock Purchase Plan, unless there is a premature disposition, as described in
the next paragraph.
If shares purchased under the Stock Purchase Plan are sold by an employee
within two years after the option is granted, then the employee will realize
ordinary income in the year of disposition in an amount equal to the excess of
the fair market value of the shares on the date of exercise over the Option
Exercise Price. Any remaining gain will be treated as capital gain, which may be
long or short-term, depending on the time that the shares are held. If an
employee does recognize ordinary income as a result of a premature disposition,
a compensation deduction is allowed to the Company in an equal amount, provided
the Company timely provides the recipient and the IRS with a form W-2 or W-2c,
whichever is applicable.
The foregoing summary of the effect of federal income taxation upon the
participant and the Company with respect to the purchase of shares under the
Stock Purchase Plan does not purport to be complete, and reference should be
made to the applicable provisions of the Code. In addition, this summary does
not discuss the provisions of the tax laws of any municipality, state or foreign
country in which the participant may reside.
The affirmative vote of a majority of the votes of holders of the Common
Stock present in person or by proxy at the Meeting is required for adoption of
Proposal No. 2.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
PROPOSAL NO. 2.
OTHER MATTERS
VOTING PROCEDURES
The votes of stockholders present in person or represented by proxy at the
Meeting will be tabulated by an inspector of elections appointed by the Company.
A quorum, consisting of a majority of shares of all stock issued, outstanding
and entitled to vote at the Meeting, will be required to be present in person or
by proxy for consideration of the proposal to elect directors and for the
proposal to adopt the Stock Purchase Plan. If a quorum is not present, a vote of
a majority of the votes properly cast will adjourn the Meeting.
The seven nominees for director of the Company who receive the greatest
number of votes cast by stockholders present in person or represented by proxy
at the Meeting and entitled to vote thereon will be elected directors of the
Company. The affirmative vote of the holders of a majority of shares of Common
Stock present in person or represented by proxy at the Meeting and entitled to
vote thereon is required to approve the adoption of the Stock Purchase Plan.
Abstentions will have no effect on the outcome of the vote for the election
of directors, but will have the effect of being cast against the proposal to
adopt the Stock Purchase Plan even though the stockholder so abstaining intends
a different interpretation. Shares of Common Stock held of record by brokers who
do not return a signed and dated proxy will not be considered present at the
Meeting, will not be counted towards a quorum and will not be voted in the
election of directors or on the proposal to adopt the Stock Purchase Plan.
Shares of Common Stock held of record by brokers who return a signed and dated
proxy
13
<PAGE>
but who fail to vote on one of the proposals will count toward the quorum but
will count neither for nor against the proposal not voted.
INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP as the
independent auditors to audit the Company's consolidated financial statements
for the fiscal year ending December 31, 1998. Such firm and its predecessor have
served continuously in that capacity since 1982.
A representative of KPMG Peat Marwick LLP will be at the Meeting and will be
given an opportunity to make a statement, if so desired. The representative will
be available to respond to appropriate questions.
REPORTING UNDER SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Securities and Exchange Commission and the Nasdaq
National Market. Executive officers, directors and greater than 10% stockholders
are required to furnish the Company with copies of all Forms 3, 4 and 5 they
file.
Based solely on the Company's review of the copies of such Forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all of its executive officers, directors and greater than 10%
stockholders complied with all Section 16(a) filing requirements applicable to
them during the Company's fiscal year ended December 31, 1997.
OTHER PROPOSED ACTION
The Board of Directors knows of no matters which may come before the Meeting
other than the election of directors and the proposal to adopt the Stock
Purchase Plan. However, if any other matters should properly be presented to the
Meeting, the persons named as proxies shall have discretionary authority to vote
the shares represented by the accompanying proxy in accordance with their own
judgment.
STOCKHOLDER PROPOSALS
Proposals which stockholders intend to present at the Company's 1999 Annual
Meeting of Stockholders and wish to have included in the Company's proxy
materials must be received by the Company no later than January 6, 1999.
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been or will be specifically
incorporated by reference into any filing by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the
sections of the Proxy Statement entitled "Compensation Committee and Board of
Director Report" and "Performance Graph" shall not be deemed to be so
incorporated, unless specifically otherwise provided in any such filing.
ANNUAL REPORT ON FORM 10-K
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ARE
AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST ADDRESSED TO
INVESTOR RELATIONS, UFP TECHNOLOGIES, INC. AT 172 EAST MAIN STREET, GEORGETOWN,
MASSACHUSETTS 01833.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
ARE URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENCLOSED ENVELOPE.
14
<PAGE>
EXHIBIT A
UFP TECHNOLOGIES, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
The UFP Technologies, Inc. 1998 Employee Stock Purchase Plan (the "Plan") is
intended to provide a method whereby employees of UFP Technologies, Inc. (the
"Company") will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of the Company's $.01 par value common
stock (the "Common Stock"). It is the intention of the Company to have the Plan
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan shall,
accordingly, be construed so as to extend and limit participation in a manner
consistent with the requirements of that Section of the Code.
2. ELIGIBLE EMPLOYEES.
(a) All persons who are employees of the Company or any of its participating
subsidiaries on or before the first day of the applicable Offering Period (as
defined below) shall be eligible to receive options under this Plan to purchase
the Company's Common Stock. In no event may an employee be granted an option if
such employee, immediately after the option is granted, owns stock possessing
five (5%) percent or more of the total combined voting power or value of all
classes of stock of the Company or of its parent corporation or subsidiary
corporation as the terms "parent corporation" and "subsidiary corporation" are
defined in Section 424(e) and (f) of the Code. For purposes of determining stock
ownership under this paragraph, the rules of Section 424(d) of the Code shall
apply and stock which the employee may purchase under outstanding options shall
be treated as stock owned by the employee.
(b) For the purpose of this Plan, the term employee shall not include an
employee whose customary employment is for not more than twenty (20) hours per
week or is for not more than five (5) months in any calendar year.
3. STOCK SUBJECT TO THE PLAN.
The stock subject to the options granted hereunder shall be shares of the
Company's authorized but unissued Common Stock or shares of Common Stock
reacquired by the Company, including shares purchased in the open market. The
aggregate number of shares which may be issued pursuant to the Plan is 150,000,
subject to increase or decrease by reason of stock split-ups, reclassifications,
stock dividends, changes in par value and the like. If the number of shares of
Common Stock reserved and available for any Offering Period (as defined hereto)
is insufficient to satisfy all purchase requirements for that Offering Period,
the reserved and available shares for that Offering Period shall be apportioned
among participating employees in proportion to their options.
4. OFFERING PERIODS AND STOCK OPTIONS.
(a) Six month periods during which payroll deductions will be accumulated
under the Plan ("Offering Periods") will commence on January 1 and July 1 of
each year and end on the June 30 or December 31 next following the commencement
date. The first Offering Period shall commence on July 1, 1998 and end on
December 31, 1998. Each Offering Period includes only regular pay days falling
within it. The Offering Commencement Date is the first day of each Offering
Period. The Offering Termination Date is the applicable date on which an
Offering Period ends under this Section.
A-1
<PAGE>
(b) On each Offering Commencement Date, the Company will grant to each
eligible employee who is then a participant in the Plan an option to purchase on
the Offering Termination Date at the Option Exercise Price, as provided in this
paragraph (b), that number of full shares of Common Stock reserved for the
purpose of the Plan as his or her accumulated payroll deductions on the Offering
Termination Date (including any amount carried forward pursuant to Article 8
hereof) will pay for at the Option Exercise Price; provided that such employee
remains eligible to participate in the Plan throughout such Offering Period. The
Option Exercise Price for each Offering Period shall be the lesser of (i)
eighty-five percent (85%) of the fair market value of the Common Stock on the
Offering Commencement Date, or (ii) eighty-five percent (85%) of the fair market
value of the Common Stock on the Offering Termination Date, in either case
rounded up to avoid fractions other than multiples of 1/8. In the event of an
increase or decrease in the number of outstanding shares of Common Stock through
stock split-ups, reclassifications, stock dividends, changes in par value and
the like, an appropriate adjustment shall be made in the number of shares and
Option Exercise Price per share provided for under the Plan, either by a
proportionate increase in the number of shares and proportionate decrease in the
Option Exercise Price per share, or by a proportionate decrease in the number of
shares and a proportionate increase in the Option Exercise Price per share, as
may be required to enable an eligible employee who is then a participant in the
Plan to acquire on the Offering Termination Date that number of full shares of
Common Stock as his accumulated payroll deductions on such date will pay for at
the Option Exercise Price, as so adjusted.
(c) For purposes of this Plan, the term "fair market value" on any date
means, if the Common Stock is listed on a national securities exchange or is on
the National Market List of the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system, the average of the high and low sales
prices of the Common Stock on such date on such exchange or as reported on
NASDAQ or, if the Common Stock is traded in the over-the-counter securities
market, but not on the National Market List of NASDAQ, the average of the high
and low bid quotations for the Common Stock on such date, each as published in
the WALL STREET JOURNAL. If no shares of Common Stock are traded on the Offering
Commencement Date or Offering Termination Date, the fair market value will be
determined by taking the average of the fair market values on the immediately
preceding and the next following business days on which shares of Common Stock
are traded.
(d) For purposes of this Plan the term "business day" as used herein means a
day on which there is trading on the NASDAQ or such other national securities
exchange on which the Common Stock is listed.
(e) No employee shall be granted an option which permits his rights to
purchase Common Stock under the Plan and any similar plans of the Company or any
parent or participating subsidiary corporations to accrue at a rate which
exceeds $25,000 of fair market value of such stock (determined at the time such
option is granted) for each calendar year in which such option is outstanding at
any time. The purpose of the limitation in the preceding sentence is to comply
with and shall be construed in accordance with Section 423(b)(8) of the Code.
5. EXERCISE OF OPTION.
Each eligible employee who continues to be a participant in the Plan on the
Offering Termination Date shall be deemed to have exercised his or her option on
such date and shall be deemed to have purchased from the Company such number of
full shares of Common Stock reserved for the purpose of the Plan as his or her
accumulated payroll deductions on such date, plus any amount carried forward
pursuant to Article 8 hereof, will pay for at the Option Exercise Price, but in
no event may an employee purchase shares of Common Stock in excess of 1,500
shares of Common Stock on any Offering Termination Date. If a participant is not
an employee on the Offering Termination Date and throughout an Offering Period,
he or she shall not be entitled to exercise his or her option. All options
issued under the Plan shall, unless exercised as set forth herein, expire at the
end of the Offering Termination Date with respect to the Offering Period during
which such options were issued.
A-2
<PAGE>
6. AUTHORIZATION FOR ENTERING PLAN.
(a) An eligible employee may enter the Plan by filling out, signing and
delivering to the Chief Financial Officer of the Company or his designee an
authorization ("Authorization"):
(i) stating the amount to be deducted regularly from his or her pay;
(ii) authorizing the purchase of stock for him or her in each Offering
Period in accordance with the terms of the Plan;
(iii) specifying the exact name in which Common Stock purchased for him
or her is to be issued in accordance with Article 11 hereof; and
(iv) at the discretion of the employee in accordance with Article 14,
designating a beneficiary who is to receive any Common Stock and/or cash in
the event of his or her death.
Such Authorization must be received by the Chief Financial Officer of the
Company or his designee at least ten (10) business days before an Offering
Commencement Date.
(b) The Company will accumulate and hold for the employee's account the
amounts deducted from his or her pay. No interest will be paid thereon.
Participating employees may not make any separate cash payments into their
account.
(c) Unless an employee files a new Authorization or withdraws from the Plan,
his or her deductions and purchases under the Authorization he or she has on
file under the Plan will continue as long as the Plan remains in effect. An
employee may increase or decrease the amount of his or her payroll deductions as
of the next Offering Commencement Date by filling out, signing and delivering to
the Chief Financial Officer of the Company or his designee a new Authorization.
Such new Authorization must be received by the Chief Financial Officer of the
Company or his designee at least ten (10) business days before the date of such
next Offering Commencement Date.
7. ALLOWABLE PAYROLL DEDUCTIONS.
An employee may authorize payroll deductions in any even dollar amount up to
but not more than ten percent (10%) of his or her base pay; provided, however,
that the minimum deduction in respect of any payroll period shall be one percent
(1%) of his or her base pay but in no event less than five dollars ($5); and
provided further that the maximum percentage shall be reduced to meet the
requirements of Section 4(e) hereof. Base pay means regular straight-time
earnings and, if applicable, commissions, but excluding payments for overtime,
bonuses, and other special payments.
8. UNUSED PAYROLL DEDUCTIONS.
Only full shares of Common Stock may be purchased. Any balance remaining in
an employee's account after a purchase will be reported to the employee and will
be carried forward to the next Offering Period. However, in no event will the
amount of the unused payroll deductions carried forward from a payroll period
exceed the Option Exercise Price per share for the immediately preceding
Offering Period. If for any Offering Period the amount of unused payroll
deductions should exceed the Option Exercise Price per share, the amount of the
excess for any participant shall be refunded to such participant, without
interest.
9. CHANGE IN PAYROLL DEDUCTIONS.
Deductions may not be increased or decreased during an Offering Period.
A-3
<PAGE>
10. WITHDRAWAL FROM THE PLAN.
(a) An employee may withdraw from the Plan and withdraw all but not less
than all of the payroll deductions credited to his or her account under the Plan
at any time prior to the Offering Termination Date by delivering a notice to the
Chief Financial Officer of the Company or his designee (a "Withdrawal Notice")
in which event the Company will promptly refund without interest the entire
balance of such employee's deductions not theretofore used to purchase Common
Stock under the Plan.
(b) If employee withdraws from the Plan, the employee's rights under the
Plan will be terminated and no further payroll deductions will be made. To
reenter, such an employee must file a new Authorization at least ten (10)
business days before the next Offering Commencement Date. Such Authorization
will become effective for the Offering Period that commences on such Offering
Commencement Date. Notwithstanding the foregoing, employees who are subject to
Section 16 of the Securities Exchange Act of 1934, as amended, who withdraw from
the Plan may not reenter the Plan until the next Offering Commencement Date
which is at least six months following the date of such withdrawal.
11. ISSUANCE OF STOCK.
Upon written request, certificates for Common Stock will be issued and
delivered to participants as soon as practicable after each Offering Period.
Common Stock purchased under the Plan will be issued only in the name of the
employee, or in the case of employees who are not subject to Section 16 of the
Securities Exchange Act of 1934, as amended, if the employee's Authorization so
specifies, in the name of the employee and another person of legal age as joint
tenants with rights of survivorship.
12. NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS.
An employee's rights under the Plan are his or hers alone and may not be
transferred or assigned to, or availed of by, any other person. Any option
granted to an employee may be exercised only by him or her, except as provided
in Article 13 in the event of an employee's death.
13. TERMINATION OF EMPLOYEE'S RIGHTS.
(a) Except as set forth in the last paragraph of this Article 13, an
employee's rights under the Plan will terminate when he or she ceases to be an
employee because of retirement, resignation, lay-off, discharge, death, change
of status, failure to remain in the customary employ of the Company for greater
than twenty (20) hours per week, or for any other reason. A Withdrawal Notice
will be considered as having been received from the employee on the day his or
her employment ceases, and all payroll deductions not used to purchase Common
Stock will be refunded.
(b) If an employee's payroll deductions are interrupted by any legal
process, a Withdrawal Notice will be considered as having been received from him
or her on the day the interruption occurs.
(c) Upon termination of the participating employee's employment because of
death, the employee's beneficiary (as defined in Article 14) shall have the
right to elect, by written notice given to the Chief Financial Officer of the
Company or his designee prior to the expiration of the thirty (30) day period
commencing with the date of the death of the employee, either (i) to withdraw,
without interest, all of the payroll deductions credited to the employee's
account under the Plan, or (ii) to exercise the employee's option for the
purchase of shares of Common Stock on the next Offering Termination Date
following the date of the employee's death for the purchase of that number of
full shares of Common Stock reserved for the purpose of the Plan which the
accumulated payroll deductions in the employee's account at the date of the
employee's death will purchase at the applicable Option Exercise Price (subject
to the maximum number set forth in Article 5), and any excess in such account
will be returned to said beneficiary. In the event that no such written notice
of election shall be duly received by the Chief Financial Officer of the Company
or his designee, the beneficiary shall automatically be deemed to have elected
to withdraw the
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<PAGE>
payroll deductions credited to the employee's account at the date of the
employee's death and the same will be paid promptly to said beneficiary, without
interest.
14. DESIGNATION OF BENEFICIARY.
A participating employee may file a written designation of a beneficiary who
is to receive any Common Stock and/or cash in case of his or her death. Such
designation of beneficiary may be changed by the employee at any time by written
notice. Upon the death of a participating employee and upon receipt by the
Company of proof of the identity and existence at the employee's death of a
beneficiary validly designated by him under the Plan, the Company shall deliver
such Common Stock and/or cash to such beneficiary. In the event of the death of
a participating employee and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such employee's death, the Company
shall deliver such Common Stock and/or cash to the executor or administrator of
the estate of the employee, or if, to the knowledge of the Company, no such
executor or administrator has been appointed, the Company, in the discretion of
the Committee, may deliver such Common Stock and/or cash to the spouse or to any
one or more dependents of the employee as the Committee may designate. No
beneficiary shall, prior to the death of the employee by whom he or she has been
designated, acquire any interest in the Common Stock or cash credited to the
employee under the Plan.
15. TERMINATION AND AMENDMENTS TO PLAN.
(a) The Plan may be terminated at any time by the Company's Board of
Directors, effective on the next following Offering Termination Date.
Notwithstanding the foregoing, it will terminate when all of the shares of
Common Stock reserved for the purposes of the Plan have been purchased. Upon
such termination or any other termination of the Plan, all payroll deductions
not used to purchase Common Stock will be refunded without interest.
(b) The Board of Directors reserves the right to amend the Plan from time to
time in any respect; provided, however, that no amendment shall be effective
without stockholder approval if the amendment would (a) except as provided in
Articles 3, 4, 24 and 25, increase the aggregate number of shares of Common
Stock to be offered under the Plan, or (b) change the class of employees
eligible to receive options under the Plan; provided, further, that so long as
there is a requirement under Rule 16b-3 under the Securities Exchange Act of
1934, as amended, for stockholder approval of the Plan and certain amendments
thereto, any such amendment which (a) materially increases the number of shares
of Common Stock which may be issued under the Plan, (b) materially increases the
benefits accruing to participants in the Plan or (c) materially modifies the
requirements as to eligibility for participation in the Plan, shall be subject
to stockholder approval.
16. LIMITATIONS OF SALE OF STOCK PURCHASED UNDER THE PLAN.
Common Stock purchased under the Plan by employees who are subject to
Section 16 of the Securities Exchange Act of 1934, as amended, may not be sold
for six (6) months after the Offering Termination Date on which such shares were
purchased, unless such transaction shall be exempt from Rule 16b-3 under the
Securities Exchange Act of 1934, as amended. Thereafter, such employees may sell
Common Stock purchased under the Plan at any time. Notwithstanding the
foregoing, because of certain Federal tax requirements, all employees will agree
by entering the Plan, promptly to give the Company notice of any such Common
Stock disposed of within two years after the Offering Commencement Date on which
the related option was granted showing the number of such shares disposed of.
The employee assumes the risk of any market fluctuations in the price of such
Common Stock. Certificates representing shares of Common Stock purchased under
the Plan will bear a legend reflecting the restrictions on transfer set forth
herein.
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<PAGE>
17. COMPANY'S PAYMENT OF EXPENSES RELATED TO PLAN.
The Company will bear all costs of administering and carrying out the Plan.
18. PARTICIPATING SUBSIDIARIES.
The term "participating subsidiaries" shall mean any subsidiary of the
Company which is designated by the Committee (as defined in Article 19) to
participate in the Plan. The Committee shall have the power to make such
designation before or after the Plan is approved by the stockholders.
19. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by a committee of "disinterested"
directors as that term is defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended, appointed by the Board of Directors of the Company,
which shall be the Company's Compensation Committee (the "Committee"). The
Committee shall consist of not less than two members of the Company's Board of
Directors. The Board of Directors may from time to time remove members from, or
add members to, the Committee. Vacancies on the Committee, howsoever caused,
shall be filled by the Board of Directors. No member of the Committee shall be
eligible to participate in the Plan while serving as a member of the Committee.
(b) The Committee shall select one of its members as chairman, and shall
hold meetings at such times and places as it may determine. Acts by a majority
of the Committee, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee.
(c) The interpretation and construction by the Committee of any provisions
of the Plan or of any option granted under it shall be final. The Committee may
from time to time adopt such rules and regulations for carrying out the Plan as
it may deem best. With respect to persons subject to Section 16 of the
Securities and Exchange Act of 1934, as amended, transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under said Act. To the extent any provision of the Plan or action by
the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by that Committee.
(d) Promptly after the end of each Offering Period, the Committee shall
prepare and distribute to each participating employee in the Plan a report
containing the amount of the participating employee's accumulated payroll
deductions as of the Offering Termination Date, the Option Exercise Price for
such Offering Period, the number of shares of Common Stock purchased by the
participating employee with the participating employee's accumulated payroll
deductions, and the amount of any unused payroll deductions either to be carried
forward to the next Offering Period, or returned to the participating employee
without interest.
(e) No member of the Board of Directors or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
option granted under it. The Company shall indemnify each member of the Board of
Directors and the Committee to the fullest extent permitted by law with respect
to any claim, loss, damage or expense (including counsel fees) arising in
connection with their responsibilities under this Plan.
20. OPTIONEES NOT STOCKHOLDERS.
Neither the granting of an option to an employee nor the deductions from his
or her pay shall constitute such employee a stockholder of the Company with
respect to the shares covered by such option until such shares have been
purchased by and issued to him or her.
21. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock pursuant
to options granted under the Plan may be used for any corporate purposes, and
the Company shall not be obligated to segregate participating employees' payroll
deductions.
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<PAGE>
22. GOVERNMENTAL REGULATION.
(a) The Company's obligation to sell and deliver shares of the Company's
Common Stock under this Plan is subject to the approval of any governmental
authority required in connection with the authorization, issuance or sale of
such stock.
(b) In this regard, the Board of Directors may, in its discretion, require
as a condition to the exercise of any option that a Registration Statement under
the Securities Act of 1933, as amended, with respect to the shares of Common
Stock reserved for issuance upon exercise of the option shall be effective.
23. TRANSFERABILITY.
Neither payroll deductions credited to an employee's account nor any rights
with regard to the exercise of an option or to receive stock under the Plan may
be assigned, transferred, pledged, or otherwise disposed of in any way by the
employee. Any such attempted assignment, transfer, pledge, or other disposition
shall be without effect, except that the Company may treat such act as an
election to withdraw funds in accordance with Article 10.
24. EFFECT OF CHANGES OF COMMON STOCK.
If the Company should subdivide or reclassify the Common Stock which has
been or may be optioned under the Plan, or should declare thereon any dividend
payable in shares of such Common Stock, or should take any other action of a
similar nature affecting such Common Stock, then the number and class of shares
of Common Stock which may thereafter be optioned (in the aggregate and to any
individual participating employee) shall be adjusted accordingly.
25. MERGER OR CONSOLIDATION.
If the Company should at any time merge into or consolidate with another
corporation, the Board of Directors may, at its election, either (i) terminate
the Plan and refund without interest the entire balance of each participating
employee's payroll deductions, or (ii) entitle each participating employee to
receive on the Offering Termination Date upon the exercise of such option for
each share of Common Stock as to which such option shall be exercised the
securities or property to which a holder of one share of the Common Stock was
entitled upon and at the time of such merger or consolidation, and the Board of
Directors shall take such steps in connection with such merger or consolidation
as the Board of Directors shall deem necessary to assure that the provisions of
this Article 25 shall thereafter be applicable, as nearly as reasonably
possible. A sale of all or substantially all of the assets of the Company shall
be deemed a merger or consolidation for the foregoing purposes.
26. WITHHOLDING OF ADDITIONAL FEDERAL INCOME TAX.
The Company will undertake such withholding in connection with the Plan as
it determines is appropriate, in its sole discretion.
27. APPROVAL OF STOCKHOLDERS.
The Plan shall not take effect until approved by the holders of a majority
of the shares of Common Stock of the Company present in person or by proxy at a
duly convened meeting of stockholders, which approval must occur no later than
the end of the first Offering Period after the date the Plan is adopted by the
Board of Directors. Options may be granted under the Plan prior and subject to
such stockholder approval. If the Plan is not so approved by the stockholders,
all payroll deductions from participating employees shall be returned without
interest and all options so granted shall terminate.
Date of Approval by the Board of Directors: , 1998.
Date of Approval by the Stockholders: , 1998
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<PAGE>
PROXY UFP TECHNOLOGIES, INC. PROXY
The undersigned hereby appoints R. Jeffrey Bailly and Ron Lataille,
and each of them, acting singly, with full power of substitution, attorneys
and proxies to represent the undersigned at the 1998 Annual Meeting of
Stockholders of UFP Technologies, Inc. to be held on Wednesday, June 3, 1998,
and at any adjournment or adjournments thereof, with all power which the
undersigned would possess if personally present, and to vote all shares of
stock which the undersigned may be entitled to vote at said meeting upon the
matters set forth in the Notice of and Proxy Statement for the Meeting in
accordance with the instructions on the reverse side and with discretionary
authority upon such other matters as may come before the Meeting. All
previous proxies are hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT WILL BE VOTED
AS DIRECTED BY THE UNDERSIGNED AND IF NO DIRECTION IS INDICATED, IT WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES AS DIRECTORS AND FOR THE PROPOSAL TO
ADOPT THE 1998 EMPLOYEE STOCK PURCHASE PLAN.
Continued, and to be signed, on reverse side
(Please fill in the reverse side and mail in enclosed envelope)
<PAGE>
/X/ Please mark votes as in this example.
1. Election of Directors:
Nominees: R. Jeffrey Bailly, William H. Shaw, Richard L. Bailly, William C.
Curry, T. Gordon Roddick, Kenneth L. Gestal, Peter R. Worrell
/ / FOR ALL NOMINEES (except as marked to the contrary)
/ / WITHHOLD AUTHORITY to vote for all nominees
FOR except vote withheld from the following nominee(s):
- -------------------------------------------------
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE WRITE THAT NOMINEE'S NAME IN THE
SPACE PROVIDED ABOVE.)
2. To adopt the UFP Technologies, Inc. FOR AGAINST ABSTAIN
1998 Employee Stock Purchase Plan as / / / / / /
described in the accompanying Proxy
Statement.
MARK HERE FOR
ADDRESS CHANGE
AND NOTE AT LEFT / /
(Signatures should be the same as the name printed hereon. Executors,
administrators, trustees, guardians, attorneys, and officers of corporations
should add their titles when signing.)
Signature: Date:
-------------------------- --------------------
Signature: Date:
-------------------------- --------------------
