news release
FOR FURTHER INFORMATION PLEASE CONTACT:
ISG Technologies Inc.
Nicole Filiatrault
Director, Communications
(905) 672-2100 ext. 142
(905) 672-2307 (FAX)
nicole@isgtec.com (E-mail)
isgetc.com (Internet)
NEWS RELEASE TRANSMITTED BY CANADIAN CORPORATE NEWS
FOR: ISG TECHNOLOGIES
TSE SYMBOL: ISO
NASDAQ SYMBOL: ISGTF
DECEMBER 12, 1996
ISG Issues Letter To Shareholders Challenging Quorum
Effort To Take Control Of The Company
MISSISSAUGA, ONTARIO--ISG Technologies Inc. (ISG) today issued the
following letter to its shareholders regarding the effort being
made by Quorum Growth Inc. to gain effective control of ISG.
Dear Shareholder -
As you know, ISG will hold its annual meeting on December 23,
1996. This meeting will determine the future of your company, as
you are being asked to vote for one of two competing slates of
Directors. One is supported by your company, the other is
proposed by a 7.4 percent shareholder who is trying to gain
control over your company.
One group of Directors is supported by ISG. Six of the seven
nominees, three of whom are being nominated to the Board for the
first time, are independent of the company and have extensive
related business experience. Their experience will prove valuable
in building on the improved financial performance which ISG
delivered in fiscal 1996 and the first quarter of fiscal 1997,
which would have been profitable excluding one-time charges
related to events described in this letter.
The ISG team is firmly committed to delivering increasing value to
ISG's shareholders.
The second list of candidates is a dissident group proposed by
Quorum Growth Inc. Quorum, while owning only about seven percent
of ISG's stock, effectively is trying to gain control of your
company by electing a Board that would consist of seven
individuals of whom five are Directors or officers of Quorum or
Quorum-related companies.
Prior to your attending the meeting or voting by sending in your
proxy, you are entitled to receive more information than Quorum
has told you to date.
You Should Know That...
Quorum effectively wants to take over control of your company
without paying for it. With 7 percent of ISG's shares, Quorum
wants to control 70 percent of the Board. In addition, if its
proxy battle is successful, Quorum even wants us to pay its
expenses.
Quorum tried to improve its own financial position at the expense
of all other shareholders. On November 11, 1996, prior to
announcing publicly its plans to nominate a dissident slate of
Directors, Quorum offered not to proceed with a proxy battle if
ISG capitulated to the following proposal:
ISG would sell for only $ 2.8 million one of its most promising
businesses D our Viewing and Reading Stations product line D to a
Quorum-backed company formed by two individuals (Tom Cafarella and
Denis O'Connor) who were removed from ISG in August 1996.
ISG would have to use its best efforts to arrange a block sale for
all of the remaining shares owned by Quorum at a guaranteed
minimum price of $2.95 per share. If ISG could not complete the
sale at the minimum price by December 31, 1996, ISG would be
required to purchase all of its shares from Quorum at the greater
of $2.95 per share or the market price on the date prior to the
purchase.
ISG would pay Tom Cafarella, Quorum's chosen CEO, $325,000 to
settle claims that he was making against the company as a result
of his dismissal by the Board.
Quorum made it clear that if ISG did not agree to Quorum's offer,
Quorum would proceed with its proxy battle. This is why ISG's
Chairman called the proposal GREENMAIL in recent court proceedings
with Quorum.
Based on the advice of ISG's financial advisor, Yorkton
Securities, your Board rejected Quorum's low offer as grossly
inadequate and unfair, and as not being in the interest of all
shareholders. A copy of Quorum's offer is available for review by
contacting ISG's Corporate Secretary, Mr. Gerry McDonald
(905-672-2100).
-------------------------------------------
Quorum wants to reinstate its candidate, Tom Cafarella, as Chief
Executive Officer of ISG. Mr. Cafarella was appointed to ISG in
November 1995, under another earlier threat of a proxy battle from
Quorum. However, Mr. Cafarella was dismissed by the Board with
the support of all the independent Directors, including William
Breukelman who had been nominated to the Board by Quorum.
After meeting with a number of key ISG employees, the independent
directors reached a number of conclusions, including that:
-a number of major customers and business partners of ISG clearly
had lost confidence in Mr. Cafarella and
-employees throughout ISG clearly had lost confidence in Mr.
Cafarella. During Mr. Cafarella's nine months at ISG, the rate of
resignations increased threefold and was still rising at the time
of his firing.
The independent directors concluded that it was in the best
interests of the company's shareholders to remove Mr. Cafarella.
The Board voted to remove Mr. Cafarella on August 8, 1996 with
only the Quorum-related Directors opposing the motion.
-------------------------------------------
Quorum claims that Mr. Cafarella led ISG to profitability. In
fact, ISG became profitable in the first fiscal quarter of 1996,
two months before Mr. Cafarella arrived. The improved financial
performance in the following quarters resulted mainly from
investments made and sales contracts signed in prior years.
Did Tom Cafarella return ISG to profitability in fiscal 1996?
-------------------------------------------
On May 22, 1996, at the time Quorum claims Mr. Cafarella, its
chosen CEO, was making ISG profitable, Quorum sold 400,000 ISG
shares, nearly one third of its holdings. This reduced Quorum's
holdings from 10.3 percent to 7.4 percent of ISG's stock. If
Quorum believed that its man, Mr. Cafarella, was performing so
well, why did it choose to sell its shares in May? Quorum did not
report this sale to ISG shareholders until it issued its dissident
proxy circular on November 29, 1996. ISG shareholders are
entitled to know why Quorum liquidated its position.
If Quorum had confidence in Tom Cafarella, why did it
significantly reduce its ISG holdings?
Quorum wants to install a Quorum-dominated board to improve ISG
share price. How have Quorum shares perfomed?
Comparison of Cumulative Total Return
Compare the Slates of Directors
Quorum has consistently acted in a manner indicating that it is
more concerned with Quorum's own welfare than the fair treatment
of all ISG shareholders. Now, Quorum wants you to give it control
of ISG by electing its dissident slate of directors comprising
seven people of whom five are employed by Quorum or Quorum-related
companies.
In contrast, ISG has nominated seven individuals of whom six are
wholly independent of the company and its management, and each of
whom is highly experienced and qualified to act in the best
interests of all shareholders.
We believe that the choice couldn't be more clear.
/T/
ISG's Proposed Board of Directors
Accountability to the shareholders of ISG begins with the
appointment of a well-qualified and independent Board of
Directors. In addition to Michael Greenberg, ISG is proposing
the appointment of the following six independent Directors:
William Blundell
-Chairman of the Board of Manulife Financial
-Former Chairman and Chief Executive Officer of General Electric
Canada
-Former Chairman of the Ontario government's Health Industry
Advisory Committee
-Director of Alcan Aluminum Limited, Amoco Canada Petroleum
Company Ltd., and the Export Development Corporation
-Member of the Ontario Fair Tax Commission and Ontario Premier's
Council
-Former Governer of the University of Toronto
-Former Vice Chairman of the Canadian Institute of Applied
Research
Mr. Blundell is a very highly respected executive in the business
and financial community. Mr. Blundell is a new nominee to the
ISG Board and, if elected as a Director, it is intended that he
will be added to the Shareholder Value Creation Committee of the
Board. This Committee currently includes William Breukelman,
Richard Lockie, and Michael Greenberg. Mr. Blundell holds a
Bachelor of Science from the University of Toronto.
E. Duff Scott
-President of Multibanc Financial Corporation
-Former Chairman of the Board of Governors of The Toronto Stock
Exchange
-Director of the Shareholder Advisory Board of Altamira
-Director of Alias Research, Bramalea Limited and OSF Industries
A prominent and well-respected member of the financial community
in Canada, Mr. Scott also has held senior positions with several
investment banking firms such as Merrill Lynch Canada, Prudential
Bache Canada, and Richardson Greenshields. Mr. Scott earned an
Honours Business Administration degree from the University of
Western Ontario.
W.L. Stapleton
-Partner in Chancellor Partners, on assignment to companies such
as REID Systems Corp., Bell Technical Services and Northern
Telecom
-Former President and CEO of B.C. Systems Corporation
-Former Vice President of MacMillan Bloedel Ltd.
-Former Vice President of Petro Canada
-A highly regarded expert in computer software
-Possesses substantial experience in the development and
implementation of strategic operational plans for large and
medium-sized businesses
Mr. Stapleton received a bachelor of Applied Science (Engineering
Physics) at the University of British Columbia.
William Breukelman
-Chairman and Principal of Executronics Limited, active in new
venture situations with an emphasis on the high technology and
entertainment sectors
-Former Chairman of IMAX Corporation
-Former co-owner and President, Sciex Inc
-Former Director and President, Fischer & Porter Canada
-Holder of 103,900 common shares of ISG
Mr. Breukelman was nominated initially to the Board by Quorum and
has since become an independent Director. Mr. Breukelman is a
professional engineer with a Bachelor of Applied Science from the
University of Toronto and an M.B.A. from the University of
Western Ontario. Mr. Breukelman was a recipient of the Financial
Post Canada Enterprise Award for Best Venture (on behalf of
Sciex).
Paul Echenberg
-President and CEO of Schroders Associates Canada, Inc. the
Canadian arm of the Schroders Merchant Banking Group, effective
January 1, 1997
-Extensive operating experience as President and CEO of a large,
multi-plant, multinational plastics and packaging company for
more than 18 years, during which it grew from $4 million to
approximately $300 million in sales
-Chairman and CEO of E-Z-EM Canada Inc., which owns 396,396
common shares of ISG
-Managing Director of Benvest Capital Inc., an investment company
He will remain a partner in Benvest Holdings Inc., the company
controlling Benvest Capital. He also is Chairman and sole
principal of Eckvest Equity Inc., an investment and consulting
company actively involved in medical and medical technology
companies. Mr. Echenberg was Chairman of Surgical Dynamics Inc.,
a medical devices company sold in November 1995 to United States
Surgical Corporation. He holds a B.Sc. with great distinction
from McGill University and an M.B.A. with distinction from
Harvard University.
Richard Lockie
-Senior Vice-President, MDS Health Ventures Capital Corp., which
targets more than $400 million to the building of emerging
healthcare companies and life science enterprises
-MDS Health Ventures Inc. owns about 7.6 percent or 951,370
common shares of ISG
-A Board member of a number of private and public companies
As an investor in various technology companies, MDS Health
Ventures is committed to building shareholder value in
partnership with the management teams of its investee companies.
Mr. Lockie received an M.B.A. from the University of Western
Ontario.
These individuals will give ISG:
-a Board of independent individuals capable of representing the
interests of ALL shareholders;
-a Board with considerable industry and general business
experience with which it can provide knowledgeable oversight and
guidance to the company's management;
-a Board composition that meets all of The Toronto Stock
Exchange's Corporate Governance guidelines, and
-a Board that is absolutely committed to increasing value for ALL
of ISG's shareholders.
Our Commitments to the Shareholders of ISG
While it is not unusual for emerging high technology companies,
such as ISG, to experience development and growing pains, we also
acknowledge that the company's financial performance and the
price of its stock have fallen short of investors' expectations.
However, we are encouraged by the progress that ISG has made.
Our true progress would be more evident were it not for the very
negative effects and unfortunate turmoil that management and
employees have been subjected to as the result of the events
described in this letter and the confrontational actions of
Quorum.
These are our commitments to the shareholders, employees,
customers, partners, and suppliers of ISG:
-To build on the significant operating and financial performance
improvements achieved in fiscal 1996.
Fiscal 1996 revenues rose nearly 40 percent and the bottom-line
improved by $1.8 million. Fiscal 1997 first-quarter revenues
increased nearly 30 percent. These improvements began to be
evident in the first five months of fiscal 1996 (prior to Mr.
Cafarella's arrival). The improved results reflect the payoff of
investments made, measures taken, and agreements signed with
customers in prior years.
Revenues rose by 40 percent in 1996
The Bottom Line Improved by $ 1.8 Million
-While ISG has matured as a young, developing high-tech company,
the markets for its product have also only recently begun to
experience rapid expansion, offering us impressive opportunities
for future growth in revenues and profitability.
-In the past year, ISG began to capitalize on the unique position
of industry leadership that it has established over the previous
four years, and on the growing technology synergies of its
related market segments. This was clearly evident by the
customer activity that ISG experienced last week in Chicago at
the world's largest medical show, the Radiological Society of
North America Conference.
-To build management excellence
-In the past few months, ISG acted to significantly strengthen
its management team with the appointment of experienced senior
executives to Vice-President positions for operations,
organization development, and marketing, and we currently are
recruiting for a Vice-President, Sales.
-As proposed by Michael Greenberg, the Board will appoint a
non-executive Chairman and it has already announced its
intention to appoint a new President and Chief Operating
Officer. The Board began the search for this executive in
September. We are taking a careful and very diligent approach
to ensure that the individual selected will be someone able to
make a significant contribution to creating additional value for
ISG's shareholders. The new President and COO will be
responsible for the further commercialization of ISG's products.
-To focus strategy and execution on constant creation of
shareholder value
-The Board has already created a Shareholder Value Creation
Committee, chaired by an independent Director, which is
examining every aspect of the company's business with the
objective of identifying any additional means by which further
value can be created for ISG's investors. The Committee intends
to examine every aspect of ISG's business with a view to
maximize shareholder value. No part of the company's business
or possible options, including sensible acquisition
opportunities, is exempt from this examination.
-To communicate
-As we focus on meeting these commitments, we will communicate
with you about the progress being made on a regular and timely
basis.
/T/
We ask that you support the strong slate of highly experienced,
independent individuals nominated by ISG for election to the
Board.
IMPORTANT - Some of you may have returned a yellow proxy card to
Quorum before receiving this letter. You now are legally entitled
to change your mind and send in your ISG BLUE proxy. Since only
your latest dated proxy counts, please make sure the latest dated
proxy you return is our BLUE proxy.
If you have already voted a yellow proxy "WITHHOLD FROM VOTING" as
a protest against Quorum and its nominees, that proxy will not
count FOR the ISG nominees and may invalidate an earlier dated
BLUE proxy. To be certain your vote counts FOR your ISG nominees,
please sign, date, and return the enclosed BLUE proxy and do not
return any yellow proxy. Time is short; please do not delay.
We, as the re-nominated incumbent Directors, thank you for your
continued support.
Sincerely,
Michael Greenberg William Breukelman Paul Echenberg
Richard Lockie
IMPORTANT - If your shares are held in the name of a brokerage
firm, only your broker can execute a proxy on your behalf. Since
the Annual Meeting is only a short time away, please contact your
broker to ensure that your directions are given effect.
If you have any questions regarding the voting of your shares,
please call, collect, either the Corporation at (905) 672-2100 or
The Proxy Solicitation Company Ltd., which is assisting the
Corporation, at 1-800-890-1037 (toll-free telephone number).
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