<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
------------------------
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
------------------------
BIG FLOWER HOLDINGS, 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:
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<PAGE>
BIG FLOWER HOLDINGS, INC.
NOTICE OF ANNUAL
MEETING OF
STOCKHOLDERS AND
PROXY STATEMENT
PLEASE COMPLETE, SIGN, DATE AND RETURN
WITH YOUR PROXY PROMPTLY
[LOGO]
TUESDAY, JUNE 23, 1998
AT 9:00 A.M.
GOLDMAN, SACHS & CO.
85 BROAD STREET
NEW YORK, NEW YORK
<PAGE>
[LOGO]
BIG FLOWER HOLDINGS, INC.
3 EAST 54TH STREET
NEW YORK, NEW YORK 10022
(212) 521-1600
May 15, 1998
Dear Stockholder:
It is our pleasure to invite you to join us at the 1998 Annual Meeting of
Stockholders of Big Flower Holdings, Inc. which will be held at 9:00 a.m., on
Tuesday, June 23, 1998, in the thirtieth floor auditorium of Goldman, Sachs &
Co., 85 Broad Street, New York, New York.
We will report to you at the meeting on the Company's current operations and
outlook. The meeting will also include a question and discussion period. The
Board of Directors and management hope that you will be able to attend in
person.
At the meeting, you will be asked to consider and vote on the election of
two (2) directors and the ratification of the appointment of Deloitte & Touche
LLP as the Company's independent certified public accountants. The Board of
Directors has unanimously approved the proposals and recommends that you vote
FOR each of them. Please give this proxy material your careful attention, as the
discussion is important to your decisions on the matters being presented.
The formal Notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted, regardless of the size of
your holdings. Accordingly, whether or not you plan to attend the meeting in
person, please mark, sign, date and return the enclosed proxy. Our Annual Report
(including our Annual Report on Form 10-K for the fiscal year ended December 31,
1997) also accompanies these proxy materials.
<TABLE>
<S> <C>
Sincerely,
[LOGO] [LOGO]
R. Theodore Ammon Edward T. Reilly
Chairman of the Board President and
Chief Executive Officer
</TABLE>
<PAGE>
[LOGO]
BIG FLOWER HOLDINGS, INC.
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, JUNE 23, 1998
------------------------
The 1998 Annual Meeting of Stockholders of Big Flower Holdings, Inc. (the
"Company") will be held on Tuesday, June 23, 1998, at 9:00 a.m., local time, in
the thirtieth floor auditorium of Goldman, Sachs & Co., 85 Broad Street, New
York, New York, for the following purposes:
(1) To elect two (2) directors to hold office as specified in the
accompanying Proxy Statement;
(2) To ratify the appointment of Deloitte & Touche LLP as the Company's
independent certified accountants; and
(3) To transact such other business as may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.
Stockholders entitled to vote at the meeting or any adjournment or
postponement thereof are holders of record of the Company's Common Stock at the
close of business on May 8, 1998.
By order of the Board of Directors
Mark A. Angelson
EXECUTIVE VICE PRESIDENT AND
GENERAL COUNSEL AND
SECRETARY OF THE BOARD OF DIRECTORS
May 15, 1998
YOUR VOTE IS IMPORTANT! STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY
NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
BIG FLOWER HOLDINGS, INC.
3 EAST 54TH STREET
NEW YORK, NEW YORK 10022
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
GENERAL
The accompanying proxy is solicited by the Board of Directors (the "Board of
Directors" or the "Board") of Big Flower Holdings, Inc. (the "Company" or "Big
Flower") in connection with the 1998 Annual Meeting of Stockholders of the
Company (the "Meeting") to be held on Tuesday, June 23, 1998, at 9:00 a.m.,
local time, in the thirtieth floor auditorium of Goldman, Sachs & Co., 85 Broad
Street, New York, New York, and at any adjournment(s) or postponement(s) of the
Meeting. This Proxy Statement and a proxy are first being mailed to stockholders
on or about May 15, 1998. The mailing address of the Company's principal
executive office is 3 East 54th Street, New York, New York 10022.
When a proxy is returned properly dated and signed, the shares represented
thereby will be voted by the persons named therein as proxies in accordance with
directions specified on the proxy. Stockholders may specify their choices by
marking the appropriate boxes on the enclosed proxy. If a proxy is dated, signed
and returned without specifying choices, the shares will be voted as recommended
by the Board of Directors FOR the election of each of the two nominees for
directors named below, and FOR the ratification of the appointment of Deloitte &
Touche LLP as the Company's independent certified accountants for the year ended
December 31, 1998 ("Proposal (2)"). The Company does not have cumulative voting
in the election of directors. Under the Company's Amended and Restated By-Laws
(the "By-Laws"), business transacted at the Meeting is confined to the purposes
stated in the Notice of the Meeting. The proxy being solicited does, however,
convey authority to the persons named therein as proxies to vote in their
discretion on other business which may properly be brought before the Meeting.
The proxy may be revoked by the stockholder at any time prior to the time it is
voted by giving notice of such revocation either personally or in writing to the
Secretary of the Company.
VOTING SECURITIES
All holders of record of the Company's common stock, par value $.01 per
share (the "Common Stock"), at the close of business on May 8, 1998 are entitled
to vote on all business to be conducted at the Meeting. At the close of business
on such day, the Company had 19,693,207 shares of Common Stock outstanding and
entitled to vote at the Meeting. Each share of Common Stock entitles the holder
to one vote per share. The presence, in person or by proxy, of stockholders
entitled to cast at least a majority of the votes which all stockholders are
entitled to cast shall constitute a quorum.
Under the General Corporation Law of the State of Delaware, the state in
which the Company is incorporated, and the Company's By-Laws, if a quorum is
present at the Meeting, the affirmative vote of a plurality of the votes cast is
required for the election of directors. The affirmative vote of a majority of
the voting power present (in person or by proxy) and entitled to vote at the
Meeting is required for approval of Proposal (2). In accordance with Delaware
law, abstentions and broker "non-votes" will not be counted as being present at
the Meeting for this purpose. Broker "non-votes" and the shares as to which a
stockholder abstains will be included for purposes of determining whether a
quorum of shares is present at the Meeting.
1
<PAGE>
PROPOSAL 1.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The directors of the Company are divided into three classes, designated
Class I, Class II and Class III. Each class consists, as nearly as possible, of
one-third of the total number of directors constituting the entire Board of
Directors. Currently, the Class I directors are Messrs. Kimmitt and Minow; the
Class II directors are Ms. Manley and Mr. Diamandis; and the Class III directors
are Messrs. Ammon and Reilly. For certain information regarding the Class I and
Class II directors of the Company, see "Directors and Executive Officers" below.
The Class I directors were reelected at the 1996 Annual Meeting of Stockholders
to hold office until the date of the 1999 Annual Meeting of Stockholders; the
Class II directors were reelected at the 1997 Annual Meeting of Stockholders to
hold office until the date of the 2000 Annual Meeting of Stockholders; and the
initial Class III directors were elected to hold office until the date of the
Meeting and, in each case, until a successor is elected and qualified and
subject to a director's prior death, resignation, retirement, disqualification
or removal.
It is recommended that the two (2) nominees herein named be elected as
directors of the Company, with each director to hold office until the Annual
Meeting of Stockholders for the year in which such director's three year term
expires, and until a successor is elected and qualified or until such director's
prior death, resignation, retirement, disqualification or removal. Both nominees
are presently serving as directors of the Company. Class III directors were
classified as such at a meeting of the Board of Directors held on November 10,
1995. The Company is unaware of any reason why any of the nominees named herein
would be unwilling or unable to serve as a director. Should, however, any
nominee for director be unwilling or unable to serve as such at the time of the
Meeting or any adjournment or postponement thereof, the persons named in the
proxy will vote for the election of such other person for such directorship as
the Board of Directors may recommend.
Certain information regarding each person nominated by the Board of
Directors, including such nominee's principal occupation during the past five
years and current directorships, is set forth below. Unless otherwise indicated,
all nominees have had the indicated principal occupations for the past five
years.
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS AND OTHER INFORMATION
- - -------------------------- --- --------------------------------------------------------------------------------
<S> <C> <C>
R. Theodore Ammon 48 R. Theodore Ammon has been the Chairman of the Board of the Company since its
inception. Mr. Ammon is also the Chairman of the Board of Big Flower Press
Holdings, Inc., a wholly-owned subsidiary of the Company ("Big Flower Press"),
and a director of Big Flower Digital Services, Inc., a wholly-owned subsidiary
of the Company ("Digital Services"). Mr. Ammon was a General Partner of Kohlberg
Kravis Roberts & Co. (a New York and San Francisco-based investment firm) from
1990 to 1992, and an executive of such firm prior to 1990. Mr. Ammon is also a
member of the Board of Directors of Host Marriot Corporation, Culligan Water
Technologies, Inc. and Samsonite Corporation. In addition, Mr. Ammon serves on
the Board of Directors of the New York YMCA, Jazz @ Lincoln Center and the
Institute of International Education, and on the Board of Trustees of Bucknell
University.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS AND OTHER INFORMATION
- - -------------------------- --- --------------------------------------------------------------------------------
<S> <C> <C>
Edward T. Reilly 51 Edward T. Reilly has been the President and the Chief Executive Officer and a
director of the Company since its inception. He has also been a director of Big
Flower Press since June 1996, and its Chief Executive Officer since April 1997,
having also served as its Chief Operating Officer from March 1996 until April
1997. Additionally, he is a director of Treasure Chest Advertising Company, Inc.
("TC Advertising"), Digital Services and Webcraft, Inc. ("Webcraft"). Prior to
joining the Company, Mr. Reilly held a variety of executive positions with
McGraw-Hill, Inc., a publishing and communications company, in their Broadcast
and Publication groups from 1968 to 1996, and served as President of McGraw-Hill
Broadcasting from 1987 to 1996. Mr. Reilly has been active in television
industry affairs, having served as the Chairman of the Television Bureau of
Advertising, a member of the Board of Directors of the Ad Council and a member
of the Board of Directors of the National Association of Broadcasters. Mr.
Reilly is also a Trustee of Lynchburg College.
</TABLE>
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Class I and
Class II directors of the Company and the executive officers of the Company, all
of whom are U.S. citizens.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- - ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Peter G. Diamandis................................... 66 Class II Director
Robert M. Kimmitt.................................... 50 Class I Director
Joan D. Manley....................................... 65 Class II Director
Newton N. Minow...................................... 72 Class I Director
Mark A. Angelson..................................... 47 Executive Vice President and General Counsel and
Secretary of the Board of Directors
Richard L. Ritchie................................... 51 Executive Vice President and Chief Financial Officer
</TABLE>
Set forth below is certain additional information concerning the persons
listed above.
PETER G. DIAMANDIS has been a Director of the Company since its inception.
He was also a director of Big Flower Press from September 1994 until December
1997. Mr. Diamandis was Vice Chairman of Donnelley Marketing, Inc., a marketing
company, from 1991 through 1996. He has also been the Chairman of TVSM, Inc., a
magazine publishing company, since 1991. From 1988 to 1991, Mr. Diamandis served
as President and Chief Executive Officer of Hachette Publications, which
purchased Diamandis Communications Inc. in 1988. From 1987 to 1988, Mr.
Diamandis served as Chairman, President and Chief Executive Officer of Diamandis
Communications Inc., a publisher of special interest magazines. In 1982, Mr.
Diamandis joined CBS Magazines ("CBS") as Vice President, Group Publisher,
Women's Day, and served as President of CBS from September 1983 to 1987. Mr.
Diamandis is a former Chairman of Magazine Publishers of America. Mr. Diamandis
serves on the Board of Trustees of Bucknell University.
ROBERT M. KIMMITT has been a Director of the Company since its inception. He
was also a director of Big Flower Press from November 1996 until December 1997.
Since May, 1997, he has been a partner in the law firm of Wilmer, Cutler &
Pickering. From 1993 to May, 1997, Mr. Kimmitt was a managing director of Lehman
Brothers and head of its Washington office. Prior to joining Lehman Brothers,
Mr. Kimmitt served from 1991 to 1993 as American Ambassador to Germany, and from
1989 to 1991 as Under Secretary of State for Political Affairs. He was a partner
in the Washington office of Sidley & Austin from 1987 to 1989. Mr. Kimmitt
served as a member of the National Security Council staff at the White House
from 1978 to 1985 and General Counsel of the Department of the Treasury from
1985 to 1987. Mr. Kimmitt serves on the boards of Allianz Life Insurance Co. of
North America; Mannesmann AG of Duesseldorf, Germany, a global industrial,
automotive, and telecommunications company; Siemens AG of Munich, Germany, a
global electronics, power generation and engineering company, and United Defense
Industries, Inc. He is also on the U.S. Group Council of BMW AG, on the Board of
the German Marshall Fund and several other non-profit organizations.
JOAN D. MANLEY has been a Director of the Company since its inception. She
was also a director of Big Flower Press from September 1994 until December 1997.
Ms. Manley retired from Time Incorporated in 1984, where she had held numerous
positions since 1960. At the time of her retirement, Ms. Manley was Group Vice
President and a director of Time Incorporated. Ms. Manley serves on the Board of
Directors of Sara Lee Corporation and Viking Office Products, Inc. and is a
Trustee of the Keystone Center.
NEWTON N. MINOW has been a Director of the Company since its inception. He
was also a director of Big Flower Press from September 1996 until December 1997.
Since 1991, Mr. Minow has been counsel to the law firm of Sidley & Austin, where
he served as Partner from 1965 to 1991. He also served as Chairman of the
Federal Communications Commission from 1961 to 1963. He is a director of Sara
Lee Corporation,
4
<PAGE>
Aon Corporation and Manpower, Inc. Mr. Minow is former Chairman of the Carnegie
Corporation of New York, an Advisory Trustee and former Chairman of the Board of
Trustees of The RAND Corporation and former Chairman of the Board of Governors
of the Public Broadcasting Service. Mr. Minow is also a Life Trustee of the
University of Notre Dame and a Life Trustee of Northwestern University.
MARK A. ANGELSON has been Executive Vice President and General Counsel and
Secretary of the Board of Directors of the Company since its inception. He has
also been Executive Vice President and General Counsel and Secretary of the
Board of Directors of Big Flower Press since March 1996. He is also a director
of Big Flower Press, TC Advertising, Digital Services and Webcraft. Prior to
joining Big Flower, Mr. Angelson practiced law with Sidley & Austin from 1982 to
1996. Mr. Angelson was Co-Chair of Sidley's international operations, founder of
the firm's English law practice and manager of the firm's offices in Singapore,
New York and London. Mr. Angelson is admitted to practice law in the State of
New York, and as a solicitor in England and Wales. He is also a Trustee of
American School in London Foundation, Inc., a Fellow of Royal Society of Arts, a
member of the Advisory Board of Jobs for the Future, Inc and a member of the
Pilgrims of Great Britain.
RICHARD L. RITCHIE has been Executive Vice President and Chief Financial
Officer of the Company since its inception. He has also been Executive Vice
President and Chief Financial Officer of Big Flower Press since January 1997.
Prior to joining Big Flower, Mr. Ritchie served as Senior Vice President and
Chief Financial Officer of Harte-Hanks Communications, Inc. from 1986 to 1996.
The term of office of each executive officer is until the organizational
meeting of the Company's Board of Directors following the next annual meeting of
Big Flower stockholders and until a successor is elected and qualified or until
such officer's prior death, resignation, retirement, disqualification or
removal.
BOARD MEETINGS AND CERTAIN COMMITTEES OF THE BOARD
Five meetings of the full Board of Directors were held during the fiscal
year ended December 31, 1997 ("Fiscal 1997"). Each incumbent director attended
more than 75% of the aggregate of all meetings of the Board of Directors that
were held after such director's election to the Board and of all committees of
the Board of Directors that such director was eligible to attend in Fiscal 1997.
The Company has standing audit, compensation and nominating committees
(each, a "Standing Committee") whose current functions and members are described
below. It is anticipated that at its first meeting following the Meeting, the
Board will designate directors to serve on each of these Standing Committees
until the next annual meeting of stockholders.
AUDIT COMMITTEE. The Audit Committee is composed of Joan D. Manley
(Chairman), Robert M. Kimmitt and Newton N. Minow. This Committee meets
periodically with the Company's management, internal accounting staff, and
representatives of the Company's independent certified public accountants to
assure that appropriate audits of the Company's affairs are being conducted.
Additionally, this committee reviews corporate compliance policies and
activities, the scope of internal and external audit activities, and the results
of the annual audit. Both the independent certified public accountants and the
internal accounting staff communicate directly with the committee regarding the
results of their examinations, the adequacy of internal accounting controls, and
the integrity of financial reporting. In the course of performing its functions,
the Audit Committee also (i) reviews with the Company's independent certified
public accountants the scope of their audit, their report and their
recommendations, (ii) considers the possible effect on the independence of such
accountants in approving non-audit services requested of them, and (iii)
recommends the action to be taken with respect to the appointment of the
Company's independent certified public accountants. The Audit Committee met
three times during Fiscal 1997.
COMPENSATION COMMITTEE. The Compensation Committee is composed of Peter G.
Diamandis (Chairman), Robert M. Kimmitt and Newton N. Minow. This Committee is
charged with the responsibility of (i) reviewing, advising and making
recommendations with respect to employee salary and compensation plans, benefits
and standards applicable to the executive officers of the Company, (ii) taking
such actions with respect thereto that are not specifically reserved to the
Board of Directors, and (iii) administering the Big
5
<PAGE>
Flower Holdings, Inc. Restated 1993 Stock Award and Incentive Plan (the "Plan"),
the Company's Executive Incentive Plan ("EIP"), and such other salary or
compensation plans as this Committee is designated to administer. The
Compensation Committee met four times during Fiscal 1997.
NOMINATING COMMITTEE. The Nominating Committee is composed of R. Theodore
Ammon (Chairman), Peter G. Diamandis and Joan D. Manley. This Committee is
charged with the responsibility of considering and recommending individuals to
be considered by the Board of Directors for membership on the Board of
Directors. The Nominating Committee was established in March 1997 and met once
in Fiscal 1997.
The Nominating Committee will also consider nominations for Board membership
by stockholders. The Nominating Committee has adopted the following rules with
respect to considering such nominations: (i) the nominating stockholder must
have owned shares of common stock of the Company for at least six months prior
to the date the nomination is submitted; (ii) the nomination must be received by
the Nominating Committee 120 days before the mailing date for proxy material
applicable to the annual meeting for which such nomination is proposed for
submission; and (iii) a detailed statement setting forth the qualifications, as
well as the written consent, of each party nominated must accompany each
nomination submitted.
COMPENSATION OF DIRECTORS
Directors of the Company who are also employees of the Company or its
subsidiaries do not receive any additional compensation for service as a member
of the Board of Directors of the Company or any of its committees. For
information relating to compensation of the Company's management directors, see
"Employment Arrangements with Executive Officers" below.
All other directors of the Company (each, a "non-employee director") are
paid an annual fee of $25,000 for serving on the Board. In addition, (a) the
Chairman of each of the Standing Committees who is a non-employee director is
paid an annual retainer of $2,500 and (b) each member of such Standing
Committees (including any Chairman who is a non-employee director) is paid a fee
of $1,000 for each Standing Committee meeting attended by such member. In
addition, each non-employee director is given the option of electing to receive
all or any portion of their annual retainer and meeting fees in the form of (a)
shares of Common Stock, (b) options to purchase shares of Common Stock, or (c)
cash. Furthermore, each member of the Board of Directors of Big Flower who is
not an employee of Big Flower, any of its subsidiaries or any of its affiliates
(a "non-management director") receives (i) an option to purchase 13,400 shares
of Common Stock (the "Initial Election Option") on the date that such director
is first elected to the Board of Directors and (ii) an option to purchase 1,000
shares of Common Stock (the "Reelection Option") on the date that such director
is reelected to the Board of Directors. Each Initial Election Option has a term
of ten years, and each Reelection Option has a term of five years. Each such
option vests immediately upon the date of grant. Each such option has an
exercise price equal to the closing price (the "Closing Price") of a share of
Common Stock on the New York Stock Exchange on the date of grant, which exercise
price may be paid in cash, by check or in previously-acquired unrestricted
shares of Common Stock, valued at the Closing Price on the date of such
exercise.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Big Flower's directors, executive officers, and
persons who own more than ten percent of Big Flower's Common Stock, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange.
Directors, executive officers and greater than ten percent stockholders are
required by the SEC regulations to furnish Big Flower with copies of all Forms
3, 4 and 5 they file.
Based solely on Big Flower's review of the copies of such forms it has
received, or written representations from certain reporting persons that no
Forms 5 were required for these persons, Big Flower believes that all its
directors, executive officers and greater than ten percent beneficial owners
complied with all filing requirements applicable to them with respect to Fiscal
1997.
6
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth the beneficial ownership as of May 8, 1998 by
each person known by the Company to be the beneficial owner of more than 5% of
the outstanding shares of Common Stock (constituting the only class of voting
capital stock of the Company), each director of the Company and nominee for
director of the Company who has such ownership, each executive officer whose
name appears in the Summary Compensation Table below who was an executive
officer of the Company as of May 8, 1998 and all directors and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE
BENEFICIAL OWNER OF OWNERSHIP (A) PERCENTAGE OF CLASS
- - -------------------------------------------------------------------------- ------------------ ---------------------
<S> <C> <C>
R. Theodore Ammon (b)..................................................... 2,417,144 12.2%
c/o Big Flower Holdings, Inc.
3 East 54th Street
New York, New York 10022
EnTrust Capital Inc....................................................... 4,100,341 20.8%
650 Madison Avenue
New York, New York 10022
FMR Corp.................................................................. 2,218,231 11.3%
82 Devonshire Street
Boston, Massachusetts 02109
The Prudential Insurance Company of America............................... 1,210,500 6.2%
751 Broad Street
Newark, New Jersey 07102-3777
Peter G. Diamandis (c).................................................... 20,660 *
700 Canal Street
Stamford, Connecticut 06902
Robert M. Kimmitt (d)..................................................... 19,561 *
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Joan D. Manley (e)........................................................ 15,965 *
0031 Wild Irishman Lane
Keystone, Colorado 80435
Newton N. Minow (f)....................................................... 29,561 *
c/o Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Edward T. Reilly (g)...................................................... 221,133 1.1%
c/o Big Flower Holdings, Inc.
3 East 54th Street
New York, New York 10022
Mark A. Angelson (h)...................................................... 138,500 *
c/o Big Flower Holdings, Inc.
3 East 54th Street
New York, New York 10022
Richard L. Ritchie (i).................................................... 25,000 *
c/o Big Flower Holdings, Inc.
3 East 54th Street
New York, New York 10022
All directors and current executive officers as
a group (7 persons) (j)................................................. 2,857,963 14.1%
</TABLE>
- - ------------------------
* Less than one percent
(NOTES CONTINUED ON NEXT PAGE)
7
<PAGE>
(a) This column includes shares that directors and executive officers have the
right to acquire within 60 days. Except as otherwise indicated, each person
and entity has sole voting and dispositive power with respect to the shares
set forth in the table.
(b) Includes (x) 6,000 shares held by Mr. Ammon as general partner of a
partnership in which certain family members are the limited partners and
have 99% of the economic interests, (y) options to purchase 200,000 shares
of Common Stock which are presently exercisable and (z) 200 shares owned by
Mr. Ammon's minor children, as to which Mr. Ammon disclaims beneficial
ownership. Additionally, Mr. Ammon holds unvested options to purchase
100,000 shares of Common Stock, which would vest in November 1998.
(c) Represents options to purchase 20,660 shares of Common Stock that are
presently exercisable.
(d) Represents options to purchase 19,561 shares of Common Stock that are
presently exercisable.
(e) Includes option to purchase 14,400 shares of Common Stock that are presently
exercisable.
(f) Includes options to purchase 19,561 shares of Common Stock that are
presently exercisable.
(g) Includes options to purchase 213,333 shares of Common Stock that are
presently exercisable.
(h) Includes options to purchase 133,300 shares of Common Stock that are
presently exercisable.
(i) Includes options to purchase 25,000 shares of Common Stock that are
presently exercisable.
(j) Includes options to purchase 645,815 shares of Common Stock that are
presently exercisable.
8
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
INTRODUCTION. This report to stockholders presents an overview of both the
charter of the Compensation Committee of the Board of Directors (the
"Compensation Committee") and of the Company's compensation philosophy. The
Compensation Committee is composed entirely of non-employee directors.
THE COMPENSATION COMMITTEE'S ROLE. The Compensation Committee's principal
function is to review and approve the compensation program for the executive
officers and other senior executives of the Company (the "Executive Compensation
Program") and to administer grants under the Plan.
The Company's Executive Compensation Program is designed to motivate the
executives to achieve the Company's business objectives, with a special emphasis
on increasing stockholder value, earnings per share ("EPS"), operating income
plus depreciation, amortization and merger costs ("EBITDA") and after tax return
on invested capital. Certain of the Company's executive officers are currently
employed pursuant to multi-year employment agreements, the purpose of which is
to retain the services of such officers for extended periods. The minimum salary
to which each such executive officer is entitled is specified in the employment
agreement, but the annual bonus for such executive officers, which is a major
part of an executive officer's cash compensation, and awards of stock options
for executive officers, are subject to approval by the Compensation Committee
from time to time. The principal terms of the employment agreements of executive
officers of the Company are described under "Employment Arrangements with
Executive Officers" below.
OVERALL OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM. The Executive
Compensation Program is designed to help the Company retain, motivate and
recruit the executives needed to maximize the Company's return to stockholders.
The Company's explicit objective is to pay at levels required to secure the
services of exceptionally talented executive officers, in particular, and
employees, in general, necessary to achieve its long-term financial, strategic
and stock price growth goals. Since one of the Company's objectives is rapid
revenue growth, by internal expansion and through acquisitions, the Company has
recruited the executive talent required to run a company that is larger than the
Company in its present form. Toward that end, the Executive Compensation Program
is designed to provide:
- Levels of compensation that are highly competitive with those provided in
the various markets in which the Company competes for its executive
resources.
- Incentive compensation that:
- varies with the financial performance of the Company and/or its
various business units;
- varies with the performance of the Company's stock price; and
- effectively rewards individual performance.
- Equity-based compensation that ties executives' long-term financial
interests to growth in the Company's market value per share.
PROVIDING HIGHLY COMPETITIVE LEVELS OF COMPENSATION. The Company provides
its executive officers with a total compensation package that--at expected
levels of performance--is generally intended to compare favorably with
compensation packages provided to executives in the advertising, marketing and
information services industries (as adjusted to reflect the Company's current
size and intended growth) who hold comparable positions or have similar
qualifications. In addition, such compensation takes into account the highly
demanding roles and combinations of responsibilities undertaken by Big Flower's
executive officers.
Given the Company's aggressive stockholder return objectives, the Company
has designed salary and incentive programs intended to attract exceptionally
high-caliber executives and is committed to paying these executives a
substantial portion of their compensation based directly on the performance of
the Company and, in appropriate cases, on the performance of a particular
business unit.
9
<PAGE>
To establish appropriate competitive frames of reference, the Company looks
toward pay levels offered by leading-performance companies in the relevant
markets for executive talent. The Company periodically assesses an executive's
competitive level of compensation based on information drawn from a variety of
sources, including proxy statements, compensation surveys and external
compensation consultants. The Company's review of competitive compensation
levels incorporates a case-by-case approach that considers each position's
relative content, accountabilities and scope of responsibility. The Company also
takes into account its businesses, current size and expected growth, expected
contributions from specific executives and other similar factors. For senior
executives, this review includes an examination of pay data for comparable
positions within the advertising and marketing services industries, as well as
data for other diversified holding companies and pay data for individuals with
backgrounds comparable to those of such officers.
While the expected value of an executive's compensation package is set at a
highly competitive level, each executive officer's pay package places a
significant portion of pay at risk, and the actual value of the package will
exceed or fall below this level depending on actual Company results. The Company
is committed to the pay-for-performance philosophy and believes that the
Executive Compensation Program should provide stockholders with
performance-for-pay.
ENSURING THAT INCENTIVE COMPENSATION VARIES WITH PERFORMANCE. The Executive
Compensation Program is designed to ensure that incentive compensation varies
with the performance of the Company and its business units. Awards paid under
the EIP and the grants under the Plan will be directly tied to the short- and
long-term financial performance (especially EPS, EBITDA and after tax return on
invested capital) of the Company and its business units, as well as the
performance of the Company's stock price.
The Company's various incentive plans each serve different purposes and, as
such, employ different measures of performance and cover different periods of
time. Accordingly, an executive officer's total compensation will not typically
vary based on any single measure of Company or business unit performance.
However, in combination, these plans provide a powerful incentive--focusing
management attention on those measures important to stockholders (such as
growth, EPS, EBITDA and after tax return on invested capital), holding
executives accountable for poor results and rewarding them for superior
accomplishments.
The Company also believes that effectively rewarding performance helps
motivate executives to contribute in ways that enhance the financial and stock
performance of the Company and its various business units. Although the
Executive Compensation Program provides compensation that varies with financial
and stock price performance, an executive's incentive awards may also be
influenced by qualitative assessment of Company, business unit and individual
performance, as appropriate. For all executive officers, these assessments are
made by the Compensation Committee.
OVERVIEW OF THE EXECUTIVE COMPENSATION PROGRAM. The Executive Compensation
Program is comprised of three principal elements: the base salary program,
annual incentives under the EIP and grants of stock and option awards under the
Plan. Each of these is designed and administered with the explicit purpose of
furthering the stockholders' interests by facilitating the employment of
highly-talented executives and motivating them to achieve exceptional levels of
performance and growth. An overview of each of these elements and of how each is
intended to support stockholder interests is provided below.
BASE SALARY COMPENSATION. The Company's base salary program is
intended to provide base salary levels that are competitive in the
external market for executive talent, reflect an individual's
on-going performance, and are periodically adjusted based on the
executive's performance, the Company's overall financial
performance and growth and expected salary increases in the market
for executive talent, taking into account the growth which the
Company hopes to achieve.
ANNUAL INCENTIVE COMPENSATION. The EIP provides competitive annual
pay opportunities linked to the Company's annual financial
performance. The EIP sets annual incentive target awards at levels
that are competitive in the context of the Company's total
Executive Compensation Program, and the appropriate mix of
variable and fixed
10
<PAGE>
compensation. Financial performance is assessed annually against
pre-set financial and strategic objectives.
LONG-TERM INCENTIVE COMPENSATION. The Company provides the
executives of the Company with stock-based incentives intended to
provide competitive long-term incentive opportunities, enable
participants to build significant wealth when meaningful
stockholder wealth has been created, and directly link a
significant portion of total pay to the Company's long-term stock
performance. Although the Plan is generally designed to provide
periodic grants of options to purchase Common Stock, it also
provides for the use of restricted stock awards.
OTHER EXECUTIVE COMPENSATION. In addition, the Company provides executives
with benefits and perquisites such as a 401(k) plan and health and life
insurance benefits. Overall, the Compensation Committee believes the provided
levels of benefits and perquisites are necessary and, in combination with the
previously mentioned compensation elements, facilitate the Company's ability to
secure the most appropriate executive talents.
CEO COMPENSATION. Mr. Reilly has been the Company's Chief Executive Officer
from its inception. In determining Mr. Reilly's compensation, the Committee took
a number of factors into account, including considering to what extent Mr.
Reilly met his personal goals established at the beginning of the fiscal year,
rewarding Mr. Reilly for the Company's financial performance during Fiscal 1997
and for increasing long-term shareholder value of the Company, and seeking
adequately and fairly to compensate Mr. Reilly in relation to his
responsibilities and contributions to the Company and in a manner that is
commensurate with compensation paid by comparable companies within the Company's
industry. For a discussion of the Company's Employment Agreement with Mr.
Reilly, see "Employment Arrangements with Executive Officers" below.
The Committee took no action during Fiscal 1997 to establish a policy with
respect to the payment of compensation to the Company's executive officers of
amounts that qualify for tax deductibility under the $1 million limit on
deductible compensation under The Omnibus Budget Reconciliation Act of 1993 (the
"Tax Act"). During Fiscal 1997 the Company exceeded targeted goals under the
EIP, which resulted in certain executives overall compensation being greater
than $1 million. Given these results, the Committee intends to formulate a
policy regarding the Tax Act to be based upon the overall needs of the Company,
taking into account the underlying principles of the Executive Compensation
Program and the particular circumstances at issue.
SUMMARY. The Compensation Committee believes the Executive Compensation
Program will ensure the Company's ability to retain, motivate and attract the
executive resources required to maximize long-term stockholder returns. The
Company's competitive pay philosophy facilitates the employment of talented
executives. The emphasis on variable pay and the direct link to both financial
and stock performance ties this competitive pay to critical measures of Company
performance. In combination, all these elements act in the best interests of the
Company's stockholders and are worthy of your support.
The Compensation Committee
Peter G. Diamandis, Chairman
Robert M. Kimmitt
Newton N. Minow
11
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid in respect of the
fiscal year ended December 31, 1997, December 31, 1996, the transition period
from July 1, 1995 to December 31, 1995 ("TP95"), and for the fiscal year ended
June 30, 1995, to R. Theodore Ammon, Chairman of Big Flower, Edward T. Reilly,
Chief Executive Officer of Big Flower, and to each of the other most highly paid
executive officers of the Company (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------
------------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION PERIOD SALARY($) BONUS($) COMPENSATION ($) OPTIONS/SARS (#)(1)
- - ------------------------------------- ----------- ----------- ----------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
R. Theodore Ammon.................... 1997 750,000 799,875 (3) --
Chairman of Big Flower 1996 750,000 339,844 (3) --
TP95 344,750 114,844 (3) 300,000
1995 643,750 392,600 (3) --
Edward T. Reilly (4)................. 1997 533,333 586,575 (3) 200,000
President and Chief Executive 1996 375,000 287,000(5) (3) 200,000
Officer of Big Flower TP95 -- -- -- --
1995 -- -- -- --
Mark A. Angelson (4)................. 1997 468,750 506,588 (3) 58,300
Executive Vice President and 1996 315,000 225,000 343,982(6) 150,000
General Counsel and Secretary of TP95 -- -- -- --
the Board of Big Flower 1995 -- -- -- --
Richard L. Ritchie (7)............... 1997 395,641 451,600(8) (3) 100,000
Executive Vice President and Chief 1996 -- -- -- --
Financial Officer of Big Flower TP95 -- -- -- --
1995 -- -- -- --
<CAPTION>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)(2)
- - ------------------------------------- ---------------
<S> <C>
R. Theodore Ammon.................... 2,400
Chairman of Big Flower 2,178
--
2,310
Edward T. Reilly (4)................. 2,400
President and Chief Executive 1,593
Officer of Big Flower --
--
Mark A. Angelson (4)................. 2,400
Executive Vice President and --
General Counsel and Secretary of --
the Board of Big Flower --
Richard L. Ritchie (7)............... 2,400
Executive Vice President and Chief --
Financial Officer of Big Flower --
--
</TABLE>
- - ------------------------
(1) All stock option grants were made pursuant to the Big Flower Holdings, Inc.
Restated 1993 Stock Award and Incentive Plan (the "Plan") and are described
below under "Options Granted in Fiscal 1997" and "Employment Arrangements
with Executive Officers."
(2) Represents amounts contributed to 401(k) plan by the Company on behalf of
the Named Executive Officer.
(3) Perquisites and other personal benefits did not exceed the lesser of $50,000
or 10% of the total annual salary and bonus reported under the headings of
"Salary" and "Bonus."
(4) The Named Executive Officer began his employment with Big Flower during the
fiscal year ended December 31, 1996; therefore, the Named Executive Officer
did not receive any compensation from Big Flower prior to that time.
(5) Includes a one-time signing bonus of $37,000 to reimburse Mr. Reilly for
certain costs incurred in connection with his leaving his previous position.
(6) Includes relocation costs of $335,862 (including tax gross up).
(7) The Named Executive Officer began his employment with Big Flower in Fiscal
1997; therefore, the Named Executive Officer did not receive any
compensation from Big Flower prior to that time.
(8) Includes a lump sum payment of $25,000 for incidental moving expenses.
12
<PAGE>
OPTIONS GRANTED IN FISCAL 1997
The following table sets forth certain information with respect to options
to purchase shares of Common Stock granted to the Named Executive Officers
during Fiscal 1997. The Company did not grant any stock appreciation rights to
any of the Named Executive Officers and no stock options were exercised by any
Named Executive Officer during Fiscal 1997.
OPTIONS GRANTED IN FISCAL 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT DATE VALUE
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL 1997 ($/SHARE) DATE VALUE($)(1)
- - ----------------------------------------- ----------- ------------- ----------- ----------- ------------------
Edward T. Reilly (2)..................... 100,000 5.62% $ 18.375 4/29/07 1,132,960
Edward T. Reilly (3)..................... 100,000 5.62% $ 21.13 4/29/07 1,042,517
Mark A. Angelson (4)..................... 58,300 3.27% $ 18.125 3/25/07 652,033
Richard L. Ritchie (5)................... 100,000 5.62% $ 18.00 1/6/07 1,060,717
</TABLE>
- - ------------------------
(1) These values were calculated using a Black-Scholes option pricing model. The
actual value, if any, that an executive may realize will depend on the
excess, if any, of the stock price over the exercise price on the date the
options are exercised, and no assurance exists that the value realized by an
executive will be at or near the value estimated by the Black-Scholes model.
The following assumptions were used in the calculations:
(a) assumed option term of 10 years;
(b) stock price volatility factor of 0.4123;
(c) 6.25% annual discount rate;
(d) no dividend payment; and
(e) 3% discount to Black-Scholes ratio for each year an option remains
unvested.
(2) These options were granted on April 29, 1997 and vest in full on the first
anniversary of the date of grant. The exercise price of $18.375 was equal to
the Closing Price on the date of the grant. The options will be exercisable
at any time between the date of vesting and the tenth anniversary of the
date of grant.
(3) These options were granted on April 29, 1997. 33 1/3% of these options will
vest on each anniversary of the date of grant. The exercise price of $21.13
was equal to 115% of the Closing Price on the date of the grant. The options
will be exercisable at any time between the date of vesting and the tenth
anniversary of the date of grant.
(4) Mr. Angelson's options were granted on March 25, 1997 and vest in full on
the first anniversary of the date of grant. The exercise price of $18.125
was equal to the Closing Price on the date of the grant. The options will be
exercisable at any time between the date of vesting and the tenth
anniversary of the date of grant.
(5) Mr. Ritchie's options were granted on January 6, 1997. 25% of these options
will vest on each anniversary of the date of grant. The exercise price of
$18.00 was equal to the Closing Price on the date of the grant. The options
will be exercisable at any time between the date of vesting and the tenth
anniversary of the date of grant.
13
<PAGE>
OPTION VALUES AT END OF FISCAL 1997
The following table sets forth certain information concerning the number and
the value at the end of Fiscal 1997 of unexercised in-the-money options to
purchase Common Stock granted to the Named Executive Officers as of the end of
Fiscal 1997. No stock appreciation rights have been granted to any of the Named
Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS
AT FISCAL 1997 END AT FISCAL 1997 END
(#) ($)
SHARES --------------------- ---------------------
ACQUIRED ON VALUE EXERCISABLE/ EXCERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
- - ---------------------------------------- ----------------- --------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
R. Theodore Ammon....................... -0- -0- 200,000/100,000 1,625,000/812,500
Edward T. Reilly........................ -0- -0- 80,000/320,000 910,000/2,239,500
Mark A. Angelson........................ -0- -0- 37,500/170,800 431,250/1,643,550
Richard L. Ritchie...................... -0- -0- 0/100,000 0/612,500
</TABLE>
- - ------------------------
(1) Based on the closing price of $24.125 of Big Flower's Common Stock on
December 31, 1997, the last trading day of Fiscal 1997, less the exercise
price payable for such shares.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The following table sets forth annual amounts payable to the Named Executive
Officers' upon their retirement under TC Advertising's supplemental executive
retirement plan (the "SERP").
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30
- - ------------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1$50,000..... $ 7,500 $ 15,000 $ 22,000 $ 30,000 $ 37,500 $ 45,000
175,000..... 8,750 17,500 26,250 35,000 43,750 52,500
200,000..... 10,000 20,000 30,000 40,000 50,000 60,000
225,000..... 11,250 22,500 33,750 45,000 56,250 67,500
250,000..... 12,500 25,000 37,500 50,000 62,500 75,000
275,000..... 13,750 27,500 41,250 55,000 68,750 82,500
300,000..... 15,000 30,000 45,000 60,000 75,000 90,000
500,000..... 25,000 50,000 75,000 100,000 125,000 150,000
600,000..... 30,000 60,000 90,000 120,000 150,000 180,000
700,000..... 35,000 70,000 105,000 140,000 175,000 210,000
800,000..... 40,000 80,000 120,000 160,000 700,000 240,000
900,000..... 45,000 90,000 135,000 180,000 225,000 270,000
</TABLE>
The compensation covered by the SERP includes the executive's entire annual
base salary. Messrs. Ammon, Reilly, Angelson and Ritchie, currently have 4, 2, 2
and 1 year/s of service, respectively. See "Employment Arrangements with
Executive Officers" below. Benefits under the SERP are computed by multiplying
the participant's average salary for the last five years prior to retirement by
a percentage equal to one percent for each year of service up to a maximum of 30
years. Benefits under the SERP are not subject to a deduction for Social
Security or other offset amounts.
14
<PAGE>
EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS
AMMON EMPLOYMENT AGREEMENT. The Company has entered into an employment
agreement with Mr. Ammon, effective November 20, 1995 (as amended to date, the
"Ammon Agreement"), pursuant to which Mr. Ammon currently serves as Chairman of
the Board of Big Flower and Big Flower Press and served as Chief Executive
Officer of Big Flower Press until April 1997. The initial term of the Ammon
Agreement is three years, subject to automatic one-year extensions commencing on
the second anniversary of the Ammon Agreement, unless either the Company or Mr.
Ammon provides specified notice to the contrary. Mr. Ammon is required to devote
to the Company the time necessary for the effective conduct of his duties under
the Ammon Agreement and is permitted to engage in outside business interests
that do not conflict with such duties or otherwise compete with the Company.
Under the Ammon Agreement, Mr. Ammon currently receives a base salary of
$750,000 per year; an annual bonus targeted at not less than 75% of base salary
(assuming bonus targets under the EIP are met); an annual payment of $108,000
with respect to life insurance premiums; and certain fringe benefits, including
participation in the SERP. Mr. Ammon was granted an option to purchase 300,000
shares of Common Stock (a) with a ten-year term, (b) at an exercise price equal
to $16.00 per share and (c) vesting ratably over a three-year period.
If Mr. Ammon's employment with the Company is terminated other than for
"cause" (as defined in the Ammon Agreement), Mr. Ammon will be entitled to
receive a supplemental retirement benefit, subject to certain vesting and
benefit accrual requirements and subject to being offset by amounts payable
under the SERP, of up to 50% of his average compensation (including salary and
EIP bonus) for the three full years immediately preceeding the termination of
his employment, which benefit would commence at age 60. Mr. Ammon will have the
right to terminate the Ammon Agreement in the event of the material breach
thereof by the Company or for other "good reason" (as defined in the Ammon
Agreement). In such event, or if the Company terminates Mr. Ammon's employment
without cause, (i) Mr. Ammon will be entitled generally to receive the salary
and bonus otherwise payable to him over the greater of (x) the remaining term of
the Ammon Agreement and (y) a period of six months; (ii) all outstanding equity
incentive awards (including stock options) would immediately vest; (iii) Mr.
Ammon would receive additional service credit for purposes of the supplemental
retirement benefit; and (iv) the life insurance and certain fringe benefits
would continue during the severance period. Upon the termination of his
employment following a "change in control" of the Company (as defined in the
Ammon Agreement), Mr. Ammon would (i) be entitled to receive a lump sum amount
equal to three times his base salary and bonus, (ii) become vested in all
outstanding equity incentive awards, (iii) have the right to receive a cash
payment equal to the spread on all outstanding stock options, (iv) receive a
lump sum payment with respect to foregone fringe benefits, (v) receive
additional service credit for purposes of the supplemental retirement benefit
and (vi) be entitled to a payment sufficient to offset the effects of any excise
tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"). During the term of the Ammon Agreement (and, in the event Mr.
Ammon terminates his employment other than for good reason or the Company
terminates Mr. Ammon's employment for cause, for a period of one year beyond the
expiration of the employment term), Mr. Ammon will be subject to certain
non-competition and non-solicitation requirements.
REILLY EMPLOYMENT AGREEMENT. The Company has entered into an employment
agreement with Mr. Reilly, effective March 29, 1996 (the "Reilly Agreement"),
pursuant to which Mr. Reilly serves as President and Chief Executive Officer of
the Company and Big Flower Press. The initial term of the Reilly Agreement is
three years, subject to automatic one-year extensions commencing on the second
anniversary of the Reilly Agreement, unless either the Company or Mr. Reilly
provides specified notice to the contrary. Mr. Reilly is required to devote to
the Company all of his working time, attention and efforts. Under the Reilly
Agreement Mr. Reilly currently receives a base salary of $550,000 per year; an
annual bonus targeted at not less than 75% of base salary (assuming bonus
targets under the EIP are met); and certain fringe benefits, including
participation in the SERP. In connection with his entering into the Reilly
Agreement, Mr. Reilly was granted an option to purchase 200,000 shares of Common
Stock (a) with a ten-
15
<PAGE>
year term, (b) at an exercise price of $12.75 per share (the Closing Price on
the date of grant), and (c) vesting in installments of 20% each on December 31,
1996, 1997, 1998, and 1999 and the remaining 20% on the fourth anniversary of
the Reilly Agreement, provided, that all such options will immediately vest upon
the occurrence of a "change in control" of the Company (as defined in the Reilly
Agreement). For information regarding options granted to Mr. Reilly in 1997, see
"Options Granted in Fiscal 1997" above.
Mr. Reilly will have the right to terminate the Reilly Agreement in the
event of the material breach thereof by the Company or for other "good reason"
(as defined in the Reilly Agreement). In such event, or if the Company
terminates Mr. Reilly's employment without "cause" (as defined in the Reilly
Agreement), (i) Mr. Reilly will be entitled to receive a lump sum amount equal
to the sum of (A) two times the sum of (x) his then base salary plus (y) the
highest annual performance bonus Mr. Reilly received in the three years
preceding such termination of employment, plus (B) the present value of all
fringe benefits payable under the remaining term of the Reilly Agreement, (ii)
all outstanding equity incentive awards (including stock options) will
immediately vest and remain exercisable for a period of one year following the
date of such termination (or, if earlier, until the end of the option term), and
(iii) Mr. Reilly would be entitled to receive a payment sufficient to offset the
effects of any excise tax imposed under Section 4999 of the Code. During the
term of the Reilly Agreement (and, in the event Mr. Reilly terminates his
employment other than for good reason or the Company terminates Mr. Reilly's
employment for cause, for a period of one year beyond the expiration of the
employment term), Mr. Reilly will be subject to certain non-competition and
non-solicitation requirements.
ANGELSON EMPLOYMENT AGREEMENT. The Company has entered into an employment
agreement with Mr. Angelson, effective March 21, 1996 (the "Angelson
Agreement"), pursuant to which Mr. Angelson serves as Executive Vice President
and General Counsel and Secretary of the Board of Directors of the Company and
Big Flower Press. The initial term of the Angelson Agreement is three years,
subject to automatic one-year extensions commencing on the second anniversary of
the Angelson Agreement, unless either the Company or Mr. Angelson provides
specified notice to the contrary. Mr. Angelson is required to devote to the
Company and its affiliates all of his working time, attention and efforts. Under
the Angelson Agreement, Mr. Angelson currently receives a base salary of
$515,000 per year; an annual bonus targeted at not less than 75% of base salary
(assuming bonus targets under the EIP are met); annual premium payments during
the term of employment with respect to a $2 million split-dollar life insurance
policy owned by Mr. Angelson; and certain fringe benefits, including
participation in the SERP. In connection with his entering into the Angelson
Agreement, Mr. Angelson was granted an option to purchase 150,000 shares of
Common Stock (a) with a ten-year term, (b) at an exercise price of $12.625 per
share (the Closing Price on the date of grant), and (c) vesting in installments
of 10% on December 31, 1996, 15% on the first anniversary of the Angelson
Agreement and 25% on each of the next three anniversaries of the Angelson
Agreement, provided, that all such options will immediately vest upon the
occurrence of a "change in control" of the Company (as defined in the Angelson
Agreement). For information regarding options granted to Mr. Angelson in 1997,
see "Options Granted in Fiscal 1997" above.
Mr. Angelson will have the right to terminate the Angelson Agreement in the
event of the material breach thereof by the Company or for other "good reason"
(as defined in the Angelson Agreement). In such event, or if the Company
terminates Mr. Angelson's employment without "cause" (as defined in the Angelson
Agreement), (i) Mr. Angelson will be entitled to receive a lump sum amount equal
to the sum of (A) two times the sum of (x) his then base salary plus (y) the
highest annual performance bonus Mr. Angelson received in the three years
preceding such termination of employment, plus (B) the present value of all
insurance premium payments and other fringe benefits payable under the remaining
term of the Angelson Agreement, (ii) all outstanding equity incentive awards
(including stock options) will immediately vest and remain exercisable for a
period of one year following the date of such termination (or, if earlier, until
the end of the option term), and (iii) Mr. Angelson would be entitled to receive
a payment sufficient to offset the effects of any excise tax imposed under
Section 4999 of the Code. During the term of the Angelson Agreement (and, in the
event Mr. Angelson terminates his employment other
16
<PAGE>
than for good reason or the Company terminates Mr. Angelson's employment for
cause, for a period of one year beyond the expiration of the employment term),
Mr. Angelson will be subject to certain non-competition and non-solicitation
requirements.
RITCHIE EMPLOYMENT ARRANGEMENTS. The Company entered into a letter
agreement with Mr. Ritchie on December 13, 1996 (the "Ritchie Agreement"),
pursuant to which Mr. Ritchie serves as Executive Vice President and Chief
Financial Officer of the Company and Big Flower Press. Mr. Ritchie is required
to devote to the Company all of his working time, attention and efforts. In the
event that Mr. Ritchie's employment should be terminated by the Company other
than for "cause" (as defined in the Executive Severance Agreement discussed
below) prior to a "change in control" of the Company (as defined in the
Executive Severance Agreement discussed below), Mr. Ritchie will be entitled to
a payment equal to one year's base salary. Under the Ritchie Agreement, Mr.
Ritchie currently receives a base salary of $425,000 per year; an annual bonus
targeted at not less than 75% of base salary (assuming bonus targets under the
EIP are met); and certain fringe benefits, including participation in the SERP.
In connection with his entering into the Ritchie Agreement, Mr. Ritchie was
granted an option to purchase 100,000 shares of Common Stock (a) with a ten-year
term, (b) at an exercise price of $18.00 per share (the Closing Price on the
date of grant), and (c) vesting in installments of 25% on January 6 of each of
1998, 1999, 2000 and 2001, provided that all such options will immediately vest
upon the occurrence of a "change in control" of the Company.
In addition, the Company has entered into a severance agreement with Mr.
Ritchie, effective January 6, 1997 (the "Executive Severance Agreement"), which
provides that if Mr. Ritchie's employment is terminated by the Company other
than for "cause" or by Mr. Ritchie for "good reason" (as defined in the
Executive Severance Agreement) following a "change in control" of the Company,
Mr. Ritchie will receive a lump sum amount equal to two times the sum of (x) the
greater of his annual base salary in effect immediately prior to the termination
of employment and his annual base salary in effect immediately prior to the
"change in control" and (y) the greater of the target bonus for Mr. Ritchie
under the EIP in the year immediately preceding that in which the termination
occurs and the average such bonus for the three years immediately preceding the
"change in control." In addition, (i) all outstanding stock incentive awards
(including stock options) will immediately vest and remain exercisable until at
least 90 days following the "change in control," and (ii) Mr. Ritchie would be
entitled to two years of continued medical and other insurance benefits. The
total amount of benefits payable to Mr. Ritchie would be limited to the extent
necessary to preserve the Company's deduction pursuant to Section 280G of the
Code.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Not applicable.
STOCK PRICE PERFORMANCE GRAPH
The following graphs compare the cumulative total stockholder returns
(assuming reinvestment of dividends) of the Company's Common Stock, the Standard
& Poor's 500 Index (the "S&P 500 Index"), and the Standard & Poor's Advertising
and Marketing Services Index (the "Advertising and Marketing Index"). The
comparisons reflected in the graph are not intended to forecast the future
performance of the Company's common stock and may not be indicative of such
future performance. The graph assumes $100 invested on November 22, 1995 (the
date of the Company's initial public offering) in the Company's common stock and
each of the indices.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN*:
BIG FLOWER VS. S&P 500 AND ADVERTISING AND MARKETING INDEX
TOTAL RETURN TO STOCKHOLDERS
REINVESTED DIVIDENDS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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TOTAL SHAREHOLDER RETURNS
<S> <C> <C> <C>
DOLLARS
BIG FLOWER HOLDINGS INC S&P 500 INDEX SERVICE(ADVERTSNG/ MKTG)-500
22Nov95 100.00 100.00 100.00
Dec95 100.81 103.11 113.46
Dec96 121.95 126.78 129.61
Dec97 156.91 169.08 190.04
YEARS ENDING
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* Assumes that the value of the investment in Big Flower common stock and in
each index was $100 on November 22, 1995 and that all dividends were
reinvested.
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The total percentage return for the Big Flower common stock for Fiscal 1997
was approximately 28.67%. This compares with the total percentage return for
such period of 46.63% for the Advertising and Marketing Index and 33.36% for the
S&P 500 Index. These percentages assume that all dividends were reinvested.
CERTAIN TRANSACTIONS
From January 1, 1997 until June 20, 1997, the Company paid approximately (x)
$5,625,000 in fees to BT Securities Corporation, an affiliate of BT Investment
Partners, Inc. ("BTIP"), which until June 20, 1997 was a beneficial owner of
more than 5% of the outstanding shares of the Company's capital stock, for
advice and underwriting services in connection with certain debt of Big Flower
Press and (y) $2,700,000 to Bankers Trust Company, an affiliate of BTIP, in
connection with its role as agent and lender under a credit facility for Big
Flower Press.
PROPOSAL 2.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
INTRODUCTION
The Board of Directors has selected Deloitte & Touche LLP ("Deloitte") to be
the Company's independent certified public accountants for its fiscal year ended
December 31, 1998. Deloitte has acted as Big Flower's independent certified
public accountants since its inception and as Big Flower Press' independent
certified public accountants since July, 1993.
Representatives of Deloitte will be present at the Meeting with the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
REQUIRED VOTE
Ratification of the appointment of the independent certified public
accountant requires the affirmative vote of a majority in voting power present
(in person or by proxy) and entitled to vote at the Meeting. In the event that
the Company's stockholders fail to ratify the appointment of Deloitte, the
selection of the Company's independent certified public accountants will be
submitted to the Company's Board of Directors for reconsideration.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS.
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OTHER MATTERS
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation of proxies by use of the mails, some of the officers, directors
and employees of the Company and its subsidiaries, none of whom will receive
additional compensation therefor, may solicit proxies in person or by telephone,
facsimile or other means. Solicitation will also be made by employees of
Georgeson & Company, which firm will be paid a fee of $6,500, plus expenses. As
is customary, the Company will, upon request, reimburse brokerage firms, banks,
trustees, nominees and other persons for their out-of-pocket expenses in
forwarding proxy materials to their principals.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
From time to time, stockholders present proposals which may be proper
subjects for inclusion in the proxy statement and for consideration at the
Meeting. To be considered, proposals must be submitted on a timely basis.
Proposals for the 1999 Annual Meeting must be received by the Company no later
than January 15, 1999, and must otherwise comply with Rule 14a-8 under the
Securities Exchange Act of 1934, as amended.
Big Flower's By-Laws currently impose certain additional procedural
requirements for submitting stockholder proposals to Annual Meetings of
Stockholders. Any questions relating to stockholder proposals should be
submitted in writing to the Secretary of the Company, at 3 East 54th Street, New
York, New York 10022.
INFORMATION INCORPORATED BY REFERENCE
The Company hereby incorporates by reference into this Proxy Statement "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 31, 1997, a copy of which is being provided to stockholders along
with this Proxy Statement.
By Order of the Board of Directors
[LOGO]
Mark A. Angelson
EXECUTIVE VICE PRESIDENT AND
GENERAL COUNSEL AND
SECRETARY OF THE BOARD OF DIRECTORS
New York, New York
May 15, 1998
20
<PAGE>
BIG FLOWER HOLDINGS, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mark A. Angelson and Richard L. Ritchie and
each of them, with power of substitution, attorneys and proxies to represent and
to vote all shares of Common Stock of Big Flower Holdings, Inc. (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of Big Flower Holdings, Inc. to be held on June 23, 1998 at 9:00 a.m. local
time, in the thirtieth floor auditorium of Goldman, Sachs & Co., 85 Broad
Street, New York, New York, and at any adjournment or postponements thereof.
Under the Company's By-Laws, business transacted at the Annual Meeting of
Stockholders is confined to the purposes stated in the Notice of the Meeting.
This Proxy will, however, convey authority to the persons named herein as
proxies to vote in their discretion on other business which may properly be
brought before the Meeting.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE NOMINEES NAMED ABOVE AND FOR PROPOSAL 2.
(Continued and to be signed on the reverse side.)
BIG FLOWER HOLDINGS, INC.
P.O. BOX 11356
NEW YORK, NY 10203-0356
<PAGE>
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<S><C><C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF NOMINEES NAMED BELOW AND FOR PROPOSAL 2.
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
listed below for all nominees listed below
Nominees: R. Theodore Ammon and Edward T. Reilly
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS"; BOX AND WRITE THAT NOMINEE'S NAME
IN THE SPACE PROVIDED BELOW.)
*Exceptions
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2. Proposal to ratify the appointment of Deloitte & Touche LLP as the Company's independent certified public accountants, as
described in the Proxy Statement.
FOR AGAINST ABSTAIN
If you plan to attend CHANGE OF ADDRESS AND/
meeting, check here OR COMMENTS MARK HERE
This Proxy should bear your signature(s) exactly as your name(s) appear
in the label to the left. When signing as attorney, executor, administrator,
personal representative, trustee, guardian or corporate officer, please give
full title. For joint accounts, each joint owner should sign.
Dated:
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Signature(s)
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Signature(s)
Votes must be indicated
(X) in Black or Blue ink. X
(Please sign, date and return this proxy in the enclosed postage prepaid envelope.)
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