Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Waverly, Inc.
..................................................................
(Name of Registrant as Specified In Its Charter)
Waverly, Inc.
..................................................................
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<PAGE>
WAVERLY, INC.
-------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------------------------------------
To the Shareholders of
WAVERLY, INC.
Notice is hereby given that the Annual Meeting of
Shareholders of Waverly, Inc. will be held at The Center Club,
100 Light Street, Baltimore, Maryland 21202, at 4:00 p.m. on
Monday, April 28, 1997, for the following purposes:
1. To elect five Class C Directors to the Board of Directors
for a term of three years.
2. To approve the appointment of Coopers & Lybrand L.L.P. as
independent accountants of the Company for the fiscal year
ending December 31, 1997.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof. Shareholders of
record at the close of business on February 26, 1997, will
be entitled to notice of and to vote at the meeting. All
shareholders are cordially invited to attend the meeting
in person. Those who cannot attend are urged to sign, date
and mail promptly the enclosed proxy in the envelope provided
for that purpose. A majority of the outstanding shares
of Common Stock must be represented at the meeting in
order to transact business, and whether you own a few or
many shares, your proxy is important in fulfilling this
requirement. Returning your proxy does not deprive you
of your right to attend the meeting and vote your shares
in person.
A copy of the annual report to shareholders is enclosed
herewith.
By order of the Board of Directors
E. MAGRUDER PASSANO, JR.
Secretary
<PAGE>
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the
solicitation by the Company of proxies to be voted at the Annual
Meeting of Shareholders to be held on April 28, 1997, at 4:00 p.m.,
at The Center Club, 100 Light Street, Baltimore, Maryland 21202,
and at any adjournment thereof. The expense of preparing, printing
and mailing the proxies will be borne by the Company. In addition
to solicitations by mail, the Company may solicit proxies
in person or by telephone and arrange for brokerage houses and
other custodians, nominees and fiduciaries to send proxies and
proxy material to their principals at the expense of The Company.
Any proxy may be revoked by a shareholder at any time prior
to its use by execution of another proxy bearing a later date, by
written notice to any of the persons named in the proxy or by
oral or written statement at the meeting.
Holders of record at the close of business on February 26,
1997, of outstanding Common Stock of the Company are entitled
to notice of and to vote at the meeting. Each share of stock is
entitled to one vote. There is no provision for cumulative voting.
Shares represented by any proxy properly executed and received
pursuant to this solicitation will be voted at the meeting in
accordance with the recommendation of the Board of Directors,
unless otherwise directed by the shareholder. Shares of
Common Stock held by the trustee of the Company's Incentive
Savings Plan will be voted by the trustee. On February 26, 1997,
the Company had 8,928,722 shares of Common Stock outstanding and
entitled to vote at the meeting (9,731,798 shares if adjusted for
all stock options exercisable within 60 days after the record
date).
The principal executive offices of the Company are located
at 351 W. Camden Street, Baltimore, Maryland 21201. The
approximate date on which this Proxy Statement and the attached
form of proxy will be mailed to shareholders is March 25, 1997.
PRINCIPAL HOLDERS OF COMMON STOCK
---------------------------------
The following table lists the only persons known to
the Company to be holding beneficially 5% or more of the Company's
outstanding Common Stock or to have filed a Schedule 13D or 13G
as of the record date, February 26, 1997:
<TABLE>
<CAPTION>
Number Percent of Total
Name and Address of Shares(1) Outstanding
---------------- ------------ ----------------
<S> <C> <C>
Life Estate under the Will of
Edward B. Passano (2)(3) 3,227,822 36.2%
Michael Urban (3)(4) 802,500 9.0%
J.F. Spahr, Jr., R.N. Spahr,
John F. Spahr, Jr. and Regina
O. Thomas, Trustees under the will
of John F. Spahr, Sr. and the
Christian C. Febiger Spahr, Jr.
Revocable Trust(5) 495,000 5.5%
All members of the Passano family
and their associates, including
the above (6) 5,209,622 57.4%
GeoCapital Corporation (7) 719,700 8.1%
767 Fifth Avenue
New York, NY 10153
<PAGE>
Newsweb Corporation and its
affiliates (8) 670,298 7.5%
1645 W. Fullerton Ave.
Chicago, IL 60614
Theodore L. Cross and certain
persons (9) 499,912 5.6%
200 W. 57th Street - 15th Floor
New York, NY 10019
__________________
<FN>
(1) Includes shares issuable to the designated individuals under
options exercisable within 60 days after the record date.
(2) This is a Life Estate under the Will of Edward B.Passano
presently held for the benefit of his son, Edward M.
Passano, Sr. The shares held in the Passano Life Estate are
subject to a voting trust agreement described below.
(3) The address of such person is 351 W. Camden Street, Baltimore,
Maryland 21201.
(4) Includes 800,000 shares held by a corporation and which
Dr. Urban is deemed to own beneficially, which are subject to
a voting trust agreement described below.
(5) The address of the Mr. Robert Spahr, Mr. John F. Spahr, Jr.,
Mr. Spahr and Ms. Thomas, Trustees under the will of John F.
Spahr, Sr. for Dorothy Spahr and the Christian C. Febiger
Spahr, Jr. Revocable Trust is 351 W. Camden Street,
Baltimore, MD 21201. These include 495,000 shares held
collectively subject to a ten-year escrow agreement and
subject to four separate voting trust agreements (see
"Spahr Voting Trusts"). Robert F. Spahr has dispositive
power as to 155,000 shares. John F. Spahr, Jr. has dispositive
power as to 155,000 shares. John F. Spahr, Jr. and
Regina O. Thomas, Trustees under the will of John F.
Spahr, Sr. for Dorothy Spahr, have dispositive power as
to 85,000 shares owned by Trustees under the will of
John F. Spahr, Sr. Ann Spahr Tyler and Jay C. Rippard,
Trustees, have dispositive power as to 100,000 shares
owned by the Christian C. Febiger Spahr, Jr. Revocable Trust.
(6) Includes 151,400 shares issuable under options exercisable
within 60 days of the record date.
(7) GeoCapital Corporation is an investment company.
Information obtained from GeoCapital contained in a
Schedule 13G filed with the Securities and Exchange Commission
on January 31, 1997, states that GeoCapital has sole
dispositive power as to 719,700 shares. Various clients of
GeoCapital have sole voting power as to 232,900 shares, and
GeoCapital has sole voting power as to 486,800 shares.
(8) Newsweb Corporation is engaged primarily in the printing and
broadcasting industries. Information obtained from Newsweb and
its affiliates as of November 1, 1994, contained in a statement
on Schedule 13D states that Fred Eychaner, as president
and sole shareholder of Newsweb, has sole power to vote or to
direct the vote and sole power to dispose or direct the
disposition of 208,400 shares owned by Newsweb, 441,898 shares
owned by Fred Eychaner and 20,000 shares owned by Fred Eychaner
IRA.
<PAGE>
(9) Theodore Cross' principal occupation is editor and
publisher of various academic journals. Information obtained from
Mr. Cross as of December 8, 1994, contained in a statement on
Schedule 13D states that Mr. Cross has sole power to vote or to
direct the vote and sole power to dispose or direct the
disposition of 357,574 shares owned by Theodore Cross.
Mr. Cross is deemed to have sole power to vote or to direct
the vote and sole power to dispose or direct the disposition of
6,500 shares owned by Management Reports, Inc. by virtue of his
ownership of 60% of the issued and outstanding stock of
Management Reports, Inc. James A. Hellmuth, as sole trustee of
the Louisville Charitable Remainder Unit Trust, has sole power
to vote or to direct the vote and sole power to dispose or
direct the disposition of 5,000 shares owned by the Louisville
Trust. Mary Cross, Amanda B. Cross, Lisa W. Pownall-Gray,
Ann Fairchild Warner, Polly Mackwell and Stuart G. Warner each
has sole power to vote or to direct the vote and sole power to
dispose or direct the disposition of their respective shares.
</TABLE>
Passano Voting Trust.
---------------------
The stock subject to the Passano Family Life Estate referred to in
note (2) above is voted by Edward M. Passano, Sr., William M.
Passano, Jr. and Susan P. Macfarlane, all of 351 W. Camden Street,
Baltimore, Maryland 21201, as voting trustees under a voting trust
agreement (the "Passano Voting Trust") dated July 31, 1989, which
will expire on the earliest to happen of (1) the execution of a
subsequent voting trust agreement by the parties; (2) the lapse of
ten years from July 31, 1989; or (3) the death of Edward M.
Passano, Sr. The latter is entitled to a 50% vote with respect to
the stock subject to the voting trust and the other trustees are
entitled to the remaining 50% vote, so that, unless the trustees
are in agreement, it could happen that the stock subject to the
voting trust could be not voted at all. William M. Passano, Jr.,
Susan P. Macfarlane and E. Magruder Passano, Jr., the three
grandchildren of the original testator, have agreed that upon the
death of Edward M. Passano, Sr., they will enter into a ten-year
voting trust agreement (together with the Passano Voting Trust,
the "Passano Voting Trusts") pursuant to which the stock they will
then receive from the termination of the Life Estate under Edward
B. Passano's Will will be voted as a unit for that period.
The voting trustees will be those three grandchildren of the
original testator or their respective spouses.
Urban Voting Trust.
-------------------
The shares referenced in note (4) above remain subject to a voting
trust (the "Urban Voting Trust") of which Mr. William M.
Passano, Jr. and Dr. Urban are the co-trustees. The address of the
trustees is 351 W. Camden Street, Baltimore, Maryland 21201. The
duration of the Urban Voting Trust shall be coterminous with that
of the Passano Voting Trust described above. The shares must be
voted in the same way as the shares subject to the Passano Voting
Trust described above unless the Passano family shares are
deadlocked and cannot be voted at all, in which case Dr. Urban will
have the sole right to vote the 800,000 shares.
Spahr Voting Trusts.
--------------------
The 495,000 shares owned collectively by Mr. Robert Spahr, Mr. John
F. Spahr, Jr., Trustees under the will of John F. Spahr, Sr. and
the Christian C. Febiger Spahr, Jr. Revocable Trust referred to in
note (5) above have been placed in voting trusts (the "Spahr Voting
Trusts"). The Spahr Voting Trusts shall expire January 9, 2001.
The shares in each of the Spahr Voting Trusts must be voted in the
same way as the shares subject to the Passano Voting Trust
described above, unless the Passano family shares are deadlocked
and cannot be voted at all. In the event of a deadlock, Mr. Robert
Spahr and Mr. John F. Spahr, Jr. will have the sole right to vote
their respective 155,000 shares. Mr. Passano will have the sole
right to vote the 100,000 shares owned by the Christian C. Febiger
Spahr, Jr. Revocable Trust, and the 85,000 shares owned by the
Trustees under the will of John F. Spahr, Sr. for Dorothy Spahr.
The 495,000 shares held collectively by Mr. Robert Spahr,
Mr. John F. Spahr, Jr., the Trustees under the will of John F.
Spahr, Sr. and the Christian C. Febiger Spahr, Jr. Revocable Trust
are subject to an escrow agreement until January 10, 2001 to secure
indemnification obligations in the agreement relating to the
acquisition of Lea & Febiger. Under the terms of the escrow
agreement, each of the Messrs. Spahr and the Christian C. Febiger
Spahr, Jr. Revocable Trust may obtain the release of up to 70,000
(adjusted for 2-for 1- stock split on June 12, 1996) shares in the
event of death, disability or divorce.
<PAGE>
As a result of these arrangements, Dr. Urban, Messrs.
Spahr, Trustees under the will of John F. Spahr, Sr. and the
Christian C. Febiger Spahr, Jr. Revocable Trust may be deemed to be
"associates" of the Passano family, as that term is defined in the
rules and regulations of the Securities and Exchange Commission.
ELECTION OF DIRECTORS
---------------------
Waverly's Board of Directors is divided into three classes.
Each class of directors is elected for a three-year term. The terms
of the current Class C Directors will expire on the date of
the 1997 Annual Meeting. The Class C Directors elected in 1997
will serve for a term that expires at the Annual Meeting of
Shareholders in 2000 or when their successors are elected and
qualified.
Proxies solicited hereby cannot be voted for a greater number
of persons than the number of nominees named. It is intended that,
unless contrary instructions are given, the persons named in the
accompanying proxy will vote all proxies in favor of the nominees
listed below to serve for their respective terms and until their
successors are elected and qualified. Management has no reason
to believe that any nominee will be unable to accept nomination or
election. However, if such event should occur, management intends
that the proxy holders will vote for such other person or persons
as they may deem advisable.
Name and Age Other Positions with the Director
on Record Date Company and Principal Occupations Since
-------------- --------------------------------- --------
Class C Directors
Term Expiring at 1997 Annual Meeting
------------------------------------
David J. Callard (58) President, Wand Partners, Inc., 1974
private investment firm, New York, NY
Edward B. Hutton, Jr. (51) President and Chief Executive Officer 1988
Michael E. Johns (53) Executive Vice President for Health 1993
Affairs; Director, Robert W. Woodruff
Health Sciences Center
Emory University, Atlanta, GA
John F. Spahr, Jr. (46) Managing Director, Teton Data Systems, 1991
Jackson, WY
Michael Urban (57) President and Chief Executive Officer, 1990
Urban & Schwarzenberg Verlag fur Medizin
GmbH, a subsidiary of the Company
The Board of Directors recommends a vote "FOR" the proposal to
approve the election of five Class C Directors for a term of three years.
<PAGE>
Name and Age Other Positions with Director
on Record Date Company and Principal Occupations Since
-------------- --------------------------------- --------
Class A Directors
Term Expiring at 1998 Annual Meeting
------------------------------------
Barbara J. Bonnell (65) Director of Research and Information, 1974
Baltimore Development Corporation,
Baltimore, MD
Donald W. Dick, Jr. (54) Principal, EuroCapital Advisors, LLC, 1980
private investment firm, Weehawken, NJ
Carolyn Manuszak (57) President, Villa Julie College, 1987
Stevenson, MD
E. Magruder Passano, Jr. (54) Vice Chairman of the Board, 1972
Secretary
Richard C. Riggs, Jr. (57) President and CEO, Barton-Cotton, Inc., 1995
Baltimore, MD
Class B Directors
Term Expiring at 1999 Annual Meeting
------------------------------------
Samuel G. Macfarlane (65) Consultant and former Vice President 1966
and Chief Financial Officer and Treasurer
of Waverly, Inc.
Ackneil M. Muldrow, II (59) President and CEO, Development Credit 1992
Fund, Inc., Baltimore, MD
Joseph M. Palazzolo (47) Chairman, Gateway Investments, Inc., 1996
Muttontown, NY
William M. Passano, Jr. (68) Chairman of the Board 1965
The directors currently on the Board have been engaged in the
principal occupation indicated in the foregoing table for the five years
preceding December 31, 1996, except as follows:
Prior to July, 1995, Mr. Dick was partner, Overseas Partners,
Inc., a private investment firm in Jersey City, New Jersey. Prior to June,
1996, Dr. Johns was Dean of the Medical Faculty and Vice President for
Medicine at The Johns Hopkins University in Baltimore, Maryland. Prior to
December 31, 1991, Mr. Macfarlane was Vice President, Chief Financial
Officer and Treasurer of the Company. From 1992 to 1993, Mr. Palazzolo was
Chairman of Frost and Sullivan, Inc., and prior to 1992, was President and
CEO of JPT Publishing, Inc. From 1991 to 1993, Mr. Spahr was Chief Executive
Officer of Lea & Febiger, a division of the Company, and prior to 1991,
Mr. Spahr was a partner of Lea & Febiger, L.P., a publisher of books in the
field of medicine and related disciplines.
The following directors hold directorships with other
companies as follows: Mr. Callard is a director of Chartwell RE Corporation.
Mr. Dick is a director of the T. Rowe Price Growth Stock Fund, Inc., the
T. Rowe Price New America Growth Fund, the T. Rowe Price Growth & Income
Fund, Inc., the T. Rowe Price Capital Appreciation Fund, Inc., the T. Rowe
Price Balanced Fund, Inc., the T. Rowe Price Mid-Cap Growth Fund, Inc., the
T. Rowe Price OTC Fund, Inc., the T. Rowe Price Dividend Growth Fund, Inc.,
the T. Rowe Price Blue Chip Growth Fund, Inc., the T. Rowe Price New
Horizons Fund, Inc., the T. Rowe Price New Era Fund, Inc., the T. Rowe Price
Equity Income Fund, the T. Rowe Price Science and Technology Fund, Inc., the
T. Rowe Price Small-Cap Value Fund, Inc., the T. Rowe Price Index Trust, Inc.,
the T. Rowe Price Equity Series, Inc., the T. Rowe Price Personal Strategy
Funds, Inc., the T. Rowe Price Value Fund, Inc., the T. Rowe Price Capital
Opportunity Fund, Inc., the T. Rowe Price Health Sciences Fund, Inc., the
T. Rowe Price International Series, Inc., the T. Rowe Price International
Funds, Inc., the T. Rowe Price Mid-Cap Value Fund, Inc., the T. Rowe Price
Financial Services Fund, Inc., the Institutional Equity Funds, Inc. and
Institutional International Funds, Inc. Mr. William M. Passano, Jr. is a
director of First Maryland Bancorp and of the First National Bank of
Maryland.
<PAGE>
Mr. Samuel G. Macfarlane is the brother-in-law of Mr. William M.
Passano, Jr., Mr. E. Magruder Passano, Jr. is the son of Mr. Edward M.
Passano, Sr. and a first cousin of Mr. William M. Passano, Jr..
Pursuant to the terms of an Agreement and Plan of Merger between the
Company and Lea & Febiger, L.P. (the "L&F Agreement"), the Company agreed
to use its best efforts to cause the election of John F. Spahr, Jr. to the
Board of Directors (or if he is unable to serve, then another specified
member of the Spahr family will be designated). If the Passano Family Voting
Trust (see the "Principal Holders of Common Stock") fails to vote all its
shares for the election of Mr. Spahr (or one of the designated substitutes)
as Director and Mr. Spahr (or such substitute) is thus not elected, each of
the Spahr Voting Trusts (see "Principal Holders of Common Stock") will
automatically expire.
<PAGE>
Committees of the Board
-----------------------
The full Board of Directors meets on a quarterly basis to receive and
act on reports of committees and of management, to declare dividends and to
take any other action requiring Board approval. In 1996 the Board of
Directors held four meetings. (Each director other than Dr. Johns attended
at least 75% of the meetings of the Board of Directors and Committees of
the Board on which such directors served.)
Executive Committee.
--------------------
The Board of Directors has an Executive Committee consisting in fiscal
1996 of Messrs. Callard (Chair), Hutton, Macfarlane, Palazzolo, E. Magruder
Passano, Jr., William M. Passano, Jr., Riggs and Spahr, Drs. Johns and
Urban and Ms. Manuszak. The Executive Committee met five times in 1996, and
minutes of its meetings are distributed to all members of the Board.
Audit Committee.
----------------
The Company's Audit Committee consisted in fiscal 1996 of Ms. Bonnell
and Messrs. Macfarlane and Riggs (Chair). During the fiscal year, the
Committee met on four occasions to review with the Company's independent
accountants the annual financial statements prior to their release, to
receive and review with them their annual letter on internal controls and
interim reports on quarterly reviews and to review with them their plans
and budget for the 1996 audit.
Management Committee.
---------------------
The Management Committee, consisting in fiscal 1996 of Ms. Manuszak
(Chair), Dr. Johns and Messrs. Muldrow and Palazzolo, met in February prior
to the regular February Board meeting to formulate recommendations to the
Board for all executive compensation for the ensuing year, including the
awards of stock options, and to determine bonus awards for the preceding
year's performance.
Nominating Committee.
---------------------
The Nominating Committee consisted in fiscal 1996 of Messrs. E.
Magruder Passano, Jr. and William M. Passano, Jr.
An annual director's fee of $15,000 is paid to directors, other than
Messrs. Callard and Spahr, who are not employees of the Company, plus $500
for each Committee meeting they attend. Committee Chairs also receive an
annual fee of $1,000 for such service. Pursuant to the terms of the Director
Stock Plan, one-half of the director's fee is payable in Company stock. The
stock awards are made on the dates of the Board of Directors' regular
February and July meetings and consist of the number of shares equal to
one-half of the retainer fee to be paid on that date divided by the market
value of the stock on the business day immediately preceding the date of
grant. Pursuant to the Plan, awards of 178 shares and 181 shares were made
to each director (other than Messrs. Callard and Spahr) in February 1996 and
July 1996, respectively. For information regarding Mr. Callard's and
Mr. Spahr's waivers of director compensation, see "Certain Transactions."
<PAGE>
The following table sets forth information regarding the beneficial
ownership by named executive officers, directors, nominee for director and
all executive officers, directors and nominee for director, as a group, of
the Company's outstanding Common Stock on February 26, 1997:
Shares Beneficially Percent of Total
Name Owned (1) (2) Outstanding
---- ------------------- ----------------
William M. Passano, Jr., Chairman,
Director 296,050 (3) 3.3%
E. Magruder Passano, Jr., Vice Chairman,
Director 253,869 2.8%
Edward B. Hutton, Jr., President and CEO,
Director 220,809 2.4%
Arthur E. Newman, Executive Vice President 57,649 *
Michael Urban, President and CEO, Urban &
Schwarzenberg Verlag fur Medizin GmbH,
Director 802,500 (4) 9.0%
Alma J. Wills, President, Periodical
Publishing 47,723 *
Barbara J. Bonnell, Director 6,298 *
David J. Callard, Director 70,198 *
Donald W. Dick, Jr., Director 4,822 *
Michael E. Johns, Director 1,432 *
Samuel G. Macfarlane, Director 9,263 *
Carolyn Manuszak, Director 3,510 *
Ackneil M. Muldrow, II, Director 2,485 *
Joseph M. Palazzolo, Director 100,528 1.1%
Richard C. Riggs, Jr., Director 894 *
John F. Spahr, Jr., Director 155,000 (4) 1.7%
All executive officers, directors and
nominees for director as a group
(23 persons), including the Life
Estate under the Will of Edward B. Passano
(3,227,822 shares) and all shares held in
the Spahr Voting Trusts (495,000 shares)
and the Urban Voting Trust (800,000) 5,738,258 60.2%
-----------------------------------
*Less than 1% of the Common Stock outstanding.
(1) Includes shares owned by trusts, spouses and minor children of
the indicated persons.
(2) Includes the following numbers of shares subject to options
exercisable within 60 days after the record date: William M.
Passano, Jr., 115,400 shares; E. Magruder Passano, Jr., 33,500
shares; Edward B. Hutton, Jr., 217,970 shares; Arthur E.
Newman, 56,750 shares; Alma J. Wills, 45,600 shares; David J.
Callard, 12,500 shares; and all other executive officers,
directors and nominee for director as a group (23 persons),
605,346 shares.
(3) Excludes 3,227,822 shares held in Life Estate under the Will
of Edward B. Passano, the 800,000 shares held in the Urban
Voting Trust and the 495,000 shares held in the Spahr Voting
Trusts with respect to which Mr. Passano has shared voting
power by virtue of his status as a trustee of the various
voting trusts. For a description of the voting trust
arrangements relating to these shares, see the description
under "Principal Holders of Common Stock."
(4) For a description of the voting trust arrangements relating
to these shares, see the description under "Principal
Holders of Common Stock."
<PAGE>
CERTAIN TRANSACTIONS
--------------------
The Company and Mr. David J. Callard have an agreement pursuant to
which Mr. Callard provides financial advisory services in his capacity as
Chair of the Executive Committee and advisory services in the area of
acquisition and development ("A&D"). Under this agreement, Mr. Callard was
retained at an annual compensation rate of $90,000 through March 31, 1996,
and in fiscal 1995 was awarded an option to purchase 5,000 shares of Common
Stock at an exercise price of $14.25 per share, which was the fair market
value on the grant date. The option is excercisable to the extent of 25% of
the shares one year from the grant date, an additional 25% two years from
the grant date, an additional 25% three years from the grant date and in
full four years from the grant date. Beginning in April 1996, the Company
agreed to pay Mr. Callard an annual retainer of $50,000. The agreement also
entitles Mr. Callard to receive contingent compensation for each A&D
transaction in which he plays an active role at the Company's request. Such
additional compensation is to be determined by mutual agreement at the
outset of each A&D project, reflecting its complexity and size. Pursuant to
the agreement, Mr. Callard is reimbursed for out-of-pocket expenses. In
connection with the agreement, Mr. Callard has waived his right to
director's fees and future participation in the Company's Director Stock
Plan.
Waverly has entered into an agreement with Mr. John F. Spahr, Jr.,
which replaces his prior employment agreement, pursuant to which Mr. Spahr
will provide consulting services to the Company. Under this agreement, Mr.
Spahr received $110,000 for 1995 and is entitled to receive $50,000 for each
of the years 1996 through 2000. In connection with the agreement, Mr. Spahr
has waived his right to director's fees and future participation in the
Company's Director Stock Plan.
The Company's subsidiary, Urban & Schwarzenberg Verlag fur Medizin GmbH
is indebted to Gisela Urban, Dr. Urban's mother, for 150,000 DM
(approximately $97,410) bearing interest at 8% per annum payable on demand
on one year's notice. Loan amounts have been converted into dollars based
upon the currency exchange rate of .6494 DM per dollar in effect on
December 31, 1996.
MANAGEMENT COMMITTEE REPORT
---------------------------
The Management Committee (the "Committee"), composed entirely of
nonemployee directors, meets periodically to formulate recommendations for
approval by the Board of Directors for executive compensation. The Committee
consisted in fiscal 1996 of Carolyn Manuszak (Chair), Michael E. Johns,
Ackneil M. Muldrow, II and Joseph M. Palazzolo.
The Committee's compensation recommendations are designed to enable
the Company to attract and retain qualified executives, reward achievement
of corporate and personal goals and motivate officers to meet divisional and
corporate financial and strategic objectives and to contribute to increasing
the shareholder value. Executive officers receive a salary, are eligible
for a bonus under Waverly's Incentive Plan ("WIN Plan") and participate in
the Company's Defined Benefit Pension Plan and in the Company's Incentive
Savings Plan ("WISP"), a tax-qualified plan that permits employees to make
contributions, a portion of which is matched by the Company. In addition,
executive officers are eligible to receive grants of options to purchase
Company stock. The Committee emphasizes stock ownership by executives as
highly desirable in that it closely aligns the economic interests of the
executives with those of the shareholders.
Salaries for executive officers (other than for the Chief Executive
Officer and the Chairman) are reviewed each year by the Company's Chief
Executive Officer and the Committee. Salaries for the Chief Executive
Officer and the Chairman are reviewed annually by the Committee. Salaries
are assessed in light of executives' performances for the prior year and
other economic and industry-specific conditions that prevail.
<PAGE>
The Company pays annual cash bonuses to executives under the WIN Plan
for achievement of corporate and/or divisional financial targets and for
achievement of individual performance objectives established as part of the
Company's long-range planning process. At the beginning of each year, the
Board meets with senior management to review the Company's long-range
strategic objectives and its annual budget. Financial and performance
targets, derived from this process, are used by the Committee to establish
objectives under the WIN Plan. In 1996, these objectives included
achievement of certain levels of earnings per share and return on equity.
For each operating division officer, 50% of bonus is based on his or her
division performance against budget and 50% is based on corporate results
against budget. For certain corporate officers (such as the Chief Executive
Officer), 100% of bonus depends on overall corporate performance. Maximum
bonuses for each officer may not exceed 50% of salary. Bonuses paid for
performance in 1996 are reflected in the Summary Compensation Table shown
below.
The Company awards stock options to its executives from time to time
to provide additional financial incentives and reward superior performance.
The Committee grants options to individual officers based on its evaluation
of a number of factors, including level of base salary, level of
responsibility, expected level of contribution to the Company, prior
individual performance and prior stock option grants. The largest grants
are awarded to the most senior employees who, in the view of the Management
Committee, have the greatest potential impact on the Company's profitability
and growth. Options under the plan may be either incentive stock options or
nonqualified stock options at the discretion of the Management Committee.
The exercise price of these options will be at least equal to the fair
market value of the Common Stock on the date of grant. In 1996, the
Committee granted stock options exercisable at fair market value to certain
key employees, including the Company's officers. Stock option awards to the
executive officers named in the Summary Compensation Table are disclosed in
that table.
Mr. Hutton, the Company's Chief Executive Officer, received
compensation in 1996 in accordance with the guidelines referred to above.
Mr. Hutton's base salary effective February 1996 was $350,000, reflecting
the Committee's conclusion that the performance of the Company in 1995
warranted a 4.5% increase in 1996. The Committee had established budget,
earnings per share and return on equity targets for Mr. Hutton under the
WIN Plan for 1996 based on the long-range strategic business plan. The
Company met its budget and performance targets in 1996 and, in light of this
performance, Mr. Hutton was awarded a bonus of $61,000 and an option to
purchase 20,000 shares of Common Stock at an exercise price of $21.50 per
share, which was equal to the fair market value on the grant date (2/14/97).
The Company also pays 100% of the premium on a $2,000,000 term-life
insurance policy for Mr. Hutton.
Rules proposed pursuant to Section 162(m) of the Internal Revenue Code
limit the allowable deduction for certain covered compensation paid to the
Company's officers to $1 million per year per executive. The rules provide
that certain qualifying, performance-based compensation will not be subject
to the deduction limit. The Company has structured its Employee Stock Option
Plan to cause option awards issuable under the Plan to comply with these
rules. In view of the current levels of other compensation paid to its
executives, the Company expects that its compensation will fall well within
the limits imposed by the Code and that Section 162(m) will not limit the
deductibility of its compensation to officers.
Carolyn Manuszak, Chair
Michael E. Johns, M.D.
Ackneil M. Muldrow, II
Joseph M. Palazzolo
<PAGE>
EXECUTIVE COMPENSATION
----------------------
The following table sets forth information concerning the compensation
paid by the Company in the last three fiscal years to the Chief Executive
Officer of the Company and the four next most highly compensated executive
officers:
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Long-Term
Annual Compensation (1) Compensation All Other
Name and Awards Compensation
Principal Position Year Salary ($)(2) Bonus ($)(3) Options (#) ($)(4)
------------------ ---- ------------- ------------ ----------- ------
<S> <C> <C> <C> <C> <C>
William M. Passano, Jr. 1996 325,000 56,875 0 9,260
Chairman of the Board 1995 300,000 71,800 0 8,610
1994 300,000 75,000 0 8,610
Edward B. Hutton, Jr. 1996 350,000 61,250 17,000 10,693
President and CEO 1995 335,000 80,200 15,000 12,952
1994 310,000 77,500 15,000 7,000
Michael Urban 1996 302,000 67,000 0 0
President and CEO, Urban 1995 313,000 52,500 0 540
Schwarzenberg Verlag 1994 263,000 47,700 5,000 2,899
fur Medizin GmbH (5)
Arthur E. Newman 1996 205,000 35,875 9,000 2,960
Executive Vice President 1995 194,000 46,500 9,000 2,811
1994 183,500 45,875 9,000 2,908
Alma J. Wills 1996 135,000 45,900 6,000 1,836
President, Periodical 1995 130,000 20,300 6,000 2,018
Publishing 1994 121,500 26,669 6,000 2,087
------------------------
<FN>
(1) Does not include perquisites and other personal benefits where the aggregate value of
such compensation to the executive officer is less than 10% of annual salary and bonus.
(2) Includes salary deferrals under the WISP.
(3) Comprises bonuses under the WIN Plan, which were accrued during the fiscal year indicated
but were paid in the following fiscal year.
<PAGE>
(4) Includes life insurance premiums paid by the Company and Company matching contributions
under the WISP. Under the WISP, the Company makes matching contributions of 25% of each
participant's contribution subject to a maximum of 1.5% of an employee's compensation up to $9,240.
The amounts for 1996 are as follows:
WISP Insurance
---- --------
Passano, W. $ 2,375 $ 6,885
Hutton $ 2,375 $ 8,318
Urban $ 0 $ 0
Newman $ 2,375 $ 585
Wills $ 1,446 $ 390
(5) Dr. Urban's compensation has been converted into dollars based upon the currency
exchange rate of .6494 DM per dollar as of December 31, 1996, .6961 DM per dollar
in effect on December 29, 1995, and .6453 DM per dollar in effect December 30, 1994.
</TABLE>
Option Grants in Last Fiscal Year
---------------------------------
The following table sets forth information concerning the grant and
exercise of options in the last fiscal year under the Waverly, Inc. 1996
Employee Stock Option Plan to the persons named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS Potential Realizable
---------------------------------------------------- Value at Assumed
Number Annual Rates of
of Securities % of Total Stock Price
Underlying Options Granted Exercise Appreciation for
Options to Employees in Price Expiration Option Term (2)
Name Granted(1) Fiscal Year ($/Sh) Date 0% 5% 10%
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Passano, W. 0 0.0% $ 0.00 N/A $0 $ 0 $ 0
Hutton 17,000 15.1% $21.125 2/9/06 $0 $225,852 $572,353
Urban 0 0.0% $ 0.00 N/A $0 $ 0 $ 0
Newman 9,000 8.0% $21.125 2/9/06 $0 $119,569 $303,010
Wills 6,000 5.3% $21.125 2/9/06 $0 $ 79,712 $202,007
----------------------------------
<PAGE>
<FN>
(1) All options were granted with an exercise price equal to the fair market value of the
Common Stock underlying the option on the date of the grant. The options are exercisable
to the extent of 25% of the shares one year from the grant date, an additional 25%
two years from the grant date, an additional 25% three years from the grant date, and
in full four years from the grant date, subject to such limitations as are imposed by
Section 162(m) of the Internal Revenue Code on qualified options, unless accelerated
upon a change in control, retirement, death or disability. These options have a
term of ten years, unless terminated sooner in connection with death, disability,
retirement or termination.
(2) Amounts are based on the 0%, 5% and 10% annual compounded rates of appreciation of the
Common Stock price, prescribed by the Securities and Exchange Commission, and are not
intended to forecast future appreciation of the Company's Common Stock. The prices of
the Common Stock, assuming such annual compounded rates of appreciation, would be
$21.125, $34.41 and $54.79, respectively.
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
------------------------------------------------------------------------
The following table provides information with respect to the stock
options exercised during fiscal year ended December 31, 1996 and the value
as of December 31, 1996 of unexercised in-the-money options held by the named
executive officers. The value realized on the exercise of options is
calculated using the difference between the per share option exercise price
and the market value of a share on the date of the exercise. The value of
unexercised in-the-money options at fiscal year end is calculated using the
difference between the per share option exercise price and the market value
of $23.75 per share at fiscal year end, December 31, 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired on Value Options at FY-End Options at FY-End
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Passano, W. 9,600 $158,400 110,400 5,000 $1,600,100 $ 61,250
Hutton 0 0 208,644 53,356 2,914,639 482,486
Urban 5,000 $ 53,125 0 2,500 0 36,250
Newman 0 0 50,000 18,000 692,125 120,375
Wills 0 $ 0 41,100 12,000 578,213 80,250
-----------------------------------
</TABLE>
DEFINED BENEFIT PENSION PLAN
----------------------------
The Company has a trusteed, noncontributory, defined benefit pension
plan in which all U.S. employees are eligible to participate. The plan
provides for an annual retirement benefit payable monthly based on the sum
of (i) amounts accrued to date under various career average pay formulae and
(ii) amounts accruing beginning for 1989 based on the following
formula: 1.5% of participant's compensation plus .65% of earnings in excess
of the Social Security Covered Compensation (the average of Social Security
Taxable Wage Basis for a specified 35-year period) for each year of credited
service. Earnings for purposes of the pension plan include base salary and
commissions but not overtime or bonuses. Benefits are payable upon
retirement, death or disability or upon termination of employment after five
years of service. Benefits are not subject to reduction for Social Security
benefits. At their normal retirement at age 65, the estimated annual
retirement payments (based on compensation for 1996 and subject to the
limitations imposed by IRS regulations) would be as follows: Mr. Hutton,
$72,767; Mr. Newman, $70,113; and Ms. Wills, $63,513. Mr. William
Passano, Jr.'s annual retirement payments, assuming retirement at age 70,
would be $103,282.
<PAGE>
The Company's subsidiary, Urban & Schwarzenberg, has agreed to provide
supplementary retirement benefits to two current and thirteen former
employees, including Dr. Urban. Monthly benefits are payable upon retirement
based upon 50% of the retiree's highest achieved salary level. Upon the
retiree's death, his or her spouse and/or other specified beneficiaries are
generally entitled to receive a benefit payment. At his normal retirement at
age 65, the estimated annual retirement payment to Dr. Urban under this plan
(based on compensation for 1996) would be 232,500 DM (approximately
$150,985).
STOCK PERFORMANCE GRAPH
-----------------------
In accordance with Securities Exchange Act regulations, the following
performance graph compares the performance of the Company's Common Stock
with the S&P 500 Index and with the Dow Jones Media/Publishing Index.
The graph assumes that the value of the investment in the Company's
Common Stock and in each Index was $100 at December 31, 1991, and that all
dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Year Waverly, Inc. S&P 500 Index Dow Media Index
---- ------------- ------------- ---------------
1991 $100.00 $100.00 $100.00
1992 154.37 107.60 116.82
1993 111.51 118.39 131.07
1994 177.78 119.96 125.59
1995 312.90 165.03 154.65
1996 327.09 202.80 179.00
<PAGE>
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company, upon the recommendation of its
Audit Committee, none of the members of which is an officer or employee of
the Company, proposes and recommends approval of the appointment of Coopers
& Lybrand L.L.P. as independent accountants to make an examination of the
accounts of the Company for the year ending December 31, 1997. Coopers &
Lybrand L.L.P. was the independent accounting firm for the Company's most
recently completed fiscal year ended December 31, 1996.
Representatives of Coopers & Lybrand L.L.P. are expected to be present
at the shareholders' meeting. They will be given the opportunity to make a
statement, if they desire to do so, and will be available to respond to
appropriate questions.
The Board of Directors recommends a vote "FOR" the proposal to approve
the appointment of Coopers & Lybrand L.L.P. as the Company's independent
accountants for 1997.
VOTE REQUIRED TO APPROVE MATTERS
--------------------------------
A majority of the outstanding shares of Common Stock entitled to vote at
this meeting, represented in person or by proxy, will constitute a quorum. The
election of directors requires a plurality of votes cast at the meeting. The
ratification of the appointment of Coopers & Lybrand L.L.P. as independent
accountants of the Company requires the affirmative vote of a majority of
the votes cast at the meeting.
Votes cast by proxy or in person at the meeting will be tabulated by the
inspectors of election appointed for the meeting. Proxies marked with
abstentions, and shareholders present at the meeting who abstain from voting,
will be treated as present for purposes of determining the presence of a
quorum. Any "broker non-votes" (i.e., proxies from brokers or nominees
marked to indicate that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares as to the vote on
a particular matter with respect to which the brokers or nominees do not have
discretionary power to vote) will be disregarded.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
--------------------------------------------
Shareholders' proposals for the 1998 Annual Meeting must be received at
the Company's principal executive offices not later than November 30, 1997
to be considered for inclusion in the Company's 1998 Proxy Statement.
OTHER BUSINESS
--------------
As of the date of this Proxy Statement, Management does not intend to
bring any other matters before the meeting requiring action of the
shareholders, nor does it have any information that other matters will be
brought before the meeting. However, if any other matters requiring the
vote of the shareholders properly come before the meeting, the persons named
in the enclosed form of proxy intend to vote in accordance with their best
judgment.
By order of the Board of Directors
E. MAGRUDER PASSANO, JR.
Secretary
March 25, 1997
