SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
Amendment No. 1
For Annual and Transition Reports Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
Commission File Number 0-6311
WAVERLY, INC.
(Exact name of Registrant as specified in its charter)
Maryland 52-0523730
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
351 West Camden Street
Baltimore, Maryland 21201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 410-528-4000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, $2 par value Nasdaq Stock Market
Indicate by check mark whether the Registrant (1) : has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [ X ]
[Cover page 1 of 2 pages.]
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $144,616,875, or $39.00 per share as of February 14, 1998. The
number of shares outstanding of the Registrant's Common Stock was 9,039,576 as
of February 14, 1998.
[Cover page 2 of 2 pages.]
<PAGE>
The purpose of this Amendment 1 is to amend and restate the following
items of the Annual Report on Form 10-K for the fiscal year ended December 31,
1997, of Waverly, Inc.(the "Company"):
Part III
Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management
Page 1
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant.
<TABLE>
<CAPTION>
The following table sets forth certain information with respect to the current
directors of the Company as of February 14, 1998:
Director
Name and Age Other Positions with the Company and Principal Occupations Since
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
David J. Callard (59) President, Wand Partners, Inc., 1974
private investment firm, New York, NY
Edward B. Hutton, Jr. (52) President and Chief Executive Officer 1988
Michael E. Johns (56) Executive Vice President for Health Affairs; 1993
Director, Robert W. Woodruff Health Sciences Center
Emory University, Atlanta, GA
John F. Spahr, Jr. (47) Managing Director, Teton Data Systems, 1991
Jackson, WY
Michael Urban (58) President and Chief Executive Officer, Urban & 1990
Schwarzenberg Verlag fur Medizin GmbH, a subsidiary of
the Company
Barbara J. Bonnell (66) Director of Research and Information, Baltimore 1974
Development Corporation, Baltimore, MD
Donald W. Dick, Jr. (55) Principal, EuroCapital Advisors, LLC, private 1980
investment firm, Weehawken, NJ
Carolyn Manuszak (59) President, Villa Julie College, Stevenson, MD 1987
E. Magruder Passano, Jr. (55) Vice Chairman of the Board, Secretary 1972
Richard C. Riggs, Jr. (58) President and CEO, Barton-Cotton, Inc., Baltimore, MD 1995
Samuel G. Macfarlane (66) Consultant and former Vice President and Chief 1966
Financial Officer and Treasurer of Waverly, Inc.
Ackneil M. Muldrow, II (60) President and CEO, Development Credit Fund, Inc., 1992
Baltimore, MD
Joseph M. Palazzolo (48) Chairman, Gateway Investments, Inc., 1996
Muttontown, NY
William M. Passano, Jr. (69) Chairman of the Board 1965
<FN>
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.
</FN>
</TABLE>
Page 2
<PAGE>
The directors currently on the Board of Directors of the Company have been
engaged in the principal occupation indicated in the foregoing table for the
five years preceding December 31, 1997, 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. 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, the T. Rowe Price Balanced
Fund, Inc., the T. Rowe Price Mid-Cap Growth 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 T. Rowe
Price Diversified Small-Cap Growth Fund, Inc., the T. Rowe Price
Media & Telecommunications Fund, Inc., the T. Rowe Price Real Estate
Fund, Inc., the T. Rowe Price Small-Cap Stock Fund, Inc., the T. Rowe Price
Tax-Efficient Balanced 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.
Pursuant to the terms of an Agreement and Plan of Merger between the
Company and Lea & Febiger, L.P., 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 designated member of the Spahr family). If the
Passano Voting Trust (see "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 3
<PAGE>
Pursuant to the Merger Agreement described in Item 1 and promptly upon the
purchase of and payment for Shares by Wolters Kluwer which represent at least
two thirds of the outstanding Shares (on a fully diluted basis), Wolters Kluwer
will be entitled to designate such number of directors, subject to compliance
with Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Rule 14f-1 promulgated thereunder, rounded up to the next
whole number, on the Board of Directors of the Company (the "Company Board") as
is equal to the product of the total number of directors on the Company Board
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Newco, Wolters Kluwer and any of their affiliates bears to the total
number of Shares then outstanding. The Company has agreed to take all action
necessary to cause Wolters Kluwer's designees (the "Designees") to be elected or
appointed to the Company Board and to secure the resignations of such number of
its incumbent directors as is necessary to enable the Designees to be elected to
the Company Board. The Merger Agreement further provides that the Company will
cause the Designees to constitute the same percentage as such individuals
represent on the Company Board of each committee of the Company Board and each
board of directors (and committee thereof) of each subsidiary of the Company.
Prior to the effective time of the Merger, the Company will retain as members of
the Company Board at least two (2) directors that are directors of the Company
on the date of the Merger Agreement; provided, that subsequent to the purchase
of and payment for Shares pursuant to the Offer, the Designees will represent at
least a majority of the entire Company Board, subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder.
<TABLE>
<CAPTION>
Set forth below are the names, ages, titles and principal occupations during the
past five years of the persons who serve as executive officers of the Company:
Position and Business Experience
Name Age During Past Five Years or More
- --------------------------------------------------------------------------------------
<S> <C> <C>
William M. Passano, Jr. 69 Chairman of the Board since 1988.
Chief Executive Officer from
1971 to 1991. Director since
1965. Employed by the Company
since 1955.
E. Magruder Passano, Jr. 55 Vice Chairman, Secretary since
April, 1990. Vice President,
Administration and Corporate
Secretary from 1971 to 1990.
Director since 1972. Employed by
the Company since 1965.
Edward B. Hutton, Jr. 52 President and Director since May,
1988. Chief Executive Officer
since 1991. From 1983 to 1988 was
President of Professional
Information Group of Simon &
Schuster, Inc.
Michael Urban 58 President of Urban & Schwarzenberg
and Director since 1990. Employed
by the Company since the April 1990
acquisition of Urban &
Schwarzenberg. From 1990 has been
President, and Chief Executive
Officer.
Page 4
<PAGE>
Position and Business Experience
Name Age During Past Five Years or More
- ------------------------------------------------------------------------------------
Arthur E. Newman 49 Executive Vice President since
1990. From 1986 through October,
1989 held various executive
positions at Simon & Schuster, Inc.
ending as Chief Operating Officer
of Prentice Hall Information
Services. This division was sold
to Maxwell MacMillan in October
1989, where he continued in the
same capacity until March, 1990.
Frederick Fusting 47 President, Professional Learning
Systems Division since January
1996. Vice President, PLS Division
from 1988 to 1995. Employed by the
Company since 1980.
Richard J. Perry 52 President, Waverly International
since January 1998. President, W &
W Marketing Division 1993 to 1997.
Executive Vice President of Lea &
Febiger from 1991 to 1992. From
1989 to 1990 was Vice President and
General Manager at Times Mirror,
Canada.
Alma J. Wills 50 President, Periodical Publishing
since 1986. Vice President, Journal
Development from 1984 to
1986. Employed by the Company
since 1976.
Stephan Joss 41 Chief Operating Officer of Urban &
Schwarzenberg since 1997.
Executive Vice President since
1992.
E. Philip Hanlon 49 Chief Financial Officer since
1992. Vice President, Finance,
since March, 1989. Vice President,
Marketing-Book division from 1987
to 1989. Controller from 1985 to
1987.
Jonas A. Ryckis 34 Treasurer, since February 1997.
Assistant Treasurer from 1995 to
1997. Employed by the Company
since 1989.
</TABLE>
Page 5
<PAGE>
Item 11. Executive Compensation.
The following Summary Compensation Table sets forth for the fiscal years ended
December 31, 1997, 1996 and 1995 information as to the total compensation
received by each of the Chief Executive Officer and the four highest paid
executive officers who received total compensation in excess of $100,000 in all
capacities.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation(1) Compensation All Other
Name and ------------------------------- Awards Compen-
Principal Position Year Salary($)(2) Bonus($)(3) Options (#) sation($)(4)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William M. Passano, Jr. 1997 340,000 35,200 - 6,734
Chairman of the Board 1996 325,000 56,875 - 9,260
1995 300,000 71,800 - 8,610
Edward B. Hutton, Jr. 1997 375,000 38,800 20,000 28,813
President and CEO 1996 350,000 61,250 17,000 10,693
1995 335,000 80,200 15,000 12,952
Michael Urban
President and CEO, 1997 270,900 - - -
Urban & Schwarzenberg 1996 302,000 67,000 - -
Verlag fur Medizin 1995 313,000 52,500 - 540
GmbH (5)
Arthur E. Newman 1997 215,000 22,200 10,000 2,993
Executive Vice President 1996 205,000 35,875 9,000 2,960
1995 194,000 46,500 9,000 2,811
Alma J. Wills 1997 150,000 29,500 7,000 2,783
President, Periodical 1996 135,000 45,900 6,000 1,836
Publishing 1995 130,000 20,300 6,000 2,018
<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.
(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 1997 are as
follows:
Page 6
<PAGE>
WISP Insurance
---- ---------
Passano, W. $2,375 $ 634
Hutton 2,375 6,743
Urban - -
Newman 2,375 618
Wills 2,375 408
(5) Dr. Urban's compensation has been converted into dollars based upon the
currency exchange rate of .5562 DM per dollar as of December 31, 1997, .6494 DM
per dollar in effect on December 31, 1996, and .6961 DM per dollar in effect
December 29, 1995.
</FN>
</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. 1997 Employee Stock
Option Plan to the persons named in the Summary Compensation Table:
<TABLE>
<CAPTION>
__________________INDIVIDUAL GRANTS_____________
| |
Potential Realizable
Value at Assumed
Number % of Total Annual Rates of
of Securities Options Stock Price
Underlying Granted to Appreciation for
Options Employees in Exercise Option Term(2)
Granted(1) Fiscal year Price Expiration
Name ($/Sh) Date 0% 5% 10%
- ------------------- --------------- --------------- ------------ --------------- ----- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Passano,W. 0 0.0% $ 0.00 N/A $0 $ 0 $ 0
Hutton 20,000 17.35% $21.50 2/14/07 $0 $270,425 $685,309
Urban 0 0.0% $ 0.00 N/A $0 $ 0 $ 0
Newman 10,000 8.67% $21.50 2/14/07 $0 $135,212 $342,655
Wills 7,000 6.07% $21.50 2/14/07 $0 $ 94,649 $239,858
<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 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
Page 7
<PAGE>
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 $21.50, %35.02 and $55.77,
respectively.
</FN>
</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, 1997 and the value as of
December 31, 1997 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 $47.00 per
share at fiscal year end, December 31, 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexerc.
Underlying Unexerc. In-the-Money
Options At FY-End Options At FY-End
Shares ---------------------------- -----------------------------
Acquired on Value
Name Exercise (3) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Passano, W. 4,400 $34,650 111,000 0 $4,172,250 $ 0
Hutton 0 0 217,970 64,030 8,103,368 1,895,258
Urban 0 0 2,500 0 94,375 0
Newman 0 0 56,750 21,250 2,071,469 322,031
Wills 0 0 45,600 14,500 1,678,350 393,188
</TABLE>
Page 8
<PAGE>
Defined Benefit Pension Plan
----------------------------
The Company has a trusteed, noncontributory, defined benefit pension plan
(the "Pension Plan") in which all U.S. employees are eligible to participate.
The Pension 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 age of 65, estimated annual retirement payments (based on
compensation for 1997 and subject to the limitations imposed by Internal Revenue
Service regulations) would be as follows: Mr. Hutton $72,665; Mr. Newman
$69,961; and Ms. Wills $68,006. Mr. William M. Passano, Jr.'s annual retirement
payments, assuming retirement at age 70, would be $ 103,282.
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 age of 65, the estimated
annual retirement payment to Dr. Urban under this plan (based on compensation
for 1997) would be 250,000 DM (approximately $ 139,000).
Severance Policy
----------------
The named executive officers (other than Mr. Passano) are entitled to
receive severance compensation pursuant to the Company's Severance Program.
Pursuant to the Severance Program, Messrs. Hutton and Newman are entitled to
receive 24 months, and Mr. Urban and Ms. Wills are entitled to 15 months,
severance pay (including base salary and prorated bonus) in the event their
employment is terminated by the Company.
Director Compensation
---------------------
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
(the "Plan"), one-half of the director's fee is payable in common stock of the
Company ("Company Stock"). The Company Stock awards are made on the dates of the
Board's regular February and July meetings and consist of the number of Shares
equal to one-half of the director's fee paid on that date divided by the market
value of the Shares on the business day immediately preceding the grant.
Pursuant to the Plan, awards of 169 Shares and 156 Shares were made to each
director (other than Messrs. Callard and Spahr) in February 1997 and July 1997,
respectively. For information regarding Mr. Callard's and Mr. Spahr's waivers of
director compensation, see Item 13, "Certain Relationships and Related
Transactions."
Page 9
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table lists 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 February 14, 1998:
<TABLE>
<CAPTION>
PRINCIPAL HOLDERS OF COMMON STOCK
---------------------------------
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 35.7%
Michael Urban(3)(4) 802,500 8.9%
John F. Spahr, Jr., Robert N. Spahr, Christian C. Febiger
Spahr, Jr. Revocable Trust, K. Spahr Vanderbilt, N. Spahr
Bush, M. Spahr Clement, V. Spahr Heth(5) 495,000 5.5%
All members of the Passano family and their associates,
including the above(6) 5,249,149 57.3%
GeoCapital Corporation(7)
767 Fifth Avenue
New York, NY 10153 706,600 7.8%
Theodore L. Cross and certain persons(8)
200 W. 57th Street - 15th Floor
New York, NY 10019 499,912 5.5%
<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
Page 10
<PAGE>
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 116,500 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 February 23, 1998, states that GeoCapital has sole
dispositive power as to 706,600 shares.
(8) 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.
</FN>
</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.
Page 11
<PAGE>
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 cotrustees. 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.
As a result of these arrangements, the 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.
Page 12
<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 14, 1998:
<TABLE>
<CAPTION>
SECURITY OWNERSHIP OF MANAGEMENT
--------------------------------
Shares Beneficially Percent of Total
Name Owned(1)(2)(3) Outstanding
- ---- ------------------- ----------------
<S> <C> <C>
William M. Passano, Jr., Chairman, Director 283,990(3) 3.1%
E. Magruder Passano, Jr., Vice Chairman, Director 253,765 2.8%
Edward B. Hutton, Jr., President and CEO, Director 232,777 2.5%
Arthur E. Newman, Executive Vice President 62,493 *
Michael Urban, President and CEO, Urban &
Schwarzenberg Verlag fur Medizin GmbH, Director 802,500(4) 8.9%
Alma J. Wills, President, Periodical Publishing 52,540 *
Barbara J. Bonnell, Director 6,454 *
David J. Callard, Director 71,448 *
Donald W. Dick, Jr., Director 4,978 *
Michael E. Johns, Director 1,588 *
Samuel G. Macfarlane, Director 9,120 *
Carolyn Manuszak, Director 1,827 *
Ackneil M. Muldrow, II, Director 1,883 *
Joseph M. Palazzolo, Director 118,584 1.3%
Richard C. Riggs, Jr., Director 1,050 *
John F. Spahr, Jr., Director 155,000 1.7%
All executive officers, directors and nominees for director as a group (27
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) 5,743,916 59.8%
<FN>
(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., 85,000
shares; E. Magruder Passano, Jr., 29,000 shares; Edward B. Hutton, Jr.,
230,110 shares; Arthur E. Newman, 61,478 shares; Alma J. Wills, 45,250
shares; David J. Callard, 12,500 shares; and all other executive officers,
directors and nominee for director as a group (27 persons), 571,363 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."
Page 13
<PAGE>
(4) For a description of the voting trust arrangements relating to these shares,
see the description under "Principal Holders of Common Stock."
</FN>
</TABLE>
In connection with the Merger Agreement, certain stockholders of the
Company, including certain directors and officers of the Company, have entered
into the Stock Option Agreement with Wolters Kluwer and Newco dated as of
February 10, 1998. For information concerning the Stock Option Agreement, see
Item 1, "Business," "Agreement and Plan of Merger with Wolters Kluwer U.S.
Corporation."
Page 14
<PAGE>
Signatures
----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized and the following persons
have signed in the capacities indicated.
Waverly, Inc.
By: /s/Edward B. Hutton, Jr.
------------------------
Edward B. Hutton, Jr.
President, Chief Executive Officer
Dated: April 28, 1998
Page 15
<PAGE>
