<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
IKON Office Solutions, 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF IKON OFFICE SOLUTIONS]
----------------
Notice of Annual Meeting of Shareholders
February 21, 2001
----------------
To the Shareholders of IKON Office Solutions, Inc. ("IKON" or the "Company"):
You are invited to be present either in person or by proxy at the 2001
annual meeting of shareholders of IKON to be held at the Company's offices at
70 Valley Stream Parkway, Malvern, Pennsylvania 19355 on Wednesday, February
21, 2001, at 9:00 a.m. to consider and act upon the following proposals:
1. To elect ten members of the Board of Directors to serve until the next
annual meeting of shareholders and until their successors have been elected
and qualified; and
2. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on December 22, 2000 are
entitled to vote at the annual meeting and any adjournments thereof. All
shareholders are urged to attend the meeting or to vote by proxy.
In order to attend the meeting, you must present an admission ticket or
provide separate verification of share ownership. If you do not expect to
attend the meeting in person, please sign and return the accompanying proxy in
the enclosed postage prepaid envelope. If you later find that you can be
present or for any other reason desire to revoke your proxy, you can do so at
any time before the voting.
/s/ James J. Forese
Chairman and Chief Executive Officer
Malvern, Pennsylvania
January 4, 2001
<PAGE>
IKON Office Solutions, Inc.
P.O. Box 834
Valley Forge, Pennsylvania 19482-0834
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of IKON Office Solutions, Inc. ("IKON" or the
"Company") of proxies to be voted at its annual meeting of shareholders on
February 21, 2001 and all adjournments thereof. The proxy statement and proxy
card will be first mailed to shareholders on or about January 4, 2001.
Only holders of record of common stock at the close of business on December
22, 2000 will be entitled to vote. On that date, there were 141,698,352 shares
of common stock outstanding. Each share of common stock entitles the holder
thereof to one vote.
ELECTION OF DIRECTORS
Nominees for Election as Directors
A Board consisting of ten directors is proposed to be elected to serve until
the next annual meeting of shareholders and until their successors have been
elected and qualified. The Board unanimously recommends a vote "For" the
election of the ten nominees listed below. All of the nominees are now
directors of IKON. Signed proxies not marked to the contrary will be voted
"For" the election of all nominees for directors. The Board is not aware that
any nominee named herein will be unable or unwilling to accept nomination or
election. Should any nominee for the office of director become unable to
accept nomination or election, the persons named in the proxy will vote for
the election of such other person, if any, as the Board may recommend.
<TABLE>
<CAPTION>
Year
became
Name Principal occupation or employment for past five years director Age
---- ------------------------------------------------------ -------- ---
<S> <C> <C> <C>
Judith M. Bell.......... President, Bell Retail Group (1994-Present); Managing 1998 64
Partner, Bell Retail Group (1995-Present); Managing
Partner, Bell's Market Grill (1984-Present); Proprietor,
The Men's Shop at the Broadmoor (1973-1999); Co-Proprie-
tor, A Short Story Inc. (1994-1999); President, United
States Golf Association (1996-1997) (also a director of
Hayden Hays Gallery, Southern Colorado Chapter of the
Arthritis Foundation and a Trustee of the El Pomar Foun-
dation; and Consulting Director, USGA Foundation (2000-
Present))
James R. Birle.......... Chairman, Resolute Partners, LLC, a private investment 1996 64
firm (1994- Present); General Partner, The Blackstone
Group (1988-1994) (also a director of Massachusetts Mu-
tual Life Insurance Company, The Connecticut Health and
Education Facilities Authority, Transparency Interna-
tional and a Trustee of Villanova University)
Philip E. Cushing....... Group Chief Executive, Vitec Group PLC, a British-based 1997 50
company in broadcast, video and photographic camera
equipment business (2000-Present); Group Chief Executive
(1996-1999), Group Managing Director (1995-1996), Direc-
tor-Services (1992-1995), Inchcape PLC, a British-based
international distribution business
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Year
became
Name Principal occupation or employment for past five years director Age
---- ------------------------------------------------------ -------- ---
<S> <C> <C> <C>
James J. Forese......... Chairman of the Board (2000-Present), President and Chief 1998 65
Executive Officer (1998-Present), Executive Vice Presi-
dent of International Operations (1996-1998), Executive
Vice President and Chief Operating Officer (1996), IKON
Office Solutions, Inc.; IBM Vice President and Chairman
of IBM Credit Corporation (1993-1995), Vice President-
Finance, International Business Machines (1990-1993)
(also a director of American Management Systems and NUI
Corporation)
Robert M. Furek......... Chairman, State Board of Trustees, Hartford, Connecticut 1999 58
School System (1997-2000); Partner, Resolute Partners,
LLC, a Private investment firm (1997-Present); President
and Chief Executive Officer, Heublein, Inc. (1987-1996);
Executive Director of International Distillery and Vint-
ner (1992-1996) (also a director of Massachusetts Mutual
Life Insurance Company and a former director of Dexter
Corporation)
Thomas R. Gibson........ Chairman and Co-founder (1994-Present), Chairman, Chief 1999 58
Executive Officer and Co-Founder, Asbury Automotive
Group (1994-2000); President and Chief Executive Offi-
cer, Spectator Management Group, a stadium and arena
management company (1992-1994); President and Chief Op-
erating Officer, Subaru of America (1985-1992)
Richard A. Jalkut....... Lead Independent Director (2000-Present), Non-Executive 1996 56
Chairman, IKON Office Solutions, Inc. (1998-2000); Pres-
ident and Chief Executive Officer, PathNet, a telecommu-
nications company (1997- Present); President and Group
Executive, Nynex Telecommunications Group (1992-1997)
(also a director of HSBC-USA, Home Wireless Network and
DIGEX)
Arthur E. Johnson....... Vice President, Corporate Strategic Development, Lockheed 1999 53
Martin Corporation (1999-Present); President and Chief
Operating Officer, Lockheed Martin Information and Serv-
ices Sector (1997-1999); President, Lockheed Martin Sys-
tems Integration Group (1997); President, Lockheed Mar-
tin Federal System (1996-1997); Group Vice President,
Loral Federal System (1994-1996)
Kurt M. Landgraf........ President, Educational Testing Service (2000-Present); 2000 54
Executive Vice President and Chief Operating Officer,
E.I. DuPont de Nemours & Company (1998-2000); Chairman
of DuPont Europe (1997-2000) and The DuPont Pharmaceuti-
cal Company (1997-2000); Executive Vice President,
DuPont U.S. (1997-1998); Chief Financial Officer, E.I.
DuPont de Nemours & Company (1996-1997); President and
Chief Executive Officer, The DuPont Merck Pharmaceutical
Company (1993-1996) (also Chairman of the Board of
Christiana Care Health Services, Inc. and a director of
University of Delaware Research Foundation and the Dela-
ware Biotechnology Institute)
Marilyn Ware............ Chairman of the Board (1988-Present), Chairman of Execu- 2000 57
tive Committee (1989-Present), Vice Chairman of the
Board and Chairman of Compensation Committee, American
Water Works Company, Inc. (1984-1988); Manager, Amworks,
LLC (1996-Present); General Partner, Waterworks Associ-
ates, L.P. (1998-Present); General Partner, Ware Associ-
ates, L.P. (1998-Present); (also a director of CIGNA
Corporation)
</TABLE>
2
<PAGE>
Security Ownership
As of December 1, 2000, shares of common stock of IKON were beneficially
owned (as determined by rules of the Securities and Exchange Commission) by
the current directors and nominees, by each of the individuals named in the
Summary Compensation Table on page 10, by all current directors and executive
officers of IKON as a group, and by each person or group known to beneficially
own more than 5% of the outstanding shares of IKON, as follows:
<TABLE>
<CAPTION>
Ownership
-------------------------------------------------------
Percentage
Sole Voting Shared Voting Acquirable of
and and/or within Ownership
Investment Power Investment Power 60 Days (%)
---------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C>
Judith M. Bell.......... 3,003 0 36,163 *
James R. Birle.......... 6,970 0 61,781 *
Philip E. Cushing....... 7,320 0 42,650 *
James J. Forese......... 142,751 2,088 434,807 *
Robert M. Furek......... 16,115 0 12,000 *
David M. Gadra.......... 5,803 4,567 27,281 *
Thomas R. Gibson........ 19,190 0 12,000 *
Richard A. Jalkut....... 10,872 0 73,010 *
Arthur E. Johnson....... 493 0 12,000 *
Kurt M. Landgraf........ 984 0 12,000 *
Dennis P. LeStrange..... 9,873 11,915 50,730 *
Don H. Liu.............. 12,000 1,947 15,000 *
Barbara A. Pellow....... 5,000 1,337 10,000 *
William S. Urkiel....... 30,000 1,918 25,000 *
Marilyn Ware............ 1,000 0 1,000 *
All current directors
and executive officers
as a group............. 277,695 44,181 844,379 *
Barrow Hanley Mewhinney
& Strauss(1)........... 13,561,410 3,364,100 0 11.890
3232 McKinney Avenue,
15th Floor
Dallas, TX 75204-2429
Capital Research &
Management(2).......... 0 17,377,400 0 12.210
333 South Hope Street,
55th Floor
Los Angeles, CA 21348-
9200
Jennison Associates,
LLC(3)................. 0 8,819,600 0 6.197
466 Lexington Avenue
New York, NY 10017
</TABLE>
* Less than 1%.
(1) According to Schedule 13G filed on February 8, 2000.
(2) According to Schedule 13G filed on February 10, 2000.
(3) According to Schedule 13G filed on October 6, 2000.
Section 16(a) Beneficial Ownership Reporting Compliance
For the fiscal year ended September 30, 2000, IKON believes all reports
required to be filed pursuant to Section 16(a) of the Securities Exchange Act
of 1934 on behalf of IKON's directors and executive officers to reflect
beneficial ownership of IKON's securities were timely filed. Mr. Jalkut was
required to file a report on Form 4 for the month of July, 2000 in order to
report the cancellation of 32,080 shares of IKON common stock as a result of
adjustment in his compensation due to a change in Mr. Jalkut's
responsibilities on IKON's Board.
3
<PAGE>
Committees of the Board of Directors; Meetings
During fiscal 2000, there were four standing committees of the Board: the
Audit Committee, the Human Resources Committee, the Investment and Strategy
Committee and the Executive Committee. Between meetings of the Board, certain
of its powers may be exercised by these standing committees, and these
committees, as well as the Board, sometimes act by unanimous written consent.
A description of the foregoing committees and their composition follows.
The Audit Committee is chaired by Mr. Birle and, effective January, 2001,
will be chaired by Mr. Landgraf. Messrs. Birle, Cushing, Landgraf, and Gibson
are members of this Committee. Its functions are to review the report of
IKON's independent auditors relating to their audit of the financial
statements of IKON, and to review and discuss internal financial controls and
accounting procedures with both the independent auditors and the internal
auditors. The Audit Committee met six times during the fiscal year ended
September 30, 2000.
The Human Resources Committee is chaired by Mr. Furek. Mr. Jalkut, Mr.
Johnson, Ms. Bell and Ms. Ware are also members of this Committee. Ms. Ware is
a new director and received a committee appointment in July, 2000. The
Committee is responsible for reviewing and evaluating persons who are
suggested as nominees for election as members of the Board or as executive
officers of the Company, and for making recommendations to the Board
concerning such nominees. The Human Resources Committee is also responsible
for evaluating the performance of the Chief Executive Officer, setting
policies regarding executive compensation and determining the salaries and
other compensation of each of the executive officers of the Company (See
"Human Resources Committee Report on Executive Compensation" on page 6). The
Committee has all of the powers and exercises all of the duties of the Board
of Directors as described in the Company's stock option, stock purchase,
deferred compensation and other similar plans. The Human Resources Committee
met four times during the fiscal year ended September 30, 2000.
The Investment and Strategy Committee is chaired by Mr. Cushing. Messrs.
Gibson, Johnson and Landgraf are also members of this Committee. Its functions
are to review and approve acquisitions and divestitures of businesses, and to
recommend to the Board the issuance of stock or debt with respect thereto, to
approve capital expenditures and to review investment-related activity and
business strategy and direction of the Company. The Investment and Strategy
Committee met once during the fiscal year ended September 30, 2000. Most of
the Committee's functions were performed by the full Board.
The Executive Committee is co-chaired by Messrs. Jalkut and Birle. Messrs.
Forese, Furek and Gibson are also members of the Committee. The Executive
Committee has been granted and exercises the powers of the Board between
regular meetings of the Board. The Executive Committee met twice during the
fiscal year ended September 30, 2000.
During the fiscal year ended September 30, 2000, the Board met twelve times.
Each director attended at least 75% of the total number of each of the
meetings of the Board and the meetings of the committees on which he or she
served.
4
<PAGE>
PERFORMANCE OF IKON COMMON STOCK
The following graph compares the cumulative total shareholder return of IKON
common stock with the cumulative total return of: (i) the Standard & Poor's
500 Stock Index; (ii) an industry peer group consisting of the following
companies: Danka Business Systems, Inc., Global Imaging Systems, Inc., Hewlett
Packard Company, Lanier Worldwide, Inc., Lexmark International Group, Inc.,
Pitney Bowes, Inc., and Xerox Corporation (the "Peer Group"); and (iii)
Russell 2000 Index. Cumulative total shareholder return is measured by
assuming an investment of $100 made on October 1, 1995 (with dividends
reinvested). The newly selected Russell 2000 Index was chosen because as of
June 28, 2000, Standard & Poor's announced that IKON was being replaced on the
S&P 500 Index with another company. IKON is now a member of the Russell 2000
Index, which will replace the S&P 500 Index as its broad equity index for
fiscal 2001.
[CHART OF IKON COMMON STOCK]
CUMULATIVE TOTAL RETURN
Based Upon an initial investment of $100 on September 30, 1995
with dividends reinvested
[GRAPH]
Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00
Ikon Office Solutions $100 $119 $76 $22 $33 $12
S&P 500(R) $100 $120 $169 $184 $236 $267
Russell 200(R) Index $100 $113 $151 $122 $145 $179
Custom Composite Index (7 Stocks) $100 $121 $182 $173 $239 $207
SOURCE: GEORGESON SHAREHOLDER COMMUNICATIONS INC.
On December 31, 1996, the Company completed a spin-off of its wholly-owned
subsidiary, Unisource Worldwide, Inc. ("Unisource"), its paper and supply
systems distribution business, by distributing a tax-free dividend to the
Company's shareholders consisting of all of the common shares of Unisource. In
the graph shown above, the prices for the Company's common stock for the
period from October 1, 1995 through December 31, 1996 have been adjusted
downward by an amount equal to the value of the Unisource dividend, measured
as of the date of the spin-off.
5
<PAGE>
COMMITTEE REPORTS AND EXECUTIVE COMPENSATION
Audit Committee Report
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting functions and internal
controls. The Audit Committee is composed of independent directors, and acts
under a written charter adopted and approved by the Board of Directors in
April 2000. Each of the members of the Audit Committee is independent, as
defined by the New York Stock Exchange listing standards. A copy of the Audit
Committee Charter is attached to this Proxy Statement as Appendix A.
The responsibilities of the Audit Committee include recommending to the
Board an accounting firm to be engaged as the Company's independent
accountants. The Audit Committee is responsible for recommending to the Board
that the Company's financial statements be included in it's annual report. The
Audit Committee took a number of steps in making this recommendation for
fiscal year 2000. First, the Audit Committee discussed with
PricewaterhouseCoopers LLP ("PwC"), the Company's independent accountants for
fiscal 2000, those matters required to be discussed by Statement on Auditing
Standards. No. 61, including information regarding the scope and results of
the audit. These communications and discussions are intended to assist the
Audit Committee in overseeing the financial reporting and disclosure process.
Second, the Audit Committee discussed with PwC its independence and received
from PwC a letter concerning independence as required under applicable
independence standards for auditors of public companies. This discussion and
disclosure assisted the Audit Committee in evaluating such independence.
Finally, the Audit Committee reviewed and discussed, with the Company's
management and PwC, the Company's audited consolidated balance sheets at
September 30, 2000, and consolidated statements of income, cash flows and
stockholders' equity for the fiscal year ended September 30, 2000. Based on
the discussions with PwC concerning the audit, the independence discussions,
and the financial statement review, and such other matters deemed relevant and
appropriate by the Audit Committee, the Audit Committee recommended to the
Board that the Company's financial statements be included in it's 2000 Annual
Report on Form 10-K.
The Audit Committee of the Board of Directors
James R. Birle (Chairman)
Philip E. Cushing
Thomas R. Gibson
Kurt M. Landgraf
Human Resources Committee Report on Executive Compensation
The Company's executive compensation program is administered by the Human
Resources Committee of the Board, which has responsibility for all aspects of
the compensation program for the executive officers of the Company. The Human
Resources Committee is comprised of the directors listed at the end of this
report, none of whom is an employee of the Company and each of whom qualifies
as a non-employee director for purposes of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and an outside director for purposes of
Section 162(m) of the Internal Revenue Code (the "Code").
A key objective of the Committee is to establish and administer programs
which attract and retain key executives, and to align their compensation with
IKON's performance, business strategies and growth in shareholder value. To
this end, the Committee has established, and the Board has endorsed, an
executive compensation philosophy which includes the following elements:
--A "pay-for-performance" orientation under which compensation reflects
corporate and individual performance;
--An emphasis on stock incentives to closely align the interest of
executives with the long-term interests of shareholders;
6
<PAGE>
--An emphasis on total compensation under which base salaries are generally
set at or near competitive levels but which motivates and rewards executives
with total compensation, including incentive programs, at or above competitive
levels if corporate and/or individual performance is superior;
--An appropriate balance of short-term and long-term compensation which
facilitates retention of talented executives, rewards long-term strategic
planning, and encourages IKON stock ownership;
--Recognition that as an executive's level of responsibility increases, a
greater portion of the total compensation opportunity should be based on stock
and other performance incentives and less on salary and benefits; and
--Recognition that selective use of executive employment, noncompete and
change-in-control agreements will enable IKON to attract and retain talented
key executives, and will enable management to place its exclusive focus on
strategic planning and operational issues affecting the business.
As a matter of policy, the Committee has structured the Company's executive
compensation plans so that cash and option awards under such plans generally
will be excluded from compensation subject to the $1,000,000 deduction limit
of Section 162(m) of the Code, subject to consideration of other corporate
objectives.
The primary components of the Company's executive compensation program are
(a) base salaries; (b) annual cash bonus opportunities; (c) long-term
incentive opportunities; and (d) executive employment, noncompete and change-
in-control agreements.
Base Salaries
Base salaries for executive officers are established at the beginning of the
term of the executive's employment contract based on a comparison to
competitive market levels for the executive's job function. During the term of
the contract, the executive's base salary is subject to upward adjustment on
the basis of individual, and corporate performance, as well as competitive,
inflationary and internal equity considerations. Prior to expiration of the
contract term, the Committee evaluates the executive's contribution to the
Company, makes a determination as to whether to continue the executive in his
or her current position, and reviews the executive's current base salary (in
light of current market levels and the executive's performance) to determine
whether such base salary should be adjusted upward or downward.
In determining the compensation of the Company's executives, the Committee
has considered the relevant market not to be limited to the companies included
in the industry peer group used for the performance graph on page 5. Because
of the Company's previous distribution focus, the companies considered to be
comparable to IKON for compensation purposes have historically included a
broad cross-section of companies which are representative of distribution
companies generally.
In setting the base salary of $825,000 for Mr. Forese for fiscal 2000
(pursuant to the negotiation of his employment contract), the Committee
evaluated the factors described above, which are used for setting compensation
generally. Mr. Forese's record and leadership abilities as the Company's
President and Chief Executive Officer, and previously as Executive Vice
President and President of International Operations, and Mr. Forese's success
in implementing corporate initiatives to restructure the Company, grow
revenues, reduce costs and increase organizational discipline during the 2000
fiscal year.
Annual Bonus
Annual bonus payments to executive officers are awarded pursuant to the IKON
Office Solutions, Inc. Annual Bonus Plan, and are based on corporate
performance compared to the targets established for the year. These annual
bonus payments are in amounts equal to a percentage of base salary. For fiscal
2000, the Committee determined that annual bonus targets for executive
officers, including the individuals named in the Summary Compensation Table,
would be based on achievement of operating income, cash flow and revenue
targets for the Company.
7
<PAGE>
In addition to the bonus amounts described above, if certain executive
officers deliver outstanding business unit and individual performance, they
are eligible to earn a discretionary "overachievement" bonus in amounts equal
to a percentage of their base salary. In order to receive this additional
overachievement bonus, the executive must demonstrate outstanding execution of
operational plan and individual performance criteria.
For fiscal 2000, Mr. Forese received a bonus of $712,800, which represents
57.6% of his fiscal 2000 bonus opportunity, based on achievement of a 70.9% of
the Company's pre-established operating income target; 142.8% of the Company's
pre-established cash flow target, and 98.8% of the Company's pre-established
revenue growth target. For the other executive officers named in the Summary
Compensation Table, bonus awards for fiscal 2000 were based on the Company's
performance described above.
Long Term Incentive Compensation
LTIP Cash Awards
Cash awards are granted pursuant to the IKON Office Solutions, Inc. Long
Term Incentive Compensation Plan ("LTIP"), and vest only if certain
performance criteria are met. The executive's entitlement to receive an LTIP
cash award is based on the achievement of objective performance goals over
successive three-year periods (with a new three-year period beginning every
fiscal year), and LTIP cash awards, if vested, are paid at the end of each
such three-year period. In fiscal 2000, no executive officer was eligible to
earn an LTIP cash award.
Restricted Stock Awards
Restricted stock awards are granted pursuant to the LTIP, and vest only if
the executive remains in the continuous employment of IKON through the
applicable vesting date. Such awards are made in order to reward performance
that contributes to IKON's success, and in order to attract, motivate and
retain qualified senior executives. The shares of IKON common stock underlying
the restricted stock award generally are issued and distributed in equal
annual installments over a three-year period beginning on the third
anniversary of the grant date, if the executive remains a full-time active
employee of the Company on the applicable distribution date. During fiscal
2000, all of the individuals named in the Summary Compensation Table on page
10 received restricted stock awards, in amounts set forth in such table.
Stock Options
Stock options are granted as a reward for past performance and as motivation
for future performance which maximizes shareholder value. Stock options are
generally granted for ten-year terms and vest over specified employment
periods. Stock options generally have an exercise price equal to the fair
market value of IKON common stock on the date of grant, although, in order to
provide an incentive to Mr. Forese to deliver performance which increases
shareholder value, certain options granted to Mr. Forese pursuant to his
employment contract have exercise prices above fair market value, as set forth
in the Option Grant Table on page 11.
On January 21, 2000 Mr. Forese, received an option grant as an incentive for
future performance. The amount of such option grant is set forth in the
Summary Compensation Table on page 10. In addition, during fiscal 2000, Ms.
Pellow received an option grant in connection with her appointment as an
executive officer of the Company.
Employment Contracts
The Committee believes that the selective use of employment, non-compete and
change-in-control contracts provides leadership continuity which benefits the
Company's shareholders and employees, and safeguards the Company against the
risks associated with former key executives entering into certain competitive
business or employment relationships. In addition, such contracts allow senior
management to focus exclusively on strategic
8
<PAGE>
planning and financial and operational issues affecting the business, and
create an incentive for executives to drive performance which will contribute
to shareholder value and future growth. Accordingly, employment and non-
compete agreements are in place with Messrs. Forese, Urkiel, LeStrange, Gadra,
Liu, Ms. Pellow and certain other senior executives. In addition, change-in-
control arrangements are in place with certain other senior executives,
including all of the current executives named in the Summary Compensation
Table. For further information on executive employment, non-compete and
change-in-control contracts see "Change-in-Control Arrangements, Executive
Employment Contracts and Severance Arrangements" beginning on page 12.
Summary of Compensation Philosophy
The Committee is firmly committed to the ongoing review and evaluation of
the Company's executive compensation practices. The Committee believes that
such review will ensure that IKON's pay practices are in keeping with the
practices of comparable companies and will ensure that such practices create
significant performance incentives for executives while maximizing shareholder
value.
The Human Resources Committee of the Board of Directors
Robert M. Furek (Chairman)
Richard A. Jalkut
Judith M. Bell
Arthur E. Johnson
Marilyn Ware
9
<PAGE>
Summary of Executive Compensation
The following table sets forth information concerning compensation paid by
the Company during the fiscal years ended September 30, 2000, 1999 and 1998
to: 1) James J. Forese, Chairman and Chief Executive Officer of the Company,
and 2) each of the next five most highly compensated executive officers of the
Company as of September 30, 2000.
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Annual Compensation(2) Long-Term Compensation
----------------------------------------------------------------------------------------
Awards Payouts
--------------------- --------------------------
Securities Restricted All Other
Name And Principal Fiscal Underlying Stock LTIP Compensation
Position(1) Year Salary($) Bonus($) Options Awards Payouts($)(3) ($)(4)
------------------ ------ ----------- ----------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James J. Forese 2000 825,000 712,800 191,000 129,250 0 26,334
Chairman and 1999 750,000 750,000 635,000 12,500 0 18,760
Chief Executive Officer 1998 450,000 0 13,500 0 194,375 42,922
David M. Gadra 2000 290,000 141,960 0 25,000 0 6,834
Senior Vice President
and 1999 270,000 170,000 30,000 15,000 0 11,872
Chief Information
Officer 1998 234,167 0 9,100 0 0 29,450
Dennis P. LeStrange 2000 335,000 194,000 0 40,000 0 13,879
Senior Vice President, 1999 287,192 200,000 40,000 20,000 0 304,944
IKON North America 1998 228,231 244,000 59,000 0 0 210,693
Don H. Liu 2000 300,000 135,200 0 25,000 0 6,834
Senior Vice President
and 1999 141,555 92,000 75,000 25,000 0 1,394
General Counsel
Barbara A. Pellow 2000 275,000 155,200 50,000 55,000 0 7,035
Senior Vice President, 1999 5,289 0 0 0 0 0
Marketing
William S. Urkiel 2000 400,000 232,800 0 30,000 0 76,821
Senior Vice President
and 1999 145,385 150,000 125,000 50,000 0 3,711
Chief Financial Officer
</TABLE>
(1) During the first half of fiscal 1998, Mr. Forese was Executive Vice
President and President of International Operations, and in July 1998, he
assumed the position of President and Chief Executive Officer. During the
second half of fiscal 2000, Mr. Forese assumed the additional position of
Chairman. During the first half of fiscal 1998, Mr. LeStrange was
President of IKON's Northeast District; in August 1998, he became Senior
Vice President-Marketing of IKON Business Services, and in May 1999, he
was promoted to the position described above. During a portion of fiscal
1999 and during fiscal 2000, each of Mr. Urkiel, Mr. Liu, and Ms. Pellow
assumed the positions described above. No disclosure of salary information
is included for Mr. Liu, Ms. Pellow and Mr. Urkiel for fiscal 1998 as such
individuals were not employees of the Company at such time.
(2) During fiscal 1999, Mr. Liu, Ms. Pellow and Mr. Urkiel received a pro-
rata share of their respective salaries and, for Messrs. Liu and Urkiel,
of their respective bonuses.
(3) LTIP payouts for fiscal 1998 were distributed in the form of cash. For
fiscal 1998, an LTIP payout represents awards attributable to fiscal 1995
and/or 1996 performance. During fiscal 1999 and 2000, there were no LTIP
payouts.
(4) Includes the value of shares of IKON common stock purchased with matching
company contributions under IKON's 401K Plan, calculated as of the date of
purchase. For fiscal 2000, such matching company
10
<PAGE>
contributions were as follows: James J. Forese--$6,834; David M. Gadra--
$6,834, Dennis P. LeStrange--$6,834, Don H. Liu--$6,834, Barbara A.
Pellow--$7,035, and William S. Urkiel--$6,683. For Mr. LeStrange, the
remaining amounts represent relocation compensation (including a gross-up
for taxes) totaling $262,326 in 1999 and $151,400 in 1998 (as further
described under Executive Employment Contracts and Severance Arrangements
on page 13), and an automobile allowance of $7,045 for fiscal 2000 and
$6,000 for fiscal 1999 and 1998. For Mr. Forese, the remaining amount
represents an automobile allowance of $19,500 for fiscal 2000. For Mr.
Urkiel, the remaining amount represents moving and relocation assistance in
the amount of $70,138 in connection with his 1999 relocation to the
Company's headquarters in Pennsylvania (as described under Executive
Employment Contracts and Severance Arrangements on pages 13 through 15).
Option Grants
The following table shows option grants to the individuals named in the
Summary Compensation Table during the fiscal year ended September 30, 2000:
Option Grants in Last Fiscal Year
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Total
Number of Options
Securities Granted to Exercise
Underlying Employees or Base Grant
Options in Fiscal Price Expiration Date
Name Granted (#) Year (%) ($/Sh) Date Value ($)
---- ----------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
James J. Forese......... 191,000(1) 5.51 9.125 01/21/2010 775,460
Barbara A. Pellow....... 50,000(2) 1.44 9.625 10/20/2009 214,000
</TABLE>
(1) These nonqualified stock options were granted at an exercise price equal
to the fair market value of IKON common stock on the date of grant. The
present value of each stock option was $4.06 on the date of grant,
calculated using the Black-Scholes option valuation methodology, based on
the following assumptions: (a) ten-year option term; (b) the options
become exercisable 20% per year beginning on the first anniversary of the
date of grant; (c) 6.80% expected risk-free rate of return; (d) 49.7%
expected volatility; and (e) 1.75% expected dividend yield.
(2) The above figure represents two grants of nonqualified stock options each
to purchase 25,000 shares of common stock. These options were granted at
an exercise price equal to the fair market value of IKON common stock on
the date of grant. The present value of each stock option was $4.28 on the
date of grant, calculated using the Black-Scholes option valuation
methodology, based on the following assumptions: (a) ten-year option term;
(b) the options become exercisable 20% on the first anniversary of the
date of grant; (c) 6.41% expected risk-free rate of return; (d) 48.9%
expected volatility; and (e) 1.66% expected dividend yield.
Option Exercises
The individuals named in the Summary Compensation Table did not exercise any
options during the fiscal year ended September 30, 2000.
Pension Plan and Supplemental Retirement Plans
IKON employees who are United States residents and who meet certain age and
service requirements (other than certain individuals who were previously
employed by IKON's Technology Services group) are participants in a pension
plan (the "Pension Plan"), which provides to eligible retired employees at age
65 annual pension benefits equal to the number of years of credited service
multiplied by 1% of average annual compensation earned during the three
consecutive years within the employee's last ten years of participation in the
Pension Plan which yield the highest average. All Pension Plan costs are paid
by IKON and the Pension Plan and benefits thereunder are funded on an
actuarial basis. The years of credited service as of September 30, 2000 for
the
11
<PAGE>
individuals named in the Summary Compensation Table were: James J. Forese--4.8
years; David M. Gadra--4.2 years; Dennis P. LeStrange--12.8 years; Don Liu--
1.6 years; Barbara Pellow--0 years, and William Urkiel--0 years. Since the
Pension Plan imposes a one-year service requirement, Ms. Pellow and Mr. Urkiel
did not become participants until October 1, 2000. Therefore, as of September
30, 2000, they had no years of credited service. Pursuant to the terms of the
Pension Plan, once Mr. Urkiel and Ms. Pellow become participants of the
Pension Plan, credited service is granted retroactive to date of hire.
IKON also sponsors a non-qualified Supplemental Executive Retirement Plan
("SERP"). Coverage under the SERP is limited to participants in the Pension
Plan who are not commissioned sales employees and whose benefits under the
Pension Plan are limited because of (a) restrictions imposed by the Code on
the amount of benefits which may be paid from a tax-qualified plan, (b)
restrictions imposed by the Code on the amount of an employee's compensation
that may be taken into account in calculating benefits to be paid from a tax-
qualified plan, or (c) any reductions in the amount of compensation taken into
account under the Pension Plan because of an employee's participation in
certain deferred compensation plans sponsored by IKON or one of its
participating subsidiaries. The SERP provides for a supplement to the annual
pension paid under the Pension Plan to participants who attain early or normal
retirement under the Pension Plan or who suffer a total and permanent
disability while employed by IKON or one of its participating subsidiaries and
to the pre-retirement death benefits payable under the Pension Plan on behalf
of such participants who die with a vested interest in the Pension Plan. The
amount of the supplement will be the difference, if any, between the pension
or pre-retirement death benefit paid under the Pension Plan and that which
would otherwise have been payable but for the restrictions imposed by the Code
and any reduction in the participant's compensation for purposes of the
Pension Plan because of his participation in certain deferred compensation
plans of IKON or one of its participating subsidiaries. The maximum amount of
annual compensation upon which such supplement may be based is $500,000 per
participant.
The following table shows estimated annual retirement benefits that would be
payable to participants under IKON's Pension Plan and, if applicable, the
SERP, upon normal retirement at age 65 under various assumptions as to final
average annual compensation and years of credited service and on the
assumption that benefits will be paid in the form of a single life annuity.
The benefits are not subject to any deduction for Social Security benefits.
<TABLE>
<CAPTION>
Estimated Annual Retirement Benefits
---------------------------------------------------------------------------
Years of Credited Service
------------------------------------------
Final Average Compensation 5 10 20 30 35
-------------------------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$200,000........................ $10,000 $20,000 $ 40,000 $ 60,000 $ 70,000
250,000........................ 12,500 25,000 50,000 75,000 87,500
300,000........................ 15,000 30,000 60,000 90,000 105,000
400,000........................ 20,000 40,000 80,000 120,000 140,000
500,000 or above............... 25,000 50,000 100,000 150,000 175,000
</TABLE>
Covered compensation under the Pension Plan and SERP of individuals named in
the Summary Compensation Table includes salary and bonus as set forth in the
Summary Compensation Table.
Change-in-Control Arrangements, Executive Employment Contracts and Severance
Arrangements
Change-in-Control Arrangements--Employee Benefit Plans and Executive
Arrangements
IKON's stock option plans, deferred compensation plans, LTIP and
supplemental executive retirement plan provide for accelerated vesting (and,
for certain plans, accelerated payout of benefits) for all participants upon a
change-in-control. In addition, accelerated vesting is provided to
participants in the Company's 401(k) plan and Pension Plan upon a change-in-
control followed by the participant's involuntary employment termination
within two years following the change-in-control.
12
<PAGE>
The Committee has authorized change-in-control agreements with senior
executive officers and other key executives. For Messrs. LeStrange, Gadra,
Urkiel, Liu, and Ms. Pellow, the agreements provide that, in the event of a
change-in-control (or, in some circumstances, a potential change-in-control)
followed by the executive's involuntary termination of employment (or
termination of employment by the executive for good reason) within two years
after such change-in-control, the executive will receive the following: 1)
full vesting in IKON's restricted stock, stock options and 401(k) plan (if
participating in such plans), 2) the executive's annual bonus opportunity for
the year in which termination occurs, prorated to the date of termination, 3)
a severance benefit equal to two times salary and two times bonus opportunity,
4) continued group hospitalization, health, dental care, life insurance,
disability insurance and participation in other employee benefit plans for two
years, 5) an amount equal to the benefit associated with two years of credited
service under the Company's pension plans, 6) an amount equal to the value of
two years of company contributions under the 401(k) plan (if participating),
payment obligation to the Company, and 7) reimbursement for excise taxes (if
any) payable as a result of benefits received upon a change-in-control. In the
event that the terms of any employee benefit plan require vesting or payment
upon an earlier date than the executive's change-in-control agreement, the
earlier date will prevail. The change-in-control agreements further provide
that, in the event of a change-in-control (or, in some circumstances, a
potential change-in-control), followed by the executive's involuntary
termination of employment (or termination by the executive for good reason)
within two years following the change-in-control, any noncompete restrictions
otherwise applicable to the executive shall be void.
The employment contract for Mr. Forese contains change-in-control provisions
which are identical to the provisions in the executive change-in-control
arrangements described above, except that, upon involuntary employment
termination within two years following a change-in-control, Mr. Forese will
receive a severance benefit equal to three times salary and three times
maximum bonus. Mr. Forese will also receive continued group hospitalization,
health, dental care, life insurance, disability insurance and participation in
other employee benefit plans for three years, and will receive an amount equal
to three years of company contributions or credited service under the
Company's 401(k) plan and pension plans. Mr. Forese will also be entitled to
the continued right to exercise each outstanding stock option (except the
special stock option to purchase 500,000 shares granted to Mr. Forese pursuant
to his employment contract, referred to below as "Special Stock Option") for
the lesser of two years or the remainder of its stated term, and he will be
entitled to exercise the Special Stock Option for the lesser of five years or
the remainder of its stated term. Mr. Forese is subject to nonsolicitation and
noncompetition restrictions upon employment termination except under certain
circumstances following a change-in-control.
Executive Employment Contracts and Severance Arrangements
The following describes the executive employment contracts and severance
arrangements which are in place for the current executives named in the
Summary Compensation Table on page 10.
James J. Forese
Mr. Forese executed a three-year employment contract with the Company
effective October 1, 1998, subject to two annual automatic renewal provisions
after expiration of the initial term unless either Mr. Forese or the Company
provide appropriate notice of an intention not to renew. Mr. Forese's annual
salary for fiscal 2000 was $825,000, and pursuant to the contract, it is
subject to annual increase in the discretion of the Human Resources Committee.
The contract also provides that Mr. Forese shall be eligible to earn an annual
bonus of at least 150% of annual salary (subject to achievement of applicable
performance goals). Mr. Forese is also eligible to receive cash awards
pursuant to the Company's LTIP, ranging from 90% to 180% of his base salary
(upon achievement of certain performance goals), and a corresponding option
grant. For the LTIP plan period from October 1, 1998 through September 30,
2001 (1999-2001 LTIP), Mr. Forese is eligible to receive a maximum cash award
of $1,012,500, and received a corresponding grant of 135,000 options.
If Mr. Forese voluntarily terminates employment during the term of the
contract (in circumstances that do not constitute a constructive termination
without cause), or is terminated for cause, no severance benefit is provided
and Mr. Forese shall forfeit all stock options not exercisable on the
termination date. Absent a change-
13
<PAGE>
in-control (or, in certain circumstances, a potential change-in-control), if
Mr. Forese's employment is terminated without cause (or due to constructive
discharge without cause), Mr. Forese will receive: 1) base salary continuation
through the later of September 30, 2001 or the second anniversary of his
termination date, 2) a pro rata bonus for the year of termination, 3) bonus
payments for a two-year period after termination, 4) the right to exercise any
outstanding stock option, other than the Special Stock Option, for a three-
month period following employment termination or the option's stated term, 5)
the right to exercise the Special Stock Option for the lesser of five years or
the remainder of its stated term, 6) an accelerated LTIP payout for all
outstanding plan periods, and 7) continued participation in medical, dental,
vision, hospitalization, disability, life insurance coverage and other
employee benefit plans through the later of September 30, 2001 or the second
anniversary of his termination date. If Mr. Forese's employment is terminated
for death or disability, Mr. Forese will receive: 1) base salary continuation
through the month of termination; 2) a pro rata bonus for the year of
termination; 3) the right to exercise any outstanding stock option, other than
the Special Stock Option, for a twelve-month period following employment
termination, all such options to become fully exercisable as of the
termination date; 4) the right to exercise the Special Stock Option for the
lesser of five years or the remainder of its stated term; 5) pro rata LTIP
payments; and 6) (if for disability) continued participation in medical,
dental, vision, hospitalization, disability, life insurance coverage and other
employee benefit plans through age 65. Mr. Forese's contract also provides
that Mr. Forese is subject to noncompetition and nonsolicitation restrictions
upon employment termination except under certain circumstances following a
change-in-control or potential change-in-control.
Finally, Mr. Forese's employment contract contains certain additional
provisions regarding payment of benefits upon employment termination following
a change-in-control (or, in certain circumstances, a potential change-in-
control), which are further described under "Change-in-Control Arrangements--
Employee Benefit Plans and Executive Arrangements," beginning on page 12.
Other Senior Executive Officers
Each of the Company's other senior executive officers named in the Summary
Compensation Table on page 10, have executed a two year employment contract.
Each contract provides for a minimum annual base salary for the given fiscal
year listed in the Summary Compensation Table, a target bonus opportunity
("Target Bonus Opportunity"), and an additional overachievement bonus award
("Overachievement Bonus Opportunity"). If any executive officer's employment
is involuntarily terminated by the Company without cause during the contract
term, he will receive a severance benefit equal to the base salary for two
years following the date of termination, pro-rata bonus for the fiscal year in
which his employment terminates, immediate vesting under the Company's
retirement and deferred compensation plans and continued participation in the
Company's group hospitalization, health, dental care, life insurance,
disability and other employee benefit plans for two years following the date
of termination, and have the right to exercise all exercisable options for a
period of 3 months after termination. If any executive officer's employment is
terminated due to death or disability, he shall be entitled to the same
benefits as set forth above for a termination without cause except that he
will also have all shares of restricted stock immediately distributed upon
termination and the right to exercise all unexercised options for a period of
12 months following termination, all such options to become fully vested upon
the termination date. If any executive officer voluntarily terminates
employment during the term, or is terminated for cause, he shall be entitled
to receive unpaid base salary until the date of termination, and any unpaid
accrued bonus and benefits under the Company's benefit plans as of the date of
termination, and the right to exercise the vested options for a period of 30
days. Unless otherwise determined by the Human Resources Committee or except
as set forth below, all unvested options will be forfeited upon any
termination of employment (other than due to death, disability or a change-in-
control) and each executive officer is subject to non-competition and non-
solicitation restrictions upon employment termination except under certain
circumstances following a change-in-control (or in certain circumstances, a
potential change-in-control).
Mr. Gadra's employment contract is effective April 1, 2000 and provides for
a Target Bonus Opportunity of at least $210,000 and an Overachievement Bonus
Opportunity of up to $105,000. Mr. LeStrange's
14
<PAGE>
employment contract is effective January 1, 2000 and provides for a Target
Bonus Opportunity of at least $250,000. Mr. LeStrange also receives certain
fringe benefits pursuant to his employment contract. Mr. Liu's employment
contract is effective March 15, 1999 and provides for a Target Bonus
Opportunity of at least $200,000. Pursuant to Mr. Liu's employment contract,
he received a grant of 25,000 shares of restricted common stock ("Restricted
Stock") payable over a period of five years in three equal annual installments
commencing March 15, 2002, provided that Mr. Liu is a full-time active
employee of the Company on each distribution date. Mr. Liu also received a
one-time special grant of 40,000 stock options ("Special Stock Options") and a
regular grant of 35,000 stock options as of March 15, 1999, each grant
exercisable over a period of five years in five equal annual installments
commencing on March 15, 2000. Ms. Pellow's employment contract is effective
August 5, 1999 and provides for a Target Bonus Opportunity of at least
$200,000. Pursuant to Ms. Pellow's employment contract, she received a grant
of 25,000 shares of Restricted Stock payable over a period of five years in
three equal annual installments commencing September 13, 2002, provided that
Ms. Pellow is a full-time active employee of the Company on each distribution
date. Ms. Pellow also received a one-time grant of 25,000 Special Stock
Options and a regular grant of 25,000 stock options on October 20, 1999, each
grant exercisable over a period of five years in five equal annual
installments commencing on the grant date. Mr. Urkiel's employment contract is
effective May 10, 1999 and provides a Target Bonus Opportunity of at least
$300,000 and an Overachievement Bonus Opportunity of up to $150,000. Pursuant
to Mr. Urkiel's employment contract, he received a grant of 50,000 shares of
Restricted Stock payable as follows: (1) 25,000 shares over a period of five
years in three equal annual installments commencing May 10, 2002, (2) 12,500
shares on May 10, 2004, and (3) 12,500 shares on May 10, 2009, provided that
Mr. Urkiel is a full-time active employee of the Company on each distribution
date. Mr. Urkiel also received a one-time grant of 50,000 Special Stock
Options and a regular grant of 75,000 stock options as of May 10, 1999, each
grant exercisable over a period of five years in five equal annual
installments commencing on May 10, 2000. Mr. Urkiel also received moving and
relocation assistance in connection with his 1999 relocation to the Company's
headquarters in Pennsylvania. In addition, for each of Mr. Liu, Ms. Pellow and
Mr. Urkiel, upon involuntary termination of employment by the Company without
cause, all shares of their respective Restricted Stock shall immediately vest
and the unvested Special Stock Options shall become fully exercisable for a
period of two years following the termination date.
Directors' Compensation
The Company's 2000 directors' compensation year began on February 1, 2000
and will end on January 31, 2001. All independent directors receive a base
director's fee of $30,000 per year for service on the Board. No attendance
fees are paid for attendance at regularly scheduled Board and committee
meetings, but a fee of $1,000 per meeting is paid for attendance at special
meetings. In addition to the foregoing base director's fee, during the 2000
directors' compensation year, Mr. Jalkut received a fee of $42,500 for serving
as Non-Executive Chairman and Co-Chairman of the Executive Committee during
the first quarter of 2000 directors' compensation year, $26,250 for serving as
Lead Independent Director and Co-Chairman of the Executive Committee during
the remaining three quarters of 2000 directors' compensation year and $750 for
serving as Chairman of the Human Resources Committee during the first quarter
of 2000 directors' compensation year. Mr. Birle received a fee of $38,000 for
serving as Chairman of the Audit Committee and Co-Chairman of the Executive
Committee, Mr. Cushing received a fee of $3,000 for serving as Chairman of the
Investment and Strategy Committee, and Mr. Furek received a fee of $2,250 for
serving as Chairman of the Human Resources Committee during the last three
quarters of 2000 directors' compensation year. All of the Company's non-
employee directors elected to receive the foregoing fees in the form of
options to purchase IKON common stock (as further described below under
"Option Grants in Respect of Directors' Fees"), except that Mr. Cushing and
Ms. Ware received all fees in cash and Mr. Jalkut received $49,750 of the
foregoing fees in cash.
For the directors' compensation year beginning on February 1, 2001, the
Company expects that the directors' fees as described above will remain
substantially unchanged.
Option Grants in Respect of Directors' Fees
IKON's Stock Option Plan for Non-Employee Directors (the "Directors' Option
Plan") enables directors of IKON to receive all or a portion of their
directors' fees in the form of options to purchase IKON common
15
<PAGE>
stock. The exercise price of such options equals 100% of the fair market value
of IKON common stock on the date of grant, with 25% of the exercise price
payable with directors' fees applied to the option exercise price at the time
of grant, and the remaining 75% payable in cash upon exercise. The Directors'
Option Plan provides for an annual grant of such stock options to each
director who has filed with IKON an election to receive options in lieu of all
or a portion of his or her Board and/or committee fees. The options are
exercisable for twenty years (except in the case of death), but generally may
not be exercised prior to the twelve-month anniversary of the date of grant.
Annual Option Grant
In addition to the above options, each independent director receives an
automatic annual grant of options to purchase 7,000 shares of IKON common
stock pursuant to the Directors' Option Plan. Options are granted at an
exercise price equal to the fair market value of IKON common stock on the date
of grant. Options are immediately exercisable and remain exercisable for a
period of ten years from the date of grant.
Restricted Stock Awards
Each non-employee director also receives an annual award of 1,750 shares of
restricted common stock, which vest 20% per year beginning on the first
anniversary of the date of grant.
New Director Options
Each new non-employee director of IKON receives a one-time grant of 25,000
options to purchase IKON common stock. The options are granted at an exercise
price equal to the fair market value of IKON common stock on the date of
grant, vest 20% per year beginning on the first anniversary of the date of
grant, and have a ten-year term.
GENERAL AND OTHER MATTERS
The Board knows of no matter, other than as referred to in this proxy
statement, which will be presented at the 2001 annual meeting of shareholders.
However, if other matters properly come before the meeting or any of its
adjournments, the person or persons voting the proxies will vote them in
accordance with their judgment in such matters.
The cost of soliciting proxies will be borne by the Company. Employees of
IKON may solicit proxies personally or by telephone. In addition to
solicitation by mail and by employees, arrangements have been made with
Georgeson Shareholder Communication, Inc. to solicit proxies, at an expected
cost of $9,000 (plus out-of-pocket expenses).
Votes are tabulated by National City Bank, the Company's transfer agent.
Shares represented by abstentions are counted in determining the number of
shares present at a meeting, but are not counted as a vote in favor of a
proposal, and therefore have the same effect as a vote withheld or a vote
against. Broker non-votes are counted in determining the number of shares
present at the meeting, but are treated as shares not voted with respect to
each proposal.
You are urged to sign and return your proxy promptly to make certain your
shares will be voted at the meeting. If you sign and return your proxy, but do
not vote on any director nominee, your shares will be voted in accordance with
the recommendation of the Board of Directors. You may revoke the proxy at any
time before it is voted by giving notice to the Secretary of IKON, and if you
attend the meeting, you may vote your shares in person. For your convenience,
a return envelope is enclosed, requiring no additional postage if mailed in
the United States.
16
<PAGE>
Independent Accountants
On October 24, 2000, pursuant to a recommendation of the Audit Committee of
the Company, the Board approved the engagement of PwC as the Company's
independent auditors for the fiscal year ending September 30, 2001.
Representatives of PwC are expected to be present at the meeting, will have
the opportunity to make a statement if they desire to do so, and are expected
to be available to respond to appropriate questions.
The reports of the Company's previous independent auditors, Ernst & Young,
LLP ("E&Y"), on the Company's consolidated financial statements for the fiscal
years ended September 30, 1999 and 1998 did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
In connection with the audits of the Company's financial statements for the
Company's fiscal years ended September 30, 2000 and 1999, and the interim
period through December 28, 1999 (the date of E&Y's dismissal as the Company's
independent auditor), (1) there were no disagreements with E&Y on any matters
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of E&Y, would have caused E&Y to make a reference to the matter
of the disagreements in connection with its reports in the financial
statements for such years; and (2) there were no "reportable events" as that
term is described in Item 304(a)(1)(v) of Regulation S-K.
2002 Annual Meeting
Shareholders may submit proposals on matters appropriate for shareholder
action at the Company's annual meetings consistent with the Company's Code of
Regulations and regulations adopted by the SEC. For shareholder proposals to
be considered by the Board for inclusion in the Proxy Statement and form of
proxy relating to the 2002 annual meeting of shareholders, they must be
received by the Company not later than September 7, 2001. If any shareholder
wishes to present a proposal to the 2002 annual meeting of shareholders that
is not included in the Company's Proxy Statement relating to such meeting and
fails to submit such proposal to the Secretary of the Company on or before
November 21, 2001, then the Board will be allowed to use its discretionary
voting authority when the proposal is raised at the annual meeting. All
proposals should be addressed to the Company at P.O. Box 834, Valley Forge, PA
19482-0834, Attention: Secretary. Nothing in this paragraph shall be deemed to
require the Company to permit presentation of a shareholder proposal or to
include in its proxy materials relating to such annual meeting of shareholders
any shareholder proposal which does not meet all of the requirements for
presentation or inclusion established by the Company's Code of Regulations
and/or the regulations of the SEC at that time in effect.
Annual Report on Form 10-K
Upon the written request of any shareholder entitled to vote at the upcoming
Annual Meeting, the Company will furnish to such shareholder, without charge,
a copy of the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2000. Such requests should be directed to IKON's website at
www.IKON.com or to: Investor Relations, IKON Office Solutions, Inc., P.O. Box
834, Valley Forge, PA 19482-0834.
DON H. LIU
Secretary
January 4, 2001
17
<PAGE>
Appendix A
IKON OFFICE SOLUTIONS
Audit Committee Charter
Responsibilities and Reporting
The Audit Committee reports to the Board of Directors and shall assist the
Board of Directors in fulfilling its responsibilities to shareholders relating
to the quality and integrity of corporate accounting and reporting, internal
controls and the audit process. The Committee shall, on behalf of the Board,
assess the independence of the company's internal and external audit effort,
review management's and the auditors' assessment of the adequacy of the system
of internal control and their assessment of the adequacy of financial
disclosures to shareholders. Additionally, the Committee may perform other
oversight functions as requested by the Board.
The Committee shall report its activities to the full Board regularly and
issue annually a summary report to be included in the company's proxy
statement that discloses that the Audit Committee has:
. Reviewed financial statements with management and the independent
accountants.
. Discussed matters outlined in SAS 61 (Communications with Audit Committee).
. Discussed with the independent accountants their independence relative to
the company and received their annual disclosure in the form of a written
affirmation.
This report shall also disclose whether the Audit Committee recommends to
the Board of Directors that the audited financial statements be included in
the company's Annual Report on Form 10-K.
The names of the Audit Committee members shall be printed in the company's
proxy statement beneath the annual audit committee report. Also, the Audit
Committee Charter shall be disclosed in the company's proxy statement appendix
once every three years.
Members/Composition
The Audit Committee shall be composed of not less than three members,
appointed annually by the Board. All of the members of the audit committee
shall be outside directors, having general knowledge about financial and
auditing matters, with at least one member having accounting or financial
management expertise. Also, each member of the Committee shall be free of any
relationship that interferes with exercising independent judgment.
Orientation/Ongoing Training for Committee Members
The Audit Committee shall be briefed from time to time by top management,
risk managers, compliance managers, information technology leaders, and
internal and external auditors on key topics, such as business and financial
risks, exposures, complex transactions, operational issues, and legal or
regulatory issues. New members shall, as deemed necessary, have access to
company management and specific information to get the requisite background on
key business practices, policies, risks and issues.
Meetings
The Committee shall meet at least four times a year.
Authority
The Audit Committee is granted authority to investigate any activity of the
company and it is empowered to retain persons having special competence as
necessary to assist the Committee in fulfilling its responsibilities.
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Continuous Flow of Information to Committee Members
The Audit Committee shall identify and routinely access all relevant
information necessary to carry out its responsibilities, including key
operating reports of the company. The Committee shall, at its discretion, make
use of outside resources to help review and assess such information.
Specific Duties
Relationship with Independent Accountants
. Annually review the qualifications of and recommend to the Board the
appointment of independent auditors for the company. In connection with
such recommendations, the Committee shall review fees paid to and services
performed by the independent accountants, as well as affirm that the
independent accountants are in fact independent by obtaining written
affirmation from the independent accountants. The Committee shall also
review annually the type and extent of non-audit services performed by the
independent accountants and consider their relevance to the issue of
independence.
. Provide for direct communication between the Board and the independent
accountants in order to assure their independence. The Committee will
provide immediate access through the Audit Committee Chairman for the
independent accountants to report any special matters they believe should
be brought to the attention of the Board.
-- Maintain free and open communication with the independent accountants.
Hold individual private sessions with the independent accountants at
least annually.
. Review with the independent accountants the scope and nature, as well as
rigor of the audit process. Emphasis should be placed on their examination
with regards to the accounting and financial areas where the Committee,
management or the accountants believe special attention should be directed.
. Receive and review all reports from the independent accountants.
. Review financial statements (including quarterly financial statements) with
management, internal audit and the independent accountants. These
discussions should include:
-- quality of earnings
-- reserves and accruals
-- suitability of accounting principles
-- any proposed changes or developments in accounting or financial
reporting practices and other significant unusual events
-- judgmental areas
-- audit adjustments
-- management's controls over the quarterly reporting process
-- other inquiries where appropriate
. Review with the independent accountants:
-- significant accounting estimates and the reasonableness of the
assumptions
-- results of their audit, including their opinion on the financial
statements
-- their evaluation of the adequacy and quality of the system of internal
control and controls over the financial reporting process
-- significant disputes, if any, with management, and
-- cooperation received from management in the conduct of the audit
. Annually review the management letter comments and management's responses.
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<PAGE>
. Clearly communicate the Committee's expectations of the independent
auditors, at least on an annual basis, including the expected nature, style
and timing of communications with the Committee, and any requests for
expanded involvement in business, regulatory or other issues. Performance
against those expectations shall be measured regularly.
Relationship with Internal Audit Department
. Provide for direct communication between the Board and the Internal Audit
Department in order to assure its independence. The Committee will provide
immediate access, through the Audit Committee Chairman, for the Internal
Auditors to report any special matters they believe should be brought to
the attention of the Board.
-- Maintain free and open communication with Internal Audit. Hold
individual private sessions with Internal Audit at least annually.
. Review and affirm the appointment or dismissal of the Vice President,
Internal Audit.
. Review the Internal Audit Department's objectives and resources, its annual
budget and audit plan, including its coordination with the examination
performed by the independent accountants, and its audit activity reports.
. Review officers' expenses and benefits for compliance with approved
policies and procedures.
. Review the results of the Internal Audit activities each quarter and for
the year. This review should include evaluation of the quality of internal
controls and the adequacy of management's actions to address control
weaknesses.
. Clearly communicate the Committee's expectations of the Internal Auditors,
at least on an annual basis, including the expected auditor involvement in
reviewing controls, monitoring specific areas of concern, communicating
with the Committee, and any requests for expanded involvement in regulatory
or other issues. Performance against those expectations shall be measured
regularly.
Relationship with Management
. Before publication, review the annual financial statements and related
footnotes and Management's Discussion and Analysis of Financial Condition
and Results of Operations contained in the company's annual report on Form
10-K and Annual Report to Shareholders.
. Review any significant changes in accounting principles proposed by
management.
. Inquire whether a second opinion regarding a significant accounting matter
had been sought and, if so, discuss the accounting selected.
. Review the significant accounting and reporting developments affecting
company.
. Review the quality of internal controls.
. Maintain free and open communication with management. Hold individual
private sessions with management at least annually.
Specific Duties
Other
. Review periodically with management the program established to monitor
compliance with the company's Code of Ethics.
. Review with management, internal audit and the independent public
accountant the company's compliance with laws, regulations, policies,
ethics and rules regarding conflicts of interest.
. Periodically review with management the status of any significant pending
litigation, tax matters and other legal and compliance areas involving the
company.
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. Periodically perform self-assessment of audit committee performance.
. Review financial and accounting personnel succession planning within the
company.
. Review and reassess the adequacy of the Audit Committee Charter at least
annually and submit such proposed changes to the Board for approval.
******
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PROMPTLY COMPLETE AND RETURN THE
PROXY/VOTING INSTRUCTION FORM BELOW
IN THE ENVELOPE PROVIDED
Carefully fold & detach along perforation
--------------------------------------------------------------------------------
PROXY/VOTING INSTRUCTION CARD
IKON OFFICE SOLUTIONS, INC.
This proxy is solicited on behalf of the Board of
Directors of IKON Office Solutions, Inc. The
undersigned hereby appoints Don H. Liu and Irene
A. Belot-Pave, or either of them, each with power
of substitution, as proxies for the undersigned to
vote all shares of Common Stock of IKON Office
Solutions, Inc. which the undersigned is entitled
to vote at the Annual Meeting of Shareholders to
be held on February 21, 2001, and any adjournments
thereof ("2001 Annual Meeting"), as hereinafter
specified and, in their discretion, upon such
other matters as may properly come before the
meeting. The presence at the 2001 Annual Meeting,
in person or by proxy, of at least a majority of
the votes entitled to be cast at the meeting
constitutes a quorum.
For employees of IKON Office Solutions, Inc.,
this proxy also provides voting instructions for
shares held for the account of the undersigned in
the IKON Office Solutions, Inc. Retirement Savings
Plan. The trustees for the Plan will vote these
shares as directed, provided you sign and return a
proxy containing your voting instructions by
February 15, 2001. If no voting instructions are
received, the trustees of the Plan may vote your
shares in their discretion (in the absence of
voting instructions, the trustees will generally
vote your shares in accordance with the
recommendation of the Board of Directors). Shares
owned by you other than those held in the Plan
will be voted only if you sign and return a proxy,
or attend the meeting and vote by ballot. If you
return a proxy and fail to specify a choice on any
matter, your shares will be voted in accordance
with the recommendation of the Board of Directors.
The Board of Directors recommends a vote in favor
of the proposal described below. Member firms of
the New York Stock Exchange have authority to vote
on the proposal described below as a routine item
and need not decline to vote in the absence of
voting instructions from an investor.
1. Election of Directors (Mark only one)
[_] Vote FOR all nominees listed below and
recommended by the Board of Directors
[_] Vote WITHHELD from all nominees
(except as directed to the contrary below)
Judith M. Bell, James R. Birle, Philip E. Cushing,
James J. Forese, Robert M. Furek, Thomas R.
Gibson, Richard A. Jalkut, Arthur E. Johnson, Kurt
M. Landgraf, Marilyn Ware
INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name in
the space provided below.
---------------------------------------------------
(continued, and to be signed, on other side)
<PAGE>
PROMPTLY COMPLETE AND RETURN THE
PROXY/VOTING INSTRUCTION FORM BELOW
IN THE ENVELOPE PROVIDED
Carefully fold & detach along perforation
--------------------------------------------------------------------------------
(continued from other side)
NO.
[_] Mark Here if
You Plan to
Attend 2001
Annual Meeting.
In order to
attend the
meeting, you must
present an
admission ticket
or provide
separate
verification of
share ownership.
An admission
ticket will be
mailed to any
shareholder who
indicates an
intention to
attend.
-
PLEASE SIGN, DATE, DETACH AND RETURN THIS PROXY,
USING THE ENCLOSED POSTAGE PREPAID REPLY ENVELOPE.
Dated ______ SIGN HERE ___________
When shares are held by joint
tenants, both joint tenants
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If the signer is a
corporation, sign the full
corporate name by duly authorized
officer. This proxy revokes all
proxies heretofore given.
*
