<PAGE> 1
[GENERAL BINDING CORPORATION LOGO]
WILLIAM N. LANE, III
Chairman
March 30, 1998
To GBC stockholders:
You are cordially invited to attend the GBC annual meeting of stockholders,
which will be held on Tuesday, May 5, 1998 at 3:30 p.m. at the Holiday Inn North
Shore, 5300 W. Touhy Av., Skokie, Illinois.
At the meeting we shall report to you on the current business and
developments at GBC. The Board of Directors and many of our executives will also
be present to discuss the affairs of the Company with you. After the meeting,
Company products will be demonstrated and refreshments will be served.
Please sign and return the enclosed proxy card to assure that your shares
will be represented. If you plan to attend the meeting, please so indicate in
the appropriate space provided on the card. The proxy will not be used if you do
attend and wish to vote in person.
Sincerely yours,
William N. Lane, III
WILLIAM N. LANE, III
Chairman
<PAGE> 2
GENERAL BINDING CORPORATION
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5, 1998
Northbrook, Illinois
March 30, 1998
The annual meeting of the stockholders of General Binding Corporation (the
"Company") will be held on Tuesday, the 5th day of May, 1998 at 3:30 p.m. local
time, at the Holiday Inn North Shore, 5300 W. Touhy Avenue, Skokie, Illinois for
the following purposes:
1. To elect a board of ten directors for the ensuing year.
2. To act upon a proposal to ratify the selection of Arthur Andersen & Co.
as independent public accountants for the fiscal year 1998.
3. To transact such other business as may properly come before the meeting.
The transfer books will not be closed. Only stockholders of record, at the
close of business on March 18, 1998, are entitled to notice of and to vote at
this meeting or any adjournment thereof.
In order that your shares may be represented at the meeting, in the event
you are not personally present, please sign the proxy and return it in the
enclosed envelope.
By order of the Board of Directors
Steven Rubin
STEVEN RUBIN
Vice President, Secretary &
General Counsel
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE SIGN,
DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN ORDER THAT YOUR SHARES WILL BE
VOTED. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES IS ENCLOSED FOR YOUR CONVENIENCE. IF YOU ATTEND THE MEETING YOU MAY
REVOKE THE PROXY AT ANY TIME BEFORE IT IS VOTED.
<PAGE> 3
GENERAL BINDING CORPORATION
ONE GBC PLAZA
NORTHBROOK, ILLINOIS 60062
------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 5, 1998
------------------
The enclosed proxy is solicited by the Board of Directors of the Company.
It may be revoked at any time before it is exercised, but if not revoked, the
shares represented by the proxy will be voted. If the proxy card is marked to
indicate a choice, the shares will be voted as directed. If no indication is
made, the proxy will be voted FOR the election of directors and FOR the
ratification of the selection of Arthur Andersen & Co. as independent auditors.
You may revoke your proxy by giving written notice of revocation to the
Secretary of the Company at any time before it is voted or by attending the
meeting and voting your shares in person. The expense incurred in the
solicitation of the proxies will be borne by the Company. In addition to this
solicitation by mail, proxies may be solicited by officers, directors, and
regular employees of the Company, without extra compensation, personally and by
mail, telephone or telegraph. Brokers, nominees, fiduciaries and other
custodians will be required to forward soliciting material to the beneficial
owners of shares and will be reimbursed for their expenses. This Proxy Statement
and the enclosed Proxy are being sent to the stockholders of the Company on or
about March 30, 1998.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The voting securities entitled to vote at the meeting are 13,321,395 shares
of Common Stock entitled to one vote per share and 2,398,275 shares of Class B
Common Stock entitled to fifteen votes per share. The record date for
determination of stockholders entitled to vote at the meeting is March 18, 1998.
By virtue of Lane Industries, Inc. direct ownership of the Common Stock and
Class B Common Stock as described below, it controls 88% of the eligible votes
at the meeting.
Abstentions and broker non-votes will be counted for purposes of
determining the presence of a quorum. Broker non-votes will not be counted as
shares present and entitled to vote nor as a vote cast on any matter presented
at the meeting. Directors are elected by a plurality of the votes of the shares
present and entitled to vote. Accordingly, abstentions and broker non-votes will
not have any effect on the election of directors. Action on any other matter is
approved by a majority vote of the shares present and entitled to vote at the
meeting. Accordingly, abstentions will have the effect of a negative vote on
such matters.
Lane Industries, Inc. intends to vote its shares for the election as
directors of the nominees named herein and to ratify the selection of
independent public accountants.
1
<PAGE> 4
The following beneficial owners of the Company's equity securities are the
only persons known to management of the Company who beneficially owned more than
five per cent of any class of the Company's voting securities as of February 28,
1998:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
CLASS OF STOCK NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
-------------- ---------------- -------------------- --------
<S> <C> <C> <C>
Class B Common Stock..... Lane Industries, Inc. 2,398,275(1)(3) 100
One Lane Center
Northbrook, IL 60062
Common Stock............. Lane Industries, Inc. 9,781,334(2)(3) 62.2(4)
One Lane Center
Northbrook, IL 60062
Common Stock............. Ariel Capital Management, Inc. 1,471,891(5) 9.4(4)
307 N. Michigan Ave.
Chicago, IL 60601
</TABLE>
- - ---------------
(1) Class B Common Stock is convertible into Common Stock at the rate of one
share of Common Stock for each Class B share upon presentation of a Class B
share to the transfer agent.
(2) Includes the 2,398,275 Class B shares described in Note (1).
(3) Lane Industries, Inc. has the sole power to vote and to dispose of these
shares. The voting stock of Lane Industries, Inc. is owned by various trusts
under which certain members of the family of William N. Lane, deceased, are
beneficiaries. William N. Lane, III, Chairman and a Director of the Company
and other members of the Lane family are considered to have control of Lane
Industries, Inc. by virtue of their control of the voting stock of Lane
Industries, Inc. through a Voting Trust Agreement under which they act as
Voting Trustees.
(4) As a percent of the outstanding shares after giving effect to the possible
conversion of Class B Common Stock described in Note (1).
(5) As of December 31, 1997 based upon information provided in a Schedule 13-G
filed with the Securities and Exchange Commission and dated February 10,
1998. Ariel Capital has sole dispositive power over all of these shares, has
sole voting power over 1,365,316 of these shares, and shared voting power
over 23,775 of these shares.
ELECTION OF DIRECTORS
It is intended that the proxy will be voted for the election of the ten
nominees for director named below except in the event any of those named should
not continue to be available for election, discretionary authority may be
exercised to vote for a substitute. All of the nominees are current directors
and were elected by the stockholders except for Mr. Miller who was elected to
the Board by the other directors on October 15, 1997. There are no family
relationships among any of the nominees.
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<PAGE> 5
No circumstances are now known which would render any nominee named herein
unavailable. The nominees of Management for election to the Board of Directors,
each to hold office until the next annual meeting, or until his successor is
elected, are as follows:
<TABLE>
<CAPTION>
COMMON STOCK
FIRST YEAR BENEFICIALLY PERCENT
ELECTED PRESENT POSITION OWNED OF
NAME AND AGE DIRECTOR WITH COMPANY FEBRUARY 28, 1998 CLASS(A)
------------ ---------- ---------------- ----------------- --------
<S> <C> <C> <C> <C>
Richard U. De Schutter, 57............. 1997 Director(b) 1,000 0
Theodore Dimitriou, 71................. 1991 Director(c) 2,000 0
Rudolph Grua, 69....................... 1984 Director(d) 48,964(e) .3
Thomas V. Kalebic, 54.................. 1977 Director(f) 77,505(g) .5
William N. Lane, III, 54............... 1977 Chairman and 261,602(i) 1.6
Director(h)
James A. Miller, 55.................... 1997 Director(j) 0 0
Arthur C. Nielsen, Jr., 79............. 1966 Director(k) 25,500 .2
Govi C. Reddy, 53...................... 1994 President and Chief 39,855(m) .3
Executive
Officer, and
Director(l)
Warren R. Rothwell, 81................. 1961 Director(n) 22,213(o) .1
Robert J. Stucker, 53.................. 1987 Director(p) 4,500 0
All Officers and Directors as a
group................................ 918,728(q) 5.8
</TABLE>
- - ---------------
(a) As a percent of outstanding shares after giving effect to the possible
issuance of shares pursuant to the Company's stock option plans described
below and the possible conversion of the Class B Common Stock (see note (1)
to Voting Securities and Principal Stockholders). Percentages less than .1%
are shown as 0%.
(b) Mr. De Schutter is currently the Chairman of the Board and Chief Executive
Officer of G.D. Searle & Co., a specialty pharmaceutical and foods company,
and has been in that position since April, 1995. Prior to assuming those
responsibilities he had been President of Searle since December, 1991.
(c) Mr. Dimitriou is currently the Chairman, and has been for more than the
past five years, the Chairman and a director of Wallace Computer Services,
Inc., a business forms and computer service and supply company.
(d) Mr. Grua is a retired investor. Prior to his retirement at the end of 1995
he had been the Company's President and Chief Executive Officer since May
1, 1984. He is also a director of the Varlen Corporation.
(e) Includes 11,143 shares owned by Mr. Grua's wife, beneficial ownership of
which is disclaimed.
(f) Mr. Kalebic is currently Executive Vice President, Chief Operating Officer
and a Director of Lane Industries, Inc., a company with hotel, home
security, farming and ranching operations in addition to other investments.
He has been an officer of Lane Industries, Inc. since 1975 (see (i) below).
Mr. Kalebic is also a Voting Trustee under the Agreement referenced in note
(3) to Voting Securities and Principal Stockholders.
(g) At March 1, 1998 Mr. Kalebic had outstanding options to acquire from Lane
Industries, Inc. up to 180,000 shares of the Company's Common Stock at
prices ranging from $14.50 to $30.00 each. Of those outstanding options
20,250 were exercisable on March 1, 1998 but are not included in the figure
included in the table.
3
<PAGE> 6
(h) Mr. Lane is the Chairman, President and a Director of Lane Industries,
Inc., and has served in such capacity since September, 1978. He was elected
Chairman of General Binding Corporation in May, 1983. He also currently
serves as a director of Wallace Computer Services, Inc.
(i) Does not include 9,781,334 shares owned by Lane Industries, Inc., an
associate of Mr. Lane, III (see notes (2) and (3) to Voting Securities and
Principal Stockholders). Also includes 20,000 shares exercisable under
stock options by May 1, 1998.
(j) Mr. Miller is currently the President, CEO and a director of Alliant
FoodService, Inc. a broadline food-service distributor. Prior to his
appointment to this position in 1995, he had been serving, since 1991, as
President of Kraft Food Service, the predecessor to Alliant.
(k) Mr. Nielsen is Chairman Emeritus of the A. C. Nielsen Co. and now acts as a
consultant to that Company.
(l) Mr. Reddy became a director in June, 1994 and was named the Company's
President and Chief Executive Officer effective January 1, 1995. He has
been employed by the Company since July, 1978 in various management
positions, the most recent of which was Senior Vice-President of
Subsidiary Operations and President of the Company's laminating film
division.
(m) Includes 13,500 shares exercisable under stock options by May 1, 1998.
(n) Mr. Rothwell is a private investor. He was the Company's President on an
interim basis from November, 1983 to May, 1984. He had previously been the
Company's Chairman since November, 1978 until his retirement from that
position in May, 1983.
(o) 1,213 of these shares are owned by Mr. Rothwell's wife. Mr. Rothwell
disclaims beneficial ownership over these shares.
(p) Mr. Stucker is a partner with the law firm of Vedder, Price, Kaufman &
Kammholz. He is also a director of Lane Industries, Inc. (see (i) above).
Vedder, Price, Kaufman & Kammholz has performed legal services for the
Company and Lane Industries, Inc. for many years and it is anticipated that
they will continue to do so in the future.
(q) Includes 352,983 shares owned by the Company's Employee's 401-K Savings and
Retirement Plan. Messrs. Kalebic, Lane and Reddy share the power to direct
the disposition of these shares as members of the Company's Executive
Committee of the Board. The members of the Executive Committee disclaim
beneficial ownership of these shares. Also includes 49,238 shares
exercisable under stock options or exercisable by May 1, 1998 under the
Company's stock option plans.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who own more than 10% of the Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission and with the exchange on which the shares of Common
Stock are traded. Such persons are also required to furnish the Company with
copies of all Section 16(a) forms they file. Based solely upon the Company's
review of such forms and, if appropriate, representations made to the Company by
any such reporting person concerning whether a Form 5 was required to be filed
for the 1997 fiscal year, the Company is not aware that any of its directors and
executive officers or 10% stockholders failed to comply with the filing
requirements of Section 16(a) during the period commencing January 1, 1997
through December 31, 1997, except that Eugene J. Angel, President of the
Company's U.S. Ring Binder Corp. subsidiary filed one Form 4, reporting an
immediate sale of an exercised stock option, late due to an inadvertent
administrative error. The transaction set forth in this one late report did not
result in any short-swing profits (under Section 16(b) of the Exchange Act) for
Mr. Angel.
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<PAGE> 7
STOCK OWNERSHIP OF MANAGEMENT
Following is information with respect to the ownership of the Company's
Common Stock by those non-director executive officers named in the Senior
Executive Compensation Table found on page 11 hereinafter.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
PRESENT POSITION OWNED
NAME WITH COMPANY FEBRUARY 28, 1998
---- ---------------- -----------------
<S> <C> <C>
Howard B. Green.................... Group President, Office 26,000
Products
Elliott L. Smith................... Group President, 21,234(a)
Desktop Finishing
Walter M. Hebb..................... Senior Vice President, 13,826(a)
Strategic Planning/Business
Development
</TABLE>
- - ---------------
(a) Includes the following number of shares that could be obtained by exercising
options under the Company's stock option plans by May 1, 1998 -- 5,875 for
Mr. Smith and 4,775 for Mr. Hebb.
BOARD OF DIRECTORS AND COMMITTEE DATA
The Board of Directors has appointed a standing Audit Committee. No
nominating committee has been appointed.
The current members of the Audit Committee are Messrs. Nielsen (Chairman),
DeSchutter, Dimitriou, Kalebic and Lane, III. The Committee (a) recommends to
the entire Board the firm to be retained each year as independent public
accountants, (b) reviews the scope of the audit to be performed by the public
accountants, (c) reviews the reports of the public accountants and (d)
periodically meets with the Company's internal auditors and financial management
to review the internal audit and control methods and procedures of the Company,
reporting thereon to the entire Board. The Audit Committee met four times in
1997.
The Board has also appointed a standing Executive Committee, which consists
of Messrs. Lane, Reddy, and Kalebic. This Committee is responsible for the
review of the Company's operations and finances. Included within these
responsibilities is the control and implementation of compensation policies and
programs for the Company's senior executives. The Executive Committee met 18
times in 1997.
There were six meetings of the Board of Directors during 1997. Each member
of the Board attended at least 75% of all board and committee meetings of which
the director was a member during the year.
DIRECTOR'S COMPENSATION
Directors who are not employees of the Company receive an annual director's
fee of $20,000 and are paid $1,000 for each Board meeting attended and $500 for
each Audit Committee meeting attended. Employee directors receive $1,000 per
meeting for attending regularly scheduled Board meetings. In addition, Thomas V.
Kalebic receives an annual fee of $5,000 to compensate him for Board Committee
5
<PAGE> 8
participation and for the additional service he provides the Company as a member
of its Executive Committee. In addition to Board meeting fees, Rudolph Grua, in
1997, was paid a consulting fee of $50,000 and was paid $23,000 pursuant to a
deferred compensation agreement he entered into with the Company when he was its
President and Chief Executive Officer.
Directors may elect to defer their annual and/or board meeting fees
pursuant to a Phantom Stock Plan which was established by the Company in 1995.
This Plan gives the Directors the ability to receive incentive compensation
based on any appreciation of the common stock of the Company and on the
dividends declared on such stock while the Directors remain in office.
Management believes this Plan promotes a closer identity of interests between
the Directors and the Company's shareholders.
Any Director who elects to participate in the Plan receives Phantom Stock
Units ("PSUS") in lieu of cash compensation for either or both of his annual
director's or board meeting fees as he so chooses. PSUS received in lieu of the
annual fee are credited as of the date of the Company's annual meeting of
stockholders during the fiscal year in question. The number of PSUS credited is
determined by dividing the amount of the annual fee by the average of the high
and low prices at which the Company's common stock trades on the NASDAQ stock
market on that date ("Value"). PSUS received in lieu of board meeting fees are
credited to a Director's account at the Value on the day of the board meeting
attended by the Director.
Directors who maintain a PSUS account also receive Dividend Equivalents in
a dollar amount equal to the cash dividend which the Director would have been
entitled to receive if he had been the owner, on the record date for a dividend
paid on the Company's common stock, of a number of shares of common stock equal
to the total PSUS then credited to the Director's account. Dividend Equivalents
are converted into PSUS and credited to the Director's PSUS account at the Value
existing on the last day of each fiscal year.
A participating Director may only redeem his PSUS account through a lump
sum cash payment within thirty (30) days after he ceases to be a member of the
Board, and his rights under the Plan may not be assigned, encumbered or
otherwise transferred except to a designated beneficiary in the event of the
death of a participant. PSUS have no voting or other shareholder rights attached
to them and the Company's obligation to redeem any PSUS is unsecured.
At December 31, 1997, the PSUS account balances for the following named
Directors were:
<TABLE>
<CAPTION>
PHANTOM STOCK UNIT
ACCOUNT BALANCE
PHANTOM STOCK UNITS DECEMBER 31, 1997
DIRECTOR EARNED IN 1997 (IN TOTAL UNITS) ($ VALUE (1))
-------- ------------------- ---------------- -------------
<S> <C> <C> <C>
William N. Lane, III........................ 244.936 646.481 19,516
Richard U. DeSchutter....................... 877.906 877.906 26,502
Theodore Dimitriou.......................... 848.101 2,236.130 67,503
Thomas V. Kalebic........................... 780.855 2,303.209 69,528
James A. Miller............................. 353.345 353.345 10,667
Arthur C. Nielsen, Jr....................... 841.101 1,664.185 50,238
Govi C. Reddy............................... 245.936 736.984 22,248
Robert J. Stucker........................... 748.359 2,211.773 66,768
</TABLE>
- - ---------------
(1) Based on $30.1875 Value.
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<PAGE> 9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION IN COMPENSATION DECISIONS
During 1997 and currently, Mr. Kalebic, a member of the Company's Executive
Committee, served as an officer and director of Lane Industries, Inc. of which
William N. Lane, III, the Company's Chairman is also the Chairman and Chief
Executive Officer (see notes (f) and (i) to Election of Directors and
Transactions with Management).
During 1997 and currently, Mr. Lane has acted as Chairman of the
Compensation Committee of the Board of Directors of Wallace Computer Services,
Inc. of which Mr. Theodore Dimitriou, a Director of the Company, is Chairman of
the Board.
During 1997, executive officer compensation matters were principally
decided by the Company's Executive Committee of the Board of Directors with the
Board in whole having oversight authority. The Executive Committee and the Board
also considered recommendations made by the Stock Option Plan Administrative
Committee, whose members are currently Mr. Dimitriou, Mr. Rothwell and Mr.
Miller, with respect to stock option matters. As members of the Company's Board
and its Executive Committee, Messrs. Lane and Reddy participated in
deliberations concerning their own compensation and the compensation of the
other executive officers of the Company.
EXECUTIVE OFFICERS OF THE COMPANY (1)
<TABLE>
<CAPTION>
NAME AND AGE TITLE
------------ -----
<S> <C>
William N. Lane, III, 54.................. Chairman
Govi C. Reddy, 53......................... President and Chief Executive Officer
Howard B. Green, 42....................... Group President, Office Products
Elliott L. Smith, 63...................... Group President, Desktop Finishing
Walter M. Hebb, 58........................ Senior Vice President, Strategic Planning/Business
Development
William R. Chambers, Jr., 43.............. Vice President & Chief Financial Officer
William P. Heffernan, 41.................. Vice President, Acquisitions
Steven Rubin, 50.......................... Vice President, Secretary and General Counsel
Wally G. Schnell, Jr., 52................. Vice President, Business Technology
Perry S. Zukowski, 39..................... Vice President, Human Resources
</TABLE>
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(1) All of the above-named officers have been actively engaged in the business
of the Company as Company employees for the past five years, in the capacity
indicated above or in a substantially similar capacity, except: Govi C.
Reddy, who before being named President and Chief Executive Officer on
January 1, 1995 had been employed by the Company in various management
positions since July, 1978 the most recent of which was Senior Vice
President, Subsidiary Operations and President of the Company's Film
Products division; Howard B. Green, who was hired by the Company in January,
1997 upon the Company's acquisition of the assets and business of the
Quartet Manufacturing Company, a manufacturer of visual presentation
products, where he had been Quartet's Chief Executive Officer for more than
the past five years; Walter M. Hebb, who had served as the Company's Senior
Vice President, Corporate Development prior to his appointment to the
position of Senior Vice President, Asia Pacific in July, 1995 for which he
served until appointed to this position in January, 1998; Elliott L. Smith,
who before being named to this position on
7
<PAGE> 10
April 1, 1998 had been the Company's Executive Vice President for more than
the past five years; William R. Chambers, who before being named to this
position in August, 1997 had been the Company's Director of Manufacturing
Development since November, 1995 and prior to that time was the owner and
chief executive officer of a custom exhibit manufacturing and service
company; William P. Heffernan, who before being named to this position in
February, 1997, had been the Company's Vice President, Business Technology
since January, 1995 and had been prior to that time the Treasurer of Lane
Industries, Inc. since April, 1994 and for the five years prior to that time
had been the Company's Corporate Controller; Wally G. Schnell, Jr., who
before joining the Company in February, 1997 had been the Managing Director
of SHL Systemhouse, a systems integration and outsourcing firm since April,
1995, and prior to that time had been the Director of Information Services
for Wallace Computer Services, a business forms and computer service and
supply business for more than five years; and Perry S. Zukowski, who before
being named to this position in March, 1998 had been the Company's Asst.
Vice President, Human Resources since March, 1997 and for the four years
prior to that had been Asst. Treasurer & Risk Management Director for Lane
Industries, Inc.
There is no family relationship between any of the above named officers.
All officers are elected for a one-year term by the Board of Directors or until
reelected.
BOARD EXECUTIVE COMMITTEE AND STOCK OPTION PLAN ADMINISTRATIVE
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In 1997, the Executive Committee of the Board of Directors approved the
compensation policies and programs of the Company as they pertained to the
Company's executive officers, with the Board having oversight responsibility on
these issues. This Committee will also bear this responsibility for the year
1998. The members of the Executive Committee were Messrs. Kalebic, Lane and
Reddy. Mr. Lane and Mr. Reddy are current officers and employees of the Company.
The Company and the Committee have maintained the philosophy that executive
officer compensation should be directly and materially linked to operating
performance. Thus, executive officer compensation is heavily weighted towards
bonuses paid on the basis of both corporate and personal performance and the
growth in wealth that can be achieved through the exercise of options in the
Company's common stock. Therefore, in years when the Company has had excellent
earnings growth, such as in 1997, its executive officers have been justly
rewarded.
The principal components of the compensation package for executive officers
of the Company are salary, bonus, and stock options. The Committee believes that
the compensation packages for the CEO and other executive officers are typical
of other companies of the same general size and necessary to attract, properly
motivate and retain a quality management team which will best serve the
interests of the stockholders.
Based on information provided in various compensation surveys subscribed to
and received by the Company, the salaries of the CEO individually and of all
other executive officers are approved by the Committee. The Committee believes,
based on this information, that the salaries paid in 1997 to Mr. Reddy, who was
the Company's CEO in 1997, and the other executive officers, as well as their
current salaries, are near the median of the average base salaries for executive
officers of other comparable sized companies.
8
<PAGE> 11
Senior executive compensation is most closely related to corporate
performance through awards made under the Management Incentive Compensation Plan
(the "MIC Plan") and grants of options under the Company's 1989 Stock Option
Plan. Under the MIC Plan participants can earn a bonus award, subject to minor
adjustments, of up to 80% of annual salary.
The amount of bonus awarded under the MIC Plan is based on a combination of
achieving certain annual corporate objectives as well as individual performance
objectives. In 1997 and again for 1998, the corporate performance objective is
based on attaining a certain earnings per share ("EPS") level. In 1997, the
Company achieved EPS that was within a range that had been targeted by the
Committee and the Board of Directors. Based on the Company's 1997 EPS of $1.82
and Mr. Reddy's level of achievement of personal objectives, he was awarded, as
CEO, a 1997 MIC Plan bonus of $225,004. The Chairman and the Committee
determined that the CEO had met all of his personal objectives for the year.
The Committee also strongly believes that the granting of stock options to
the CEO and the other senior executives should be an integral portion of
over-all executive compensation. The opportunity to provide wealth to the
executive group through the growth in value of the Company's Common Stock is an
integral means of aligning the interest of management with stockholders and
helps focus the attention of management on the long-term success of the Company.
Options are granted to the CEO and the other executive officers on a periodic
basis by the Stock Option Plan Administrative Committee. Options awarded during
1997 reflect continuation of this policy through intermittent grants to the CEO
and other executive officers based on their relative levels of compensation and
responsibilities. In 1996, following review of input received from management
and its compensation consultant, the Board of Directors adopted and the
Shareholders approved an amendment and restatement of the 1989 Stock Option Plan
to enable the Stock Option Plan Administrative Committee to grant longer term,
performance-related options related to the achievement of the Company's
multi-year performance targets.
These longer-term performance options were granted on March 13, 1996. The
options vest in full on September 13, 2005 and expire on March 13, 2006, subject
to earlier vesting at the discretion of the Stock Option Plan Administrative
Committee in the event certain levels of revenue growth, return on equity and
growth in earnings per share of Common Stock are attained by the Company over a
three-year period ending December 31, 1998. To the extent options become
exercisable as a result of such performance, 50% of those options will be
exercisable on March 13, 1999 and 50% on March 13, 2000, in each case to be
exercised within four years of such date. The options will expire in the event
the optionee's employment terminates, except in certain circumstances in the
event of retirement, disability, death or involuntary termination without cause.
If retirement, disability or death occurs during the three-year performance
period, a pro rata portion of the option will remain outstanding until the end
of the performance period at which time it will vest to the extent performance
measures are attained and will be exercisable through March 13, 2000. If
termination of employment occurs after the option has become exercisable, then
the option may be exercised for a period of one year following such termination
of employment due to death, disability or retirement, or three months in the
event of involuntary termination without cause. Mr. Reddy received longer-term,
performance options to acquire up to 36,000 shares of the Company's common stock
at a price of $23 per share.
To further enhance the aligning of management interest with that of the
Stockholders, the Committee and the Board implemented an executive stock
ownership program effective January 1,
9
<PAGE> 12
1994. Under the terms of this program, the Company's senior officers, as well as
certain other members of management, are encouraged to acquire and maintain a
certain level of ownership of the Company's Common Stock. The level of required
ownership call for ranges from a number of shares in value equal to or greater
than one times annual salary for those employees with a salary level of $149,999
and below to two and one-half times salary for those employees with a salary
level of $300,000 or above. Depending on length of service, an employee will
have from five to seven years to attain their desired ownership levels, however,
the Committee will monitor annually the progress being made by the employee to
reach such level. If the Committee is not satisfied with the progress of share
acquisition by any employee it could elect to recommend a reduction in future
stock option grants to the affected employees by the Stock Option Plan
Administrative Committee.
Sec. 162(m) of the Internal Revenue Code generally limits the corporate tax
deduction for compensation paid to executive officers named in the Senior
Executive Compensation Table that follows to $1 million, unless certain
requirements are met. The Committee has determined not to modify the MIC Plan or
any of the Company's other compensation programs at this time since compensation
paid to executive officers under the current company programs would be less than
the $1 million limit. In the future, the Committee will periodically review the
necessity of modifying the compensation programs for executive officers so that
the corporate tax deduction is maximized, however, it will retain the
flexibility to not make such modifications when it deems such action to be in
the best interests of the Company and its shareholders.
<TABLE>
<S> <C>
The Executive Committee The Stock Option Plan
Thomas V. Kalebic Administrative Committee
William N. Lane, III Theodore Dimitriou
Govi C. Reddy Warren R. Rothwell
James A. Miller
</TABLE>
10
<PAGE> 13
SENIOR EXECUTIVE COMPENSATION
The following table shows the compensation paid and accrued by the Company
during the last fiscal year to each of its five highest paid senior executives,
including the Chief Executive Officer and one additional highly compensated
employee.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------ TOTAL
ANNUAL COMPENSATION AWARDS COMPENSATION
------------------------------------ ------ ------------
OTHER ANNUAL OPTIONS/ ALL OTHER (TOTAL OF
NAME AND SALARY BONUS(1) COMPENSATION(2) SARS COMPENSATION(3) COLUMNS
PRINCIPAL POSITION YEAR ($)(A) ($)(B) ($)(C) (#) ($)(D) A-D)($)
------------------ ---- ------ -------- --------------- -------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
William N. Lane, III......... 1997 230,000 115,000 -- 15,000 11,700 356,700
Chairman of the Board 1996 229,991 161,000 -- 60,000 11,250 402,241
1995 210,865 150,500 45 10,000 11,535(4) 372,945
Govi C. Reddy................ 1997 450,609 225,004 14,264 12,000 11,700 701,577
President and Chief 1996 350,012 262,500 13,060 48,000 11,250 636,822
Executive Officer 1995 294,234 225,000 9,327 25,000 11,535(4) 540,096
Howard B. Green.............. 1997 300,000 302,400 -- -- 32,750(6) 635,150
Group President,
Office Products(5)
Elliott L. Smith............. 1997 245,342 124,204 9,638 5,000 11,700 390,884
Group President, 1996 228,385 119,902 9,371 17,000 11,250 368,908
Desk Top Finishing 1995 217,795 108,265 6,513 2,500 11,941 344,514
Walter M. Hebb............... 1997 183,846 -- 5,873 3,500 11,700 201,419
Senior Vice President, 1996 173,731 84,693 6,643 13,000 11,250 276,317
Strategic Planning/ 1995 160,180 85,750 5,434 3,000 8,389 259,753
Business Development
Richard R. Gilbert........... 1997 240,000 180,000 -- -- 14,400(7) 434,400
President, Quartet
Manufacturing Co.
Division(5)
</TABLE>
- - ---------------
(1) Annual bonus amounts are earned and accrued during the fiscal years
indicated, and paid subsequent to the end of such year.
(2) The above named individuals receive certain non-cash personal benefits, the
aggregate cost of which to the Company are below applicable reporting
thresholds. The amounts included in this column represent the amounts
reimbursed to the named individuals for income taxes attributable to such
personal benefits.
(3) Unless otherwise noted below, these amounts for the year 1995 represent
contributions by the Company to the Company's tax qualified Profit Sharing,
Savings and Retirement Plan Trust and for the years 1996 and 1997 to the
Company's 401-K Savings and Retirement Plan on behalf of the named
individuals and to their respective accounts established pursuant to the
Company's non-tax qualified Supplemental Deferred Compensation Plan.
(4) This amount also includes Board of Director's fees paid in 1995 to the
following named individuals in amounts as follows -- Mr. Lane $1,000 and Mr.
Reddy $1,000.
(5) Mr. Green and Mr. Gilbert were hired by the Company in January, 1997 in
connection with the Company's acquisition of the business and assets of The
Quartet Manufacturing Company. As part of that transaction, Messrs. Green
and Gilbert entered into non-competition agreements with the Company for
which the Company is paying Mr. Green $17,000 per month and Mr. Gilbert
$10,000 per month. The Company's obligation under these non-competition
agreements ceases on either
11
<PAGE> 14
January 15, 2000 or the date upon which the employment by the Company of the
respective individuals terminates, whichever first occurs. The
non-competition obligations of Messrs. Green and Gilbert continue for a
period of three years following any termination of their employment with the
Company. The non-competition consideration paid to Messrs. Green and Gilbert
is treated as base compensation in addition to their salaries for purposes
of any award they earn pursuant to the Company's Management Incentive
Compensation Plan.
(6) Represents a $26,000 bonus paid to Mr. Green in lieu of retirement plan
payments and a $6,750 Company contribution to his 401-K Savings and
Retirement Plan account.
(7) Represents a $9,000 bonus paid to Mr. Gilbert in lieu of retirement plan
payments and a $5,400 Company contribution to his 401-K Savings and
Retirement Plan account.
RETIREMENT PLAN
The Company maintains a Guaranteed Retirement Income Plan ("GRIP") covering
all employees who participated in the Company's Profit Sharing Plan through
December 31, 1995. GRIP provides in pertinent part for annual retirement
benefits at age 65 after 30 years of benefit service equal to 50% of the average
of the five highest consecutive years of compensation out of the last ten years
worked. The retirement benefit is reduced by the annual income which would be
provided by the purchase or funding of an annuity with the balance in the
employee's retirement account under the Profit Sharing Plan and by 50% of the
primary social security benefit payable at age 65. The amount of the retirement
benefit and the social security offset are proportionately reduced for benefit
service of less than 30 years. No benefit is payable, except in certain
circumstances, to anyone with less than seven years participation in the Profit
Sharing Plan. All benefits accruing and earned under GRIP for plan participants
were frozen at the end of 1995 in connection with the Company's conversion of
its Profit Sharing Plan to a 401-K Savings Plan. As a result, no GRIP
participant can accrue any additional plan benefits while GRIP remains frozen.
No contribution was made by the Company in 1997 for GRIP because the Plan
has been actuarially determined to be currently overfunded with respect to any
Plan liability to participants.
All of the individuals listed in the cash compensation table presently
participate in GRIP other than Mr. Green. For those individuals listed in the
cash compensation table, their respective years of benefit service as of
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
YEARS OF
INDIVIDUAL BENEFIT SERVICE
---------- ---------------
<S> <C>
William N. Lane, III................................... 29
Govi C. Reddy.......................................... 17
Elliott L. Smith....................................... 9
Walter M. Hebb......................................... 9
</TABLE>
Upon reaching age 65 the only individual named in the cash compensation
table entitled to receive a GRIP benefit would be Mr. Smith and that benefit
would be $556 per month.
12
<PAGE> 15
STOCK OPTION INFORMATION
The following table sets forth the details of options granted to the
individuals listed in the Senior Executive Compensation Table during 1997. The
second table in this section sets forth certain information with respect to
options exercised by those individuals in 1997 as well as the value of their
unexercised options at the end of the year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SAR'S
OPTIONS/ GRANTED TO
SAR'S EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT VALUE(2)
NAME (#) YEAR ($/SHARE) DATE ($)
---- ---------- ---------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
William N. Lane, III...... 15,000 17.6 29.75 1/28/05 207,600
Govi C. Reddy............. 12,000 14.1 29.75 1/28/05 166,080
Elliott L. Smith.......... 5,000 5.8 29.75 1/28/05 69,200
Walter M. Hebb............ 3,500 4.1 29.75 1/28/05 48,400
</TABLE>
- - ---------------
(1) All options granted to the named individuals were granted under the
Company's 1989 Stock Option Plan on January 29, 1997. Twenty-five percent
(25%) of each option first became exercisable one (1) year after the
respective grant date. Only twenty-five percent (25%) of an initial option
grant may be exercised during any one (1) year period commencing with the
anniversary date of an option grant. All of these options were granted with
an exercise price equal to the closing price of the Company's Common Stock
after trading on the grant date in the NASDAQ stock market. No SARs were
granted in connection with these option grants.
(2) Based on the Black-Scholes stock option pricing model. The following
assumptions were made for purposes of calculating the Grant Date Present
Value: the option term is assumed to be eight years; volatility at 37.15; a
dividend yield of 1.5%; and, a risk free interest rate of 6.65%. The actual
value, if any, a named individual may realize will depend on the market
value of the underlying shares at the time the option is exercised, so there
is no assurance the value realized will be at or near the value estimated by
the Black-Scholes model. The Company's use of this model should not be
construed as an endorsement of its accuracy at valuing stock options.
13
<PAGE> 16
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR,
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/ OPTIONS/SARS
ACQUIRED SAR'S AT AT FY-END(2)
ON VALUE FY-END EXERCISABLE/
EXERCISE REALIZED(1) EXERCISABLE/ UNEXERCISABLE
NAME (#) ($) UNEXERCISABLE ($)
---- -------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
William N. Lane, III........... 16,188 179,287 8,750/97,750 103,906/750,219
Govi C. Reddy.................. 4,300 55,669 10,500/79,050 132,125/720,450
Elliott L. Smith............... -- -- 7,250/26,750 48,750/191,969
Walter M. Hebb................. 2,025 23,750 3,900/22,800 45,475/183,200
</TABLE>
- - ---------------
(1) Value realized represents the difference between the option exercise price
and the fair market value of the Company's Common Stock on the date the
option was exercised.
(2) Based on fair market value of $30.00 per Common Share on December 31, 1997.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock for the last five fiscal years with the cumulative total
return on the NASDAQ Composite Index and a peer group consisting of other
companies that manufacture and sell office products.
<TABLE>
<CAPTION>
General NASDAQ
Measurement Period Binding Total Return
(Fiscal Year Covered) Corporation Peer Group Index
<S> <C> <C> <C>
12/92 100 100 100
12/93 84 99 115
12/94 106 90 112
12/95 110 136 159
12/96 168 157 195
12/97 171 200 240
</TABLE>
14
<PAGE> 17
The peer group used in the preceding graph consists of the Company, The
Standard Register Company, Tab Products Co., Ennis Business Forms, Inc., Hunt
Manufacturing Co., A.T. Cross Company, Dixon Ticonderoga Company, Smith Corona
Corporation, Gradco Systems, Inc.(1), Day Runner, Inc., Varitronic Systems,
Inc.(1), United Stationers Inc., and Duplex Products Inc.(1)
TRANSACTIONS WITH MANAGEMENT
In 1978 the Company implemented a Recapitalization Plan which had been
previously approved by the stockholders. As part of the Plan the Company entered
into an agreement with Lane Industries, Inc., providing for the sharing of
Federal income tax savings, if any, between the Company and Lane Industries,
Inc., resulting from the filing of consolidated Federal income tax returns. In
1997 the Company made $6,200,000 in payments pursuant to this Agreement which
represented the Company's portion of its tax liability under this Agreement.
In 1985 the Company entered into an Agreement with Lane Industries, Inc.
under which the Company would receive twenty per cent (20%) of tax savings, if
any, realized by filing unitary state tax returns on a combined basis with Lane
Industries, Inc. In 1997 the Company made $41,000 in payments pursuant to this
Agreement which represented the Company's portion of its state income tax
liabilities under this Agreement.
Certain Lane Industries, Inc. personnel perform federal and state income
tax planning, legal, risk management, acquisition due diligence and finance
services for the Company. In 1997 and the first two months of 1998, the Company
has paid $2,257,769 to Lane Industries, Inc. for these and related support
services and facilities costs. Management of the Company believes that these
costs are reasonable and fair and that the expense incurred is less than the
expense the Company would incur for employing its own personnel with comparable
levels of skill and experience to perform these services.
The Company makes reservations for business travel and accommodations
through a travel agency which is controlled by Lane Industries, Inc. The Company
pays the rates charged by the various carriers, hotels and car rental companies
which in turn pay commissions to this travel agency. The Company booked
approximately $1,105,600 of business travel and accommodations through such
travel agency in 1997 and the first two months of 1998.
On October 20, 1997, in anticipation of needing Swiss francs to complete
its purchase of Ibico AG, the Company agreed to purchase 20 million Swiss francs
from Lane Investment Limited Partnership ("LILP"), of which Lane Industries,
Inc. is the General Partner, at a cost of approximately $13,829,000. The price
paid for the Swiss francs was based on the mid-point between the bid and ask
forward exchange rates for April 30, 1998, the date the francs were to be
delivered to the Company, as established on the contract date by the Bank of New
York. The delivery date of the purchase was subsequently changed to February 27,
1998 to coincide with the scheduled closing date of the Ibico AG transaction. On
the delivery date, the Company paid LILP approximately $13,831,200 to acquire
the Swiss francs, reflecting the average foreign currency exchange rates on that
date. The Swiss francs acquired by the Company were paid to Ibico AG by the
Company as part of the purchase price consideration and were in turn used by
Ibico AG to repay a pre-closing loan made by LILP to Ibico AG. The Company
believes that it paid a lesser amount to LILP for the delivery of the foreign
currency than it would have paid in a comparable arms-length open market
transaction.
- - ---------------
1 Public trading of shares ceased during the year 1996
15
<PAGE> 18
On February 26 and 27, 1998, the Company borrowed a total of $60,000,000
from Lane Industries, Inc. The proceeds of these borrowings were used to help
finance the purchase of Ibico AG. The notes issued by the Company for this loan
were issued pursuant to a Note Purchase Agreement entered into with Lane
Industries, Inc. on February 25, 1998 (the "Loan Agreement"). The Loan Agreement
provides, in pertinent part, that (i) the Company may borrow up to $100,000,000
from Lane Industries at any time prior to April 30, 1998; (ii) that all
borrowings are subordinated to any other indebtedness of the Company; (iii) that
all borrowings shall bear interest at a rate per annum that floats with the
London Interbank Offered Rate for three month loans as published by The Wall
Street Journal plus a 2% margin through May 26, 1998 and margins ranging from 4%
to 8% thereafter; and, (iv) that all borrowings, unless prepaid, would be due on
April 14, 2002. The Loan Agreement contains certain covenants made by the
Company which, in the aggregate, are less restrictive than those covenants made
by the Company to its existing senior lenders. The Company believes that the
costs to the Company in connection with the Loan Agreement are lower than those
that would be incurred in a comparable arms-length open market transaction.
In January, 1998 the Company purchased for treasury purposes 4,500 shares
of its common stock from Rudolph Grua, one of the Company's Directors. These
shares were purchased at a price of $30.5625 each. In March, 1997, the Company
purchased for treasury purposes 3,000 shares of its common stock from Mr. Grua's
wife at a price of $32.875 each. The price paid for both of these transactions
was equal to the average price of the Company's common stock for trades reported
on the NASDAQ stock market on the date the transaction took place.
16
<PAGE> 19
PROPOSAL TO RATIFY SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, on the recommendation of the Audit Committee, has
selected Arthur Andersen & Co. as independent public accountants to make an
audit of the accounts of the Company for the year 1998. If this selection is not
ratified, the Board of Directors will reconsider its selection.
The firm of Arthur Andersen & Co. has audited the books of the Company and
its predecessor annually since 1948, has offices in or convenient to most of the
locations in the United States and foreign countries where the Company operates,
and is considered to be well qualified. The Company has been advised by Arthur
Andersen & Co. that neither the firm nor any of its partners has any financial
interest, either direct or indirect in the Company or any of its subsidiaries.
Representatives of Arthur Andersen & Co. will be present at the annual meeting
and will have the opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS FAVORS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF ARTHUR ANDERSEN & CO. AS INDEPENDENT PUBLIC ACCOUNTANTS.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder which is to be presented at the annual
meeting to be held in 1999 must be received at the Company's offices in
Northbrook, Illinois not later than December 10, 1998 in order to be included in
the proxy statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors knows of no other business to be presented for
consideration at the meeting. Should any other matter requiring stockholders'
action or approval be presented to the meeting, it is the intention of the proxy
holders named in the enclosed form of proxy to take such action as shall be in
accordance with their best judgment in the interest of the Company.
By order of the Board of Directors
Steven Rubin
STEVEN RUBIN
Vice President, Secretary
and General Counsel
Northbrook, Illinois
March 30, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR 1997 HAS BEEN
MAILED TO ALL STOCKHOLDERS. THE ANNUAL REPORT IS NOT TO BE REGARDED AS
PROXY SOLICITING MATERIAL.
17
<PAGE> 20
PROXY GENERAL BINDING CORPORATION PROXY
ONE GBC PLAZA, NORTHBROOK, ILLINOIS 60062
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints William N. Lane, III, Robert J. Stucker
and Rudolph Grua, or any other them, with full power of substitution, to
represent and to vote as designated on the reverse side, all the shares of
General Binding Corporation held of record by the undersigned on March 18,
1998, at the annual meeting of stockholders to be held on May 5, 1998, or at any
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO SPECIFIC DIRECTION IS GIVEN, THE
PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND PROPOSAL 2.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE RETURN
ENVELOPE.
(Continued and to be signed on reverse side)
- - --------------------------------------------------------------------------------
FOLD AND DETACH HERE
- - --------------------------------------------------------------------------------
<PAGE> 21
<TABLE>
<S><C>
- - ------------------------------------------------------------------------------------------------------------------------------------
GENERAL BINDING CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
[ ]
For All
1. ELECTION OF DIRECTORS For Withheld Except Nominees written below 2. Ratification of the appointment For Against Abstain
R. U. DeSchutter, / / / / / / of Arthur Andersen & Co. as / / / / / /
T. Dimitriou, R. Grua, ------------------- independent public accountants
T. V. Kalebic, Nominee Exception for the fiscal year 1998.
J. A. Miller,
W. N. Lane, III, 3. In their discretion upon such other matters as may
R. J. Stucker properly come before the meeting or any adjournment
A. C. Nielsen, Jr., or adjournmemrs thereof.
G. C. Reddy and
W. R. Rothwell The undersigned hereby revokes any proxy or proxies
heretofore given to vote upon or act with respect to
said stock and hereby ratifies and confirms all that
said proxies and substitutes, or any of them, may
do by virtue thereof.
[ ] I (we) shall attend the meeting.
[ ] I (we) shall not attend the meeting.
Signature ________________________________________ Signature if held jointly _______________________________ Dated: _________, 1998
Please sign exactly as name appears hereon. When signing as attorney, executor, administrator, trustee or guardian, please
give full title. If stock is held in the name of more than one person, all named holders must sign the proxy.
- - ------------------------------------------------------------------------------------------------------------------------------------
FOLD ANDD DETACH HERE
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
