<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
John. H. Harland Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(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):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
/ / 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:
N/A
(2) Form, Schedule or Registration Statement No.:
N/A
(3) Filing Party:
N/A
(4) Date Filed:
N/A
<PAGE> 2
JOHN H. HARLAND COMPANY
ROBERT R. WOODSON
Chairman, Chief Executive Officer and President
March 13, 1995
Dear Shareholder:
You are cordially invited to attend the 1995 annual meeting of shareholders of
John H. Harland Company to be held at the High Museum of Art, 1280 Peachtree
Street, NE, Atlanta, Georgia on Friday, April 28, 1995 at 10:00 a.m.
The items of business are listed in the Notice of Annual Meeting and are more
fully addressed in the Proxy Statement which follows. In addition, we will
review with you the progress of the Company during the past year and report the
results of operations for the first quarter.
Your vote is very important regardless of the number of shares you may hold.
Please date, sign and return the proxy in the enclosed envelope to ensure that
your shares are represented at the meeting.
On behalf of your Board of Directors, thank you for your continued support and
interest in John H. Harland Company.
Sincerely,
/s/ Robert R. Woodson
- ---------------------
Robert R. Woodson
<PAGE> 3
2939 MILLER ROAD
DECATUR, GEORGIA 30035
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1995
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of John H.
Harland Company will be held at the High Museum of Art, 1280 Peachtree Street,
NE, Atlanta, Georgia on Friday, April 28, 1995 at 10:00 a.m. for the following
purposes:
(1) To elect two (2) Directors;
(2) To amend the Company's Employee Stock Purchase Plan to increase the
number of shares of Common Stock authorized under the Purchase Plan from
3,600,000 to 4,350,000;
(3) To amend the Company's Employee Stock Purchase Plan to replace the term
"Annualized Base Pay" with the term "Annualized Cash Compensation" and to
provide a definition of "Annualized Cash Compensation," described in the
accompanying Proxy Statement;
(4) To amend the Company's 1981 Incentive Stock Option Plan, as Extended to
increase the number of shares of Common Stock authorized under the Option Plan
from 435,955 to 1,185,955;
(5) To ratify the appointment of Deloitte & Touche LLP as the Company's
independent certified public accountants for the year ending December 31, 1995;
and
(6) To transact any and all such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 1, 1995 as
the record date for the determination of shareholders entitled to receive notice
of, and to vote at, the meeting and any adjournment thereof.
Your attention is directed to the Proxy Statement submitted with this
Notice.
VICTORIA P. WEYAND
Vice President and Secretary
Atlanta, Georgia
March 13, 1995
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE VOTE, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE,
WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE UNITED STATES.
[LOGO]
<PAGE> 4
March 13, 1995
JOHN H. HARLAND COMPANY
2939 MILLER ROAD
DECATUR, GEORGIA 30035
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1995
The enclosed form of proxy is solicited by the Board of Directors of John
H. Harland Company (the "Company") for use at the annual meeting on April 28,
1995 and any adjournment thereof. When such proxy is properly executed and
returned, the shares it represents will be voted as directed at the meeting and
any adjournment thereof or, if no direction is indicated, they will be voted in
favor of the proposals set forth in the notice attached hereto. Any shareholder
giving a proxy has the power to revoke it at any time before it is voted.
Revocation of a proxy is effective upon receipt by the Secretary of the Company
of either (i) an instrument revoking it or (ii) a duly executed proxy bearing a
later date. Furthermore, if a shareholder attends the meeting and elects to vote
in person, any previously executed proxy is thereby revoked.
Only shareholders of record as of the close of business on March 1, 1995
will be entitled to vote at the annual meeting. As of that date, the Company had
outstanding 30,438,906 shares of Common Stock. Each share of Common Stock is
entitled to one vote. No cumulative voting rights are authorized and appraisal
rights for dissenting shareholders are not applicable to the matters being
proposed. It is anticipated that this Proxy Statement and the accompanying proxy
will be first mailed to the shareholders on or about March 13, 1995.
Votes cast by proxy or in person at the annual meeting will be tabulated by
the election inspectors appointed for the meeting. Such inspectors also will
determine whether or not a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as unvoted for purposes of determining
the approval of any matter submitted to the shareholders for a vote. If a broker
indicates on a proxy that it does not have discretionary authority as to certain
shares to vote on a particular matter, those shares will not be considered as
present and entitled to vote with respect to that matter.
Pursuant to the Company's Bylaws and applicable state law, a quorum is
present if a majority of the votes entitled to be cast are represented in person
or by proxy at such meeting. The affirmative vote of a plurality of votes cast
by shares entitled to vote for the election of directors at a meeting at which a
quorum is present is required to elect directors.
ELECTION OF DIRECTORS
Under the Bylaws, directors are divided into three classes with each class
serving a three-year term and one class elected at each annual meeting of
shareholders. The term of two of the present directors expires at the 1995
annual shareholders' meeting and those two directors are being nominated for
reelection to the Board to serve until the annual shareholders' meeting in 1998
or until their successors are elected and qualified. The
<PAGE> 5
remaining directors presently on the Board will continue as members of the Board
until their respective terms expire as indicated in the following list.
The Board has no reason to believe that either of the nominees for the
office of director will be unavailable for election as a director. However, if
at the time of the annual meeting either of the nominees should be unable or
decline to serve, the persons named in the proxy will vote for such substitute
nominees, vote to allow the vacancy created thereby to remain open until filled
by the Board, or vote to reduce the number of directors for the ensuing year, as
the Board recommends. In no event, however, can the proxy be voted to elect more
than two directors.
MANAGEMENT OF THE COMPANY
DIRECTORS
The following list sets forth the names of the two nominees for reelection
to the Board to serve until the annual shareholders' meeting in 1998 or until
their successors are elected and qualified. It also contains, as to each present
director, information with regard to age, the year first elected a director, the
year their term as a director expires, a brief description of principal
occupation and business experience during the past five years, directorships of
companies (other than the Company) presently held, and certain other
information, which has been furnished by the respective individuals.
NOMINEES FOR ELECTION TO THE BOARD
<TABLE>
<C> <S>
68 years of age
First elected a Director in 1980
Present Term expires 1995
[PHOTO] Chairman of the Board, Pattillo Construction Company, Inc. (an industrial
builder and developer), since 1952
Director, Eaton Corporation, Protective Life Corporation, Trust Company
Bank, SunTrust Banks, Inc. and Simpson Paper Company
H. G. PATTILLO Serves on the Executive Committee and on the Long Range Planning
Committee of the Board of Directors
68 years of age
First elected a Director in 1973
Present Term expires 1995
Retired Chairman and Chief Executive Officer, Richway Stores, a Division
[PHOTO] of Federated Department Stores, Inc. (an operator of discount department
stores),
since 1987
Director, Payless Cashways, Inc.
JOHN H. WEITNAUER, Serves as Chairman of the Audit Committee and on the Executive Committee
JR. of the Board of Directors
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
DIRECTORS WHOSE TERMS WILL CONTINUE AFTER THE ANNUAL MEETING
45 years of age
First elected as a director in 1993
Present Term expires 1996
[PHOTO] Executive Vice President, Baranco Automotive Group (an automobile
dealership), since 1992, Vice President, Baranco Pontiac, from 1978 to
1992
Director, First Union National Bank of Georgia and Complete Health
Services, Inc.
JUANITA P. BARANCO Serves on the Audit Committee of the Board of Directors
69 years of age
First elected a Director in 1987
Present Term expires 1997
Chairman of the Executive Committee, Beers Construction Company
[PHOTO] (a general contracting company), since 1994, Chairman of the Board
from 1987 to 1994 and President from 1960 to 1987
Director, NationsBank Corporation, Atlanta Gas Light Company, and
Rock-Tenn Company
LAWRENCE L . Serves as Chairman of the Compensation and Stock Option Committee and on
GELLERSTEDT, JR. the Executive Committee of the Board of Directors
57 years of age
First elected a Director in 1991
[PHOTO] Present Term expires 1997
Partner, King & Spalding, Atlanta, Georgia (legal counsel to the
Company), since 1968
EDWARD J. HAWIE Serves on the Executive Committee of the Board of Directors
</TABLE>
3
<PAGE> 7
<TABLE>
<C> <S>
52 years of age
First elected a Director in 1988
[PHOTO] Present Term expires 1996
President and Chief Operating Officer, McWane, Inc. (an Alabama-based
manufacturer of cast iron pipes, fittings and foundry products), since
1980
Director, Protective Life Corporation and National Commerce Corporation
JOHN J. MCMAHON Serves as Chairman of the Long Range Planning Committee and on the Audit
Committee of the Board of Directors
58 years of age
First elected a Director in 1984
[PHOTO] Present Term expires 1997
Vice Chairman of the Board and Chairman of the Executive Committee,
Callaway Gardens (a horticultural, environmental and recreational
facility), since 1992, President and Chief Executive Officer from 1972 to
1992
Director, American Business Products, Inc. and Trust Company Bank of
Columbus
G. HAROLD NORTHROP Serves on the Compensation and Stock Option Committee and on the Long
Range Planning Committee of the Board of Directors
56 years of age
First elected a Director in 1990
Present Term expires 1996
[PHOTO] Chairman and Chief Executive Officer, Genuine Parts Company
(a distributor of automobile replacement parts), since 1990, President
and
Chief Executive Officer from 1989 to 1990, and President and Chief
Operating Officer from 1986 to 1989
Director, Equifax Inc., Crawford & Company and Trust Company Bank
LARRY L . PRINCE Serves on the Compensation and Stock Option Committee of the Board of
Directors
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
62 years of age
First elected a Director in 1971
Present Term expires 1996
[PHOTO] Chairman, Chief Executive Officer and President of the Company since
1992, Chief Executive Officer and President from 1990 to 1992, and
President from 1984 to 1992
Director, Allied Holdings, Inc., Haverty Furniture Companies, Inc. and
NationsBank of Georgia, N.A.
ROBERT R. WOODSON Serves as Chairman of the Executive Committee of the Board of Directors
56 years of age
First elected a Director in 1994
Present Term expires 1997
[PHOTO] Chairman of the Board, President and Chief Executive Officer, National
Data Corporation (a company specializing in computer systems and
network services for the healthcare and payment systems markets), since
1992; Chairman of the Board, Spectrum Research Group, Inc., since
1989, and Chief Executive Officer from 1989 to 1990
Director, Spectrum Research Group, Inc.
ROBERT A. Serves on the Long Range Planning Committee of the Board of Directors
YELLOWLEES
</TABLE>
5
<PAGE> 9
BENEFICIAL OWNERSHIP
The following table sets forth (in alphabetical order) the beneficial
ownership of (i) the Company's directors and nominees, (ii) the Chief Executive
Officer and each of the three other most highly compensated executive officers
of the Company, (iii) all directors and executive officers of the Company as a
group, and (iv) five percent shareholders of the Company, all as of February 1,
1995.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
---------------------------------
NAME NUMBER(1) PERCENT OF CLASS
- --------------------------------------------------------------- ---------- ----------------
<S> <C> <C>
Juanita P. Baranco............................................. 455(2) *
Miriam D. Conant............................................... 1,741,508(3) 5.7%
William M. Dollar.............................................. 22,462(4)(5) *
Lawrence L. Gellerstedt, Jr.................................... 3,000(6) *
Edward J. Hawie................................................ 810(7) *
INVESCO PLC.................................................... 2,568,520(8) 8.4
MacKay-Shields Financial Corporation........................... 1,953,416(9) 6.4
John J. McMahon................................................ 8,475(10) *
G. Harold Northrop............................................. 2,000 *
H. G. Pattillo................................................. 29,672(11) *
Larry L. Prince................................................ 1,000 *
Earl W. Rogers, Jr............................................. 18,306(4) *
Michael S. Rupe................................................ 20,693(12) *
John H. Weitnauer, Jr.......................................... 6,459 *
Robert R. Woodson.............................................. 532,122(13) 1.7
Robert A. Yellowlees........................................... -- --
All executive officers and directors as a group (12 persons)... 624,761 2.1
</TABLE>
- ---------------
* Represents less than 1%
(1) Under the rules of the Securities and Exchange Commission, a person is
deemed to be a "beneficial owner" of a security if that person has or
shares "voting power," which includes the power to vote or to direct the
voting of such security, or "investment power," which includes the power to
dispose or to direct the disposition of such security. A person also is
deemed to be a beneficial owner of any securities of which that person has
the right to acquire beneficial ownership within 60 days. Under these
rules, more than one person may be deemed to be a beneficial owner of the
same securities and a person may be deemed to be a beneficial owner of
securities as to which he has no beneficial interest. Except as otherwise
indicated, the persons shown possessed sole voting and investment power
with respect to all shares set forth opposite their name.
(2) Such shares are held jointly by Mrs. Baranco with her husband.
(3) Includes 276,500 shares held by a trust created from the Estate of John H.
Harland, of which she is a co-trustee, as to which Mrs. Conant may be
deemed to share voting and investment power and with respect to which she
disclaims any beneficial interest. Also includes 346,984 shares owned by
Mrs. Conant's husband and 457,000 shares owned of record and beneficially
by the John H. and Wilhelmina D. Harland Charitable Foundation, Inc. of
which Mrs. Conant and her husband are trustees, as to all of which shares
Mrs. Conant may be deemed to share voting and investment power, and in all
of which shares Mrs. Conant disclaims any beneficial interest. Mrs.
Conant's address is Suite 106, Two Piedmont Center, Atlanta, Georgia 30305.
6
<PAGE> 10
(4) Includes shares which may be acquired on or before April 1, 1995 pursuant
to the exercise of stock options as follows: 8,000 shares by Mr. Dollar and
14,500 shares by Mr. Rogers.
(5) Includes 1,662 shares Mr. Dollar holds jointly with his wife. Also includes
12,800 shares owned by the Company's Profit Sharing Plan and Trust, for
which Mr. Dollar serves as a plan administrator, as to all of which shares
Mr. Dollar may be deemed to share voting and investment power, and in all
of which shares Mr. Dollar disclaims any beneficial interest.
(6) Includes 1,000 shares held by Mr. Gellerstedt's wife, with respect to which
he disclaims any beneficial interest.
(7) Includes 110 shares held by Mr. Hawie's wife, with respect to which he
disclaims any beneficial interest.
(8) According to a Schedule 13G dated February 10, 1995 as filed with the
Securities and Exchange Commission, INVESCO PLC ("INVESCO") holds the
shares on behalf of other persons who have the right to receive or the
power to direct the receipt of dividends from, or the proceeds from the
sale of, such securities. According to INVESCO's Schedule 13G, the interest
of any such person does not exceed 5% of the class of securities. Also
according to INVESCO's Schedule 13G, INVESCO has shared voting and
investment power with respect to all of such shares and has sole voting and
investment power with respect to none of such shares. INVESCO's address is
11 Devonshire Square, London EC2M 4YR, England.
(9) According to a Schedule 13G dated February 10, 1995 as filed with the
Securities and Exchange Commission, MacKay-Shields Financial Corporation
("MacKay-Shields") holds the shares on behalf of other persons who have the
right to receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, such securities. According to
MacKay-Shields' Schedule 13G, the interest of any such person does not
exceed 5% of the class of securities. Also according to MacKay-Shields'
Schedule 13G, MacKay-Shields has shared voting and investment power with
respect to 1,952,900 shares and 516 shares are held directly with sole
voting power by its parent company, New York Life Insurance Company
(NYLIC). MacKay-Shields' address is 9 West 57th Street, New York, NY 10019.
(10) Includes 5,195 shares held by Mr. McMahon's wife, with respect to which he
disclaims any beneficial interest.
(11) Includes 20,000 shares held by Mr. Pattillo's wife, with respect to which
he disclaims any beneficial interest.
(12) Mr. Rupe was employed by the Company through December 16, 1994. The 20,693
shares may be acquired upon the exercise of options on or before March 16,
1995.
(13) Includes 28,800 shares owned by Mr. Woodson's wife and 12,800 shares owned
by the Company's Profit Sharing Plan and Trust, for which Mr. Woodson
serves as a plan administrator, as to all of which shares Mr. Woodson may
be deemed to share voting and investment power, and in all of which shares
Mr. Woodson disclaims any beneficial interest. Also includes 250,000 shares
held in the J. William Robinson Irrevocable Trust with respect to which Mr.
Woodson may be deemed to have investment power but with respect to which he
disclaims any beneficial interest. Also includes 66,286 shares that Mr.
Woodson has the right to acquire by exercising options available to him as
of April 1, 1995.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and greater than 10% shareholders ("Reporting
Persons") to file certain reports ("Section 16 Reports") with respect to
beneficial ownership of the Company's equity securities. Based on a review of
the Section 16 Reports filed by Reporting Persons with respect to the period
from January 1, 1994 through
7
<PAGE> 11
December 31, 1994, and certain representations of such Reporting Persons, all
filing requirements under Section 16(a) applicable to Reporting Persons during
such period have been met, with one exception. A Form 3 was required to be filed
for Ms. Juanita Baranco by the tenth day of the month following her becoming a
member of the Board of Directors. The Form 3, filed later, indicated that Ms.
Baranco owned no shares at the time she became a member of the Board of
Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing Audit Committee of the Board of Directors
composed of John H. Weitnauer, Jr., Chairman, Juanita P. Baranco and John J.
McMahon. The principal functions of the Audit Committee are to recommend to the
Board of Directors the persons or firm to be employed as independent auditors of
the Company; to review with such auditors the scope of their engagement, their
report of audit and the accompanying management letter, if any; and to consult
with the independent auditors and management with regard to the Company's
accounting methods and the adequacy of the Company's internal system of
accounting control.
The Company has a standing Compensation and Stock Option Committee composed
of Lawrence L. Gellerstedt, Jr., Chairman, G. Harold Northrop and Larry L.
Prince. The principal functions of the Compensation and Stock Option Committee
are to fix the compensation of the Chief Executive Officer, and to review the
recommendations of the Chief Executive Officer regarding the compensation of
other officers of the Company, to approve the granting of stock options to
officers and certain key employees and to make recommendations to the Board of
Directors relating to other aspects of employee compensation.
The Company has a standing Executive Committee composed of Robert R.
Woodson, Chairman, Lawrence L. Gellerstedt, Jr., Edward J. Hawie, H. G. Pattillo
and John H. Weitnauer, Jr. The principal function of the Executive Committee is
to act between meetings of the Board of Directors.
The Company has a Long Range Planning Committee composed of John J.
McMahon, Chairman, G. Harold Northrop, H. G. Pattillo and Robert A. Yellowlees.
The principal function of the Long Range Planning Committee is to review and
make recommendations to the Company on its long-term goals and objectives.
The Board of Directors of the Company met six times during the fiscal year
ended December 31, 1994. During that time the Audit Committee held two meetings,
the Compensation and Stock Option Committee held two meetings, the Executive
Committee held seven meetings and the Long Range Planning Committee held three
meetings. All of the directors attended 75% or more of the aggregate number of
meetings of the Board of Directors and all committees on which they served
during that period. The Company does not have a standing nominating committee.
8
<PAGE> 12
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table presents summary information with respect to
compensation paid by the Company to the Chief Executive Officer and each of the
three other most highly compensated executive officers of the Company
(determined as of the end of the last fiscal year, with the exception of one
executive officer who was employed by the Company through December 16, 1994) for
the fiscal years ended December 31, 1992, 1993 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
-------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)(2)
- ----------------------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert R. Woodson........................ 1994 $ 382,000 $143,250 20,000 $ 82,341
Chairman, Chief Executive Officer 1993 $ 360,400 $115,325 38,286 $ 77,663
and President 1992 $ 340,000 $ 20,000 4,000 $ 73,856
Earl W. Rogers, Jr....................... 1994 $ 181,810 $ 63,179 8,000 $ 19,121
Executive Vice President 1993 $ 134,387 $ 35,931 -- $ 20,379
1992 $ 107,787 $ 15,000 3,000 $ 16,968
Michael S. Rupe.......................... 1994(1) $ 181,810 $ 61,270 8,000 $ 45,672(1)
Former Executive Vice President 1993 $ 173,152 $ 61,642 17,193 $ 6,068
1992 $ 163,350 $ 32,315 4,000 $ 4,263
William M. Dollar........................ 1994 $ 113,850 $ 24,762 3,000 $ 5,996
Vice President, Treasurer and 1993 $ 103,500 $ 21,994 -- $ 25,771
Chief Financial Officer 1992 $ 99,500 $ 13,969 3,000 $ 2,355
</TABLE>
- ---------------
(1) Mr. Rupe was employed by the Company through December 16, 1994. In addition
to the amounts set forth in footnote (2), the amount reflected in the All
Other Compensation column includes severance pay of $45,452.
(2) Amounts include contributions to the Company's profit sharing plan for 1994,
1993 and 1992, respectively, as follows: Mr. Woodson: $23,000, $30,000 and
$30,000; Mr. Rogers: $21,400, $18,505 and $15,228; Mr. Rupe: $0, $3,532 and
$1,764; and Mr. Dollar: $4,500, $3,167 and $2,149. Includes amounts accrued
pursuant to deferred compensation arrangements for 1994, 1993 and 1992,
respectively, as follows: Mr. Woodson: $55,781, $46,610 and $43,152; Mr.
Rogers: $1,859, $1,632 and $1,512; Mr. Rupe: $0, $2,332 and $2,161; and Mr.
Dollar: $1,827, $22,451 and $0. Includes life insurance and split dollar
premiums paid on behalf of the individuals in 1994, 1993 and 1992,
respectively, as follows: Mr. Woodson: $1,560, $1,313 and $704; Mr. Rogers:
$262, $242 and $228; Mr. Rupe: $220, $204 and $338; and Mr. Dollar: $169,
$153 and $206.
9
<PAGE> 13
OPTION GRANTS
The following table provides details regarding stock options granted to the
named executive officers during 1994:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
------------------------------------------------------------------- ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE
SECURITIES OPTIONS EXERCISE MARKET PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO OR BASED OF UNDERLYING TERM(2)
OPTIONS EMPLOYEES IN PRICE SECURITY ON EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE OF GRANT DATE 5%($) 10%($)
- ------------------------- ---------- ------------ -------- --------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert R. Woodson........ 20,000 17.5% $ 21.750 $21.750 1/7/98 $120,182 $265,572
Earl W. Rogers, Jr....... 8,000 7.0% $ 21.750 $21.750 1/7/98 $ 48,073 $106,229
Michael S. Rupe.......... 8,000(3) 7.0% $ 21.750 $21.750 1/7/98 $ 48,073 $106,229
William M. Dollar........ 3,000 2.6% $ 21.750 $21.750 1/7/98 $ 18,027 $ 39,836
</TABLE>
- ---------------
(1) Upon exercise of an option, the exercise price may be paid in cash, Common
Stock or a combination of cash and Common Stock. Options are exercisable
one year from the date of grant and expire no later than the earlier of the
following dates: (a) the date on which the option is exercised in full, (b)
three months after the date of the employee's termination of employment, or
(c) the date which is the fifth anniversary of the date of the grant.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall market conditions. The amounts
reflected in this table may not necessarily be achieved.
(3) Mr. Rupe was employed by the Company through December 16, 1994; therefore,
under the terms of the Incentive Stock Option Plan, these options have been
cancelled.
OPTION EXERCISES
None of the named executive officers exercised any options during 1994. The
following table shows the number of shares covered by both exercisable and
unexercisable stock options as of December 31, 1994.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
------------- -------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ------------------ ------------- -------------
<S> <C> <C>
Robert R. Woodson.................................................. 46,286/20,000 $ 0/0
Earl W. Rogers, Jr................................................. 6,500/8,000 $ 0/0
Michael S. Rupe.................................................... 20,693/0 $ 0/0
William M. Dollar.................................................. 5,000/3,000 $ 0/0
</TABLE>
10
<PAGE> 14
DEFERRED COMPENSATION ARRANGEMENTS
The Company has entered into deferred compensation arrangements with
certain of its key employees, including the named executive officers, providing
for monthly payments to the officer upon his retirement, disability or other
termination of employment and to the officer's spouse or surviving minor
children in the event of death. These arrangements, as presently in effect,
provide for monthly payments at retirement of a specified amount, subject to a
reduction in the event of early retirement and, with respect to certain cases,
to a required minimum period of service prior to full vesting.
The following table sets forth information with respect to the estimated
annual benefit payable upon retirement at age 65 to the named executive officers
under deferred compensation arrangements:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
NAME RETIREMENT BENEFIT(1)
- ------------------ ---------------------
<S> <C> <C>
Robert R. Woodson....................................... $ 100,000
Earl W. Rogers, Jr...................................... $ 12,000
William M. Dollar....................................... $ 12,000
</TABLE>
- ---------------
(1) The amounts shown are based upon various assumptions by the Company
regarding future conditions and events, including assumptions relating to
the individual's continued employment with the Company until retirement,
the absence of a change in control of the Company or any violations of the
noncompetition arrangements described herein. The Company cannot accurately
predict the future, and actual benefits therefore may differ materially
from the amounts shown in this column. Amounts payable to the named
executive officers pursuant to deferred compensation arrangements are not
based on any formula, but rather were determined by the Compensation and
Stock Option Committee. Mr. Rupe was employed by the Company through
December 16, 1994 and is not eligible for benefits under the terms of the
arrangement.
Payment of benefits under the deferred compensation arrangements commences
at normal retirement age and continues during the life of the officer, and
during the life of the officer's spouse and the minority of any surviving minor
children, subject to a fifteen-year maximum period governing the payment of
death benefits. Payment of benefits under these arrangements is conditioned upon
the officer not engaging in certain activities in competition with the Company
following termination of his employment. However, the arrangements further
provide that if the officer's employment is terminated by the Company after a
change in control of the Company, or if he resigns within 180 days following any
such occurrence or transaction, the agreement not to compete shall not apply,
and in addition, he may elect to receive either (i) a lump sum distribution of
benefits equal to the liability then accrued by the Company with respect to his
agreement, or (ii) a series of payments based upon his stated salary as in
effect on the date of such change of control, merger or sale (without reduction
for early retirement). A change in control of the Company is deemed to have
occurred under the arrangements at such time as beneficial ownership of more
than 50% of the Common Stock of the Company is held by any one person or group
of two or more persons formed for the purpose of acquiring, holding or disposing
of the Company's Common Stock.
NONCOMPETE AND TERMINATION AGREEMENTS
The Company has entered into non-compete and termination agreements with
certain officers, including each of the named executive officers under which
each such officer has agreed that he will not compete with the Company or
disclose confidential information during his employment or for a two-year period
following
11
<PAGE> 15
termination of his employment. However, if the officer's employment is
terminated by the Company (other than by reason of intentional wrongdoing), at
any time after a change in control of the Company takes place, or if the officer
resigns within 365 days after such a change in control takes place, then the
officer's agreement not to compete will not apply and the officer will be
entitled to receive a lump sum payment from the Company equal to the lesser of
three times such officer's average annual compensation for the five calendar
year period which immediately precedes the date his employment terminates or the
maximum payment which the Company can make to such officer as a result of change
in control of the Company under appropriate Internal Revenue Code provisions. A
change in control of the Company is defined for these purposes as in the
deferred compensation agreements described above.
DIRECTOR FEES
For the year ended December 31, 1994, each non-employee director was paid a
fee of $16,000 and $750 per Board and committee meeting attended with the
exception of the committee chairmen who received $1,000 per committee meeting
attended. Employee directors received no compensation for Board services.
The report of the Compensation and Stock Option Committee and the stock
performance graph that follow shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates the
information by reference, and shall not otherwise be deemed filed under such
Acts.
COMPENSATION AND STOCK OPTION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee (the "Committee") of the
Company's Board of Directors is responsible for overseeing the Company's
executive compensation program. The Committee, which consists of outside,
non-employee directors, has adopted a compensation program for executives
designed to:
- provide market-competitive base salaries;
- reward performance that supports achievement of business plan goals;
- motivate executives to achieve strategic operating objectives; and
- encourage common stock ownership to further align the executives'
interests with the shareholders' interests.
In late 1992, the Company retained an independent compensation consulting
firm to assist in assessing the reasonableness and competitiveness of the
Company's executive compensation program. The Committee carefully considered the
results of the compensation survey and the recommendations of the consulting
firm in establishing the compensation plan for the Company's executives,
including Mr. Robert Woodson, the Company's Chief Executive Officer. In
addition, the Committee considered recommendations of the Company's Chief
Executive Officer (except with respect to the Chief Executive Officer's
compensation), the Company's performance, and other factors discussed below. The
components of the Company's executive compensation program for 1994 were (i)
cash compensation, consisting of base salaries and annual incentive bonuses
based on the achievement of individual and Company performance goals, and (ii)
long-term incentives, including stock options and profit sharing contributions.
The Committee will review the applicability of Section 162(m) of the Internal
Revenue Code of 1986, as amended by the Omnibus Budget
12
<PAGE> 16
Reconciliation Act of 1993. Section 162(m) may deny a federal income tax
deduction for an executive's compensation exceeding $1 million per year in
certain cases. Currently, compensation is not expected to exceed the $1 million
threshold for any executive.
CASH COMPENSATION
The consulting firm compared the Company's cash compensation program (base
salaries and cash bonuses) with the cash compensation programs of companies in a
peer group comprised of (i) 48 public companies based in the Atlanta, Georgia
metropolitan area with annual revenue in excess of $150 million, (ii) nine
graphics printing industry companies with annual revenue in excess of $100
million and (iii) approximately 135 non-durable goods manufacturing companies
with annual revenue in excess of $350 million (collectively, the "Market
Group"). The independent consulting firm, in consultation with the Company,
concluded that the Market Group was an appropriate peer group for compensation
comparison purposes.
Based on the results of the compensation study, the total cash compensation
(base salaries and bonuses) payable to the Company's executive officers was
slightly higher than the average cash compensation paid by other companies in
the Market Group. While the Company's base salaries were slightly higher than
the Market Group average, the Company's bonuses were lower than the Market Group
average. The goal is to provide competitive cash compensation to executive
officers within the median range of the market.
The consulting firm recommended that a larger portion of executive cash
compensation be tied to Company performance. The Committee approved modest
increases in base salaries for 1994 and continued the bonus plan put into place
in 1993.
Base Salary. The Committee reviews each executive officer's base salary,
including the Chief Executive Officer's base salary, on an annual basis. The
Committee believes that the base salaries paid to the Company's executive
officers are reasonable and competitive with the base salaries paid by the other
companies in the Market Group and enhance the Company's ability to attract and
retain talented executives.
The Committee increased the executive officers' base salaries in 1994 from
5% to 10% over the base salaries paid in 1993. In determining the percentage
increase in each executive officer's base salary, the Committee considered
recommendations of the Chief Executive Officer, increases in the cost of living,
additional responsibilities of certain executive officers, the competitive
market for base salaries as reflected in the consulting firm's compensation
survey, the executive's past and potential future contributions to the success
of the Company, and the Company's overall performance. These factors were
considered subjectively by the Committee in the aggregate, and none of the
factors was accorded any specific weight.
Annual Incentive Bonus. Under the supervision of the Committee, the
Company maintains a bonus plan pursuant to which annual cash bonuses are payable
to certain key officers and employees. Based on the results of the 1992
compensation survey, the Committee made changes to the bonus plan in 1993 and
these changes have remained in effect through 1994. The Company's prior
potential bonus for executive officers (25% of base salary) was significantly
lower than the potential bonus of the market (an average of approximately 40% of
base salary for persons in comparable positions). The Committee increased the
bonus potential in 1993 in order to be more competitive with the market.
The consulting firm also noted that the Company's threshold for the award
of bonuses in 1992 was higher than the market and that the Company's bonus
program provided for no additional award if performance goals were exceeded. In
order to bring the Company's program more in line with the market, the Committee
in 1993 lowered the threshold for the award of bonuses from 95% to 90% of
targeted amounts, but provided that no bonuses would be awarded (unless
authorized by the Committee) if earnings per share were less than the prior
13
<PAGE> 17
year. The Committee also provided for additional awards if the targeted
performance measures were exceeded, with a maximum award based on the attainment
of 110% of certain target amounts.
In 1994, bonuses for executive officers, other than the Chief Executive
Officer, were payable on a sliding scale based on (i) individual performance and
(ii) Company performance. Individual performance was based on the attainment of
specific contribution or expense goals for areas in the Company for which the
executive was directly responsible. The individual component equaled 25% to 50%
of the total bonus potential, depending on the executive's primary
responsibility. Executives directly responsible for an operating unit of the
Company, compared to executives responsible for an administrative/support
department, had a higher percentage of their bonus tied to individual
performance. The Company's performance was based on earnings per share in
relation to targeted earnings per share for the year. The Company component
equaled 75% to 50% of the total bonus potential, again based on the executives'
primary responsibility.
Based on results for 1994, the executive officers (excluding the Chief
Executive Officer) received bonuses equal to an average of approximately 31.3%
of base salaries. With respect to the individual performance component, certain
executive officers received individual performance bonuses as a result of
meeting targeted contribution levels. One other executive officer received an
individual performance bonus less than the potential bonus amount due to expense
levels that were higher than those established for maximum bonus. With respect
to the Company performance component, earnings per share for 1994 were 98% of
the targeted earnings per share amount. Executive officers received Company
performance bonuses in amounts less than the potential bonus amounts as a result
of the Company's earnings per share for 1994.
LONG-TERM INCENTIVES
Stock Options. Pursuant to the Company's 1981 Incentive Stock Option Plan,
as Extended (the "Plan"), the Company, acting through the Committee, may grant
stock options to key employees from time to time. Based on the 1992 survey of
344 manufacturing and service companies, the independent consulting firm advised
the Company that option grants to the executive officers were substantially
lower than the market. In addition, the consulting firm noted that the
percentage of common stock owned by the executive officers as a group was lower
than the market. The Committee, in an effort to compensate for below-market
option grants, increased the size of the option grants in 1993. In an on-going
effort to provide competitive long-term incentives, stock option grants are
targeted at the median range of the market.
The Committee considered recommendations of the Chief Executive Officer,
responsibility levels, compensation and the market price of the Company's common
stock in determining the size of option grants in 1994. Based on the Committee's
desire to increase stock ownership among executive officers, the number of
options held by an executive officer and the exercise price thereof was
considered in determining individual grants. These factors were considered
subjectively in the aggregate, and none of the factors was accorded a specific
weight.
Profit Sharing Plan. The Company also maintains a profit sharing plan for
the benefit of its executive officers and all other employees of the Company.
The Company's annual contribution to the profit sharing plan is based on the
increase in the Company's profitability compared to the prior year. The
contribution received by each individual is dependent upon that person's salary
and length of service to the Company. The size of the Company's annual profit
sharing contribution is decided by a committee of the Board of Directors, within
certain limits, based on the profitability of the Company and, to a lesser
extent, the earnings of the plan during the prior year.
14
<PAGE> 18
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee considered the 1992 findings of the consulting firm and the
other general factors discussed above in determining Mr. Woodson's compensation
in 1994. The compensation survey indicated that Mr. Woodson's cash compensation
(base salary and bonus) was below the average cash compensation paid to other
Chief Executive Officers in the Market Group. Although Mr. Woodson's base salary
was slightly above the market average, this difference was more than offset by
Mr. Woodson's bonus, which was below the market average.
Based on increases in the cost of living, the competitive market for base
salaries, Mr. Woodson's past and potential future contributions to the success
of the Company and the Company's overall performance, the Committee approved a
6% increase in Mr. Woodson's base salary in 1994 over 1993. These factors were
considered in the aggregate on a subjective basis, and no factors were given any
specific weight.
Mr. Woodson received a bonus in 1994 which was based solely on the
Company's earnings per share in relation to a targeted figure. Based on the
results of the 1992 compensation survey, the Committee made changes to the bonus
plan in 1993 and these changes remained in effect through 1994. The consulting
firm noted that the Company's threshold for bonus for the Chief Executive
Officer was higher than the market and that the Chief Executive Officer received
no additional award if the Company performance goal was exceeded. In order to
bring the Company's Chief Executive Officer bonus program more in line with the
market, the Committee in 1993 lowered the threshold for Mr. Woodson's bonus from
95% to 90% of the targeted earnings per share amount, but provided that no bonus
would be awarded (unless authorized by the Committee) if earnings per share were
less than the prior year. In addition, the consulting firm noted that Mr.
Woodson's prior potential bonus (25% of base salary) was significantly lower
than the potential bonus of the market (an average of approximately 58% of base
salary for Chief Executive Officers). Consistent with the consulting firm's
recommendations to increase Mr. Woodson's bonus as a percentage of base salary,
the Committee in 1993 increased the bonus payable upon achievement of the
targeted earnings per share amount from 25% to 50% of Mr. Woodson's base salary.
The Committee also approved a maximum bonus of 60% of base salary based on the
attainment of 110% of the targeted earnings per share amount. Because the
Company achieved 98% of its target earnings per share, Mr. Woodson received a
bonus equal to 37.5% of his base salary.
The 1992 compensation survey indicated that option grants to Mr. Woodson,
as a percentage of base salary, were lower than the market. The Committee, in an
effort to compensate for below-market option grants, increased the size of the
option grant in 1993. The Committee considered compensation and the market price
of the Company's common stock in determining the size of option grant to Mr.
Woodson in 1994. The Committee also considered options currently held by Mr.
Woodson and the exercise price thereof in making its determination. The factors
considered by the Committee in determining the size of the option grant to Mr.
Woodson were considered subjectively in the aggregate. No factors were given any
specific weight.
The Committee believes that its executive compensation reflects the goals
and philosophy of the Company's compensation program. As described above, an
increasing portion of the executive officers' compensation is at risk and tied
to improving shareholder value and attaining corporate earnings targets.
COMPENSATION AND STOCK
OPTION COMMITTEE
Lawrence L. Gellerstedt, Jr., Chairman
G. Harold Northrop
Larry L. Prince
February 17, 1995
15
<PAGE> 19
FIVE YEAR STOCK PERFORMANCE GRAPH
The line graph below reflects the cumulative, five-year shareholder return
(assuming the reinvestment of dividends) on the Company's Common Stock compared
to such return of the S&P 500 Index and the Dow Jones Industrial and Commercial
General Services Index. The graph reflects the investment of $100 on December
31, 1989 in the Company's Common Stock, the S&P 500 Index and the Dow Jones
Industrial and Commercial General Services Index.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG
JOHN H. HARLAND COMPANY, S&P 500 INDEX AND THE
DOW JONES INDUSTRIAL AND COMMERCIAL SERVICES INDEX
[GRAPH]
<TABLE>
<CAPTION>
DJ IND. &
COMM. GEN-
MEASUREMENT PERIOD JOHN H. HAR- ERAL SERVICES
(FISCAL YEAR COVERED) LAND COMPANY S&P 500 INDEX
<S> <C> <C> <C>
DEC-89 100 100 100
DEC-90 90 97 94
DEC-91 116 126 117
DEC-92 131 136 133
DEC-93 113 150 139
DEC-94 110 152 134
</TABLE>
16
<PAGE> 20
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS TO AMEND THE
COMPANY'S EMPLOYEE STOCK PURCHASE PLAN AND THE COMPANY'S 1981 INCENTIVE STOCK
OPTION PLAN, AS EXTENDED.
AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors, by unanimous vote, has recommended that the
shareholders approve an amendment to the Company's Employee Stock Purchase Plan
(the "Purchase Plan") to increase the number of shares of common stock
authorized to be sold under the Purchase Plan from 3,600,000 to 4,350,000
shares. The proposed amendment to the Purchase Plan is set forth in Exhibit A to
this Proxy Statement.
The proposed amendment to the Purchase Plan will be adopted upon receiving
the affirmative vote of holders of a majority of the shares present or
represented by proxy at the meeting. Proxies will be voted in accordance with
the specifications marked thereon, and, if no specification is made, will be
voted "FOR" adoption of the proposed amendment to the Purchase Plan.
The Board of Directors has determined that the amendment to the Purchase
Plan is in the best interests of the Company and its shareholders. The proposed
amendment would provide additional shares for purchase by employees of the
Company. The Company's Board of Directors believes that such purchases are an
effective method to attract and retain employees and that the availability of
shares for future purchases under the Purchase Plan is important to the
Company's business prospects and operations.
AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN
TO CHANGE THE DEFINITION OF "PAY"
The Executive Committee of the Board of Directors ("Executive Committee"),
acting with full power and authority to exercise all the authority of the Board
of Directors of the Company, has unanimously approved and recommended that the
shareholders approve an amendment to the Purchase Plan to change the definition
of compensation used to determine the amount of stock purchased under the
Purchase Plan from a definition based on annualized base pay to one based on
total cash compensation. The proposed amendment to the Purchase Plan is set
forth in Exhibit B.
The proposed amendment to the Purchase Plan will be adopted upon receiving
the affirmative vote of holders of a majority of the shares present or
represented by proxy at the meeting. Proxies will be voted in accordance with
the specifications marked thereon, and, if no specification is made, will be
voted "FOR" adoption of the proposed amendment to the Purchase Plan.
The Executive Committee of the Board has determined that the amendment to
the Purchase Plan is in the best interests of the Company and its shareholders.
The proposed amendment would allow employees to participate based on total cash
compensation rather than total base compensation.
17
<PAGE> 21
The following discussion summarizes the principal features of the Purchase
Plan prior to the amendments proposed above. This discussion does not purport to
be complete and is qualified in its entirety by reference to the Purchase Plan.
JOHN H. HARLAND COMPANY EMPLOYEE STOCK PURCHASE PLAN
GENERAL INFORMATION*
The Purchase Plan was adopted by the Board of Directors on March 15, 1979,
and was approved by the Company's shareholders at the April 26, 1979 annual
meeting. The Purchase Plan has been amended from time to time since it was
adopted. The Purchase Plan authorizes the sale of not more than 3,600,000 shares
of Common Stock of the Company to eligible employees under the Purchase Plan.
Since the inception of the Purchase Plan through December 31, 1994, a total of
3,135,468 shares have been purchased, so that as of December 31, 1994, a total
of 464,532 shares were available for sale under the Purchase Plan. The shares
sold to employees pursuant to the Purchase Plan may be either authorized but
unissued shares or shares purchased by the Company in the open market. Proceeds
from the sale of Common Stock pursuant to the Purchase Plan will constitute
general funds of the Company.
Under the Purchase Plan, the Company conducts a continuous series of
offerings of its Common Stock to regular full-time employees of the Company and
its subsidiaries who have been employed by the Company or any of its
subsidiaries for at least one year. (See Participation paragraph below.) Each
such offering commences on the first business day of each calendar quarter and
terminates on the last business day of such quarter (an "Offering Period").
Based upon an analysis of the Employee Retirement Income Security Act of
1974, as amended, ("ERISA") and its legislative history and in the absence of
clarifying regulations relating to employee stock purchase plans, the Purchase
Plan, in the opinion of management, is not subject to any provisions of ERISA.
In addition, the Purchase Plan is not qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
PARTICIPATION
All regular full-time employees become eligible to participate in the
Purchase Plan at the beginning of the next Offering Period after they have
completed one continuous year of employment. For purposes of the Purchase Plan,
a regular full-time employee is an employee, as defined by the Code, whose
customary employment with the Company or any subsidiary is for more than 20
hours per week or for more than five months in any calendar year. Directors
(other than directors who are employees) are not eligible to participate in the
Purchase Plan, but all officers who are employees, whether or not Directors, may
participate.
An eligible employee may become a participant in the Purchase Plan by
completing and filing with the Committee (as defined below) a written
authorization for payroll deductions. Every participant will continue to be a
participant under the Purchase Plan until such time as he becomes ineligible for
participation or elects to terminate his participation. (See Withdrawals and
Assignments paragraph below.)
- ---------------
(*All share amounts have been adjusted to reflect stock split-ups effected as
stock dividends in 1980, 1981, 1985 and 1987.)
18
<PAGE> 22
PAYROLL DEDUCTIONS AND PURCHASE OF STOCK
General. As more fully described below, each participant in the Purchase
Plan may elect to have from 3% to 10% (in whole percentage points) of his pay
withheld to purchase Common Stock during each Offering Period. However, a
participant may not purchase more than $5,000 of stock through the Purchase Plan
in any calendar year.
The price for shares purchased under the Purchase Plan (referred to herein
as the "option price") is 85% of the fair market value of the Common Stock on
either the first day of the Offering Period or the last day of the Offering
Period, whichever is lower. The fair market value of the Common Stock will be
the mean between the highest and lowest quoted selling prices of the Common
Stock on the New York Stock Exchange on the date of determination.
The money withheld from each participant's pay is used following the end of
each Offering Period to exercise an "option" granted to the participant under
the Purchase Plan to purchase 12 shares of Common Stock for each $500 of his
Annualized Base Pay (as defined below), up to a maximum of 1,800 shares of
Common Stock. This "option" is the mechanism used in the Purchase Plan to
determine the maximum number of shares that a participant may purchase with his
payroll deductions. The option does not provide employees any rights to purchase
more shares of Common Stock than can be purchased with the money withheld from
pay for the purchase price provided in the Purchase Plan.
Payroll Deductions. Each participant in the Purchase Plan must, at the
time he files his authorization for payroll deductions, elect to have deductions
made from his pay on each payday during the time he is a participant at the
annual rate of not less than 3% nor more than 10% (in whole percentage points
only) of his Annualized Base Pay. For purposes of the Purchase Plan, the term
Annualized Base Pay is defined to mean the participant's current annualized base
pay from the Company and its subsidiaries, excluding overtime and all other
extra compensation such as bonuses, contributions to pension, profit sharing,
health and life insurance, and other plans. If the proposed amendment relating
to the definition of Annualized Base Pay is adopted, the Purchase Plan will be
amended to replace the term Annualized Base Pay with the term Annualized Cash
Compensation. Further, the term Annualized Cash Compensation will mean the
participant's current annualized cash compensation from the Company or any
subsidiary, including overtime, bonuses, commissions and other cash incentives
and any pre-tax deferrals under the Company's or any subsidiary's employee
benefit plans. The full text of the proposed amendment is set forth on Exhibit B
to this Proxy Statement.
The Company will withhold on each payday the percentage specified in the
authorization. An employee may not elect to participate in an Offering Period
once it has commenced, and a participant under the Purchase Plan may not vary
the amount of the deduction from his base pay during an Offering Period except
that the Company will cease making deductions from a participant's base pay upon
receipt of a written notice of election by the participant to withdraw from the
Purchase Plan. (See Withdrawals and Assignments paragraph below.) On the other
hand, a participant may change the amount to be deducted from his base pay for
any Offering Period by giving notice to such effect to the Committee (as defined
below) prior to the commencement of such Offering Period. Once an employee files
a payroll deduction authorization, the Company will make deductions from his
base pay during each subsequent Offering Period until it has received notice to
the contrary or until the participant becomes ineligible to participate. (See
Withdrawals and Assignments paragraph below.)
Purchase of Stock. Unless a participant gives written notice prior to the
end of the Offering Period that he is withdrawing from the Purchase Plan or that
he desires to effect only a partial exercise of his option, as
19
<PAGE> 23
described in the following paragraph, his option for the purchase of stock with
payroll deductions made during such Offering Period will be exercised
automatically for him on the last day of such Offering Period and the Committee
will purchase for his account the maximum number of full shares of stock subject
to his option which the accumulated payroll deductions in his account at that
time will purchase at the applicable option price. Any balance remaining in a
participant's account after such purchases have been made will then be paid over
to the participant as soon as practicable following the termination date for
that Offering Period, except that any such balance remaining solely from the
failure to purchase a fractional share of stock may be credited to that
participant's account to be applied toward purchases at the end of the next
Offering Period.
A participant, by written notice to the Committee during any Offering
Period, may elect effective at the last day of such Offering Period to exercise
his option for a specified number of full shares, not less than five, but less
than the number of full shares of stock which the accumulated payroll deductions
in his account will purchase at the applicable option price. In such event the
balance of his account will be distributed to him in cash, without interest, as
promptly as practicable after the Offering Period ends. (See Withdrawals and
Assignments paragraph below.)
As promptly as practicable after the termination of each Offering Period,
the Company will deliver certificates representing the shares purchased by each
participant in that Offering Period registered in the name of such participant,
or, if the participant directs before the last day of such Offering Period, in
the name of the participant and one other person designated by the participant
as joint tenants with the right of survivorship, to the extent permitted by
applicable law.
Following each Offering Period, participants will receive a report of the
amount of shares of Common Stock purchased for their account during the Offering
Period.
No contributions have been or will be made to the Purchase Plan by the
Company or any of its subsidiaries, and no person may contribute to the Purchase
Plan other than by payroll deductions in the manner described above. When $5,000
of the amount credited to a participant's account has been used to purchase
stock during any calendar year, any excess will be returned to such participant,
payroll deductions for him will cease, and he will not receive any further
options to purchase Common Stock under the Purchase Plan during that calendar
year.
Additional Information Concerning "Options." As noted above, in order to
determine the maximum number of shares that a participant may purchase with his
payroll deductions, at the beginning of each Offering Period each participant
will be granted an option to purchase 12 shares of stock for each $500 of his
Annualized Base Pay (disregarding fractional shares) up to a maximum of 1,800
shares. However, if the number of shares available for purchase under the
Purchase Plan is insufficient to grant to each participant an option to purchase
the full number of shares to which he would otherwise be entitled, but the
Committee nonetheless determines to continue the operation of the Purchase Plan
for that Offering Period, then each participant shall be granted an option to
purchase that number of available shares (up to a maximum of 1,800 shares) which
is equal to the total number of available shares multiplied by a fraction, the
numerator of which is such participant's Annualized Base Pay and the denominator
of which is the total Annualized Base Pay of all participants.
No employee may be granted an option under the Purchase Plan (i) if the
exercise of that option would result in such employee owning actually or by
attribution more than 5% of the total combined voting power or value of all
classes of stock of the Company or of any parent or subsidiary of the Company,
or (ii) which would permit his right to purchase stock under all employee stock
purchase plans of the Company and of any parent and any subsidiaries of the
Company then in effect to accrue at a rate that exceeds $25,000 of fair
20
<PAGE> 24
market value of such stock (determined at the time such option is granted) for
each calendar year in which such stock option would be outstanding at any time
within the meaning of the Code.
WITHDRAWALS AND ASSIGNMENTS
A participant may voluntarily withdraw from the Purchase Plan at any time
by giving written notice to such effect. As promptly as practicable after the
end of the Offering Period in which such withdrawal takes place such participant
will be paid the amount of the payroll deductions credited to his account, in
cash and without interest. A participant is automatically deemed to have
withdrawn from the Purchase Plan at the end of any Offering Period during which
he elects to purchase less than the number of full shares which he has an option
to purchase in that Offering Period. The balance of the accumulated payroll
deductions in the account of any participant who has withdrawn will be paid to
him, in cash, without interest, and any shares of Common Stock which he has
elected to purchase will be delivered to him or to his beneficiary in the event
of death, as soon as practicable following the termination date of the Offering
Period during which his withdrawal became effective. Any participant who
withdraws from the Purchase Plan during an Offering Period may again become a
participant in the Purchase Plan in any succeeding Offering Period by filing a
new authorization for payroll deductions before the commencement of the Offering
Period for which he desires to resume participation.
Any participant whose employment with the Company is terminated for any
reason, including retirement or death, will immediately cease to be a
participant. Any option which he may have been granted under the Purchase Plan
will expire and cannot be exercised, and the payroll deductions credited to his
account will be returned to him, or to his beneficiary in the case of death,
within 30 days after termination and without interest.
Neither the payroll deductions credited to a participant's account or any
rights with regard to the exercise of an option or to receive stock under the
Purchase Plan may be assigned, transferred, pledged or otherwise disposed of in
any way by the participant. Any such attempted assignment, transfer, pledge or
other disposition by a participant may be treated by the Company as an election
to withdraw from the Purchase Plan.
The payroll deductions held by the Company under the Purchase Plan need not
be segregated from the Company's general funds and may be used by the Company
for any corporate purpose.
ADMINISTRATION OF THE PURCHASE PLAN
The Purchase Plan is administered by the Compensation and Stock Option
Committee of the Board of Directors (the "Committee"). The Committee is
appointed by the Board of Directors and consists of not less than three of its
members. No member of the Board of Directors who is eligible to participate in
the Purchase Plan may serve as a member of the Committee. Committee members
serve at the pleasure of the Board of Directors and may be removed by the Board
of Directors. The Committee is responsible for supervising the administration of
the Purchase Plan and resolving such questions as may arise regarding the proper
interpretation of the terms of the Purchase Plan. All expenses of administering
the Purchase Plan are paid by the Company.
AMENDMENT AND TERMINATION
The Board of Directors reserves the right at any time to abandon or
withdraw the Purchase Plan entirely, to withhold the granting of options to
purchase shares, to change the terms on which options to purchase shares may be
granted or to otherwise amend the Purchase Plan, provided such action does not
adversely
21
<PAGE> 25
affect rights previously granted to participants. In addition, shareholder
approval must be obtained to authorize the sale of more than a total of
3,600,000 shares of Common Stock under the Purchase Plan, to effect any change
in the eligibility requirements for participation in the Purchase Plan, or to
permit payroll deductions at a rate in excess of 10% of a participant's
Annualized Base Pay. The Purchase Plan will terminate when the shares of Common
Stock available under the Purchase Plan have been so substantially exhausted as
to make an offering to all eligible employees impracticable under the Purchase
Plan, unless earlier terminated by the Board of Directors as described above.
The number of shares of Common Stock reserved for issuance under the
Purchase Plan, and the number of shares of stock covered by each outstanding
option and the exercise price per share thereof, will be adjusted for any
increase or decrease in the number of issued and outstanding shares of Common
Stock of the Company resulting from a division or consolidation of the shares,
or the payment of a stock dividend or other increase or decrease in the number
of issued and outstanding shares of Common Stock effected without receipt of
consideration by the Company.
FEDERAL INCOME TAX CONSEQUENCES
The Purchase Plan is intended to satisfy the requirements of Section 423 of
the Code as an "employee stock purchase plan." The following is a very general
summary of the federal income tax consequences (1) to an employee resulting from
participation in the Purchase Plan and (2) to the Company resulting from
maintaining the Purchase Plan, assuming that the Purchase Plan satisfies the
requirements of Section 423 of the Code.
This description is only a general summary based on current federal income
tax laws, regulations (including certain proposed regulations), and judicial and
administrative interpretations thereof. The federal income tax laws and
regulations are frequently amended, and such amendments may or may not be
retroactive with respect to transactions described herein. Furthermore,
employees participating in the Purchase Plan may be subject to taxes other than
federal income taxes, such as state and local income taxes and estate or
inheritance taxes and individual circumstances may vary results.
Generally, amounts deducted from pay to purchase shares under the Purchase
Plan are included in a participating employee's taxable income for the calendar
year in which those amounts are deducted. The purchase of shares under the
Purchase Plan at a discount from the market price does not result in any taxable
income to the participating employee when the employee purchases the shares.
However, the employee will determine his or her taxable income for the calendar
year in which the employee sells or otherwise disposes of a share purchased
under the Purchase Plan in accordance with the rules discussed in the next
paragraph.
If the employee holds a share purchased under the Purchase Plan for at
least two years from the first day of the quarterly offering period in which the
employee purchased the share (the "grant date"), or if the employee dies (at any
time) while owning the share, the employee generally will be required to report
as ordinary income in the year he or she disposes of the share (by sale or
otherwise) or dies the lesser of (i) the excess of the share's fair market value
at the time of such disposition or death over the price paid for the share or
(ii) the excess of the share's fair market value on the grant date over the
option price on such date. If the employee disposes of the share within two
years of the grant date, the employee generally will be required to report as
ordinary income in the year of disposition an amount equal to the excess of the
fair market value of the share on the date it was purchased under the Purchase
Plan over the price the employee paid for the share. In either case, the
employee's tax basis in the share will be increased (over the amount the
employee paid for the share) by the amount of ordinary income reportable by the
employee. Moreover, in addition to the
22
<PAGE> 26
ordinary income so reportable, if the employee disposes of the share in a
taxable sale or exchange, the difference between the amount realized on such
sale or exchange and the employee's tax basis (adjusted as described above) will
be treated as long-term or short-term capital gain or loss, depending upon
whether the employee held the share for more than one year after the date of
purchase under the Purchase Plan. Under current law, net capital gain (i.e., the
excess of net long-term capital gain over net short-term capital loss) of
individuals is subject to a maximum marginal tax rate of 28%, while ordinary
income may be subject to tax at higher rates.
The Company is not entitled to a federal income tax deduction unless the
employee disposes of the share within two years of the grant date. The amount of
the Company's deduction, if any, is equal to the amount of the employee's
ordinary income on such disposition of the share and the deduction must be taken
in the Company's taxable year in which the disposition occurs.
AMENDMENT OF 1981 INCENTIVE STOCK OPTION PLAN, AS EXTENDED, TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors, by unanimous vote, has recommended that the
shareholders approve an amendment to the John H. Harland Company 1981 Incentive
Stock Option Plan, as Extended (the "Plan") to increase the number of shares of
authorized but unissued shares of Common Stock available for grant under the
Plan from 435,955 to 1,185,955 shares. The proposed amendment to the Plan is set
forth in Exhibit C to this Proxy Statement.
The proposed amendment to the Plan will be adopted upon receiving the
affirmative vote of holders of a majority of the shares present or represented
by proxy at the meeting. Proxies will be voted in accordance with the
specifications marked thereon, and, if no specification is made, will be voted
"FOR" adoption of the proposed amendment to the Plan.
The Board of Directors has determined that the proposed amendment to the
Plan is in the best interests of the Company and its shareholders. The proposed
amendment would provide additional shares for grant to key employees of the
Company. The Company's Board of Directors believes that grants of stock options
are an effective method to attract and retain key employees and that the
availability of shares for future grants under the Plan is important to the
Company's business prospects and operations.
The following discussion summarizes the principal features of the Plan.
This discussion does not purport to be complete and is qualified in its entirety
by reference to the Plan.
JOHN H. HARLAND COMPANY 1981 INCENTIVE STOCK OPTION PLAN, AS EXTENDED
ADMINISTRATION
The Plan is administered by a committee of the Board of Directors which is
composed of at least three members (the "Committee"). Each director, while a
member of the Committee, will satisfy the requirements of committee membership,
if any, under Rule 16b-3 of the Securities Exchange Act of 1934 (the "Exchange
Act").
23
<PAGE> 27
PARTICIPANTS
Any employee of the Company or any subsidiary of which the Company owns,
directly or indirectly, 50% or more of the total combined voting power of all
classes of stock may participate in the Plan provided the Committee, acting in
its absolute discretion, determines such employee to be key to the success of
the Company or such subsidiary. A key employee can be a member of the Board of
Directors, but no member of the Board of Directors of the Company will be a key
employee under the Plan solely because of his membership on the Board of
Directors. The Company estimates that approximately 110 employees of the Company
and its subsidiaries presently are eligible to participate in the Plan.
The Committee may grant options under the Plan to such key employees as the
Committee may determine, provided however, that the aggregate fair market value
of Common Stock subject to all incentive stock options ("ISOs"), within the
meaning of Section 422 of the Code, granted on or after January 1, 1987 to a key
employee under the Plan and any other stock option plan adopted by the Company
or its subsidiaries which first became exercisable in any calendar year (which
begins on or after January 1987) shall not exceed $100,000. The Committee has
the right to grant new options in exchange for the cancellation of options or
under any other circumstances which the Committee deems appropriate. The written
stock option agreement under which an option is granted (the "Option Agreement")
shall incorporate the terms and conditions which the Committee deems consistent
with the terms of the Plan and, if the Committee intends such option to be an
ISO, which are not inconsistent with Section 422 of the Code.
OPTION PRICE
The option price of options granted under the Plan will be determined by
the Committee, but such price will be no less than the fair market value of the
Common Stock on the date the option is granted ("grant date") provided, however,
if the Committee grants an option to a key employee for a number of shares of
Common Stock in exchange for the cancellation of any option (whether or not
granted under the Plan) to purchase the same number of shares of Common Stock,
the option price may be the same as the option price for such shares under the
option which is cancelled. The option price of options granted to a key employee
who owns stock of the Company or its subsidiaries possessing more than 10% of
the total combined voting power of all stock of the Company or such subsidiary
("more than 10% shareholder") will be no less than 110% of the fair market value
on grant date. The option agreement may, at the discretion of the Committee,
provide for payment of the exercise price in cash, Common Stock, or a
combination of cash and Common Stock.
OPTION PERIOD
Each option granted under the Plan will be exercisable in whole or in part
as set forth in the particular Option Agreement under which such option is
granted, but in no event before the date such option is granted, and each option
will expire after the earlier of (1) the date such option is exercised in full,
(2) the end of the three-consecutive month period which immediately follows the
last day (in his current period of employment) that the key employee is employed
by the Company or its subsidiaries or the end of such longer period the
Committee in its discretion deems appropriate under the circumstances, or (3)
the date which is the tenth anniversary of the date such option is granted (or
the fifth anniversary of the grant date for a more than 10% shareholder). If the
employment of a key employee terminates because of death or disability, the
three-consecutive month period described in this section automatically shall
become a twelve-consecutive month period.
24
<PAGE> 28
NON-TRANSFERABILITY
No option granted under the Plan is transferable by a key employee other
than by will or by the laws of descent and distribution, and such option shall
be exercisable during a key employee's lifetime only by the key employee.
ADJUSTMENT OF SHARES
The Plan provides for adjustments by the Committee in an equitable manner
of the number of shares of Common Stock available for the grant of options, the
number of shares of Common Stock covered by options and the option price to
reflect any changes in the capitalization of the Company and in the event of
certain transactions which provide for the substitution or assumption of such
options.
SALE OR MERGER OF THE COMPANY
If the Company agrees to sell all or substantially all of its assets or
agrees to any merger, consolidation, reorganization, division or other corporate
transaction in which Common Stock is converted into another security or into the
right to receive securities or property and such agreement does not provide for
the assumption or substitution of all outstanding options, each Option
Agreement, at the direction and discretion of the Board of Directors, may be
cancelled unilaterally by the Company if (1) any restrictions on the exercise of
the option are waived before the Option Agreement is cancelled such that the key
employee has the opportunity to exercise the option in full before such
cancellation, (2) the Company transfers to the key employee shares of Common
Stock, the number of which shall be determined by the Company by dividing the
excess of (a) fair market value of the number of shares which remain subject to
the exercise of such option as of any date over the total option price for such
shares by (b) the fair market value of a share of Common Stock on such date,
which number shall be rounded down to the nearest whole number, or (3) the
Company transfers to a key employee the same consideration which the key
employee otherwise would receive as a shareholder of the Company in connection
with such sale or other corporate transaction if he held the number of shares of
Common Stock which would have been transferrable to him under (2) above if such
number had been determined immediately before such sale or other corporate
transaction.
TERM OF THE PLAN
The Plan terminates on November 17, 2002 or, if earlier, on the date on
which all of the Common Stock reserved under the Plan has been issued, and no
option shall be granted under the Plan after the date the Plan terminates.
AMENDMENT OF THE PLAN
The Plan may be amended by the Board of Directors from time to time to the
extent that the Board deems necessary or appropriate in light of, and consistent
with, the provisions of sec. 422 of the Code; provided, however, no amendment
shall be made without approval of the shareholders of the Company (1) to
increase the number of shares available under the Plan for granting options, (2)
to extend the maximum life of the Plan or the maximum life of an option, (3) to
decrease the minimum option price under the Plan, (4) to change the class of
employees eligible for options under the Plan or to otherwise materially modify
(within the meaning of Rule 16b-3 of the Exchange Act) the requirements as to
eligibility for participation in the Plan or (5) to otherwise materially
increase (within the meaning of Rule 16b-3 of the Exchange Act) the benefits
accruing under the Plan. The Board of Directors may also suspend the granting of
options under the Plan at
25
<PAGE> 29
any time and may terminate the Plan at any time. The Board of Directors may
however, modify, amend or cancel any options theretofore granted only under
certain circumstances.
FEDERAL INCOME TAX CONSEQUENCES
A brief description of the federal income tax consequences of the Plan
under present law is set forth below. Individual circumstances may vary these
results. This brief description is only a general summary based on current
federal income tax laws, regulations (including certain proposed regulations),
and judicial and administrative interpretations thereof and the related federal
securities laws and rules and regulations. The federal income tax laws and
regulations and the related federal securities laws and regulations are
frequently amended, and such amendments may or may not be retroactive with
respect to transactions described herein.
As identified by the Committee, each option granted under the Plan is
either an ISO or a non-qualified stock option ("NQO"). A key employee is not
subject to any federal income tax upon the grant of an option pursuant to the
Plan nor will the grant of an option result in an income tax deduction for the
Company (or any subsidiary of the Company).
Upon the exercise of an ISO and the related transfer of Common Stock to a
key employee, the key employee normally will not recognize any income for
federal income tax purposes and the Company (or any subsidiary of the Company)
normally will not be entitled to any federal income tax deduction. However, the
excess of the fair market value of the shares transferred upon the exercise of
an ISO over the option price of such shares (the "spread") generally will
constitute an item of alternative minimum tax adjustment to the key employee for
the year in which the option is exercised. Thus, notwithstanding that a key
employee will not recognize income for regular income tax purposes upon exercise
of a ISO, the key employee's federal income tax liability may be increased as a
result of such exercise under the alternative minimum tax rules of the Code. The
portion of a key employee's minimum tax liability, if any, attributable to the
spread may give rise to a credit against such employee's regular tax liability
in later years.
If the Common Stock transferred pursuant to the exercise of an ISO is
disposed of within two years from the date of the grant of the option or within
one year from the date of exercise (the "holding periods"), the key employee
generally will recognize ordinary income equal to the lesser of (1) the gain
recognized (i.e., the excess of the amount realized on the disposition over the
option price) or (2) the spread. If the key employee is subject to Section 16(b)
of the Exchange Act, however, special rules (as discussed below with respect to
the exercise of a NQO) may apply for purposes of determining the amount of
ordinary income recognized on the disposition. The balance, if any, of the key
employee's gain over the amount treated as ordinary income on a disposition
generally will be long-term or short-term capital gain depending upon whether
the holding period applicable to long-term capital assets is satisfied. The
Company (or a subsidiary of the Company) normally will be entitled to a federal
income tax deduction equal to any ordinary income recognized by the key
employee.
Following satisfaction of the holding periods, the disposition of shares of
Common Stock acquired by the exercise of an ISO generally will result in
long-term capital gain or loss treatment with respect to the difference between
the amount realized on the disposition and the option price. The Company (or a
subsidiary of the Company) will not be entitled to any federal income tax
deduction as a result of a disposition of such shares after the holding periods.
Upon the exercise of an NQO, the key employee generally will recognize
ordinary income in an amount equal to the excess, if any, of their fair market
value of the shares transferred to the key employee upon exercise over the
option price. Such fair market value will generally be determined on the date
the shares are
26
<PAGE> 30
transferred pursuant to the exercise. However, if the key employee is subject to
Section 16(b) of the Exchange Act, the date on which the fair market value of
the transferred shares will be determined is delayed for up to six months if the
key employee cannot sell the Common Stock without being subject to liability
under Section 16(b) of the Exchange Act. If, however, the key employee who is
subject to Section 16(b) of the Exchange Act timely elects under sec.83(b) of
the Code, such fair market value will be determined on the date the stock is
transferred pursuant to the exercise without regard to the effect of Section
16(b). Income will be recognized in the year such fair market value is
determined, and the Company (or a subsidiary of the Company) generally will be
entitled to a corresponding federal income tax deduction, provided the Company
(or a subsidiary of the Company) satisfies applicable federal income tax
withholding requirements. The sale or other taxable disposition of shares of
Common Stock acquired through the exercise of an NQO generally will result in a
short-term or long-term capital gain or loss equal to the difference between the
amount realized on the disposition and the fair market value of the shares of
Common Stock when the NQO was exercised.
Special rules will apply to a key employee who exercises an option by
paying the option price, in whole or in part, by the transfer to the Company of
shares of Common Stock.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP, subject to
ratification by the shareholders at the Annual Meeting, as auditors of the
Company for fiscal 1995. Deloitte & Touche LLP, or its predecessors, has audited
the Company's financial statements for the past 47 years. Should this firm be
unable to perform the requested services for any reason or not be ratified by
the shareholders, the Directors will appoint other independent auditors to serve
for the remainder of the year. Representatives of Deloitte & Touche LLP will be
present at the annual meeting of shareholders, will have the opportunity to make
a statement if they so desire, and will be available to respond to appropriate
questions.
ANNUAL REPORT TO SHAREHOLDERS
The annual report of the Company for the year ended December 31, 1994,
including audited financial statements, accompanies this Proxy Statement.
ANNUAL REPORT ON FORM 10-K
The Company will provide without charge, at the written request of any
record beneficial shareholder on March 1, 1995, a copy of the Company's Annual
Report on Form 10-K including the financial statements and financial statement
schedules, as filed with the Securities and Exchange Commission, except exhibits
thereto. The Company will provide copies of the exhibits, should they be
requested by eligible shareholders, and the Company may impose a reasonable fee
for providing such exhibits. Requests for copies of the Company's Form 10-K
should be mailed to:
JOHN H. HARLAND COMPANY
P.O. Box 105250
Atlanta, Georgia 30348
Attention: Victoria P. Weyand
Vice President and Secretary
27
<PAGE> 31
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the Company's 1996
Annual Meeting of Shareholders must be received no later than November 14, 1995
in order to be considered for inclusion in the proxy statement and form of proxy
to be distributed by the Board of Directors in connection with such meeting.
OTHER MATTERS
The minutes of the annual meeting of shareholders held on April 22, 1994
will be presented to the meeting, but it is not intended that action taken under
the proxy will constitute approval of the matters referred to in such minutes.
The Board of Directors knows of no other matters to be brought before the
meeting. However, if any other matters should come before the meeting, the
persons named in the proxy will vote such proxy in accordance with their
judgment.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In an
effort to have as large a representation at the meeting as possible, special
solicitation of proxies may, in certain instances, be made personally or by
telephone, facsimile or mail by one or more employees of the Company. The
Company also may reimburse brokers, banks, nominees and other fiduciaries for
postage and reasonable clerical expenses of forwarding the proxy material to
their principals who are beneficial owners of the Company's stock. In addition,
the Company has retained Georgeson & Co., Inc. to assist in the solicitation of
proxies with respect to shares of the Company's Common Stock held of record by
brokers, nominees and institutions and, in certain cases, by other holders. Such
solicitation may be made through the use of mails, by facsimile or by personal
calls. The anticipated cost of the services of Georgeson & Co., Inc. is $5,500.
Victoria P. Weyand
Vice President and Secretary
March 13, 1995
28
<PAGE> 32
PROPOSED AMENDMENTS TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN (THE "PURCHASE
PLAN")
EXHIBIT A
RESOLVED, that the first paragraph of section 11 of the Purchase
Plan be amended to change the number of shares of stock available for
sale under the Purchase Plan during all offerings under the Purchase plan
to 4,350,000.
EXHIBIT B
RESOLVED, that the Purchase Plan be amended to replace the term
"Annualized Base Pay" with the term "Annualized Cash Compensation"
wherever the former term appears and to substitute the following for the
second paragraph of section 6 of the Purchase Plan:
For purposes of the Plan, the term "Annualized Cash Compensation"
shall mean the participant's current annualized cash compensation
from the Company or any Subsidiary, including overtime, bonuses,
commissions and other cash incentives and any pre-tax deferrals
under the Company's or any Subsidiary's employee benefit plans.
PROPOSED AMENDMENT TO THE COMPANY'S 1981 INCENTIVE STOCK OPTION PLAN, AS
EXTENDED (THE "PLAN")
EXHIBIT C
RESOLVED, that paragraph 3 of the Plan, addressing Option Shares be
amended to change the number "435,955" contained in such section to
"1,185,955."
29
<PAGE> 33
APPENDIX A
JOHN H. HARLAND COMPANY
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1995
The undersigned hereby appoints ROBERT R. WOODSON and EDWARD J. HAWIE and
each of them, proxies, with full power of substitution and resubstitution, for
and in the name of the undersigned, to vote all shares of stock of John H.
Harland Company, which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders to be held on Friday, April 28,
1995 at 10:00 a.m., at the High Museum, Atlanta, Georgia, and at any adjournment
thereof, upon the matters described in the accompanying Notice of Annual Meeting
of Shareholders and Proxy Statement, receipt of which is hereby acknowledged,
and upon any other business that may properly come before the meeting or any
adjournment thereof. Said proxies are directed to vote on the matters described
in the Notice of Annual Meeting and Proxy Statement as follows, and otherwise in
their discretion upon such other business as may properly come before the
meeting and any adjournment thereof.
1. To elect two (2) directors:
<TABLE>
<S> <C> <C>
H. G. PATTILLO FOR all nominees (except as marked to the contrary) / /
JOHN H. WEITNAUER, JR. WITHHOLD AUTHORITY for all nominees listed / /
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH NOMINEE'S NAME IN THE LIST ABOVE.)
2. To amend the Company's Employee Stock Purchase Plan to increase the
number of shares of Common Stock authorized under the Purchase Plan from
3,600,000 shares to 4,350,000 shares.
<TABLE>
<S> <C> <C>
FOR / / AGAINST / / ABSTAIN / /
</TABLE>
3. To amend the Company's Employee Stock Purchase Plan to replace the term
"Annualized Base Pay" with the term "Annualized Cash Compensation" and to
provide a definition of "Annualized Cash Compensation," described in the
accompanying Proxy Statement.
<TABLE>
<S> <C> <C>
FOR / / AGAINST / / ABSTAIN / /
</TABLE>
(Continued, and to be signed, on the other side)
(Continued from other side)
4. To amend the Company's 1981 Incentive Stock Option Plan, as Extended to
increase the number of shares of Common Stock authorized under the Option
Plan from 435,955 shares to 1,185,955 shares.
<TABLE>
<S> <C> <C>
FOR / / AGAINST / / ABSTAIN / /
</TABLE>
5. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent certified public accountants for the year ending December 31,
1995.
<TABLE>
<S> <C> <C>
FOR / / AGAINST / / ABSTAIN / /
</TABLE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED
THE PROXY WILL BE VOTED "FOR" THE ABOVE STATED PROPOSALS
Please sign and date below, and
return this proxy immediately in
the enclosed envelope, whether or
not you plan to attend the annual
meeting.
DATE , 1995
-----------------
-----------------------------------
-----------------------------------
-----------------------------------
Please sign exactly as your name or
names appear hereon. Where more
than one owner is shown above, each
should sign. When signing in a
fiduciary or representative
capacity, please give full title.
If this proxy is submitted by a
corporation, it should be executed
in the full corporate name by a
duly authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
<PAGE> 34
APPENDIX B
EMPLOYEE STOCK PURCHASE PLAN
JOHN H. HARLAND COMPANY
1. PURPOSE
This Employee Stock Purchase Plan (the "Plan") is intended as an
incentive and to encourage stock ownership by all employees of John H. Harland
Company (the "Company") and (subject to the conditions hereinafter set forth)
of its Subsidiaries, so that they may acquire or increase their proprietary
interest in the success of the Company, and to encourage them to remain in the
employ of the Company and its Subsidiaries. It is further intended that the
Plan qualify as an "employee stock purchase plan" within the meaning of Section
423 of the Internal Revenue Code of 1954 (the "Code").
As used herein, the term "Subsidiary" shall be determined as of each
Offering Date and shall include any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations in such chain other than the last corporation owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
2. ADMINISTRATION
The Plan shall be administered by a Committee (the Committee)
appointed by the Board of Directors of the Company (the Board). The Committee
shall consist of not less than three members of the Board; provided, however,
(a) that no member of the Board shall be appointed to serve as a member of the
Committee unless at the time of his appointment he is not eligible and has not
at any time within one year prior to such time been eligible to receive any
option pursuant to the terms of the Plan or to be selected as a person to whom
stock may be allocated or to whom qualified, restricted or employee stock
purchase plan options may be granted pursuant to any other plan of the Company
or any of its affiliates entitling the participants therein to acquire stock or
qualified, restricted or employee stock purchase plan options of the Company or
any of its affiliates and (b) that any member of the Board appointed to serve
as a member of the Committee who thereafter becomes eligible to receive any
option pursuant to the Plan or to be selected as a person to whom stock may be
allocated or to whom qualified, restricted or employee stock purchase plan
options may be granted pursuant to any other plan of the Company or any of its
affiliates, as aforesaid, shall, effective at the time of such eligibility, be
deemed to have been removed from the Committee. The Board may from time to
time remove members from, or add eligible individuals as members to, the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by
the Board. The Committee shall select one of its members as Chairman, and
shall hold meetings at such times and places as it may determine. Minutes of
all meetings shall be made and preserved. A majority of the Committee shall
control its actions at any meeting.
<PAGE> 35
The interpretation and construction by the Committee of any provision
of the Plan shall be final unless reversed by the Board.
3. ELIGIBILITY
Any regular full-time employee of the Company or any Subsidiary of the
Company shall be eligible to participate in the Plan on an Offering Date if, on
such date, such employee has been employed continuously by the Company or any
Subsidiary for at least one year. An employee shall be considered to have been
employed for at least one year by the Company or any Subsidiary, if during a
relevant one-year period the employee has been employed continuously by any
combination of the Company and its Subsidiaries or by any combination of its
Subsidiaries.
The term "employee" shall have the same meaning as the term "employee"
as defined by Section 3401(c) of the Code and shall include officers (and
directors who are also employees) but shall exclude employees whose customary
employment is for not more than twenty hours per week or for not more than five
months in any calendar year.
Any provision of the Plan to the contrary notwithstanding, no employee
shall be granted an option:
(i) if, immediately after the grant, such employee would
own stock, and/or hold outstanding options to purchase stock,
possessing 5% or more of the total combined voting power or value of
all classes of stock of the Company or of any subsidiary or parent of
the Company, determinations of employee stock ownership being made for
this purpose in accordance with Section 423(b)(3) of the Code; or
(ii) which permits his rights to purchase stock under all
employee stock purchase plans of the Company and of any parent and any
subsidiary corporations of the Company to accrue at a rate which
exceeds $25,000 of fair market value of such stock (determined at the
time such option is granted) for each calendar year in which such
stock option would be outstanding at any time, within the meaning of
Section 423(b)(8) of the Code.
4. OFFERING DATES
The Plan will be implemented by a continuous series of offerings, each
of which shall commence on the first business day of a calendar quarter (the
"Offering Date") and shall terminate on the last business day of such quarter
(the "Termination Date"). The first offering shall be made on July 2, 1979.
No offering shall be made if in the opinion of the Committee the stock
made available under this Plan has been so substantially exhausted as to make
an offering to all eligible employees impractical under the Plan.
-2-
<PAGE> 36
5. PARTICIPATION
An eligible employee may become a participant by completing an
authorization for a payroll deduction on the form provided by the Committee and
filing the same with the Committee.
Payroll deductions shall become effective on the first Offering Date
after an employee has filed his authorization and shall terminate upon the
earlier to occur of (1) the participant's request to terminate or (2)
ineligibility of the participant for any reason described in this Plan. During
the continuance of an authorization for a payroll deduction of a participant,
he shall receive an option on each Offering Date.
6. PAYROLL DEDUCTIONS
At the time a participant files his authorization for a payroll
deduction, he shall elect to have deductions made from his Annualized Base Pay,
as hereinafter defined, on each payday during the time he is a participant in
an offering at the annual rate of 3, 4, 5, 6, 7, 8, 9, or 10% of his Annualized
Base Pay.
For purposes of the Plan, the term "Annualized Base Pay" shall mean
the participant's current annualized base pay from the Company or any
Subsidiary (excluding overtime and all other extra compensation such as
bonuses, contributions to pension, profit sharing, health and life insurance
and other plans).
All payroll deductions made for a participant shall be credited to his
account under the Plan and held with other Company funds. A participant may
not make any separate cash payment into such account.
A participant may discontinue his participation in the Plan and
thereby have further payroll deductions discontinued as provided in paragraph
10, but no other change can be made during an offering and, specifically, a
participant may not alter the rate of his payroll deduction for that offering.
7. GRANTING OF OPTION
On each Offering Date, each participant shall be granted an option to
purchase one share of stock for each $500 of his Annualized Base Pay, up to a
maximum of 150 shares; provided, however, that if the number of shares
available for purchase under the Plan is insufficient to grant to each
participant an option to purchase the full number of shares to which he would
otherwise be entitled but the Committee nonetheless determines to effect such
offering, then each participant shall be granted an option to purchase that
number of available shares which is equal to the total number of available
shares multiplied by a fraction the numerator of which is such participant's
Annualized Base Pay and the denominator of which is the
-3-
<PAGE> 37
total Annualized Base Pay of all participants, up to a maximum of 150 shares.
The option price of each share of stock purchased with payroll
deduction made during each offering for a participant therein shall be the
lower of:
(i) 85% of the fair market value per share of the stock
on the Offering Date, or
(ii) 85% of the fair market value per share of the stock
on the Termination Date.
During such time as the stock is not listed on an established stock
exchange, the fair market value per share shall be the mean between the highest
and lowest quoted selling prices of the stock in the over-the-counter market on
the applicable valuation date as reflected by the National Association of
Securities Dealers, Inc. If the stock is listed on an established stock
exchange, the fair market value per share shall be the mean between the highest
and lowest quoted selling prices of the stock on such stock exchange on the
applicable valuation date. If for any reason the aforesaid means of
ascertaining the fair market value per share is unavailable for the applicable
valuation date, fair market value shall be determined in accordance with
Sections 20.2031-2(c), (d), (e) and (f) of the Estate Tax Regulations.
8. EXERCISE OF OPTION
Unless a participant gives written notice to the Committee as
hereinafter provided, his option for the purchase of stock with payroll
deductions made during any offering will be exercised automatically for him on
the Termination Date for the purchase of as many full shares of stock subject
to the option granted to him as the accumulated payroll deductions in his
account at that time will purchase at the applicable option price.
By written notice to the Committee during any offering, a participant
may elect, effective at the Termination Date of such offering to:
(i) withdraw all the accumulated payroll deductions in
his account at that time, without interest; or
(ii) exercise his option for a specified number of full
shares, not less than 5, but less than the number of full shares of
stock which the accumulated payroll deductions in his account will
purchase at the applicable option price and withdraw the balance of
the accumulated payroll deductions in his account at such time after
giving effect to such partial exercise.
A participant who withdraws all or any part of the amount credited to
his account during an offering shall be deemed to have
-4-
<PAGE> 38
given notice of his intention to cease to be a participant for that offering
(except to the extent of any partial exercise under clause (ii) of the
preceding sentence) and any succeeding offerings; provided, however, that such
participant may become a participant in the offering following that during
which he made the aforesaid withdrawal and any succeeding offering for which he
is otherwise eligible in accordance with the Plan, if he files with the
Committee an authorization for payroll deductions in accordance with paragraph
5.
The amount credited to the account of a participant during an offering
period who exercises his option in full in excess of that which will purchase
the full number of shares for which his option was granted shall be paid over
to the participant as soon as practicable following the Termination Date for
the offering period, except that any such excess amount that results solely
from the failure to purchase a fractional share of stock may be carried forward
in the participant's account and be available for the next succeeding offering.
No participant may use more than $2,500.00 of the amount credited to
his account under the Plan for purchase of stock during any calendar year.
When this amount has been used to purchase stock any excess (including any
excess resulting from an inability to purchase a whole share within the limit
of $2,500.00) shall be returned to him, payroll deductions for him shall cease,
and he shall be ineligible to participate in any additional offering during
that calendar year. Unless, however, he withdraws his authorization for
payroll deductions, it shall become effective again on the first Offering Date
beginning in the next calendar year.
9. DELIVERY
As promptly as practicable after each Termination Date, the Company
will deliver to each participant, as appropriate, any stock purchased upon the
exercise of his option together with any cash to which he may be entitled.
10. WITHDRAWAL
A participant may withdraw payroll deductions credited to his account
under the Plan at any time by giving written notice to the Committee in
accordance with paragraph 8. All of the participant's payroll deductions
credited to his account will be paid to him in accordance with paragraph 9 of
the Plan after receipt of his notice of withdrawal, and no further payroll
deductions will be made from his pay after receipt of such notice except in
accordance with an authorization for a new payroll deduction filed with the
Committee.
Upon termination of the participant's employment for any reason,
including retirement or death, he shall immediately cease to be a
-5-
<PAGE> 39
participant, any option which he may have been granted under the Plan shall
immediately expire and shall not be exercised, and the payroll deductions
credited to his account will be returned to him, or, in the case of his death,
to the person or persons entitled thereto under paragraph 12, within 30 days
after such termination.
11. STOCK
The stock to be sold to participants under the Plan shall be Common
Stock of the company and may, at the election of the Company, be either
treasury stock or stock originally issued for such purpose. The maximum number
of shares of stock which shall be made available for sale under the Plan during
all offerings under the Plan shall be 300,000 shares subject to adjustment upon
changes in capitalization of the Company as provided in paragraph 15.
The participant will have no interest in stock covered by his option
until such option has been exercised.
Stock to be delivered to a participant under the Plan will be
registered in the name of the participant, or, if the participant so directs,
by written notice to the Company prior to the Termination Date of the pertinent
offering, in the names of the participant, and one such other person as may be
designated by the participant, as joint tenants with rights of survivorship, to
the extent permitted by applicable law.
Any shares which are subject to sale pursuant to an option granted
under the Plan but which are not purchased on the Termination Date of the
related offering, shall again become available for sale pursuant to options
granted under the Plan.
12. DESIGNATION OF BENEFICIARY
A participant may file with the Committee a written designation of a
beneficiary who is to receive any stock and cash to the participant's credit
under the Plan in the event of such participant's death prior to delivery to
him of such stock and cash. Such designation of beneficiary may be changed by
the participant and upon receipt by the Committee of proof of the identity and
existence at the participant's death of a beneficiary validly designated by him
under the Plan, the Company shall deliver such stock and cash to such
beneficiary. In the event of the death of a participant who has not filed a
written designation of a beneficiary, the Company shall deliver such stock and
cash to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Committee) the Company, at the direction of the Committee acting in its
discretion, may deliver such stock and cash to the spouse or to any one or more
dependents or relatives of the participant, or if no spouse, dependent, or
relative is known to the Committee then to such other person as the Committee
may designate. No designated beneficiary shall, prior to the death of
-6-
<PAGE> 40
the participant by whom he has been designated, acquire any interest in the
stock or cash credited to the participant under the Plan.
13. TRANSFERABILITY
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive stock under the
Plan may be assigned, transferred, pledged, or otherwise disposed of in any way
by the participant. Any such attempted assignment, transfer, pledge, or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with paragraph 10.
14. USE OF FUNDS
All payroll deductions received or held by the Company under this Plan
may be used by the Company for any corporate purpose and the Company shall not
be obligated to segregate such payroll deductions.
15. CHANGES IN CAPITALIZATION
The number of shares of stock covered by each outstanding option and
the price per share thereof in each such option, and the number of shares of
stock issuable through options granted pursuant to this Plan for which options
have not been granted, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of stock of the Company
resulting from a subdivision or consolidation of shares or the payment of a
stock dividend (but only such a payment with respect to the stock of the
Company) or any other increase or decrease in the number of shares of stock
effected without receipt of consideration by the Company. If any adjustment
hereunder would create a factional share or a right to acquire a fractional
share, such fractional share shall be disregarded and the number of shares
available under this Plan or the number of shares to which any optionee is
entitled shall be the next lower number of whole shares, rounding all fractions
downward.
16. SECURITIES REGISTRATION
In the event that the Company shall deem it necessary to register
under the Securities Act of 1933 or other applicable statutes any shares with
respect to which an option shall have been exercised, or to qualify any such
shares for exemption from the Securities Act of 1933 under Regulation A of the
Rules and Regulations of the Securities and Exchange Commission, then the
Company shall take such action at its own expense before delivery of such
shares. In the event the shares of stock of the Company shall be listed on any
national stock exchange at the time of the exercise of an option under this
Plan, then whenever required, the Company shall register the shares with
respect to which such option is exercised under the Securities
-7-
<PAGE> 41
Exchange Act of 1934, and shall make prompt application for the listing on such
stock exchange of such shares, at the sole expense of the Company.
17. AMENDMENT OR TERMINATION
The Board may at any time terminate or amend the Plan. No such
termination can affect options previously granted, nor may an amendment make
any change in any option theretofore granted which would adversely affect the
rights of any participant, nor may an amendment be made without prior written
approval of the stockholders of the Company if such amendment would:
(a) Permit the sale of more shares of stock than are authorized
under paragraph 11 of the Plan; or
(b) Effect any change in the designation of eligible employees
under paragraph 3 of the Plan; or
(c) Permit payroll deductions at a rate in excess of 10% of a
participant's Annualized Base Pay.
18. NOTICES
All notices or other communications by a participant to the Committee
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Committee at the location, or by the
person, designated by the Committee for the receipt thereof.
-8-
<PAGE> 42
APPENDIX C
JOHN H. HARLAND COMPANY
1981 INCENTIVE STOCK OPTION PLAN,
AS EXTENDED
1.
BACKGROUND
The John H. Harland Company 1981 Incentive Stock Option Plan was
adopted effective as of September 21, 1981 and expired by its terms on
September 20, 1991. There were 435,995 shares of $1.00 par value Common Stock
("Stock") of the John H. Harland Company ("Company") available for options
under such plan at that time. This John H. Harland Company 1981 Incentive
Stock Option Plan, as Extended ("Plan") represents a reactivation of the 1981
Incentive Stock Option Plan and extends the life of such plan effective as of
November 18, 1992.
2.
PURPOSE
The purpose of this Plan is to promote the interests of the Company and
its subsidiaries by encouraging its key employees to continue their association
with the Company and by providing such employees with the additional incentive
for industry and efficiency inherent in an opportunity to participate in the
ownership of the Company and in its future growth.
3.
OPTION SHARES
The shares of the Company's Stock which may be subject to stock options
granted pursuant to this Plan shall be an aggregate
<PAGE> 43
number of 435,955 shares of authorized but unissued Stock. In the event that a
stock option granted pursuant to this Plan to purchase any of such shares of
Stock shall expire or be exchanged for a new option for any reason before being
exercised in full, the shares of Stock reserved for the unexercised portion of
such option again shall become available for stock options granted pursuant to
this Plan.
4.
EFFECTIVE DATE OF PLAN
The effective date of this Plan shall be November 18, 1992, the date as
of which the Company's Board of Directors adopted this Plan, provided the
shareholders of the Company (acting at a duly called meeting of such
shareholders) also approve this Plan on or before November 18, 1993. All
options granted before such shareholder approval shall be granted subject to
such approval.
5.
ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Stock Option Committee
("Committee") of not less than three (3) members appointed by the Board of
Directors of the Company from among its members. No member of such Board of
Directors shall be appointed or serve as a member of the Committee, and any
such appointment or service immediately and automatically shall terminate, in
the event that (1) such person is, or becomes, a key employee (as described in
Section 6 of this Plan), (2) such person is, or becomes, eligible for the
allocation of stock or the grant of any option or stock appreciation right
under any other plan of the Company or any of its affiliates (as such term is
defined in the General Rules and Regulations under the Securities Exchange Act
-2-
<PAGE> 44
of 1934, as amended) or (3) such person was described in clause (1) or clause
(2) of this Section 5 within the immediately preceding year.
6.
ELIGIBILITY
Only key employees of the Company and of each of its subsidiaries (as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended
("Code")) and as hereinafter referred to as "subsidiaries") shall be eligible
for the grant of an incentive stock option pursuant to this Plan. A key
employee can be a member of the Board of Directors of the Company, but no
member of the Board of Directors of the Company shall be a key employee under
this Plan solely by reason of his membership on such Board of Directors.
7.
GRANT OF OPTIONS
Stock options shall be granted by the Company acting through the
Committee to key employees pursuant to the terms of this Plan from time to time
to purchase shares of Stock; provided, however, if the Committee intends that
such option qualify as an incentive stock option under Section 422 of the
Code, the aggregate fair market value (as determined as of the date an
incentive stock option is granted) of the Stock covered by such option and the
stock covered by any other incentive stock options granted to such key employee
(pursuant to any other plans of the Company or its subsidiaries) which first
become exercisable in any calendar year shall not exceed $100,000. Such fair
market value figure shall be determined by the Committee on the date such
incentive stock option is granted, and the Committee shall interpret and
administer the limitation set forth in this paragraph in
-3-
<PAGE> 45
accordance with Section 422(d) of the Code. A stock option may be granted by
a key employee in exchange for the cancellation of any option to purchase Stock
or under any other circumstances under which the Committee deems appropriate.
Each grant of a stock option pursuant to this Plan shall be evidenced
by a written stock option agreement ("option agreement"), signed by a member of
the Committee or by a duly authorized officer of the Company, and each option
agreement shall incorporate such terms and conditions as the Committee acting
in its discretion deems consistent with the terms of this Plan and, if the
Committee intends such option to qualify as an incentive stock option, which
are not inconsistent with the provisions of Section 422 of the Code. The
Committee (with the written consent of a key employee) also shall have the
power to amend an option agreement to the extent that the Committee acting in
its discretion deems consistent with the terms of this Plan. The stock option
agreement for an option which the Committee intends to qualify as an incentive
stock option shall state that such option is an incentive stock option.
8.
OPTION PRICE
The price for each share of Stock subject to purchase under a stock
option granted pursuant to this Plan ("option price") shall be determined by
the Committee but in no event shall be less than the fair market value of the
Stock on the date of the grant of the option; provided, however, (1) if a key
employee owns (after taking into account the attribution rules in Section
424(d) of the Code) stock of the Company or its subsidiaries which possesses
more than ten percent of
-4-
<PAGE> 46
the total combined voting power of all classes of stock of the Company or a
subsidiary, the option price for a stock option granted to such key employee
which the Committee intends to qualify as an incentive stock option shall in no
event be less than one hundred ten percent of the fair market value of the
Stock on the date the option is granted to such key employee and (2) if the
Committee grants an option to a key employee under this Plan for a number of
shares of Stock in exchange for the cancellation of any option (whether or not
granted under this Plan) to purchase the same number of shares of Stock, the
option price under such option for such shares may be the same as the option
price for such shares under the option which is cancelled. An option agreement
at the discretion of the Committee can provide for the payment of the option
price (upon the exercise of a stock option) in cash, in Stock or in a
combination of cash and Stock. A payment by a check acceptable to the
Committee shall be treated as a payment in cash under this Plan.
9.
LIFE OF OPTION
Each stock option granted pursuant to this Plan shall be exercisable on
or, if so provided in the option agreement which evidences such option, after
the date the option is granted and shall expire automatically on the date the
option is exercised in full or, if earlier, shall expire according to the terms
of such option agreement; provided, however, the terms of each such option
agreement shall make each stock option (to the extent not fully exercised)
expire no later than on or before the first to occur of (1) the end of the
three consecutive month period which immediately follows the last
-5-
<PAGE> 47
day (in his current period of employment) that the key employee is employed by
the Company or its subsidiaries (or the end of such longer period as the
Committee (subject to the rules in Section 9(2) and Section 9(3) in its
discretion deems appropriate under the circumstances), (2) the date which is
the tenth anniversary of the date the option is granted or (3) the date which
is the fifth anniversary of the date the option is granted in the event that
(a) the option is granted to a key employee who owns (after taking into account
the attribution rules in Section 424(d) of the Code) stock which possesses
more than ten percent of the total combined voting power of all classes of
stock of the Company or a subsidiary and (b) the Committee intends that such
option qualify as an incentive stock option. A transfer of employment from the
Company to a subsidiary or from a subsidiary to the Company or between two
subsidiaries shall not be treated as a termination of employment under this
Plan.
10.
DEATH OR DISABILITY
In the event that the employment of a key employee by the Company or
its subsidiaries terminates because he dies or becomes disabled (within the
meaning of Section 23(e)(3) of the Code), the three consecutive month period
described in Section 9(l) of this Plan automatically shall become a twelve
consecutive month period.
11.
NON-TRANSFERABILITY
No stock option granted pursuant to this Plan shall be transferable by
a key employee otherwise than by will or by the laws of descent and
distribution, and such option shall be exercisable
-6-
<PAGE> 48
during the key employee's lifetime only by the key employee. The restriction
on transfer described in this Section 11 shall be incorporated in each option
agreement.
12.
SECURITIES REGISTRATION
Each stock option agreement shall provide that, upon the receipt of
shares of Stock pursuant to the exercise of a stock option granted under this
Plan, the key employee shall, if so requested by the Company, hold such shares
of Stock for investment and not with a view to resale or distribution to the
public and, if so requested by the Company, shall deliver to the Company a
written undertaking satisfactory to the Company to that effect. As for Stock
issued pursuant to this Plan, the Company at its expense shall take such action
as it deems necessary or appropriate to register the original issuance of such
Stock to a key employee under the Securities Act of 1933, as amended, or under
any other applicable securities laws or to qualify any such Stock for an
exemption under any such laws prior to the issuance of such Stock to a key
employee; however, the Company shall have no obligation whatsoever to take any
such action in connection with the transfer, resale or other disposition of
such Stock by a key employee.
13.
LIFE OF PLAN
This Plan shall terminate on November 17, 2002 or, if earlier, on the
date on which all of the Stock reserved under Section 3 of this Plan has been
issued as a result of the exercise of stock options granted pursuant to this
Plan. No options to purchase Stock shall be
-7-
<PAGE> 49
granted under this Plan after the date the Plan terminates but, as for any
stock options granted pursuant to this Plan which are outstanding on such date,
the Committee and its full administrative powers shall survive (the termination
of this Plan) until all such options have been exercised in full or otherwise
have expired.
14.
ADJUSTMENT
The number of shares of Stock available for the granting of options
under Section 3 of this Plan and the number of shares of Stock subject to
stock options granted pursuant to this Plan and the related option price shall
be adjusted by the Committee in an equitable manner to reflect any change in
the capitalization of the Company, including, but not limited to, such changes
as stock dividends or stock splits. Furthermore, the Committee shall have the
right to adjust (in a manner which satisfies the requirements of Section
424(a) of the Code) the number of shares of Stock available for the granting of
options under Section 3 of this Plan and the number of shares of Stock covered
by stock options granted under this Plan and the related option price in the
event of any corporate transaction described in 424(a) of the Code which
provides for the substitution or assumption of such options. If any adjustment
under this Section 14 would create a fractional share of Stock or a right to
acquire a fractional share of Stock, such fractional share shall be disregarded
and the number of shares of Stock available under this Plan and the number
subject to any options granted pursuant to this Plan shall be the next lower
number of shares of Stock, rounding all fractions downward. An adjustment made
under this Section 14 by the Committee shall be conclusive and binding on all
affected persons.
-8-
<PAGE> 50
15.
SALE OR MERGER OF THE COMPANY
If the Company agrees to sell all or substantially all of its assets
for cash or property or for a combination of cash and property or agrees to any
merger, consolidation, reorganization, division or other corporate transaction
in which Stock is converted into another security or into the right to receive
securities or property and such agreement does not provide for the assumption
or substitution of stock options granted under this Plan, each option agreement
at the direction and discretion of the Company's Board of Directors may be
cancelled unilaterally by the Company if (1) any restrictions on the exercise
of a stock option are waived before the stock option agreement is cancelled
such that the key employee has the opportunity to exercise the option in full
before such cancellation, (2) the Company transfers to the key employee shares
of Stock, the number of which shall be determined by the Company by dividing
the excess of (a) the fair market value of the number of shares which remain
subject to the exercise of such option as of any date over the total option
price for such shares by (b) the fair market value of a share of Stock on such
date, which number shall be rounded down to the nearest whole number, or (3)
the Company transfers to a key employee the same consideration which the key
employee otherwise would receive as a shareholder of the Company in connection
with such sale or other corporate transaction if he held the number of shares
of Stock which would have been transferrable to him under Section 15(2) if
such number had been determined immediately before such sale or other corporate
transaction.
-9-
<PAGE> 51
16.
AMENDMENT OR TERMINATION
This Plan may be amended by the Company's Board of Directors from time
to time to the extent that such Board of Directors deems necessary or
appropriate in light of, and consistent with, the provisions of Section 422 of
the Code; provided, however, no such amendment shall be made absent the
approval of the shareholders of the Company (1) to increase the number of
shares of Stock available under Section 3 for granting stock options, (2) to
extend the maximum life of the Plan under Section 12 or the maximum life of an
option under Section 9, (3) to decrease the minimum option price under Section
8, (4) to change the class of employees eligible for stock options under
Section 6 or to otherwise materially modify (within the meaning of Rule 16b-3
of the Securities Exchange Act of 1934, as amended) the requirements as to
eligibility for participation in this Plan or (5) to otherwise materially
increase (within the meaning of Rule 16b-3 of the Securities Exchange Act of
1934, as amended) the benefits accruing to a key employee under this Plan. The
Company's Board of Directors also may suspend the granting of stock options
pursuant to this Plan at any time and may terminate this Plan at any time;
provided, however, the Board of Directors shall not have the right to modify,
amend or cancel any stock option granted before such suspension or termination
unless (1) the key employee consents in writing to such modification, amendment
or cancellation or (2) there is a dissolution or liquidation of the Company or
a transaction described in Section 15 of this Plan.
-10-
<PAGE> 52
17.
MISCELLANEOUS
The headings to sections in this Plan have been included for
convenience of reference only. The masculine pronoun shall include the
feminine and the singular the plural whenever appropriate.
-11-
