<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 CO.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
HARLAND LOGO
John H. Harland Company
JOHN H. WEITNAUER JR.
Chairman of the Board
March 12, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 annual meeting of
shareholders of John H. Harland Company to be held at the
Ritz-Carlton Atlanta, 181 Peachtree Street, NE, Atlanta, Georgia on
Friday, April 23, 1999 at 10:00 a.m. A 9:30 reception will precede
the meeting.
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 the Company's results during the past year
and discuss our plans for 1999.
Your vote is important regardless of the number of shares you 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 Harland.
Sincerely,
/S/ JOHN H. WEITNAUER JR.
John H. Weitnauer Jr.
Box 105250 Atlanta, Georgia 30348 Phone (770) 981-9460
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 23, 1999
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of John H.
Harland Company will be held at the Ritz-Carlton Atlanta, 181 Peachtree Street,
NE, Atlanta, Georgia on Friday, April 23, 1999 at 10:00 a.m. for the following
purposes:
(1) To elect four Directors;
(2) To ratify the appointment of Deloitte & Touche LLP as the Company's
independent certified public accountants for 1999;
(3) To approve the 1999 Stock Option Plan, providing for the issuance of up
to 2,000,000 shares of Common Stock;
(4) To approve the Amended and Restated Articles of Incorporation of the
Company; and
(5) To transact 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, 1999 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.
JOHN C. WALTERS
Vice President and Secretary
Atlanta, Georgia
March 12, 1999
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.
<PAGE> 4
J O H N H . H A R L A N D C O M P A N Y
BOX 105250
ATLANTA, GEORGIA 30348
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 23, 1999
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 23,
1999 and any adjournment thereof. When such proxy is duly executed and returned,
the shares it represents will be voted as directed or, if no direction is
indicated, they will be voted for the election of the nominees as Directors and
in favor of the ratification of auditors, the approval of the 1999 Stock Option
Plan and the approval of the Amended and Restated Articles of Incorporation. Any
shareholder giving a proxy may revoke it at any time before it is voted by
delivering to the Secretary of the Company a notice of revocation or a duly
executed proxy bearing a later date. Furthermore, if a shareholder attending the
meeting elects to vote in person, any previously executed proxy will be revoked.
Only shareholders of record as of the close of business on March 1, 1999
are entitled to vote at the meeting. As of that date, the Company had
outstanding 31,103,263 shares of Common Stock. Each share is entitled to one
vote. No cumulative voting rights are authorized. This Proxy Statement and the
accompanying proxy will be first mailed to shareholders on or about March 12,
1999.
Votes cast by proxy or in person at the meeting will be tabulated by the
election inspectors appointed for the meeting, who also will determine whether a
quorum is present. The inspectors will treat abstentions as shares that are
present and entitled to vote for purposes of determining a quorum but as unvoted
for purposes of approving any matter submitted to the shareholders. 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.
Pursuant to the Company's Bylaws and Georgia law, a quorum is present if a
majority of the votes entitled to be cast are represented in person or by proxy
at the meeting. The affirmative vote of a plurality of votes cast 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. The
terms of five Directors expire at the 1999 Annual Meeting. Two of such
Directors, H. G. Pattillo and Robert R. Woodson, are retiring in accordance with
the Company's retirement policy after a collective 47 years of dedicated service
to the Board and will not stand for reelection. John H. Weitnauer Jr., whose
term expires at the 1999 Annual Meeting and who currently serves as Chairman of
the Board, has agreed to remain on the Board for transition purposes, and is
being nominated for reelection for a one-year term. Richard K. Lochridge and
Timothy C. Tuff, whose terms also expire at the 1999 Annual Meeting, are being
nominated for reelection for a three-year term expiring in 2002. In addition, in
order to
<PAGE> 5
maintain an equal number of Directors in each class, G. Harold Northrop, whose
term currently expires in 2000, is being nominated for reelection for a
three-year term expiring in 2002. The remaining Directors will continue to serve
until their respective terms expire as indicated.
The Board has no reason to believe that any of the nominees will be
unavailable to serve as a director. However, if at the time of the meeting any
nominee should be unable or decline to serve, the persons named in the proxy
will vote for a substitute nominee, 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 four Directors.
NOMINEE FOR ELECTION FOR A ONE-YEAR TERM
<TABLE>
<CAPTION>
CURRENT DIRECTOR OF
AGE PRINCIPAL OCCUPATION TERM EXPIRES HARLAND SINCE
NAME --- -------------------- ------------ -------------
<S> <C> <C> <C> <C>
JOHN H. WEITNAUER JR. 72 Chairman of the Board of the 1999 1973
Company
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM
RICHARD K. LOCHRIDGE 55 President and Chief Executive 1999 February 1999
Officer, Lochridge & Company, Inc.
(management consulting)
Director, Hannaford Bros. Co.,
Lowe's Companies, Inc. and
PETsMART, Inc.
G. HAROLD NORTHROP 63 Vice Chairman of the Board and 2000 1984
retired President and Chief
Executive Officer, Callaway
Gardens (horticultural,
environmental and recreational
facility)
Director, American Business
Products, Inc. and SunTrust Bank,
West Georgia NA
TIMOTHY C. TUFF 51 President and Chief Executive 1999 October 1998
Officer of the Company
</TABLE>
DIRECTORS WHOSE TERMS WILL CONTINUE AFTER THE ANNUAL MEETING
<TABLE>
<S> <C> <C> <C> <C>
JUANITA P. BARANCO 49 Executive Vice President, Baranco 2001 1993
Automotive Group (automobile dealership)
Director, Federal Reserve Bank of Atlanta
and Georgia Power Company
EDWARD J. HAWIE 61 Partner, King & Spalding (legal counsel to 2000 1991
the Company)
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
CURRENT DIRECTOR OF
AGE PRINCIPAL OCCUPATION TERM EXPIRES HARLAND SINCE
NAME --- -------------------- ------------ -------------
<S> <C> <C> <C> <C>
JOHN J. MCMAHON JR. 56 Chairman of the Executive 2001 1988
Committee, McWane, Inc. (pipe and
valve manufacturing) and Chairman,
Ligon Industries (leveraged buyout
company) Director, Alabama
National Bancorporation, National
Bank of Commerce and Protective
Life Corporation
LARRY L. PRINCE 60 Chairman and Chief Executive 2001 1990
Officer, Genuine Parts Company
(distributor of automobile
replacement parts) Director,
Crawford & Company, Equifax Inc.,
Southern Mills, SunTrust Bank Inc.
and UAP Inc. (Canada)
ROBERT A. YELLOWLEES 60 Chairman and Chief Executive 2000 1994
Officer, National Data Corporation
(information systems and services
for the healthcare and payment
systems industry)
Director, Protective Life
Corporation
</TABLE>
Each of the Directors and nominees has been principally employed in his or
her present capacity for at least five years, except for Messrs. Tuff and
Weitnauer. Mr. Tuff was elected to his present positions in October 1998. From
1993 until October 1998 he served as President and Chief Executive Officer of
Boral Industries, Inc., managing the North American and European operations of
Australian-based Boral, Ltd., a world leader in building and construction
materials. Mr. Weitnauer served as Chairman and Interim President and Chief
Executive Officer of the Company from January 1998 until Mr. Tuff joined the
Company, and continues to serve as Chairman of the Board. He previously served
as Chairman and Chief Executive Officer of Richway Stores, a division of
Federated Department Stores, Inc., an operator of discount department stores,
for seven years until his retirement in 1987. In addition, Mr. McMahon, who has
been employed by McWane, Inc. for more than the past five years, assumed his
present positions with such company and with Ligon Industries in January 1999.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee is composed of Mrs. Baranco (Chair), Mr. Hawie and Mr.
Woodson. Its principal functions are to recommend the independent auditors to
the Board; review with such auditors the scope of their engagement, their audit
report and the accompanying management letter, if any; and consult with the
auditors and management regarding the Company's accounting methods, the adequacy
of its internal controls and the objectivity of its financial reporting.
The Executive Committee is composed of Messrs. Weitnauer (Chair), McMahon,
Prince and Tuff. Its principal function is to act between meetings of the Board.
3
<PAGE> 7
The Governance Committee (formerly the Compensation and Stock Option
Committee) is composed of Messrs. Northrop (Chair), Lochridge and Yellowlees.
Its principal functions are to review qualifications for Board membership and
make recommendations for the election of Directors and appointment of executive
officers of the Company; make recommendations to the Board from time to time as
to matters of corporate governance; administer management incentive compensation
and stock option plans; establish the compensation of the Chief Executive
Officer and other officers of the Company and review the compensation of
Directors. The Committee is authorized to consider Director nominees recommended
by shareholders, who may do so by writing to the Secretary of the Company,
giving the candidate's name, biographical data and qualifications.
The Board met 19 times during 1998. The Audit Committee held three
meetings, the Governance Committee held six meetings, the Executive Committee
held six meetings and the interim Search Committee held seven meetings. All of
the Directors attended at least 75% of the aggregate number of meetings of the
Board and all committees on which they served during the year.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
AND CERTAIN OTHER PERSONS
The following table sets forth the beneficial ownership of the Company's
Common Stock by each Director, each named executive officer and all Directors
and executive officers as a group, all as of February 15, 1999, and by 5%
shareholders as of the dates indicated in the footnotes.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
-------------------------------
NAME NUMBER PERCENT OF CLASS
- ---- --------- ----------------
<S> <C> <C>
Juanita P. Baranco.......................................... 2,687(2) *
Richard C. Blum & Associates, L.P........................... 3,644,450(3) 11.7
FMR Corp. .................................................. 2,494,700(4) 8.0
Edward J. Hawie............................................. 3,970(5) *
ICM Asset Management, Inc. ................................. 1,983,410(6) 6.4
Richard K. Lochridge........................................ 7,000 *
John J. McMahon Jr. ........................................ 12,528(7) *
G. Harold Northrop.......................................... 6,205(8) *
S. David Passman III........................................ 57,587(9) *
H. G. Pattillo.............................................. 42,968(10) *
Mark C. Perlberg............................................ 71,851(9) *
Pioneer Investment Management, Inc. ........................ 2,208,165(11) 7.1
Larry L. Prince............................................. 5,471(12) *
Earl W. Rogers Jr........................................... 81,103(9) *
Timothy C. Tuff............................................. 51,500(13) *
Tweedy, Browne Company LLC, TBK Partners, L.P. and
Vanderbilt Partners, L.P. ................................ 2,306,845(14) 7.4
John C. Walters............................................. 61,770(9) *
John H. Weitnauer Jr. ...................................... 13,784(15) *
Robert R. Woodson........................................... 475,411(16) 1.5
Robert A. Yellowlees........................................ 5,285(17) *
All executive officers and Directors as a group (15
persons).................................................. 899,120(9) 2.9
</TABLE>
4
<PAGE> 8
- ---------------
* Represents less than 1%
(1) As defined in Rule 13d-3 under the Securities Exchange Act of 1934
("Exchange Act").
(2) Includes 1,832 share equivalents credited to Mrs. Baranco's deferred
compensation account under the Compensation Plan for Non-Employee Directors
(the "Deferral Plan").
(3) According to a Schedule 13D dated February 2, 1999 filed with the
Securities and Exchange Commission ("SEC") by Richard C. Blum & Associates,
L.P. ("RCBA L.P."), Richard C. Blum & Associates, Inc. ("RCBA Inc."), RCBA
GP, L.L.C. ("RCBA GP") and Richard C. Blum (the Chairman and a substantial
shareholder of RCBA Inc. and a managing member of RCBA GP), 909 Montgomery
Street, San Francisco, California 94133, (i) RCBA L.P. and RCBA Inc. hold
1,941,550 shares on behalf of limited partnerships (for which RCBA L.P.
serves as the general partner) and certain investment advisory clients,
(ii) RCBA GP holds 1,438,000 shares on behalf of the limited partnership
for which it serves as the general partner, and (iii) RCBA L.P. has voting
and investment power with respect to 264,900 shares that are owned by an
unaffiliated third party investment manager which disclaims membership in a
group with any of the above persons. Voting and investment power concerning
the entire 3,644,450 shares are held solely by RCBA L.P. and RCBA GP, and
each of the reporting persons has shared voting and shared dispositive
power with respect to such shares. Mr. Blum, RCBA L.P., RCBA Inc. and RCBA
GP disclaim beneficial ownership of such shares except to the extent of any
pecuniary interest therein.
(4) According to a Schedule 13G dated February 1, 1999 filed with the SEC, FMR
Corp. ("FMR"), 82 Devonshire Street, Boston, Massachusetts 02109, 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 shares. Except as set forth below, the interest of any such
person does not exceed 5% of the outstanding Common Stock. FMR and Edward
C. Johnson 3d, Chairman of FMR, each has sole power to vote 195,000 shares
and sole dispositive power covering the entire 2,494,700 shares. Fidelity
Management & Research Company (a wholly owned subsidiary of FMR) is the
beneficial owner of 2,299,700 shares as a result of acting as investment
advisor to various investment funds ("Funds"). The ownership of one
investment company, Fidelity Value Fund, amounted to 2,199,700 shares. Mr.
Johnson, FMR and the Funds each has sole power to dispose of the shares
owned by the Funds. The remaining 195,000 shares are owned beneficially by
Fidelity Management Trust Company (a wholly owned subsidiary of FMR) as a
result of its serving as investment manager of the Funds.
(5) Includes 110 shares held by Mr. Hawie's wife, in which he disclaims any
beneficial interest. Also includes 1,010 share equivalents credited under
the Deferral Plan.
(6) According to a Schedule 13G dated February 10, 1999 filed with the SEC, ICM
Asset Management, Inc., 601 West Main Avenue, Suite 600, Spokane,
Washington 99201, has sole voting power covering 1,415,435 shares and sole
dispositive power with respect to the entire 1,983,410 shares, all of which
are beneficially owned by such firm. Clients of such firm have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, such shares. The interest of any single client
does not exceed 5% of the outstanding Common Stock.
(7) Includes 5,195 shares held by Mr. McMahon's wife, in which he disclaims any
beneficial interest. Also includes 3,853 share equivalents credited under
the Deferral Plan.
(8) Includes 4,005 share equivalents credited under the Deferral Plan.
(9) Includes 55,000, 70,000, 75,600, 59,000 and 259,600 shares which may be
acquired on or before April 15, 1999 upon the exercise of stock options by
Messrs. Passman, Perlberg, Rogers and Walters, respectively, and by all
executive officers as a group.
(10) Includes 30,000 shares held by Mr. Pattillo's wife, in which he disclaims
beneficial interest.
5
<PAGE> 9
(11) According to a Schedule 13G dated January 11, 1999 filed with the SEC,
Pioneer Investment Management, Inc., 60 State Street, Boston, Massachusetts
02109, has sole voting and dispositive power covering such shares, all of
which are beneficially owned by such firm.
(12) Includes 4,271 share equivalents credited under the Deferral Plan.
(13) Includes 50,000 restricted shares of Common Stock issued to Mr. Tuff in
connection with his employment by the Company. Of such shares, 50% will
vest after completion of three years of employment and an additional 25%
will vest after four years and five years, respectively. Such shares are
also subject to early vesting upon the occurrence of certain events,
including a change in control or termination of employment without cause.
Prior to vesting, Mr. Tuff is entitled to vote and to receive all dividends
declared on such shares.
(14) According to a Schedule 13D dated April 23, 1998 filed with the SEC by
Tweedy, Browne Company LLC ("TBC"), TBK Partners, L.P. ("TBK") and
Vanderbilt Partners, L.P. ("Vanderbilt"), 52 Vanderbilt Avenue, New York,
New York 10017, TBC has sole voting power with respect to 1,900,401 shares
held in certain customer accounts and has shared dispositive power with
respect to 2,210,445 shares held in such accounts. Each such customer has
the right to receive or the power to direct the receipt of dividends from,
or the proceeds from the sale of, the shares held in such person's account.
TBK and Vanderbilt have sole voting and sole dispositive power with respect
to 71,000 shares and 25,400 shares, respectively. Each of said persons may
be deemed to be the beneficial owner of the shares with respect to which
they have voting and dispositive power as described above.
(15) Includes 2,034 share equivalents credited under the Deferral Plan.
(16) Includes 28,800 shares owned by Mr. Woodson's wife, in which he disclaims
any beneficial interest; 280,350 shares held in trust with respect to which
Mr. Woodson has dispositive power but in which he disclaims any beneficial
interest; 20,000 shares which may be acquired upon the exercise of stock
options; and 603 share equivalents credited under the Deferral Plan.
(17) Includes 4,084 share equivalents credited under the Deferral Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers, Directors and 10% shareholders to file certain reports with respect to
beneficial ownership of the Company's equity securities. Based solely upon a
review of such reports, and written representations of such persons, the Company
believes that all applicable filing requirements were met during 1998.
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 each of the named executive officers during
1998, 1997 and 1996.
6
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION($) RESTRICTED SECURITIES ALL OTHER
---------------------------- STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER AWARDS($) OPTIONS(#)(1) ($)(2)
- --------------------------- ---- ------- ------- ------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Amman(3)....... 1998 38,462 -- -- -- -- 497,846
Chairman, President 1997 500,000 -- 23,845 -- -- 19,940
and Chief 1996 500,000 -- -- -- -- 7,498
Executive Officer
John H. Weitnauer Jr..... 1998 486,538 243,269 -- -- -- 18,786
Chairman, Interim 1997 -- -- -- -- -- --
President and Chief 1996 -- -- -- -- -- --
Executive Officer (4)
Timothy C. Tuff.......... 1998 70,673(5) 150,000 407,650(6) 504,849 350,000 --
President and Chief 1997 -- -- -- -- -- --
Executive Officer 1996 -- -- -- -- -- --
S. David Passman III..... 1998 260,000 272,500 -- -- 125,000 8,092
Senior Vice President 1997 260,000 90,000 -- -- -- 3,802
and Chief Financial 1996 36,154 110,000 -- -- 125,000 --
Officer
Mark C. Perlberg......... 1998 260,000 195,000 -- -- 125,000 7,623
Senior Vice President 1997 256,923 27,500 -- -- 35,000 7,660
and President -- 1996 215,912 -- 168,875 -- 90,000 1,276
Financial Markets
Division
Earl W. Rogers Jr. ...... 1998 241,775 180,000 -- -- 123,000 3,370
Senior Vice President 1997 238,846 27,500 -- -- -- 7,244
and President -- 1996 225,000 -- -- -- 115,000 4,950
Printed Products Division
John C. Walters.......... 1998 250,000 187,500 -- -- 70,000 11,218
Senior Vice President 1997 248,846 17,500 -- -- -- 11,510
and General Counsel 1996 215,417 -- -- -- 100,000 7,575
</TABLE>
- ---------------
(1) The Company has not granted any Stock Appreciation Rights ("SARs").
(2) Included in this category for 1998 are amounts for Messrs. Amman, Passman,
Perlberg, Rogers and Walters for the following compensation plans: (a) life
and medical insurance premiums, $12,552, $3,292, $2,823, $3,370 and $6,418,
respectively; and (b) matching contributions of $4,800 to the Company's
401(k) Plan (other than Mr. Rogers). Also includes life insurance premiums
paid for Mr. Weitnauer.
(3) Resigned in January 1998. Pursuant to an agreement with the Company, Mr.
Amman continued to receive his base salary for a period of 12 months from
his date of resignation. He also received $18,956 in connection with the
termination of his participation in the 401(k) Plan.
7
<PAGE> 11
(4) Served as Interim President and Chief Executive Officer from January 1998
until Mr. Tuff joined the Company.
(5) Represents partial year salary from date of hire.
(6) Represents reimbursement of taxes incurred in connection with the issuance
of restricted stock.
OPTION GRANTS
The following table provides details regarding stock options granted to the
named executive officers during 1998:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------ -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Timothy C. Tuff(2)........ 200,000 10.3 12.75 10/6/08 1,603,681 4,064,043
150,000 7.7 20.00 10/6/08 1,886,684 4,781,227
S. David Passman III...... 25,000 1.3 14.75 2/11/08 231,905 587,693
100,000 5.1 13.9375 12/17/08 876,522 2,221,279
Mark C. Perlberg.......... 25,000 1.3 14.75 2/11/08 231,905 586,693
100,000 5.1 13.9375 12/17/08 876,522 2,221,279
Earl W. Rogers, Jr. ...... 23,000 1.2 14.75 2/11/08 213,353 540,677
100,000 5.1 13.9375 12/17/08 876,522 2,221,279
John C. Walters........... 20,000 1.0 14.75 2/11/08 185,524 470,154
50,000 2.6 13.9375 12/17/08 438,261 1,110,640
</TABLE>
- ---------------
(1) 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.
(2) Mr. Tuff was granted additional stock options on January 4, 1999, covering
an aggregate of 350,000 shares. See "Chief Executive Officer Compensation"
on page 12.
Upon exercise of an option, the exercise price may be paid in cash, by
check or Common Stock or any combination of the foregoing. Options granted prior
to October 1995 are fully exercisable one year from date of grant and expire on
the earlier of five years from date of grant or three months after termination
of employment. Options granted since October 1995 are exercisable at the rate of
20% per year beginning one year from date of grant and expire on the earlier of
10 years from date of grant or three months after termination of employment.
OPTION EXERCISES
None of the named executive officers exercised any options during 1998. The
following table sets forth information with respect to unexercised options as of
December 31, 1998. The table also illustrates the value of in-the-money options
based on the positive spread between the exercise price of such options and the
closing price of the Company's Common Stock on December 31, 1998.
8
<PAGE> 12
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FY-END(#) FY-END($)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Timothy C. Tuff.................................. 0 350,000 0 612,500
S. David Passman III............................. 50,000 200,000 0 214,063
Mark C. Perlberg................................. 43,000 207,000 0 214,063
Earl W. Rogers Jr. .............................. 51,000 192,000 0 211,938
John C. Walters.................................. 40,000 130,000 0 115,000
</TABLE>
DEFERRED COMPENSATION ARRANGEMENTS
The Company has entered into a Supplemental Retirement Agreement with Mr.
Tuff pursuant to which he is entitled to receive an annual benefit of $186,000
upon retirement at age 65. In addition, provided that he is employed by the
Company for a minimum of five years, he will be entitled to a reduced retirement
benefit ($36,000 after five years, increasing annually). Such retirement benefit
vests in the event of long term disability. In addition, he may elect to receive
a reduced early retirement benefit after age 62, in the annual amount of
$92,000. All such benefits are payable for a period of 10 years. The Company has
also provided life insurance coverage for Mr. Tuff in the amount of $750,000.
In addition, the Company has entered into deferred compensation agreements
with certain of its key employees, providing for monthly payments upon
retirement, disability or other termination of employment. These agreements
provide for specified monthly payments at retirement, and continue during the
life of the employee. Mr. Rogers is entitled to receive an annual benefit of
$12,000 upon retirement at age 65. In addition, if his employment is terminated
after a change in control of the Company, or if he resigns within 180 days
thereafter, he may elect to receive a lump sum distribution of benefits. None of
the other executive officers participates in such program.
NONCOMPETE AND TERMINATION AGREEMENTS
The Company has entered into noncompete and termination agreements with
certain officers, including each of the named executive officers (other than
Messrs. Amman and Weitnauer), under which each officer has agreed that he will
not compete with the Company for a two-year period following voluntary
termination of employment. However, if employment is terminated (other than for
cause) at any time after a change in control of the Company, or if the officer
resigns within one year thereafter, then the agreement not to compete will not
apply and the officer will receive a lump sum payment equal to the lesser of
three times his average annual compensation for the five calendar year period
preceding the date of termination (or the highest compensation in any single
year, in the case of Mr. Tuff) or the maximum payment which the Company can make
to such officer under appropriate Federal tax provisions. In the event of an
involuntary termination of employment without cause (in the absence of a change
in control), the officer (other than Mr. Tuff) shall receive a lump sum payment
equal to his annual base salary at that time. The agreement with Mr. Tuff
provides that in the event of such involuntary termination, he will receive
salary continuation for a period of 36 months if such termination occurs less
than two years after his date of employment, 24 months if such termination
occurs between two and three years thereafter and 12 months if such termination
occurs more than three years thereafter. Each agreement is for an initial term
of five years, renewable for successive one-year terms unless terminated by
either party.
9
<PAGE> 13
DIRECTOR COMPENSATION
In 1996, the Board of Directors adopted a Compensation Plan for
Non-Employee Directors ("Directors' Plan"), pursuant to which the annual
retainer is paid in Common Stock of the Company, issuable on a quarterly basis,
in such amount as fixed by the Board from time to time. The current annual
retainer is $30,000. Payment of the annual retainer in Common Stock serves to
more closely align the interests of the Directors with shareholders. In
addition, the Board has adopted a Director share ownership program pursuant to
which non-employee Directors will be expected to acquire ownership of Common
Stock in an aggregate amount equal to five times the annual retainer over a
period of time.
Directors may elect to defer receipt of all or any portion of the annual
retainer, as well as meeting and committee fees payable by the Company. Fees so
deferred are credited to the Director's deferred compensation account, in cash
or stock equivalents, or a combination thereof. Directors may credit deferred
meeting fees in stock equivalents based on the average market price of the
Common Stock during the five trading dates prior to the meeting date. The cash
portion earns interest at the Prime Rate in effect from time to time as
published in The Wall Street Journal. The stock equivalent portion is credited
with dividends in the form of additional stock equivalents. Deferred fees will
be distributed in Common Stock or cash at such future dates as specified by the
Directors in accordance with the Directors' Plan, unless distribution is
accelerated in certain events, including a change in control of the Company.
Currently, nine Directors have elected to defer the retainer or meeting fees as
stock equivalents.
During 1998, each non-employee Director received 800 shares of Common
Stock. In addition, such Directors received $750 per Board and committee meeting
attended with committee chairs receiving $1,000. Beginning in 1999, non-employee
Directors will receive a $1,000 meeting fee, with committee chairs receiving
$1,500. Employee Directors receive no compensation for Board services.
The following report of the Governance Committee and the stock performance
graph 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 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.
GOVERNANCE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Governance Committee (the "Committee") is responsible for overseeing
the Company's executive compensation program. The Committee has previously
adopted compensation programs designed to:
- attract and retain highly qualified key executives;
- provide 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 closely align executive and
shareholder interests.
Such compensation programs are designed to balance short and long-term
financial objectives, build shareholder value and provide rewards for
individual, team and corporate performance. The Company believes that it is
important to encourage the ownership of the Company's Common Stock throughout
the Company, with an overall intent to encourage each employee to be, and to
behave like, an owner of the business. To that end, the Company has expanded the
group of key employees receiving stock option grants, and also maintains
10
<PAGE> 14
an employee stock purchase plan which enables employees to purchase Company
stock at a discount through payroll deductions.
The components of the Company's executive compensation program for 1998
were (i) cash compensation, consisting of base salary and annual incentive bonus
based on the achievement of Company performance goals, and (ii) long-term stock
incentives. The Committee's policy with respect to executive compensation is to
implement such policy taking into account any potential limitation on the
deductibility of compensation in excess of $1,000,000 per year imposed by
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
but does not require that all compensation qualify for exemption from such
limitation.
CASH COMPENSATION
Base Salary. The Committee reviews annually the base salary of each
executive officer, including the Chief Executive Officer. The Committee believes
that the base salaries paid to the executive officers are reasonable and
competitive and enhance the Company's ability to attract and retain talented
executives. Based on the transitional nature of the Company's operations in
1998, no adjustments were made to salaries of executive officers.
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 officers and employees. These key executives are responsible for
establishing strategic direction or are responsible for major functional or
operating units, and have an impact on bottom-line results. For the past several
years, the Company has tied a significant portion of executive compensation to
the achievement of Company goals, putting a substantial portion of total
compensation at risk. Under the Company's Senior Management Incentive Plan,
bonuses for 1998 were based solely upon achievement of the Company's earnings
per share goal. A threshold performance would result in a bonus equal to 50% of
the target bonus. Performance between threshold and target would result in a
prorated bonus with 100% being earned if the target were met. Performance above
the target would result in a prorated maximum bonus equal to 150% of the target
bonus. The potential cash bonus at target was up to 50% of base salary with a
maximum bonus of 75% of base salary for performance in excess of target. Actual
performance exceeded the 75% ceiling resulting in payments of the maximum bonus
for 1998.
For 1999, the Senior Management Incentive Plan will not be based solely
upon the Company's earning per share results, and instead will be designed to
reward achievement of individual objectives and department or business unit
performance measured against plan as well as the performance of the Company
measured against overall plan.
LONG-TERM INCENTIVES
The Committee may grant stock options to key employees under the Company's
stock option plans. Options were granted in February 1998 to executive officers
and other key employees as part of an overall updating of prior grants. In
addition, option grants were made in December 1998 in conjunction with the
reorganization of the Company's business units which was implemented late in the
year after Mr. Tuff joined the Company. Such options were granted to an expanded
level of employees compared to prior grants. 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 such option grants. The Committee believes that increased stock
ownership among executive officers will serve to provide additional motivation
on their part to contribute to the success of the Company.
11
<PAGE> 15
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Weitnauer was named Interim President and Chief Executive Officer in
connection with the resignation of Mr. Amman in January 1998. His annual base
salary was fixed at $500,000, equal to Mr. Amman's base compensation. As an
incentive to serve as Interim President until a permanent CEO was hired, the
Board provided Mr. Weitnauer with a bonus amounting to 50% of the cumulative
base compensation paid to him in his interim status. Mr. Weitnauer currently
receives $5,000 per month in his capacity as Chairman of the Board.
Mr. Tuff was recruited to become President and Chief Executive Officer in
October 1998. In determining his compensation package, the Board considered his
compensation history as well as the prior CEO base compensation and bonus
targets, the competitive market for salaries as well as the recommendations of
the executive search firm retained by the Company. His initial annual base
salary was fixed at $525,000. In addition, in order to attract Mr. Tuff to the
Company, and to partially compensate him for leaving his prior employer, the
Board awarded a $150,000 bonus for 1998. Mr. Tuff's bonus plan for 1999 is
similar to the Senior Management Incentive Plan, except that his target bonus is
60% of base salary with a maximum bonus of 90% of base salary. He will be
entitled to a minimum bonus of 30% of base salary for 1999.
In order to align the Chief Executive Officer compensation with shareholder
value creation, Mr. Tuff was awarded a stock option package consisting of
700,000 shares, 200,000 of which were priced at market at the date of grant
($12.75), with the balance priced at significant premiums to market (250,000
shares at $20 and 250,000 shares at $25). Options covering 350,000 shares were
granted in October 1998 and options covering the remaining 350,000 shares were
granted in January 1999. These options, in the aggregate, are exercisable at the
rate of 20% per year after one year, beginning with the lowest priced options.
The Board believes that these options will provide a meaningful incentive for
Mr. Tuff to increase the profitability of the Company, and in turn create
shareholder value. Mr. Tuff also received a restricted stock grant covering
50,000 shares of Common Stock.
The Committee believes that its executive compensation policies and
programs effectively serve the interests of shareholders and the Company and are
appropriately balanced to provide increased motivation for executives to
contribute to the Company's overall future success. As described above, a
significant portion of the executive officers' compensation is at risk and tied
to attaining corporate earnings targets and improving shareholder value.
GOVERNANCE COMMITTEE
G. Harold Northrop, Chair
Richard K. Lochridge
Robert A. Yellowlees
12
<PAGE> 16
FIVE YEAR STOCK PERFORMANCE GRAPH
The line graph below reflects the cumulative, five-year shareholder return
on the investment of $100 (assuming the reinvestment of dividends) on December
31, 1993 in the Company's Common Stock compared to such return of the S&P 500
Index and the Dow Jones Industrial and Commercial Services -- General Services
Index.
<TABLE>
<CAPTION>
DJ Ind. &
Comm.
Services -
General
Measurement Period John H. Services
(Fiscal Year Covered) Harland Co. S&P 500 Index
<S> <C> <C> <C>
Dec-93 100 100 100
Dec-94 97 101 97
Dec-95 106 139 124
Dec-96 174 171 135
Dec-97 112 229 161
Dec-98 86 294 184
</TABLE>
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 1999. Deloitte & Touche LLP, or its predecessors, has audited
the Company's financial statements since 1947. 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 meeting, will have the opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions.
13
<PAGE> 17
APPROVAL OF 1999 STOCK OPTION PLAN
The Board of Directors has adopted and unanimously recommends that the
shareholders approve the Company's 1999 Stock Option Plan (the "Plan"), covering
the issuance of 2,000,000 shares of Common Stock. As of February 28, 1999, an
aggregate of 2,554,827 shares were covered by outstanding options under the
Company's existing 1981 Incentive Stock Option Plan (the "1981 Plan") and only
22,001 shares were available for subsequent grants thereunder. Since the
available shares under the 1981 Plan are insufficient to meet the Company's
needs for the foreseeable future, the Board has determined that it is in the
best interests of the Company and its shareholders to adopt the Plan. Upon
approval of the Plan by shareholders, the 1981 Plan will be terminated, except
with respect to options outstanding thereunder. The Committee has granted
options under the Plan covering an aggregate of 483,340 shares, subject to
approval of the Plan by the shareholders at the meeting.
The 2,000,000 shares covered by the Plan, representing 6.4% of the Common
Stock currently outstanding, would provide additional shares for grants to
employees of the Company. The Board believes that stock options are an important
incentive to attract and retain key employees and enhance the link between
shareholder value creation and executive compensation. The availability of
shares for future grants under the Plan is important to the Company's business
prospects and operations.
Regulations under Section 162(m) of the Code require shareholder approval
of the Plan in order that compensation attributable to options granted under the
Plan will be exempt from the deduction limitations of that Section. In addition,
Section 162(m) regulations require the Plan to limit the number of options that
may be granted to an employee in any calendar year. Accordingly, the Plan fixes
such number at 500,000 shares.
The Plan will be approved upon receiving the affirmative vote of holders of
a majority of the shares voting at the meeting. Proxies will be voted in
accordance with the specifications marked thereon, and, if no specification is
made, will be voted "FOR" approval of the Plan.
The following discussion summarizes the material terms of the Plan. This
discussion does not purport to be complete and is qualified in its entirety by
reference to the Plan, a copy of which is attached hereto as Exhibit A.
ADMINISTRATION
The Plan is administered by the Committee. No member of the Committee may
participate in the Plan.
ELIGIBILITY
Any employee of the Company or any subsidiary (within the meaning of
Section 424(f) of the Code) may participate in the Plan. The Company currently
has approximately 5,400 employees.
The Committee may grant options under the Plan to such 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 to an employee which first become
exercisable in any calendar year 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
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.
14
<PAGE> 18
OPTION PRICE
The price of options granted under the Plan will be determined by the
Committee, but may not be less than the fair market value of the Common Stock on
the date of grant; provided, however, if the Committee grants an option to an
employee in exchange for the cancellation of an option to purchase the same
number of shares of Common Stock, the option price will be equal to the option
price for the cancelled option. An ISO granted to an employee who owns more than
10% of the outstanding Common Stock of the Company or any subsidiary (a "10%
shareholder") will be at no less than 110% of fair market value on the grant
date. The Option Agreement may, at the discretion of the Committee, provide for
payment of the option price in cash, by check or Common Stock, or a combination
thereof. The option price may also be paid through a broker-facilitated cashless
exercise procedure acceptable to the Committee.
OPTION PERIOD
Options are exercisable as set forth in each Option Agreement, and will
expire no later than ten years after the grant date (five years for any ISO held
by a 10% shareholder). Options may be exercised for such period of time after
termination of employment as the Committee in its discretion deems appropriate.
NON-TRANSFERABILITY
Options are not transferable other than by will or the laws of descent and
distribution and are exercisable during the employee's lifetime only by the
employee.
ADJUSTMENT OF SHARES
The Plan provides for equitable adjustment by the Committee in the number
of shares of Common Stock available for the grant of options or subject to
outstanding options and the option price thereof to reflect any changes in the
capitalization of the Company or 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 a sale of assets, merger, consolidation,
reorganization 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 so that the employee may exercise the option in full
before such cancellation, (2) the Company transfers to the employee shares of
Common Stock, the number of which shall be determined by the Company by dividing
(a) the aggregate fair market value of the shares covered by such option less
the aggregate exercise price for such shares by (b) the fair market value of a
share on such date, or (3) the Company transfers to the employee the same
consideration which the employee otherwise would receive as a shareholder of the
Company in connection with such transaction if the employee held the number of
shares of Common Stock transferable under (2) above.
LIFE OF THE PLAN
No option may be granted under the Plan after the earlier of December 17,
2008 or the date on which all of the Common Stock reserved under the Plan has
been issued.
15
<PAGE> 19
ESTIMATE OF BENEFITS
The number of options that may be granted under the Plan to the Chief
Executive Officer and other executive officers of the Company is not currently
determinable.
AMENDMENT OF THE PLAN
The Plan may be amended by the Board to the extent deemed necessary or
appropriate, provided that no amendment will be made without approval by the
shareholders of the Company to increase the number of shares available under the
Plan or change the class of employees eligible for ISOs under the Plan. The
Board also may suspend the granting of options and may terminate the Plan at any
time, although the Board may not modify, amend or cancel any outstanding options
without the employee's consent.
FEDERAL INCOME TAX CONSEQUENCES
The following description of the federal income tax consequences of the
Plan is only a general summary based on current federal income tax laws,
regulations (including proposed regulations) and judicial and administrative
interpretations thereof, all of which are frequently amended, and which may be
retroactively applied to transactions described herein. Furthermore, employees
participating in the Plan may be subject to taxes other than federal income
taxes, such as federal employment taxes, state and local taxes and estate or
inheritance taxes, and individual circumstances may vary these results.
As identified by the Committee, each option granted under the Plan is
either an ISO or a non-incentive stock option ("Non-ISO"). An 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.
Upon the exercise of a Non-ISO, the employee generally will recognize
ordinary income in an amount equal to the excess of the fair market value of the
shares over the option price. Such fair market value generally will be
determined on the date the shares are transferred pursuant to the exercise.
However, if the employee is subject to Section 16(b) of the Exchange Act, the
date on which the fair market value of the shares will be determined may be
delayed for up to six months if the employee cannot sell the Common Stock
without being subject to liability under such Section. However, if the employee
timely elects under Section 83(b) of the Code, such fair market value will be
determined on the date the shares are 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 generally will be
entitled to a corresponding federal income tax deduction. The sale or other
taxable disposition of shares of Common Stock acquired through the exercise of a
Non-ISO 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 transferred to the employee when exercised.
Upon the exercise of an ISO, the employee normally will not recognize any
income for federal income tax purposes and 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 over the option price
of such shares (the "Spread") generally will constitute an adjustment to income
for purposes of calculating the alternative minimum tax of the employee for the
year in which the option is exercised, and such employee's federal income tax
liability may be increased as a result of such exercise under the alternative
minimum tax rules of the Code.
16
<PAGE> 20
If the Common Stock transferred pursuant to the exercise of an ISO is
disposed of within two years from the grant date or within one year from the
date of exercise (the "holding periods"), the employee generally will recognize
ordinary income equal to the lesser of (1) the gain realized (i.e., the excess
of the amount realized on the disposition over the option price) or (2) the
Spread. If the employee is subject to Section 16(b) of the Exchange Act, special
rules (as discussed above with respect to the exercise of a Non-ISO) may apply
for purposes of determining the amount of ordinary income recognized on the
disposition. The balance, if any, of the 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 the holding period. The Company normally will be
entitled to a federal income tax deduction equal to any ordinary income
recognized by the employee.
If the holding periods are met, the disposition of shares acquired upon 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 will not be entitled to any
federal income tax deduction as a result of a disposition of such shares after
the holding periods.
Special rules will apply to an 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.
APPROVAL OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION
The Board of Directors has adopted and unanimously recommends that the
shareholders approve the Amended and Restated Articles of Incorporation (the
"Amended Articles"), a copy of which is attached hereto as Exhibit B. The prior
Restated Articles of Incorporation (the "Prior Articles") were adopted in 1969,
and there have been seven amendments since that time. The Prior Articles were
cumbersome and in certain respects outdated in light of subsequent changes to
the Georgia Business Corporation Code (the "GBCC"). Accordingly, the Board of
Directors believes that it is in the best interests of the Company and its
shareholders to approve the Amended Articles.
The Amended Articles include the following changes from the Prior Articles:
1. Limitation on Director Liability. The Amended Articles provide
that if the GBCC is amended to authorize corporate action which further
limits the personal liability of directors, the liability of a Director of
the Company shall be limited to the fullest extent permitted by the GBCC,
as amended. This is intended to afford Directors the maximum limitation on
liability allowable by law. The Board is not aware of any proposed
modifications to the GBCC.
2. Business Judgment Guidelines. In 1984, the shareholders adopted an
amendment to the Prior Articles to make clear that the response of the
Board to any acquisition proposal would be based on the Board's evaluation
of what is in the best interests of the Company, taking into account a
variety of factors. For such purpose, the Board would be instructed to
consider all relevant factors, including the consideration being offered as
well as the social and economic effects on employees, customers, suppliers
and other constituents of the Company and on the communities in which the
Company operates. In 1989, the GBCC was amended to incorporate certain of
these considerations on a discretionary rather than mandatory basis. The
Amended Articles incorporate the substance of the GBCC amendment. The Board
believes that it is appropriate to treat certain issues relating to a
transaction (for example, the interests of employees, customers, suppliers
and creditors) in a discretionary fashion, rather than being subjected to a
17
<PAGE> 21
mandatory evaluation of all of the circumstances relating thereto. Under
present Georgia law, directors of a corporation are required to discharge
their duties in a manner they believe in good faith to be in the best
interests of the corporation and with the care an ordinarily prudent person
in a like position would exercise under similar circumstances. The Board
will continue to have an obligation to evaluate various factors in the
event of an acquisition proposal, beyond the consideration offered in
relation to the market price of the Company's stock, but the Board believes
that it is in the best interests of the Company and its shareholders that
the Board be able to exercise discretion when considering certain relevant
factors that weigh upon the merits of an acquisition proposal.
3. Preferred Stock. The Amended Articles (as well as the Prior
Articles) provide for the issuance of a class of Preferred Stock consisting
of 500,000 shares, issuable in series, as the Board may determine. The
Amended Articles have been modified to clarify that the Board has the
authority to establish provisions of the Preferred Stock not specifically
mentioned in the Articles. In addition, the Amended Articles deleted prior
language relating to the priority and timing of payment of Preferred Stock
dividends, non-accrual of interest on unpaid dividends, and the treatment
of Preferred Stock in connection with any dissolution, liquidation or
winding up of the affairs of the Company, in each case to provide maximum
flexibility to the Board in addressing these issues when determining the
specific rights of any class of Preferred Stock.
4. Par Value. Under the GBCC, payment of the par value of the
Company's Common Stock is no longer required in order to make such shares
fully paid and nonassessable upon issuance. The Amended Articles eliminate
the requirement that the consideration for such issuance be not less than
par value, and provide that shares of Common Stock may be issued for such
consideration as may be determined from time to time by the Board.
5. Share Repurchases and Treasury Shares. Under prior law,
corporations were limited to using unreserved and unrestricted capital
surplus and earned surplus to finance stock repurchases. These tests have
been replaced with solvency tests under the GBCC. The Amended Articles
reflect the current standard, and also clarify the fact that the Board has
the authority to resell or otherwise dispose of treasury shares acquired by
the Company, or to provide that such shares constitute authorized but
unissued shares.
6. Miscellaneous Changes. Other minor changes have been made in the
Amended Articles to provide clarity and/or consistency with the GBCC. These
include an expansion of the business purpose of the Company, a simpler
statement regarding preemptive rights, the deletion of a provision
addressing the Board's responsibilities which is addressed in the revised
GBCC, and a clarification on the rights of the holders of Common Stock to
receive dividends and upon dissolution.
The affirmative vote of the holders of a majority of all the outstanding
shares of Common Stock of the Company will be required for approval of the
Amended Articles. Proxies will be voted in accordance with the specifications
marked thereon, and if no specification is made, will be voted "FOR" approval of
the Amended Articles.
18
<PAGE> 22
ANNUAL REPORT TO SHAREHOLDERS
The annual report for the year ended December 31, 1998 accompanies this
Proxy Statement.
ANNUAL REPORT ON FORM 10-K
The Company will provide without charge, at the written request of any
shareholder, 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 may
impose a reasonable fee for providing such exhibits. Requests should be mailed
to:
JOHN H. HARLAND COMPANY
Box 105250
Atlanta, Georgia 30348
Attention: Victoria P. Weyand
Vice President, Communications
(770) 593-5127
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the Company's 2000
annual meeting of shareholders must be received no later than November 12, 1999
in order to be considered for inclusion in the proxy statement to be distributed
in connection with such meeting.
OTHER MATTERS
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 be made personally or by telephone, facsimile or
mail by employees of the Company. The Company also may reimburse brokers, banks,
nominees and other fiduciaries for their expenses of forwarding the proxy
material to beneficial owners. In addition, the Company has retained Georgeson &
Co., Inc. to assist in the solicitation of proxies, which may be made through
the mail, by facsimile or by telephone, at a fee of $5,500.
John C. Walters
Vice President and Secretary
March 12, 1999
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<PAGE> 23
EXHIBIT A
JOHN H. HARLAND COMPANY
1999 STOCK OPTION PLAN
1. BACKGROUND AND PURPOSE
The purpose of this Plan is to promote the interest of the John H. Harland
Company through the granting of Options in order (1) to attract and retain
Employees, (2) to provide an additional incentive to each Employee to work to
increase the value of Stock and (3) to provide each Employee with a stake in the
future of the Company which corresponds to the stake of each of the Company's
stockholders.
2. DEFINITIONS
Each term set forth in this sec. 2 shall have the meaning set forth
opposite such term and any reference to the plural of a defined term shall
include the singular.
Board -- means the Board of Directors of the Company.
Code -- means the Internal Revenue Code of 1986, as amended.
Committee -- means a committee of the Board comprised of at least 3 members
appointed by the Board. Each Committee member shall be a "non-employee director"
within the meaning of Rule 16b-3 and an "outside director" within the meaning of
Code sec. 162(m).
Company -- means the John H. Harland Company and any successor to the John
H. Harland Company.
Effective Date -- means the effective date described in sec. 4.
Employee -- means an employee of the Company or any entity that would be
treated as a single substituted for "80 percent" in the regulations under such
section; provided, however, that solely for purposes of granting ISOs, the term
"Employee" means an employee of the Company or any Subsidiary or Parent.
Fair Market Value -- means as of any date (a), if the Stock is quoted on a
national quotation system, (1) the closing price of the Stock on such date on
the national quotation system selected by the Committee or (2) if there was no
quotation of the Stock on such date on such quotation system, the closing price
on the next preceding business day on which there was a quotation, or (b), if
the Stock is not quoted on a national quotation system, the price that the
Committee acting in good faith determines through any reasonable valuation
method that a share of Stock might change hands between a willing buyer and a
willing seller, neither being under any compulsion to buy or to sell and both
having reasonable knowledge of the relevant facts.
ISO -- means an Option that is intended to satisfy the requirements of Code
sec. 422.
1933 Act -- means the Securities Act of 1933, as amended.
1934 Act -- means the Securities Exchange Act of 1934, as amended.
Non-ISO -- means an Option that either expressly or operationally does not
satisfy the requirements of Code sec. 422.
Option -- means an option to purchase Stock granted in accordance with
sec. 7.
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Option Agreement -- means the document that sets forth the terms and
conditions of an Option.
Option Price -- means the price to purchase one share of Stock upon the
exercise of an Option.
Parent -- means any corporation that is a parent corporation of the Company
within the meaning of Code sec. 424(e).
Plan -- means this John H. Harland Company 1999 Stock Option Plan, as
amended from time to time.
Rule 16b-3 -- means the exemption under Rule 16b-3 to Section 16(b) of the
1934 Act or any successor to such rule.
Stock -- means $1.00 par value common stock of the Company.
Subsidiary -- means a corporation that is a subsidiary corporation (within
the meaning of Code sec. 424(f)) of the Company.
Ten Percent Shareholder -- means a person who owns (after taking into
account the attribution rules of Code sec. 424(d)) more than ten percent of the
total combined voting power of all classes of stock of either the Company, a
Subsidiary or Parent.
3. SHARES RESERVED UNDER PLAN
There shall be 2,000,000 shares of Stock authorized for issuance under this
Plan. To the extent the Company deems appropriate, such shares of Stock may be
reserved from authorized but unissued shares of Stock and from shares of Stock
that have been reacquired by the Company. Any shares of Stock subject to an
Option that remain unissued after the cancellation, expiration or exchange of
the Option shall be available for use in future grants under this Plan. However,
any shares of Stock used to exercise an Option or to satisfy a withholding
obligation shall not be available for use in future grants under this Plan.
4. EFFECTIVE DATE
The effective date of this Plan shall be the date of its adoption by the
Board; provided that an ISO shall not be effective unless the shareholders of
the Company (acting at a duly called meeting of such shareholders) approve the
adoption of this Plan within 12 months of the Effective Date. Any ISO granted
before the shareholder approval automatically shall be granted subject to such
approval.
5. COMMITTEE
This Plan shall be administered by the Committee. The Committee acting in
its absolute discretion shall interpret this Plan and take such action in the
administration and operation of this Plan as the Committee deems appropriate
under the circumstances. Any action of the Committee shall be binding on the
Company, on each affected Employee and on each other person directly or
indirectly affected by such action.
6. ELIGIBILITY AND ANNUAL GRANT CAPS
Only Employees shall be eligible for the grant of Options. No Employee in
any calendar year shall be granted an Option to purchase more than 500,000
shares of Stock.
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7. OPTIONS
7.1 Committee Action. The Committee acting in its absolute discretion may
grant Options to Employees from time to time. An Option may be granted by the
Committee to an 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 an Option shall be evidenced by an Option Agreement.
The Option Agreement shall describe whether the Option is an ISO or a Non-ISO
and shall incorporate such other terms and conditions of the grant as the
Committee acting in its absolute discretion deems appropriate. If the Committee
grants an ISO and a Non-ISO to an Employee on the same date, the right of the
Employee to exercise the ISO shall not be conditioned on his or her failure to
exercise the Non-ISO.
7.2 $100,000 Limit for ISOs. To the extent that the aggregate Fair Market
Value of Stock subject to ISOs that first becomes exercisable in any calendar
year (determined as of the date the ISO is granted) exceeds $100,000, such
Options shall be treated as Non-ISOs. The Fair Market Value of Stock subject to
any other option (determined as of the date the option is granted) that (a)
satisfies the requirements of Code sec. 422 and (b) is granted to an Employee
under another plan maintained by the Company, a Subsidiary or Parent shall be
treated (for purposes of this $100,000 limitation) as if granted under this
Plan. The Committee shall interpret and administer the limitation in this
sec. 7.2 in accordance with Code sec. 422(d) or any successor section. This
sec. 7.2 shall be in effect only for so long as the $100,000 limitation is in
effect under Code sec. 422 or any successor section.
7.3 Option Price. The Option Price shall be no less than the Fair Market
Value of a share of Stock on the date the Option is granted; provided, however,
(a) if the Option is an ISO granted to an Employee who is a Ten Percent
Shareholder, the Option shall be no less than 110% of the Fair Market Value of a
share of Stock on the date such ISO is granted and (b) if the Committee grants
an Option to an Employee for a number of shares of Stock in exchange for the
cancellation of any Option to purchase the same number of shares of Stock, the
Option Price under such Option for such shares shall be the same as the Option
Price for such shares under the Option that is canceled. The Option Price shall
be payable in full upon the exercise of any Option. At the discretion of the
Committee, an Option Agreement can provide for the payment of the Option Price
either in cash, by check or in Stock that is acceptable to the Committee, or in
any combination of cash, check and such Stock. A payment by a check acceptable
to the Committee shall be treated as a payment in cash under this Plan. The
Option Price may be paid through any broker facilitated cashless exercise
procedure acceptable to the Committee or its delegate. The value of any Stock
surrendered as payment in the exercise of an Option shall be equal to the Fair
Market Value of such Stock on the date the properly endorsed certificate for
such Stock is delivered to the Committee or its delegate.
7.4 Exercise Period. Each Option shall be exercisable in whole or in part
at such time or times as set forth in the related Option Agreement, but no
Option shall be exercisable after the earlier of (a) the tenth anniversary of
the date the Option is granted, if the Option is (1) a Non-ISO or (2) an ISO
that is granted to an Employee who is not a Ten Percent Shareholder on the date
the Option is granted, or (b) the fifth anniversary of the date the Option is
granted, if the Option is an ISO and the Employee is a Ten Percent Shareholder
on the date the Option is granted. An Option Agreement may provide for the
exercise of an Option after the employment of an Employee has terminated for any
reason whatsoever, including death or disability; provided an Option Agreement
for an ISO must incorporate the post-employment exercise restrictions of
Code sec. 422.
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8. NONTRANSFERABILITY
An Option shall not be transferable by an Employee other than by will or by
the laws of descent and distribution. During an Employee's lifetime, an Option
shall be exercisable only by the Employee; however, the person or persons to
whom an Option is transferred by will or by the laws of descent and distribution
thereafter shall be treated as the Employee under this Plan. The restriction on
transfer described in this sec. 8 shall be incorporated in each Option
Agreement.
9. SECURITIES REGISTRATION
Each Option Agreement shall provide that, upon the receipt of Stock, the
Employee shall, if so requested by the Company, (a) hold such Stock for
investment and not with a view of resale or distribution to the public and (b)
deliver to the Company a written statement 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 an Employee under the 1933 Act or under any
other applicable securities laws or to qualify such Stock for an exemption under
any such laws prior to the issuance of such Stock to an 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 an
Employee.
10. LIFE OF PLAN
No Option shall be granted under this Plan on or after the earlier of (a)
the tenth anniversary of the effective date of this Plan (as determined under
sec. 4), in which event this Plan shall continue in effect until all outstanding
Options have been exercised in full or are no longer exercisable, or (b) the
date on which all of the Stock authorized for issuance under sec. 3 has been
issued as the result of the exercise of Options, in which event this Plan also
shall terminate on such date.
11. ADJUSTMENT
11.1 Capital Structure. In the event of any change in the capitalization
of the Company, including, but not limited to, such changes as stock dividends
or stock splits, the Committee shall adjust in an equitable manner the number,
kind or class (or any combination thereof) of shares of Stock authorized for
issuance under sec. 3 and subject to Options and the Option Price of such
Options, to reflect such change.
11.2 Mergers. The Committee as part of any corporate transaction described
in Code sec. 424(a) shall have the right to adjust (in any manner that the
Committee in its discretion deems consistent with Code sec. 424(a)) the number,
kind or class (or any combination thereof) of shares of Stock authorized for
issuance under sec. 3 and subject to Options and the Option Price of such
Options. The Committee may grant Options (in any manner that the Committee in
its discretion deems consistent with Code sec. 424(a)) to effect the assumption
of, or the substitution for, options previously granted by any other corporation
to the extent that a corporate transaction described in sec. 424(a) calls for
such substitution or assumption of such options.
11.3 Fractional Shares. If any adjustment under this sec. 11 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
that otherwise would result from such adjustment shall be the next lower number
of shares of Stock, rounding all fractions downward. An adjustment made under
this sec. 11 by the Committee shall be conclusive and binding on all affected
persons and, further, shall not constitute an increase in "the number of shares
of Stock authorized for issuance under sec. 3" within the meaning of sec. 13.
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12. 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 Options, each Option Agreement at the direction and discretion
of the Board may be canceled unilaterally by the Company if (1) any restrictions
on the exercise of an Option are waived before the Option Agreement is canceled
such that the Employee has the opportunity to exercise the Option in full before
such cancellation, (2) the Company transfers to the 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 an Employee the same consideration which the Employee otherwise
would receive as a shareholder of the Company in connection with such sale or
other corporate transaction if the Employee held the number of shares of Stock
which would have been transferable to him or to her under sec. 12(2) if such
number had been determined immediately before such sale or other corporate
transaction.
13. AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent that
the Board deems necessary or appropriate; provided, however, in the event any
such amendment (a) increases the number of shares of Stock authorized for
issuance under sec. 3 or (b) changes the class of employees eligible for ISOs,
no further ISOs may be granted, unless shareholder approval of such amendment is
obtained within 12 months of the date the amendment is adopted. The Board also
may suspend the granting of Options at any time and may terminate this Plan at
any time; provided, however, neither the Board nor the Committee shall have the
right unilaterally to modify, amend or cancel any Option granted before such
suspension or termination unless (a) the Employee consents in writing to such
modification, amendment or cancellation or (b) there is a dissolution or
liquidation of the Company or a transaction described in sec. 11 or sec. 12.
14. MISCELLANEOUS
14.1 Shareholder Rights. No Employee shall have any rights as a
shareholder of the Company as a result of the grant of an Option or his or her
exercise of such Option pending the actual delivery of the Stock subject to such
Option to such Employee.
14.2 No Contract of Employment. The grant of an Option shall not
constitute a contract of employment and shall not confer on an Employee any
rights upon his or her termination of employment in addition to those rights, if
any, expressly set forth in the related Option Agreement.
14.3 Withholding. Each grant of an Option shall be made subject to the
condition that the Employee consents to whatever action the Committee directs to
satisfy the federal and state tax withholding requirements, if any, that the
Committee in its discretion deems applicable to the exercise of such Option. The
Committee also shall have the right to provide in an Option Agreement that an
Employee may elect to satisfy federal and state tax withholding requirements
through a reduction in the number of shares of Stock actually transferred to him
or to her under this Plan.
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14.4 Construction. All references to sections (sec.) are to sections
(sec.) of this Plan unless otherwise indicated. The headings to sections in this
Plan have been included for convenience of reference only. This Plan shall be
construed under the laws of the State of Georgia.
14.5 Other Conditions. Each Option Agreement may require that an Employee
(as a condition to the exercise of an Option) enter into any agreement or make
such representations prepared by the Company, including any agreement that
restricts the transfer of Stock acquired pursuant to the exercise of an Option
or provides for the repurchase of such Stock by the Company under certain
circumstances.
14.6 Rule 16b-3. The Committee shall have the right to amend any grant of
an Option or to withhold or otherwise restrict the transfer of any Stock under
this Plan to an Employee as the Committee deems appropriate in order to satisfy
any condition or requirement under Rule 16b-3 to the extent Rule 16 of the 1934
Act might be applicable to such grant or transfer.
14.7 Loans. If approved by the Committee, the Company may lend money to,
or guarantee loans made by a third party to, any Employee to finance the
exercise of any Option, and the exercise of an Option with the proceeds of any
such loan shall be treated as an exercise for cash. If approved by the
Committee, the Company also may, in accordance with an Employee's instructions,
transfer Stock acquired in the exercise of an Option directly to a third party
in connection with any arrangement made by the Employee for financing the
exercise of such Option.
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EXHIBIT B
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
JOHN H. HARLAND COMPANY
I
The name of the corporation is:
"JOHN H. HARLAND COMPANY."
II
The corporation shall have perpetual duration.
III
The corporation has the purpose of engaging in any lawful business.
IV
The corporation shall have authority to issue not more than one hundred
forty four million, five hundred thousand (144,500,000) shares of stock, which
shall be divided into classes as follows:
(A) One hundred forty four million (144,000,000) shares of Common
Stock having a par value of One ($1) Dollar per share. Each share of Common
Stock shall have one vote on each matter submitted to a vote of the
shareholders of the corporation. The holders of shares of Common Stock
shall be entitled to receive, in proportion to the number of shares of
Common Stock held, the net assets of the corporation upon dissolution after
any preferential amounts required to be paid or distributed to holders of
outstanding shares of Preferred Stock, if any, are so paid or distributed.
Subject to the provisions of applicable law and the rights of the holders
of the outstanding shares of Preferred Stock, if any, the holders of shares
of Common Stock shall be entitled to receive, when and as declared by the
Board of Directors of the corporation, out of the assets of the corporation
legally available therefor, dividends or other distributions, whether
payable in cash, property or securities of the corporation.
(B) Five hundred thousand (500,000) shares of Preferred Stock of One
($1) Dollar par value per share which shall be issued in the manner and
with the designations, rights, preferences and limitations set forth
hereinafter:
(1) All shares of Preferred Stock shall be identical except that
the Board of Directors of the corporation is hereby expressly authorized
and empowered, in its sole discretion, to divide the class of Preferred
Stock into one or more series, and, prior to the issuance of any of such
shares in any particular series, to fix and determine, in the manner
provided by law, the following provisions of such series:
(i) The distinctive designation of such series and the number of
shares which shall constitute such series, which number may be
increased (except where otherwise provided by
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<PAGE> 30
the Board of Directors in creating such series) or decreased (but not
below the number of shares thereof then issued) from time to time by
like action of the Board of Directors;
(ii) The annual rate, and timing of payment, of dividends, if
any, payable on shares of such series and the date from which any
such dividends shall be accumulated, if dividends are to be
cumulative;
(iii) Whether the shares of such series shall be redeemable and,
if so, the redemption price and the terms and conditions of such
redemption;
(iv) The rights of shares of such series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the corporation;
(v) Whether or not the shares of such series shall be entitled
to the benefit of a sinking fund, retirement fund or a purchase fund
to be applied to the redemption or purchase of shares of such series,
and if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which the shares of
such series may be redeemed or purchased through the application of
such fund;
(vi) The rights, if any, of the holders of shares of such series
to convert such shares into, or exchange such shares for, shares of
Common Stock or shares of any other class or series of Preferred
Stock and the terms and conditions of such conversion or exchange;
(vii) Whether or not the shares of such series shall have any
voting powers and, if voting powers are so granted, the extent of
such voting powers and the terms and conditions under which such
voting powers may be exercised. Unless expressly granted by the Board
of Directors, no series of Preferred Stock shall have the right to
vote for directors or in any other matter except as required by
Georgia law; and
(viii) Any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof relating to such
series.
(2) Each share of stock within an individual series shall be
identical in all respects with the other shares of such series, except
as to the date from which dividends thereon, if any, shall accumulate,
if cumulative.
(3) The holders of Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors and paid by the
corporation from funds legally available for such payment, cash
dividends at the annual rate for each particular series of Preferred
Stock set by the Board of Directors as herein authorized.
(4) The description of shares of each series of Preferred Stock,
including any designations, preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption shall be as set
forth in resolutions adopted by the Board of Directors, and articles of
amendment shall be filed with the Georgia Secretary of State as required
by law to be filed with respect to issuance of such Preferred Stock,
prior to the issuance of any shares of such series.
(C) The Common Stock and the Preferred Stock herein authorized may be
issued from time to time for such consideration, having a value as
determined by the Board of Directors, or as a dividend, as the Board of
Directors may determine. Upon receipt by the corporation of payment of
consideration so
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determined for the issuance of shares, such issued shares shall be
determined to be fully paid and nonassessable.
(D) The corporation shall have the power to create and issue, whether
or not in connection with the issuance and sale of any of its shares or
other securities, rights or options entitling the holders thereof to
purchase from the corporation, upon such consideration, terms and
conditions, as the Board of Directors may determine, authorized but
unissued shares or treasury shares.
(E) The corporation shall have the full power to purchase and
otherwise acquire, and dispose of, its own shares and securities granted by
the laws of the State of Georgia. Shares so acquired shall become treasury
shares of the corporation and may be resold or otherwise disposed of by the
corporation for such consideration as shall be determined by the Board of
Directors. At any time, the Board of Directors may by resolution provide
that any or all treasury shares so acquired shall constitute authorized,
but unissued shares.
V
No shareholder shall have any preemptive right to subscribe for or to
purchase any shares of stock or other securities issued by the corporation.
VI
The corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon shareholders
herein are granted subject to this reservation.
VII
(A) In addition to any affirmative vote required by law, these Articles of
Incorporation or otherwise with respect to any shares of Common Stock of the
corporation, and except as otherwise expressly provided in paragraph C of this
Article VII:
(1) any merger or consolidation of the corporation or any Subsidiary
(as hereafter defined) with (a) any Interested Shareholder (as hereinafter
defined) or (b) any other corporation (whether or not itself an Interested
Shareholder) which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of an Interested Shareholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with an
Interested Shareholder or any Affiliate of any Interested Shareholder of
any assets of the corporation or any Subsidiary having an aggregate Fair
Market Value (as hereinafter defined) of $10,000,000 or more; or
(3) the issuance or transfer by the corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
corporation or any Subsidiary to any Interested Shareholder or any
Affiliate of any Interested Shareholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate Fair Market
Value of $1,000,000 or more; or
(4) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by or on behalf of an Interested
Shareholder or any Affiliate of any Interested Shareholder; or
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(5) any reclassification of securities (including any reverse stock
split), or recapitalization of the corporation, or any merger or
consolidation of the corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Shareholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the corporation or any Subsidiary
which is directly or indirectly owned by any Interested Shareholder or any
affiliate of any Interested Shareholder;
shall require the affirmative vote of the holders of at least seventy-five
percent (75%) of the outstanding shares of Common Stock of the corporation,
including the affirmative vote of the holders of at least seventy-five
percent (75%) of the outstanding shares of Common Stock of the corporation
other than those beneficially owned by the Interested Shareholder involved
in such transaction. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(6) The term "Business Combination" as used in this Article VII shall
mean any transaction which is referred to in any one or more of
subparagraphs 1 through 5 above in this Article VII.
(B) The provisions of paragraph A of this Article VII shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of these Articles of Incorporation, if all of the conditions specified
in either of the following subparagraphs 1 or 2 are met:
(1) The Business Combination shall have been approved by at least
seventy-five (75%) of the directors of the Company.
(2) All of the following conditions shall have been met:
(i) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the Business
Combination of consideration other than cash to be received per share by
holders of Common Stock in such Business Combination shall be at least
equal to the highest amount determined under subclauses (a), (b) and (c)
below (taking into account all stock dividends and stock splits):
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Shareholder involved in the Business
Combination for any share of Common Stock acquired by it (1) within
the two-year period immediately prior to the first public
announcement of the proposal of the Business Combination (the
"Announcement Date") or (2) in the transaction in which it became an
Interested Shareholder, whichever is higher;
(b) the highest Fair Market Value per share of Common Stock
during the 30-day period ending on the Announcement Date or during
the 30-day period ending on the date on which the Interested
Shareholder involved in the Business Combination became an Interested
Shareholder, whichever is higher; and
(c) (if applicable) the price per share equal to the highest
Fair Market Value per share of Common Stock determined pursuant to
subparagraph 2(i)(b) above, multiplied by the ratio of (1) the
highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by the Interested
Shareholder involved in the Business
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Combination for any shares of Common Stock acquired by it within the
two-year period immediately prior to the Announcement Date to (2) the
Fair Market Value per share of Common Stock on the date that the
Interested Shareholder made its first purchase of shares of Common
Stock during such two-year period.
(ii) The consideration to be received by holders of outstanding
Common Stock shall be in cash or in the same form as the Interested
Shareholder involved in the Business Combination has previously paid for
shares of Common Stock. If the Interested Shareholder has paid for
shares of Common Stock with varying forms of consideration, the form of
consideration for Common Stock shall be either cash or the form used to
acquire the largest number of shares of Common Stock previously acquired
by it.
(iii) After the Interested Shareholder involved in the Business
Combination became an Interested Shareholder and prior to the
consummation of such Business Combination: (a) except as approved by at
least seventy-five percent (75%) of the directors, there shall have been
no failure to declare and pay at the regular date therefor dividends in
full (whether or not cumulative) on the outstanding Preferred Stock; (b)
there shall have been (1) no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to reflect any subdivision
of the Common Stock), except as approved by at least seventy-five
percent (75%) of the directors, and (2) an increase in such annual rate
of dividends as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization, or any similar
transaction which has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure so to increase such
annual rate is approved by at least seventy-five percent (75%) of the
directors; and (c) such Interested Shareholder shall not have become the
beneficial owner of any additional shares of Common Stock except as part
of the transaction which results in such Interested Shareholder becoming
an Interested Shareholder.
(iv) After the Interested Shareholder involved in the Business
Combination became an Interested Shareholder, such Interested
Shareholder shall not have received the benefit, directly or indirectly
(except proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or
other tax advantages provided by the corporation or any of its
Subsidiaries, whether in anticipation of or in connection with such
Business Combination or otherwise.
(v) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder
(or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to public shareholders of the corporation at least 30
days prior to the meeting at which the Business Combination will be
voted upon (whether or not such proxy information statement is required
to be mailed pursuant to such Act or subsequent provisions). The proxy
or information statement shall contain on the cover page thereof a
statement as to how members of the Board voted on the proposal in
question and any recommendation as to the advisability or inadvisability
of the Business Combination that any director wishes to make, and shall
also contain the opinion of a reputable national investment banking firm
as to the fairness of the terms of the Business Combination, from the
point of view of the remaining public shareholders of the corporation
(such investment banking firm to be engaged solely on behalf of the
remaining public shareholders, to be paid a reasonable fee for its
services by the corporation upon receipt of such opinion and to be an
investment banking firm which has not previously been associated with
the Interested Shareholder).
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(C) For the purposes of this Article VII:
(1) A "person" shall mean any individual, firm, corporation or other
entity.
(2) "Interested Shareholder" shall mean any person (other than the
corporation, any Subsidiary or either the corporation or any Subsidiary
acting as trustee or in a similar fiduciary capacity) who or which:
(i) is the beneficial owner, directly or indirectly, of more than
10% of the outstanding Common Stock; or
(ii) is an Affiliate of the corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 10% or more of the then
outstanding Common Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of
Common Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Interested Shareholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933.
(3) A person shall be a "beneficial owner" of any Common Stock:
(i) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has,
directly or indirectly, (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (b) the right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Common Stock.
(4) For the purposes of determining whether a person is an Interested
Shareholder pursuant to subparagraph 2 of this paragraph C, the number of
shares of Common Stock deemed to be outstanding shall include shares deemed
owned through application of subparagraph 3 of this paragraph C but shall
not include any other shares of Common Stock which may be issuable pursuant
to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrant or options, or otherwise.
(5) An "Affiliate" of a specified person is a person that directly,
through one or more intermediaries, controls, or is controlled by, or is
under common control with, the person specified.
(6) The term "Associate" used to indicate a relationship with any
person means (i) any firm, corporation or other entity (other than the
corporation or any Subsidiary) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more
of any class of equity securities, (ii) any trust or other estate in which
such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity, and (iii) any
relative or spouse of such person, or any relative of such spouse who has
the same home as such person.
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(7) "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
corporation unless owned solely as trustee or other similar fiduciary
capacity.
(8) "Fair Market Value" means: (i) in the case of stock, the closing
sales price of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such stock is not
listed on such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the closing
sales price or the average of the bid and asked prices reported with
respect to a share of such stock on the National Association of Securities
Dealers, Inc. Automatic Quotation System or any system then in use, or if
no such quotations are available, the fair market value on the date in
question of a share of such stock as determined by the Board of Directors
in good faith; and (ii) in the case of property other than cash or stock,
the fair market value of such property on the date in question as
determined by the Board of Directors in good faith.
(9) In the event of any Business Combination in which the corporation
survives, the phrase "consideration other than cash to be received" as used
in paragraph B(2)(i) of this Article VII shall include the shares of Common
Stock retained by the holders of such shares.
(D) The Board of Directors of the corporation shall have the power and duty
to determine for the purposes of this Article VII, on the basis of information
known to them after reasonable inquiry, (i) whether a person is an Interested
Shareholder, (ii) the number of shares of Common Stock beneficially owned by any
person, (iii) whether a person is an Affiliate or Associate of another, and (iv)
whether the assets which are the subject of any Business Combination have an
aggregate Fair Market Value of $10,000,000 or more, and whether the
consideration to be received for the issuance or transfer of securities by the
corporation or any Subsidiary in any Business Combination has an aggregate Fair
Market Value of $1,000,000 or more.
(E) Nothing contained in this Article VII shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
(F) Notwithstanding any other provisions of these Articles of Incorporation
or the bylaws of the corporation (and notwithstanding the fact that a lesser
percentage may be specified by law), the affirmative vote of the holders of at
least seventy-five percent (75%) of the outstanding shares of Common Stock of
the corporation, including the affirmative vote of the holders of at least
seventy-five percent (75%) of the outstanding shares of Common Stock of the
corporation other than those beneficially owned by any Interested Shareholder,
shall be required to amend or repeal, or adopt any provisions inconsistent with,
this Article VII of these Articles of Incorporation.
VIII
The Board of Directors of the corporation, when evaluating any offer of a
person (as defined in paragraph C(1) of Article VII), other than the corporation
itself, to (a) make a tender or exchange offer for any equity security of the
corporation, (b) merge or consolidate the corporation with another person, or
(c) purchase or otherwise acquire all or substantially all of the properties and
assets of the corporation (an "Acquisition Proposal"), may, in connection with
the exercise of its business judgment, consider the interests of the employees,
customers, suppliers and creditors of the corporation and its subsidiaries, the
communities in which offices or other establishments of the corporation and its
subsidiaries are located, and all other factors
B-7
<PAGE> 36
such Directors consider pertinent; provided, however, that the foregoing shall
be deemed solely to grant discretionary authority to the Directors and shall not
be deemed to provide to any constituency any right to be considered.
IX
Notwithstanding any other provisions of these Articles of Incorporation or
the bylaws of the corporation (and notwithstanding the fact that a lesser
percentage may be specified by law), neither Section 2 or 8 of Article II of the
bylaws nor this Article IX may be amended or repealed nor may any provisions
inconsistent with said Section 2 or 8 of Article II of the bylaws or this
Article IX be adopted, except upon the affirmative vote of the holders of at
least seventy-five percent (75%) of the outstanding shares of Common Stock of
the corporation, including the affirmative vote of the holders of at least
seventy-five percent (75%) of the outstanding shares of Common Stock of the
corporation other than those beneficially owned by any Interested Shareholder
(as defined in Article VII hereof), or alternatively, upon the affirmative vote
of at least seventy-five percent (75%) of the directors.
X
No Director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of the duty of
care or other duty as a Director, except for liability (i) for any
appropriation, in violation of his duties, of any business opportunity of the
corporation, (ii) for acts or omissions which involve intentional misconduct or
a knowing violation of law, (iii) for the types of liabilities set forth in
Section 14-2-832 of the Georgia Business Corporation Code, or (iv) for any
transaction from which the Director derived an improper personal benefit. If the
Georgia Business Corporation Code is amended to authorize corporate action
further eliminating or limiting the personal liability of Directors, then the
liability of a Director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Georgia Business Corporation Code, as amended.
Neither the amendment nor repeal of this Article X nor the adoption of any
provision of these Amended and Restated Articles of Incorporation inconsistent
with this Article shall eliminate or adversely affect any right or protection of
a Director of the corporation existing immediately prior to such amendment,
repeal or adoption.
B-8
<PAGE> 37
HARLAND LOGO
(RECYCLED PAPER LOGO)
<PAGE> 38
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
JOHN H. HARLAND COMPANY
APRIL 23, 1999
The undersigned hereby appoints TIMOTHY C. TUFF and JOHN C. WALTERS, 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 Common 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 23, 1999 at 10:00 a.m., at the Ritz-Carlton Atlanta, 181 Peachtree
Street, NE, 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.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED
THE PROXY WILL BE VOTED "FOR" THE STATED PROPOSALS
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON OTHER SIDE)
- --------------------------------------------------------------------------------
IF YOU ARE NOT CURRENTLY RECEIVING NEWS RELEASES OR WOULD LIKE TO OBTAIN
ADDITIONAL FINANCIAL INFORMATION, YOU MAY RETURN THIS POSTAGE-PAID REPLY CARD.
UPON HARLAND'S RECEIPT OF THIS CARD, YOUR NAME WILL BE PLACED ON OUR MAILING
LIST:
My name and mailing address are: The types of information most
(Please print legibly) pertinent to my needs are:
[ ] Annual Reports
- -------------------------------------
[ ] Quarterly Earnings & Press Releases
- -------------------------------------
[ ] SEC Form 10K
- -------------------------------------
[ ] SEC Form 10Q
- -------------------------------------
<PAGE> 39
<TABLE>
<CAPTION>
WITHHOLD
FOR FOR ALL
<S> <C> <C> <C>
1. To elect four (4) directors: 3. To approve the 1999 Stock Option Plan, providing
JOHN H. WEITNAUER JR. for the issuance of up to 2,000,000 shares of Common
RICHARD K. LOCHRIDGE Stock of the Company.
G. HAROLD NORTHROP FOR AGAINST ABSTAIN
TIMOTHY C. TUFF
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH NOMINEE'S NAME LISTED ABOVE.)
2. To ratify the appointment of Deloitte & Touche 4. To approve the Amended and Restated Articles of Incorporation
LLP as the Company's independent certified of the Company.
public accountants for the year ending FOR AGAINST ABSTAIN
December 31, 1999.
FOR AGAINST ABSTAIN
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</TABLE>
JOHN H. HARLAND COMPANY
INVESTOR RELATIONS DEPARTMENT
P.O. Box 105250
Atlanta, GA 30348
