<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>
AMERICAN BUSINESS PRODUCTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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
(LOGO)
AMERICAN BUSINESS PRODUCTS, INC.
2100 RiverEdge Parkway Suite 1200
Atlanta, GA 30328
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1999
To Our Shareholders:
The 1999 Annual Meeting of Shareholders of American Business Products, Inc.
(the "Company") will be held at The Cobb Galleria Centre, Two Galleria Parkway,
Atlanta, Georgia, on Wednesday, May 5, 1999 at 11:00 a.m., Atlanta time, for the
purpose of considering and voting upon:
1. A proposal to elect three directors of the Company;
2. A proposal to approve and adopt the American Business Products, Inc.
1999 Incentive Compensation Plan; and
3. Such other business as properly may come before the Annual Meeting or
any adjournments thereof. The Board of Directors is not aware of any
other business to be presented to a vote of the shareholders at the
Annual Meeting.
Information relating to the above matters is set forth in the attached
Proxy Statement. Shareholders of record at the close of business on March 1,
1999 are entitled to receive notice of and to vote at the Annual Meeting and any
adjournments thereof.
We look forward to seeing you at the meeting.
By Order of the Board of Directors
/s/ JOHN H. KARR
JOHN H. KARR
Treasurer and Assistant Secretary
Atlanta, Georgia
March 31, 1999
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE,
EXECUTE AND RETURN THE ENCLOSED PROXY CARD OR CARDS IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE. THE PROMPT RETURN OF PROXY CARDS WILL SAVE YOUR COMPANY
THE EXPENSE OF FURTHER PROXY SOLICITATION.
<PAGE> 3
AMERICAN BUSINESS PRODUCTS, INC.
2100 RIVEREDGE PARKWAY
SUITE 1200
ATLANTA, GEORGIA 30328
---------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1999
---------------------
This Proxy Statement is furnished to the shareholders of American Business
Products, Inc. (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company to be voted at the 1999 Annual Meeting of
Shareholders (the "Annual Meeting") and at any adjournments thereof. The Annual
Meeting will be held on Wednesday, May 5, 1999, at The Cobb Galleria Centre, Two
Galleria Parkway, Atlanta, Georgia, at 11:00 a.m., Atlanta time.
The approximate date on which this Proxy Statement and the enclosed form(s)
of proxy card are first being sent or given to shareholders is March 31, 1999.
VOTING
GENERAL
The securities that can be voted at the Annual Meeting consist of the
Common Stock of the Company, $2.00 par value per share (the "Common Stock"),
with each share entitling its owner to one vote on each matter submitted to the
shareholders. The record date for determining the holders of Common Stock who
are entitled to notice of and to vote at the Annual Meeting is March 1, 1999. On
the record date, 15,431,795 shares of the Common Stock were outstanding and
eligible to be voted at the Annual Meeting.
QUORUM AND VOTE REQUIRED
The presence, in person or by proxy, of a majority of the outstanding
shares of the Common Stock of the Company is necessary to constitute a quorum at
the Annual Meeting. In counting the votes to determine whether a quorum exists
at the Annual Meeting, the proposal receiving the greatest number of votes "for"
or "against" and abstentions (including instructions to withhold authority to
vote) will be used.
In voting with regard to the proposal to elect directors (Proposal 1),
shareholders may vote in favor of all nominees, withhold their votes as to all
nominees or withhold their votes as to specific nominees. The vote required to
approve Proposal 1 is governed by Georgia law and is a plurality of the votes
cast by the holders of shares entitled to vote, provided a quorum is present. As
a result, in accordance with Georgia law, votes that are withheld will not be
counted and will have no effect.
In voting with regard to the proposal to approve and adopt the American
Business Products, Inc. 1999 Incentive Compensation Plan (Proposal 2),
shareholders may vote in favor of the proposal or against the proposal or may
abstain from voting. The vote required to approve Proposal 2 is governed by
Georgia law and the rules of the New York Stock Exchange (the "Exchange"). A
majority of the shares of the Common Stock
<PAGE> 4
outstanding on the record date and eligible to be voted at the Annual Meeting
must be voted on Proposal 2. Abstentions will count as votes cast. Votes cast
favoring Proposal 2 must exceed the sum of the votes cast opposing Proposal 2
and abstentions. As a result, in accordance with the rules of the Exchange,
abstentions will have an effect on approval of the proposal.
Under the rules of the Exchange that govern most domestic stock brokerage
firms, member brokerage firms that hold shares in street name for beneficial
owners may, to the extent that such beneficial owners do not furnish voting
instructions with respect to any or all proposals submitted for shareholder
action, vote in their discretion upon proposals which are considered
"discretionary" proposals under the rules of the Exchange. Member brokerage
firms that have received no instructions from their clients as to "non-
discretionary" proposals do not have discretion to vote on these proposals. Such
"broker non-votes" will not be considered in determining whether a quorum exists
at the Annual Meeting and will not be considered as votes cast in determining
the outcome of any proposal.
PROXIES FOR HOLDERS OF COMMON STOCK
Proxy cards are being transmitted with this Proxy Statement to all holders
of the Common Stock. If the proxy is completed properly and returned by the
shareholder and is not revoked, it will be voted at the Annual Meeting in the
manner specified thereon. IF THE PROXY IS PROPERLY EXECUTED AND RETURNED BUT
WITHOUT INSTRUCTIONS FOR VOTING, THE SHARES REPRESENTED BY THE PROXY WILL BE
VOTED "FOR" EACH OF THE PROPOSALS LISTED ON THE PROXY CARD AND DESCRIBED HEREIN.
Any shareholder who executes and delivers a proxy card may revoke it at any time
prior to its use by giving written notice to the Secretary of the Company, or by
executing and delivering to the Secretary a duly executed proxy card bearing a
later date, or by appearing at the meeting and voting in person; provided,
however, that under the rules of the Exchange, any beneficial owner of the
Common Stock whose shares are held in street name by a member brokerage firm may
revoke his proxy and vote his shares in person at the Annual Meeting only in
accordance with the applicable rules and procedures of the Exchange. The Board
of Directors of the Company does not know of any other business to be brought
before the Annual Meeting other than that described herein, but it is intended
that, as to any such other business, a vote will be cast pursuant to the proxy
in accordance with the judgment of the persons named as proxies.
PROXIES FOR PARTICIPANTS IN EMPLOYEE BENEFIT PLANS
Separate proxy cards are being transmitted to all persons who have shares
of the Common Stock attributable to their accounts as participants or
beneficiaries under the American Business Products, Inc. Profit Sharing
Retirement Plan (the "Profit Sharing Plan") and the American Business Products,
Inc. Employee Savings Plan (the "Employee Savings Plan"). These proxy cards
appoint the respective Trustees for the Profit Sharing Plan and the Employee
Savings Plan to vote the shares held for the accounts of the participants or
their beneficiaries in the Profit Sharing Plan and the Employee Savings Plan in
accordance with the instructions noted thereon. IN THE EVENT NO PROXY CARD IS
RECEIVED FROM A PARTICIPANT OR BENEFICIARY IN THE PROFIT SHARING PLAN OR A PROXY
CARD IS RECEIVED WITHOUT INSTRUCTIONS FOR VOTING, THE TRUSTEES OF THE PROFIT
SHARING PLAN WILL VOTE THE SHARES OF STOCK OF THE PARTICIPANT OR BENEFICIARY
WITH REGARD TO EACH OF THE PROPOSALS LISTED ON THE PROXY CARD AND DESCRIBED
HEREIN AS THE TRUSTEES DEEM PROPER IN THEIR BEST JUDGMENT. IN THE EVENT NO PROXY
CARD IS RECEIVED FROM A PARTICIPANT OR BENEFICIARY IN THE EMPLOYEE SAVINGS PLAN
OR A PROXY CARD IS RECEIVED WITHOUT INSTRUCTIONS FOR VOTING, THE TRUSTEES OF THE
EMPLOYEE SAVINGS PLAN WILL VOTE THE SHARES OF STOCK OF THE PARTICIPANT OR
BENEFICIARY WITH REGARD TO EACH OF THE PROPOSALS LISTED ON THE PROXY
2
<PAGE> 5
CARD AND DESCRIBED HEREIN IN PROPORTION WITH THE VOTES CAST BY THE PARTICIPANTS
OR BENEFICIARIES IN THE EMPLOYEE SAVINGS PLAN WHO PROPERLY EXECUTED AND
DELIVERED PROXY CARDS TO THE TRUSTEES.
Any Profit Sharing Plan or Employee Savings Plan participant or beneficiary
who executes and delivers a proxy card to the Trustees may revoke it at any time
prior to its use by giving written notice to the respective Trustees or by
executing and delivering to the Trustees a duly executed proxy card bearing a
later date. Under the terms of the Profit Sharing Plan and the Employee Savings
Plan, only the Trustees of the plans can vote the shares allocated to the
accounts of participants, even if such participants or their beneficiaries
attend the Annual Meeting in person.
In addition to soliciting proxies through the mail, the Company may solicit
proxies through its directors, officers and employees in person and by
telephone, facsimile or telegraph. All expenses incurred in connection with the
solicitation of proxies will be borne by the Company, including the charges and
expenses of brokerage firms, nominees, custodians, fiduciaries and others for
forwarding solicitation materials to beneficial owners of the Common Stock.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of December 31, 1998
regarding the ownership of the Common Stock by each person known to the Company
to be the beneficial owner of more than 5% of the Common Stock, by each
executive officer named in the Summary Compensation Table herein and by all
directors, nominees, and executive officers of the Company as a group, based on
data furnished to the Company by such persons.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED(1) CLASS
---- --------------------- ----------
<S> <C> <C>
Curtis Investment Company, LP............................... 1,477,902(2) 9.6 %
Henry J. Bird............................................... 48,615(3) *
American Business Products, Inc.
Profit Sharing Retirement Plan............................ 749,862(4) 4.9
Larry L. Gellerstedt, III................................... 72,242(5) *
Thomas R. Carmody........................................... 91,686(5) *
Richard G. Smith............................................ 26,578(5) *
Raymond J. Wilson........................................... 2,187(5) *
John H. Karr................................................ 1,920(5) *
Christopher R. Williams..................................... 126 *
All directors, nominees, and executive officers of the
Company as a group (17 persons)........................... 424,800(6) 2.7
</TABLE>
- ---------------
* Represents less than one percent of the outstanding shares of the Common
Stock.
(1) The stock ownership information shown above and in "Proposal 1 -- Election
of Directors -- Information Regarding Nominees and Directors" is based upon
information furnished to the Company by the named persons. Beneficial
ownership as reported in this Proxy Statement has been determined in
accordance with regulations of the Securities and Exchange Commission (the
"Commission") and includes shares of the Common Stock which may be acquired
within 60 days of December 31, 1998 upon the exercise of outstanding stock
options. The named persons have sole voting and investment power with regard
to the shares shown as beneficially owned by such persons except as
otherwise indicated.
3
<PAGE> 6
(2) Curtis Investment Company, LP ("CIC") is a limited partnership of which
Henry J. Bird was the managing general partner on December 31, 1998. As
managing general partner, Mr. Bird had sole voting and investment power for
all of the shares owned by CIC, although Mr. Bird's proportionate interest
in CIC is 1.7%. Therefore, Mr. Bird was deemed to be the indirect beneficial
owner of the 1,477,902 shares owned by CIC on December 31, 1998. Effective
January 1, 1999, CIC became a limited liability company named Curtis
Investment Company, LLC. Mr. Bird is the Managing Member of Curtis
Investment Company, LLC. The address of CIC is 124 Riverstone Parkway,
Canton, Georgia 30114.
(3) The shares shown include 26,159 shares owned by Henry J. Bird; 289 shares
allocated to the account of Mr. Bird under the Profit Sharing Plan; 74
shares allocated to the account of Mr. Bird under the Employee Savings Plan;
and 21,093 shares owned by the Henry Curtis Family Trust of 1990 for which
Mr. Bird shares voting and investment power. Mr. Bird's address is 124
Riverstone Parkway, Canton, Georgia 30114.
(4) The Profit Sharing Plan directs that certain stock bonus accounts, and all
undistributed income accruing thereon, held in the Trust Fund established
under the Plan be invested by the Trustees primarily in shares of the Common
Stock. The participants have no power to direct the investment of the stock
bonus accounts. Therefore, the Trustees of the Plan are deemed to have
investment power with respect to the shares held by the Plan. As a result,
the Plan is deemed to be the beneficial owner of the shares held by it and
each of the Trustees is deemed to be the indirect beneficial owner of the
shares held by the Plan. The Trustees of the Plan are Larry L. Gellerstedt,
III and John H. Karr. The address of the Plan and the Trustees is 2100
RiverEdge Parkway, Suite 1200, Atlanta, Georgia 30328.
(5) With regard to the beneficial ownership of shares of Common Stock by Mr.
Gellerstedt, the shares shown include 50,000 shares which Mr. Gellerstedt
may acquire upon the exercise of stock options; with regard to Mr. Carmody,
the shares shown include 51,547 shares owned jointly with his wife and
33,000 shares which Mr. Carmody may acquire upon the exercise of stock
options; with regard to Mr. Smith, the shares shown include 23,500 shares
which Mr. Smith may acquire upon the exercise of stock options; with regard
to Mr. Wilson, the shares shown include 2,000 shares which Mr. Wilson may
acquire upon the exercise of stock options; with regard to Mr. Karr, the
shares shown include 1,750 shares which Mr. Karr may acquire upon the
exercise of stock options; and with regard to Messrs. Gellerstedt and Karr,
the shares shown do not include 749,862 shares for which Messrs. Gellerstedt
and Karr share investment power as co-trustees of the Profit Sharing Plan
and from which they disclaim beneficial ownership.
(6) The shares shown include 110,048 shares which may be acquired by certain
directors and executive officers pursuant to the exercise of stock options;
1,180 shares owned by the spouses of certain directors and executive
officers for which the respective persons disclaim beneficial ownership;
79,507 shares voted by a director as trustee and as to which he disclaims
any beneficial ownership; 21,093 shares owned by the Henry Curtis Family
Trust of 1990 for which a director shares voting and investment power and
for which he disclaims any beneficial ownership; and 3,516 shares allocated
to the accounts of the directors and executive officers under the Profit
Sharing Plan and 354 shares allocated to executive officers under the
Employee Savings Plan. The shares shown do not include 749,862 shares for
which Messrs. Gellerstedt and Karr share investment power as co-trustees of
the Profit Sharing Plan and for which they disclaim beneficial ownership.
4
<PAGE> 7
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES
The Bylaws of the Company provide that the Board of Directors of the
Company shall consist of not less than three nor more than fifteen persons and
that the number of directors shall be determined from time to time by the Board
of Directors. The Articles of Incorporation of the Company further provide that
the Board of Directors of the Company shall be divided into three classes as
nearly equal in number as possible. The term of office of one of the classes of
directors expires each year, and a new class of directors is elected each year
by the shareholders for a term of three years or until their successors are
elected and qualified. The Board currently consists of 11 members.
Mr. F. Duane Ackerman resigned from the Board of Directors effective
December 31, 1998 and Mr. Joe W. Rogers, Jr. was appointed by the Board of
Directors to succeed Mr. Ackerman as a director in the class whose term expires
at the 2000 Annual Meeting.
The Board of Directors has nominated Henry Curtis VII, C. Douglas Miller
and G. Harold Northrop to stand for election as directors at the Annual Meeting.
Each of Messrs. Curtis, Miller and Northrop is presently a member of the Board
of Directors whose term is scheduled to expire at the Annual Meeting. Each
nominee has consented to serve as a director if elected. If elected by the
shareholders, Messrs. Curtis, Miller and Northrop will serve a three-year term
which will expire at the time of the 2002 Annual Meeting of Shareholders or at
the time their successors are elected and qualified.
If any of the nominees should become unavailable to serve for any reason
(which is not anticipated), the Board of Directors, in its discretion, may
designate a substitute nominee or nominees (in which case the persons named as
proxies on the enclosed proxy card will vote all valid proxy cards for the
election of such substitute nominee or nominees), allow the vacancy or vacancies
to remain open until the Board of Directors locates a suitable candidate or
candidates, or by resolution reduce the authorized number of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE PROPOSAL TO ELECT MESSRS. CURTIS, MILLER AND NORTHROP AS DIRECTORS OF THE
COMPANY TO HOLD OFFICE UNTIL THE 2002 ANNUAL MEETING OF SHAREHOLDERS OR UNTIL
THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
INFORMATION REGARDING NOMINEES AND DIRECTORS
Set forth below is certain information regarding the three nominees for
director and all current directors whose terms of office will continue after the
Annual Meeting. Information regarding their beneficial ownership of Common Stock
of the Company is as of December 31, 1998.
PERSONS NOMINATED TO SERVE UNTIL THE 2002 ANNUAL MEETING
HENRY CURTIS VII served as Vice President of the Company from April 1995
until his retirement in May 1998. He served as Vice President of Sales Support
of Curtis 1000 Inc. from 1992 to March 1995. He previously served as Director of
Administration and Sales Support of Curtis 1000 Inc. from 1990 to 1992. Mr.
Curtis served as Director of Employee Benefits of the Company from 1983 to 1990
and has held various positions with the Company and its wholly-owned
subsidiaries, Curtis 1000 Inc. and Vanier Graphics Corporation, since 1971. He
has been a director of the Company since 1989. Mr. Curtis is 50. He beneficially
owns 238,625 shares (1.5%) of the Common Stock.(1)
5
<PAGE> 8
C. DOUGLAS MILLER has been Chairman of the Board and Chief Executive
Officer of Norrell Corporation since October 27, 1997 and served as President
and Chief Executive Officer of Norrell Corporation from October 15, 1993 to
October 27, 1997. He joined Norrell Services, Inc., a subsidiary of Norrell
Corporation, in 1979, and served as President and Chief Operating Officer of
Norrell Corporation from 1990 to his election as President and Chief Executive
Officer. Mr. Miller is also Chairman of the Board of Directors of Norrell
Corporation. Mr. Miller has been a director of the Company since April 24, 1996.
Mr. Miller is 57. He beneficially owns 1,693 shares of the Common Stock.*(2)
G. HAROLD NORTHROP has been Vice Chairman of the Board of Trustees of the
Ida Cason Callaway Foundation, a nonprofit foundation (the "Foundation"), since
1992 and Chairman of the Executive Committee of the Board of Trustees of the
Foundation since 1991. He also has served as a Trustee of the Foundation and a
director of Callaway Gardens Resort, Inc., which operates Callaway Gardens, a
resort and convention center, since 1972. Mr. Northrop was President and Chief
Executive Officer of the Foundation from 1972 until 1991 and was President and
Chief Executive Officer of Callaway Gardens Resort, Inc. from 1972 until 1990.
Mr. Northrop has been a director of the Company since 1986. He also is a
director of SunTrust Bank of Columbus, Georgia and John H. Harland Company. Mr.
Northrop is 63. He beneficially owns 9,628 shares of the Common Stock.*(2)
DIRECTORS TO SERVE UNTIL THE 2000 ANNUAL MEETING
THOMAS F. KELLER, Ph.D. has been R.J. Reynolds Professor of Business
Administration at Duke University since 1974 and served as Dean of the Fuqua
School of Business at Duke University from 1974 until his retirement on June 30,
1996. Dr. Keller has been a director of the Company since 1992. Dr. Keller is
also a director of Ladd Furniture, Inc., Nations Funds, Inc., Nations Fund
Portfolios, Inc., Nations Government Income Term Trust 2003, Inc., Nations
Government Income Term Trust 2004, Inc., Nations Balanced Target Maturity Fund,
Inc., Nations LifeGoal Funds, Inc., Hatteras Income Securities, Inc., The Mentor
Family of Funds, Dimon, Incorporated, Wendy's International, Inc., Biogen, Inc.,
Triangle Community Foundation, and North Carolina Zoological Society and a
trustee of Nations Institutional Reserves, Nations Fund Trust and Spillman
College. Dr. Keller is 67. He beneficially owns 7,166 shares of the Common
Stock.*(2)
DANIEL W. McGLAUGHLIN was President and Chief Executive Officer of Equifax,
Inc. from January 1, 1996 until January 1, 1998 and has served as a director of
Equifax since 1990. He joined Equifax in August 1989 as Senior Vice President,
Information Technology and served as Executive Vice President from January 1991
to December 1992, and as President and Chief Operating Officer from January 1993
to December 1995. Mr. McGlaughlin is Chairman of The Georgia Industrial
Fellowships for Teachers and Chairman of the Board of Trustees of the Atlanta
Botanical Gardens. Mr. McGlaughlin has been a director of the Company since July
1996. Mr. McGlaughlin is also a director of Equifax Inc., ChoicePoint, FORE
Systems, Inc., Nichols Research Corporation, Wachovia Corporation of Georgia and
its subsidiary Wachovia Bank of Georgia, N.A., and the Atlanta United Way. Mr.
McGlaughlin is 62. He beneficially owns 6,877 shares of the Common Stock.*(2)
JOE W. ROGERS, JR. serves as Chairman, Chief Executive Officer and
President of Waffle House, Inc., a 24-hour fast food restaurant chain of over
1,100 restaurants located in 25 states. Restaurants are company-owned and
franchised with approximately a 50/50 mix. Mr. Rogers became Chief Executive
Officer and President in 1973. Waffle House is a privately held corporation, and
Mr. Rogers is the controlling shareholder. Mr. Rogers is 52. He beneficially
owns 5,200 shares of the Common Stock.*
6
<PAGE> 9
WILLIAM B. STOKELY, III is Chairman and President of The Stokely Company, a
personal investment holding company, Stokely Hospitality Properties Inc., and
Tellico Development Corporation, and Managing/Operating Partner of Stokely
Hospitality Enterprises. Mr. Stokely is also Chairman and President of the
William B. Stokely Foundation. Mr. Stokely served as Chairman of the Board and
Chief Executive Officer of Stokely Van Camp, Inc. from 1981 until 1983 and
worked for the company for 20 years. Mr. Stokely serves as Chairman of the Board
of the Greater Knoxville Sports Corporation and also serves on the University of
Tennessee Development Council and Business Advisory Council and is on the Berry
College Board of Trustees. He has been a director of the Company since December
11, 1997. Mr. Stokely is 58. He beneficially owns 13,300 shares of the Common
Stock.*(1)
DIRECTORS TO SERVE UNTIL THE 2001 ANNUAL MEETING
LARRY L. GELLERSTEDT, III was named Chairman, Chief Executive Officer and
President of the Company on May 8, 1998. He became President and Chief Executive
Officer of the Company on March 30, 1998. He was previously employed at Beers
Construction Company ("Beers") in Atlanta, Georgia from 1978 through 1997. He is
currently the non-employee Chairman of the Board of Beers. From November 1990
through December 1997, Mr. Gellerstedt served as Chairman, Chief Executive
Officer and President of Beers. Mr. Gellerstedt is a director of ALLTEL
Corporation, Rock-Tenn Company, SunTrust Bank, Atlanta, Southern Mills and Beers
Construction Company. Mr. Gellerstedt is Chairman of the Board of ESR Children's
Health Care System, Inc., and serves on the boards of the Metropolitan Atlanta
YMCA, Jesse Parker Williams Foundation, and the Commerce Club. Mr. Gellerstedt
is 42. He beneficially owns 72,242 shares of the Common Stock.*(2)
HOLLIS L. HARRIS served as Chairman, President and Chief Executive Officer
of Air Canada from January 1993 until his retirement on August 1, 1996. He
previously served as Vice Chairman, President and Chief Executive Officer of Air
Canada from February 1992 until December 1992. He was Chairman of the Board of
Directors, President and Chief Executive Officer of Continental Airlines, Inc.
and President and Chief Executive Officer of Continental Airlines Holdings, Inc.
from 1990 until 1991. Mr. Harris served as President and Chief Operating Officer
of Delta Air Lines, Inc. from 1987 to 1990. Mr. Harris has been a director of
the Company since 1988. Mr. Harris is 67. He beneficially owns 930 shares of the
Common Stock.*
W. STELL HUIE has been Senior Counsel to the law firm of Long Aldridge &
Norman LLP, general counsel to the Company, since January 1995. He previously
was a Senior Partner in Long Aldridge & Norman LLP from 1984 until January 1995.
He has been a practicing attorney since 1953. Mr. Huie has been a director of
the Company since 1968. Mr. Huie is 68. He beneficially owns 26,945 shares of
the Common Stock.*(1)(2)
JAMES F. McDONALD has been President and Chief Executive Officer of
Scientific-Atlanta, Inc., a communications company, since July 1993. From July
1991 until July 1993, Mr. McDonald was a general partner in the venture capital
firm of J.H. Whitney & Co. Mr. McDonald is a director of Burlington Resources,
Inc., Frontier Corporation and Scientific Atlanta, Inc. He has been a director
of the Company since December 11, 1997. Mr. McDonald is 59. He beneficially owns
1,300 shares of the Common Stock.*
- ---------------
* Less than one percent of the outstanding shares of Common Stock.
(1) With regard to Mr. Curtis, the shares shown include 6,950 shares which Mr.
Curtis may acquire upon the exercise of stock options, 1,458 shares
allocated to Mr. Curtis' account under the Profit Sharing Plan, 98
7
<PAGE> 10
shares allocated to Mr. Curtis' account under the Employee Savings Plan,
79,507 shares voted by him as trustee of certain family trusts and for which
he disclaims any beneficial ownership and 21,093 shares for which he shares
voting and investment power as co-trustee of a family trust and for which he
disclaims any beneficial ownership; with regard to Mr. Stokely, the shares
shown include 10,000 shares voted by him as Chairman and President of the
William B. Stokely, Jr. Foundation and for which he disclaims any beneficial
ownership; and with regard to Mr. Huie, the shares shown include 1,180
shares owned by Mr. Huie's wife for which Mr. Huie disclaims any beneficial
ownership.
(2) With regard to each of Messrs. McGlaughlin and Miller, the shares shown
include 1,277 shares which he may acquire upon the exercise of stock
options; with regard to each of Messrs. Keller and Northrop, the shares
shown include 6,216 shares which he may acquire upon the exercise of stock
options; with regard to Mr. Gellerstedt, the shares shown include 50,000
shares which he may acquire upon the exercise of stock options; and with
regard to Mr. Huie, the shares shown include 4,939 shares which he may
acquire upon the exercise of stock options.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the full
Board and through committees of the Board, consisting of an Executive Committee,
a Compensation and Nominating Committee (the "Compensation Committee"), an Audit
Committee, and a Finance and Strategic Planning Committee. During the fiscal
year ended December 31, 1998, the Board of Directors also had a Search
Committee. Each committee has a charter which defines its membership
qualifications, duties and responsibilities. During fiscal 1998, the Board of
Directors held six meetings, the Executive Committee held six meetings, the
Compensation Committee held five meetings, the Audit Committee held three
meetings, the Finance and Strategic Planning Committee held five meetings and
the Search Committee held five meetings. Attendance at meetings of the Board of
Directors and its committees as a whole averaged 89%. Each incumbent director
except Mr. McDonald attended at least 75% of the aggregate of all meetings of
the Board of Directors and all committees of the Board of Directors of which he
was a member held during the period in the Company's 1998 fiscal year during
which he served.
The Executive Committee is composed of Messrs. Northrop (Chairman),
Gellerstedt, Huie and McGlaughlin. This committee, during intervals between
meetings of the Board, may exercise the powers of the Board of Directors except
with regard to a limited number of matters which include amending the Articles
of Incorporation or bylaws of the Company, forming, appointing initial members
of or delegating responsibility to committees of the Board, filling vacancies on
the Board of Directors or any of its committees, approving or proposing to the
shareholders action that is required to be approved by the shareholders, or
approving a plan of merger that does not require shareholder approval. The
Executive Committee is also responsible for reviewing and advising the full
Board on management succession issues, including making recommendations to the
full Board with respect to selection of a new Chief Executive Officer. The
outside director members of the Executive Committee are responsible for
reviewing, at least annually, the Board's corporate governance principles and
practices.
The Executive Committee is responsible for conducting periodic reviews on
at least an annual basis of the Board's performance in order to increase the
effectiveness of the Board. The Executive Committee evaluates the Board's
performance as a body, including the independence of the Board and the range of
experience, expertise and availability of individual Directors. The Executive
Committee reviews the Board's relationship with management to ensure that the
Board is receiving adequate information and that the Board's involvement with
management is effective. The Executive Committee reports its findings to the
Board and makes
8
<PAGE> 11
recommendations to improve the Board's performance including any proposals
regarding changes in the membership of the Board. All actions of the Executive
Committee are submitted for review and ratification by the full Board of
Directors.
The Compensation Committee is composed entirely of outside directors,
including Messrs. Huie (Chairman), Harris, Miller and Stokely. Mr. Ackerman
served on the Compensation Committee during fiscal 1998 and was replaced by Mr.
Miller effective January 1, 1999. This committee is responsible for evaluating
the performance of the Company's Chief Executive Officer, setting his annual and
long-term performance goals, evaluating his performance against such goals and
recommending his salary, bonus and long-term incentives. The committee reviews
the performance of the Chief Executive Officer, recommends to the Board the
amount of base compensation and the form of bonus compensation of executive
officers of the Company and recommends to the Board nominees for election to the
Board of Directors. The Compensation Committee will consider nominees for
director recommended by shareholders if submitted to the Company in accordance
with the procedures set forth in Article III, Section 2 of the bylaws of the
Company. See "Shareholder Proposals For 2000 Annual Meeting."
The Audit Committee is composed entirely of outside directors, including
Messrs. Keller (Chairman), Harris, Rogers and McDonald. Mr. Miller served on the
Audit Committee during fiscal 1998 and was replaced by Mr. Rogers effective
January 1, 1999. This committee is responsible for the review and evaluation of
the Company's internal controls and accounting procedures and risk management
program and for the review of audit reports with the Company's independent
auditors to ensure that the financial information is accurate, timely and
includes the appropriate disclosure. In addition, this committee makes
recommendations to the Board of Directors concerning the appointment of
independent auditors and provides a communication link between the auditors and
the Board of Directors.
The Finance and Strategic Planning Committee is composed of Messrs.
McGlaughlin (Chairman), Curtis, McDonald, Miller and Northrop. The committee is
responsible for reviewing or recommending to the full Board of Directors, as
required, the long-term business goals and strategies of the Company. The
Committee is responsible for reviewing and making recommendations to the full
Board with respect to material changes to the financial plans and policies
including the capitalization of the Company, dividend policy, offering terms of
corporate securities, equity and debt funding for the Company's subsidiaries and
affiliates and other significant financial transactions. The Committee reviews
and recommends to the Board approval of long-term business objectives and
strategic plans, including acquisitions, joint ventures, or dispositions of
businesses and capital assets (transactions) and the financing of such
transactions. The Committee also reviews the business development activity and
the allocation of corporate resources.
The Search Committee was composed of Messrs. Northrop (Chairman), Huie and
Keller. The committee was responsible for negotiating a severance arrangement
with the Company's former President and Chief Executive Officer, negotiating the
compensation arrangement with the Company's Interim President and Chief
Executive Officer and taking all steps necessary to hire a new President and
Chief Executive Officer. The Search Committee was disbanded on February 24,
1998.
9
<PAGE> 12
DIRECTOR COMPENSATION
Nonemployee directors of the Company are compensated for their services
through a combination of cash, restricted stock awards and stock option grants.
Each nonemployee director may elect to defer some or all of his cash
compensation. The specifics are described below.
CASH COMPENSATION
Nonemployee directors receive a quarterly retainer fee of $3,750 plus
$1,100 for each meeting of the Board of Directors attended, and a nonemployee
Chairman of the Board receives an additional fee of $500 for each meeting of the
Board of Directors attended. Nonemployee directors who are members of the
Executive Committee, the Compensation Committee, the Audit Committee or the
Finance and Strategic Planning Committee receive $750 for each committee meeting
attended, and nonemployee chairmen of these committees receive an additional fee
of $500 for each committee meeting attended. Nonemployee directors who were
members of the Search Committee received $1,100 for each committee meeting
attended, and the nonemployee chairman of this committee received an additional
$500 for each committee meeting attended. Directors who are salaried employees
of the Company or any of its subsidiaries generally do not receive fees for
their services as directors. However, Mr. Carmody continued to receive
nonemployee directors' fees for the period November 7, 1997 to March 30, 1998,
during which he served as Interim President and Chief Executive Officer of the
Company. See "Table 1: Summary Compensation Table."
The Board of Directors asked Mr. Northrop to provide additional services in
assisting the Company's management personnel and in transitioning management.
For these additional services, Mr. Northrop was paid $40,000 during fiscal 1998.
NONCASH COMPENSATION
1993 Directors Stock Incentive Plan. The American Business Products, Inc.
1993 Directors Stock Incentive Plan, effective as of October 1, 1993, and as
amended December 11, 1996 and May 8, 1998 (the "1993 DSIP"), currently provides
for the discretionary grant of nonqualified stock options ("NSOs") to directors
who are not otherwise compensated employees of the Company or its subsidiaries.
The 1993 DSIP also provides that as of the date of the annual shareholders
meeting at the beginning of each year for which a nonemployee director is
reelected or continues to serve as a director, he will receive an award of 100
shares of the Common Stock, subject to certain restrictions ("restricted
stock"). Newly elected directors receive an award of 200 shares. No director may
receive more than 2,000 shares of restricted stock under this plan.
Ten directors currently are eligible to participate in the 1993 DSIP.
During the fiscal year ended December 31, 1998, the plan committee granted NSOs
to purchase 4,000 shares of the Common Stock at an option price of $22.50 per
share to each of the following directors of the Company: Messrs. Ackerman,
Harris, Huie, Keller, McDonald, McGlaughlin, Miller, Northrop and Stokely.
During the fiscal year ended December 31, 1998, the plan committee awarded 100
shares of restricted stock to each of Messrs. Ackerman, Harris, Huie, Keller,
McDonald, McGlaughlin, Miller, Northrop and Stokely. Upon his election to the
Board of Directors, the plan committee awarded 200 shares of restricted stock to
Mr. Rogers.
Subject to approval of the shareholders, the Board of Directors has adopted
the American Business Products, Inc. 1999 Incentive Compensation Plan, a new
plan designed to provide incentive compensation to both nonemployee directors
and key employees of the Company. (See Proposal 2 -- APPROVAL AND ADOPTION OF
THE AMERICAN BUSINESS PRODUCTS, INC. 1999 INCENTIVE COMPENSATION PLAN.) The new
plan is designed to replace the 1993 DSIP, and any shares authorized under that
10
<PAGE> 13
plan that remain available for issuance will be "transferred" to the new plan.
The company is using this method of transferring available shares rather than
asking for additional new shares for the new plan in order to avoid shareholder
dilution. If any awards are made under the 1993 DSIP between the date of this
proxy and the shareholders' approval of the new 1999 Incentive Compensation
Plan, the number of shares available under the new plan will be diminished. Upon
shareholder approval of the new plan, no further grants or awards shall be made
under the 1993 DSIP.
Deferred Compensation Plan for Directors. The Company maintains the
Deferred Compensation Plan for Directors in which all nonemployee directors of
the Company are eligible to participate. If a director elects to participate,
the director may elect to defer retainer fees, meeting fees or all fees
otherwise payable to him for service on the Board of Directors. At the election
of each participant, amounts deferred under the plan prior to April 1, 1994 are
treated as if invested under either a "cash deferral program" or a "phantom
stock program." Under the cash deferral program, the deferred fees are credited
with deemed interest at a rate determined from time to time by a committee
appointed by the Board of Directors of the Company. Under the phantom stock
program, the deferred fees are treated as if applied to purchase shares of the
Common Stock of the Company. A bookkeeping account is set up for the participant
which is credited with a number of "stock units" equal to the number of shares
of Common Stock that could have been purchased with the fees at the time of
deferral. The number of stock units credited to the participant is adjusted
periodically to account for dividends, stock splits and other events affecting
the number of outstanding shares, as if the stock units were actual shares of
the Common Stock. All amounts deferred under the plan on or after April 1, 1994
are invested under the cash deferral program.
Generally, a participant will receive payment of his benefit under the plan
in quarterly installments over five years, in cash, beginning after he attains
age 70 or, if later, after he retires or otherwise leaves the Board of Directors
of the Company. The amount of each cash payment is determined, in the case of
the cash deferral program, by the amount of fees deferred plus the interest
accrued thereon or, in the case of the phantom stock program, by the number of
stock units credited to the participant's account and the market value per share
of the Common Stock. If a participant dies before receiving full payment of his
benefit under the plan, the remaining amount will be paid in a lump sum, in
cash, to his beneficiary.
Of the executive officers of the Company named in the Summary Compensation
Table, only Mr. Carmody received fees for services as a director. Mr. Carmody
received no fees for his service as a director prior to his retirement from
employment with the Company on June 30, 1996; thereafter, he received fees for
his services as a nonemployee director and Chairman of the Board of Directors
until May 8, 1998. No amounts have been deferred by Mr. Carmody under the plan.
For the 1998 fiscal year, $105,936.94 representing deemed interest at the rate
of 10.29% was credited pursuant to the cash deferral program under the plan and
241.49 stock units representing dividends on phantom stock units, were credited
pursuant to the phantom stock program under the plan for the benefit of all
current nonemployee directors participating in the plan as a group.
Deferred Compensation Investment Plan (Directors). The Deferred
Compensation Investment Plan (Directors) was implemented as a one-time deferral
plan in 1985 for nonemployee directors of the Company. No directors other than
those who elected to participate in 1985 have entered the plan. Each participant
could elect to defer some or all of his 1985 annual compensation for services as
a director to be invested in the plan. The Company has invested the deferred
funds in company-owned life insurance contracts, but the Company may change its
investment at any time. The maximum annual amount of benefit payable to a fully
vested participant is specified in the participant's joiner agreement with the
Company but may be reduced due to certain adverse changes in federal income tax
provisions.
11
<PAGE> 14
A participant's vested benefit will never fall below the amount of the
deferral, plus interest compounded at an annual rate of 12%.
A participant becomes fully vested in his benefit (i) if he remains on the
Board of Directors to age 60, (ii) if prior to retirement, he becomes disabled
or dies, or (iii) upon a change in control of the Company. Upon retirement or
other termination of service as a director after attaining age 60, a participant
(or his beneficiary if he dies) generally will receive equal monthly payments,
beginning at the later of age 70 or retirement, for a period of ten years. If a
participant terminates his service on the Board of Directors prior to attaining
age 60 for reasons other than death or disability, he or his beneficiary will
receive a lump-sum payment of the amount of compensation he has deferred, plus
interest compounded at an annual rate of 12%.
In fiscal 1998, no amounts were paid under the plan to any current
director, no amounts were deferred by any current director, and the Company
incurred expense of $50,808 for all current and retired directors who
participate in this plan.
Consulting Agreement with Henry Curtis VII. In May 1998, Henry Curtis VII
retired from his 28-year career with the Company. Mr. Curtis most recently
served as a Vice President of the Company from 1995 until his retirement, and
continues to serve as a director of the Company. In recognition of his
dedication and service to the Company, and in exchange for his assistance in
transitioning certain duties, the Company entered into a consulting agreement
with Mr. Curtis, dated May 26, 1998, which provided certain payments and
benefits through December 31, 1998. Further, any stock options held by Mr.
Curtis on December 31, 1998 became 100% exercisable and remain exercisable until
March 31, 1999. The Company also agreed to make certain payments to him each
year (beginning in 2000) to assist him with the cost of group health insurance
coverage for himself and his family until he reaches age 65.
12
<PAGE> 15
EXECUTIVE COMPENSATION
Table 1 summarizes by various categories, for the fiscal years ended
December 31, 1998, 1997 and 1996, the total compensation earned by (i) the Chief
Executive Officer of the Company, (ii) each of the four most highly compensated
executive officers of the Company who were serving as executive officers at
December 31, 1998 and whose salary and bonus for the fiscal year ended December
31, 1998 exceeded $100,000, and (iii) the Interim Chief Executive Officer of the
Company from January 1, 1998 through March 30, 1998 (collectively referred to as
the "named executive officers"). For information regarding the various factors
considered by the Compensation Committee in recommending the compensation of the
Chief Executive Officer of the Company and, generally, the other executive
officers of the Company, see "Compensation and Nominating Committee Report"
below.
TABLE 1: SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------
RESTRICTED SECURITIES
ANNUAL COMPENSATION STOCK UNDERLYING ALL OTHER
NAME AND --------------------------- AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) ($) (#) (3)
- ------------------ ---- --------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
L.L. Gellerstedt, III (4)........... 1998 $341,138 $100,000 $250,000 50,000 0
President and Chief Executive
Officer
T.R. Carmody (5).................... 1998 142,252 0 0 0 94,852
Interim President and Chief 1997 45,000 0 0 0 39,047
Executive Officer from November 7, 1996 237,500 0 0 0 878,026
1997 through March 30, 1998
R.G. Smith.......................... 1998 235,800 115,190 0 24,000 12,398
Vice President 1997 220,000 0 0 84,000 11,801
Finance and Chief 1996 200,000 75,000 0 5,000 0
Financial Officer
R.J. Wilson (6)..................... 1998 146,300 73,478 0 14,000 4,631
Corporate Controller 1997 70,771 17,500 0 8,000 0
J. H. Karr (7)...................... 1998 131,900 63,164 0 14,000 4,271
Treasurer and Assistant Secretary 1997 62,500 15,625 0 7,000 25,000
C.R. Williams (8)................... 1998 108,719 80,060 0 29,000 469
Vice President and Chief
Information Officer
</TABLE>
- ---------------
(1) Includes before-tax contributions made to the Employee Savings Plan, the
Company's tax-qualified Code Section 401(k) plan, during fiscal 1998 by
Messrs. Smith, Wilson and Karr, and during fiscal 1997 by Mr. Smith.
(2) Reflects cash bonus awards earned by Messrs. Smith, Wilson, Karr and
Williams, and a stock bonus award earned by Mr. Gellerstedt during the
respective fiscal years for the achievement of performance criteria pursuant
to the Annual Management Incentive Bonus Plan. In October 1998, before any
amounts under the Company's Bonus Plan were earned or calculable, Mr.
Gellerstedt recommended to the Compensation Committee that his bonus for
1998 be limited to $100,000 and that any excess over $100,000 that the
Compensation Committee might otherwise have considered granting to him under
the
13
<PAGE> 16
Bonus Plan formula be used, at the discretion of the Compensation Committee,
for merit bonuses to other employees. The Compensation Committee, in
exercising its sole right to determine bonuses, honored Mr. Gellerstedt's
recommendation and set his 1998 bonus under the Plan at $100,000. At the end
of the performance period, the actual bonus formula resulted in an excess of
$135,000, which the Compensation Committee granted as discretionary bonuses
(in addition to any bonuses earned under the 1998 Bonus Plan) to selected
executives based on their efforts during 1998 and contributions to overall
results that were viewed as substantial.
(3) All Other Compensation earned during fiscal 1998 includes the following: (i)
Company contributions to the Profit Sharing Plan, the Company's
tax-qualified profit sharing retirement plan: Mr. Smith -- $6,646, Mr.
Wilson -- $3,220, and Mr. Karr -- $2,984; (ii) Company matching
contributions to the Employee Savings Plan: Mr. Smith -- $1,600, Mr.
Wilson -- $772, and Mr. Karr -- $716; (iii) group term life insurance
premiums paid by the Company: Mr. Smith -- $893, Mr. Wilson -- $639, Mr.
Karr -- $571, and Mr. Williams -- $469; (iv) a special bonus paid in lieu of
certain contributions to the Profit Sharing Plan due to limitations imposed
by the Internal Revenue Service: Mr. Smith -- $3,259; and (v) the following
payments to Mr. Carmody attributable to the period January 1, 1998 through
March 30, 1998 during which he served as Interim President and Chief
Executive Officer: nonemployee directors' quarterly retainer fee -- $5,325,
nonemployee directors' meeting fees -- $5,450, Supplemental Retirement
Income Plan -- $43,750, Deferred Compensation Investment Plan
(Executives) -- $13,950, transfer of automobile -- $8,877, and payments for
community activities -- $17,500.
All Other Compensation earned during fiscal 1997 includes the following: (i)
Company contributions to the Profit Sharing Plan: Mr. Smith -- $5,424; (ii)
Company contributions to the Employee Savings Plan: Mr. Smith -- $1,600;
(iii) a special bonus paid in lieu of certain contributions to the Profit
Sharing Plan due to limitations imposed by the Internal Revenue Service: Mr.
Smith -- $4,777; (iv) the following payments to Mr. Carmody attributable to
the period November 7 through December 31, 1997 during which he served as
Interim President and Chief Executive Officer: nonemployee directors'
quarterly retainer fee -- $2,188, nonemployee directors' meeting fees
-- $3,200, Supplemental Retirement Income Plan -- $25,521, and Deferred
Compensation Investment Plan (Executives) -- $8,138; and (v) with respect to
Mr. Karr -- $25,000 representing a moving allowance.
All Other Compensation earned during fiscal 1996 includes the following: (i)
Company contributions to the Profit Sharing Plan: Mr. Carmody -- $7,950;
(ii) premiums paid by the Company for life insurance policies, any proceeds
of which are payable to the respective beneficiaries designated by the named
executive officers: Mr. Carmody -- $1,310; (iii) a special bonus paid in
lieu of certain contributions to the Profit Sharing Plan due to limitations
imposed by the Internal Revenue Service: Mr. Carmody -- $32,166; (iv)
expense incurred by the Company under the Deferred Compensation Investment
Plan (Executives): Mr. Carmody -- $39,000; (v) the cash surrender value of a
life insurance policy transferred to Mr. Carmody on September 9,
1996 -- $675,600; and (vi) expense incurred by the Company under the
Supplemental Retirement Income Plan: Mr. Carmody -- $122,000.
(4) Mr. Gellerstedt became President and Chief Executive Officer of the Company
as of March 30, 1998.
(5) Mr. Carmody retired from his employment with the Company on June 30, 1996;
his 1996 salary is attributable to the period January 1, 1996 to June 30,
1996. From November 7, 1997 through March 30, 1998, Mr. Carmody held the
positions of Interim President and Chief Executive Officer; his 1997 salary
is attributable to the period November 7, 1997 through December 31, 1997;
his 1998 salary is attributable to the period January 1, 1998 through March
30, 1998. See "Employment and Other Agreements" for a description of the
agreement pursuant to which Mr. Carmody served.
(6) Mr. Wilson began employment and became the Company's Corporate Controller as
of June 30, 1997.
14
<PAGE> 17
(7) Mr. Karr began employment with the Company on June 30, 1997, and became
Treasurer on July 23, 1997 and Assistant Secretary on December 9, 1998.
(8) Mr. Williams began employment with the Company and became the Vice President
and Chief Information Officer on March 30, 1998.
OPTION GRANTS
Table 2 sets forth information regarding the number and terms of stock
options granted to the named executive officers during the fiscal year ended
December 31, 1998. Included in such information, in accordance with the rules
and regulations of the Commission, is the potential realizable value of each
option granted, calculated using the 5% and 10% option pricing model.
TABLE 2: OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ------------------------------------------------------------------------------------ ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED (1) FISCAL YEAR (PER/SH) (2) DATE (3) 5% 10%
- ---- ----------- ------------ ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
L.L. Gellerstedt............ 50,000 10.71 $22.4375 3/30/08 $705,541 $1,787,979
T.R. Carmody................ 0 -- -- -- -- --
R.G. Smith.................. 24,000 5.14 $21.5625 12/09/08 325,452 824,761
R.J. Wilson................. 14,000 3.00 $21.5625 12/09/08 189,847 481,111
J. H. Karr.................. 14,000 3.00 $21.5625 12/09/08 189,847 481,111
C.R. Williams............... 5,000 1.07 $ 22.50 05/08/08 70,750 179,296
24,000 5.14 $21.5625 12/09/08 225,453 824,761
</TABLE>
- ---------------
(1) 50,000 options were granted to Mr. Gellerstedt on March 30, 1998, which were
immediately exercisable, pursuant to the provisions of his offer of
employment. An aggregate of 76,000 options were granted to the named
executive officers on December 9, 1998, under the terms of the American
Business Products, Inc. 1991 Stock Incentive Plan (the "1991 Stock Incentive
Plan"). Other than the options granted to Mr. Gellerstedt, the options will
become exercisable in increments, with 25% of the option shares becoming
exercisable on the first anniversary of the date of grant, an additional 25%
of the option shares becoming exercisable on each successive anniversary
date, with full exercisability occurring on the fourth anniversary date.
(2) The exercise price of an option may be paid in cash, by delivery of shares
of the Common Stock, by broker-assisted cashless exercise or by a
combination thereof, subject to certain conditions. To the extent that the
exercise price of an option is paid with shares of the Common Stock, the
optionee may be eligible for a reload option if he is still employed by the
Company at the time of exercise. The options granted on December 9, 1998 are
limited to one reload. A reload option is an option granted for the same
number of shares as is exchanged in payment of the exercise price and is
subject to all of the same terms and conditions as the original option
except for the exercise price, which is the fair market value of the Common
Stock on the date the reload option is granted.
(3) The options were granted for a term of 10 years, subject to earlier
termination upon occurrence of certain events related to termination of
employment or change of control of the Company.
15
<PAGE> 18
OPTION EXERCISES
Table 3 sets forth the number of shares of the Common Stock acquired upon
the exercise of options by the named executive officers during the fiscal year
ended December 31, 1998, including the aggregate value of gains on the date of
exercise. The table also sets forth (i) the number of shares covered by
unexercised options (both exercisable and unexercisable) as of December 31,
1998, and (ii) the respective values of "in-the-money" options, which represent
the positive spread between the exercise price of existing options and the fair
market value of the Common Stock at December 31, 1998, which was $23.50.
TABLE 3: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
FISCAL YEAR-END
---------------------------------------------------------
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
EXERCISES DURING YEAR OPTIONS IN-THE-MONEY OPTIONS
-------------------------- AT FISCAL YEAR-END AT FISCAL YEAR-END
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
L.L. Gellerstedt............ 0 $0 50,000 0 $53,125 $ 0
T.R. Carmody................ 0 0 33,000 0 216,500 0
R.G. Smith.................. 0 0 23,500 89,500 71,406 246,968
R.J. Wilson................. 0 0 2,000 20,000 7,375 49,250
J.H. Karr................... 0 0 1,750 19,250 6,453 46,484
C.R. Williams............... 0 0 0 29,000 0 51,500
</TABLE>
LONG-TERM INCENTIVE COMPENSATION
Table 4 sets forth information regarding the long-term incentive awards
granted to the named executive officers during the fiscal year ended December
31, 1998. Included in this information, in accordance with the rules and
regulations of the Commission, are the potential threshold, target and maximum
amounts of future payments under awards that are not based on the Company's
stock price.
TABLE 4: LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF OR OTHER ESTIMATED FUTURE PAYOUTS
SHARES, UNITS PERIOD UNTIL UNDER NON-STOCK PRICE-BASED PLANS
OR OTHER MATURATION OR -------------------------------------
NAME RIGHTS(#)(1) PAYOUT THRESHOLD($) TARGET($) MAXIMUM($)
- ---- ------------- ----------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
L.L. Gellerstedt(2)............ 0 -- $ 0 $ 0 $ 0
R.G. Smith..................... 70,000 1/1/99 - 12/31/00 14,000 70,000 175,000
1/1/99 - 21/31/01 14,000 70,000 175,000
R.J. Wilson.................... 35,000 1/1/99 - 12/31/00 7,000 35,000 87,500
1/1/99 - 12/31/01 7,000 35,000 87,500
J.H. Karr...................... 30,000 1/1/99 - 12/31/00 6,000 30,000 75,000
1/1/99 - 12/31/01 6,000 30,000 75,000
C.R. Williams.................. 35,000 1/1/99 - 12/31/00 7,000 35,000 87,500
1/1/99 - 12/31/01 7,000 35,000 87,500
</TABLE>
16
<PAGE> 19
- ---------------
(1) Payouts of awards for the 1999-2000 performance period and the 1999-2001
performance period are tied to achieving specified levels of economic profit
(as defined elsewhere in this proxy statement). The target amount will be
earned for each period if 100% of the targeted economic profit goal
established for that period is achieved. The threshold amount for each
period will be earned at the achievement of 87% of the targeted goals,
whereas the maximum awards will only be earned for achieving 127% of the
target performance goals.
(2) Mr. Gellerstedt did not receive long-term incentive awards in fiscal year
1998 other than those reported in Table 1: Summary Compensation Table and
Table 2: Option Grants in Last Fiscal Year, which were made to him under the
provisions of his offer of employment. After year-end, the Board of
Directors approved a separate long-term incentive arrangement for Mr.
Gellerstedt that is discussed in more detail in the Compensation and
Nominating Committee Report on Executive Compensation as well as in the
section covering Compensatory Plans and Arrangements.
COMPENSATORY PLANS AND ARRANGEMENTS
Set forth below is information regarding the Company's compensatory plans
and arrangements under which the named executive officers have vested rights to
receive future payments in an amount exceeding $100,000. Consistent with the
Company's pay-for-performance philosophy, the Company currently does not intend
to include any new participants under the Supplemental Retirement Income Plan.
Supplemental Retirement Income Plan. The Supplemental Retirement Income
Plan (the "SRIP") is a nonqualified plan established for the benefit of certain
executives that generally provides fixed monthly cash payments for life upon
retirement, with guaranteed payments to the participant or his beneficiary for a
minimum of 15 years. Annual payments generally are equal to 50% of the highest
annual compensation (base salary plus bonus) paid to a vested participant during
the last three years in which the participant received his annual salary prior
to reaching age 62, but amounts payable under the plan are subject to dollar
limits set by the Board of Directors for each participant.
Mr. Carmody, who retired on June 30, 1996, is entitled to and is receiving
benefits of $175,000 per year under the plan. Benefit payments of $43,750 under
the SRIP attributable to the period January 1, 1998 through March 30, 1998,
during which Mr. Carmody served as Interim President and Chief Executive Officer
of the Company are included in "Table 1: Summary Compensation Table." Expenses
incurred by the Company in fiscal 1998 for the benefit of Mr. Carmody were
$128,183. None of the other named executive officers participates in or has any
vested benefit under the SRIP.
Deferred Compensation Investment Plan (Executives). The Deferred
Compensation Investment Plan (Executives) is a nonqualified plan that permitted
certain executives to make a one-time election to defer a specified amount of
his 1985 annual compensation. The maximum annual amount of benefit payable to a
fully vested participant is specified in the participant's joiner agreement with
the Company but may be reduced due to certain adverse changes in federal income
tax provisions. A participant's vested benefit will never fall below the amount
of the deferral, plus interest compounded at an annual rate of 12%.
Mr. Carmody, who retired on June 30, 1996, is entitled to and is receiving
his maximum benefit of $55,800 per year under the plan. Benefits of $13,950
attributable to the period January 1, 1998 through March 30, 1998, during which
Mr. Carmody served as Interim President and Chief Executive Officer of the
Company are included in "Table 1: Summary Compensation Table." Expenses incurred
by the Company for
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<PAGE> 20
the benefit of Mr. Carmody in fiscal 1998 were $40,875. None of the other named
executive officers participates in or has any vested benefit under this plan.
EMPLOYMENT AND OTHER AGREEMENTS
Larry L. Gellerstedt, III. In its offer of employment to Mr. Gellerstedt,
the Company agreed to provide certain compensation and benefits to him, in
addition to certain signing incentives. The signing incentives are reported in
other portions of this proxy. In addition to establishing his base salary and a
minimum annual bonus for 1998, the Company agreed to develop a long-term
incentive program for Mr. Gellerstedt upon the acceptance of his strategic plan
for the Company. It was the Board's intent that this long-term incentive
arrangement would, over time, provide potential ownership opportunities for Mr.
Gellerstedt of up to two to two and one-half percent of the outstanding shares
of the Company. In addition, the Company agreed to provide certain perquisites
to Mr. Gellerstedt, including an automobile allowance. Mr. Gellerstedt is
eligible to participate in the Company's employee benefit plans pursuant to the
eligibility provisions of those plans. The salary and signing incentives
provided to Mr. Gellerstedt are more fully described in the "Compensation and
Nominating Committee Report -- Chief Executive Officer Compensation."
Also, pursuant to the offer letter, if the Company terminates Mr.
Gellerstedt's employment without cause (as defined in the offer letter) during
the first two years of his employment, or if Mr. Gellerstedt voluntarily
terminates during that period for good reason (as defined in the offer letter),
the Company would continue his base salary plus the amount of his most recent
bonus under the Bonus Plan and group health insurance for 12 months. Further, in
the event of his termination of employment by the Company (or his voluntary
termination for good reason) within two years following a change in control of
the Company, the Company will pay Mr. Gellerstedt three times the sum of his
base salary then in effect plus the amount of his most recent bonus under the
Bonus Plan and will continue his group health insurance coverage for 36 months.
Payments made to Mr. Gellerstedt under the change in control provisions will be
limited or reduced to avoid the imposition of the golden parachute excise taxes.
Prior to payment of any severance or change in control benefits, Mr. Gellerstedt
agrees to sign a restrictive covenant containing noncompete, nonsolicitation and
nondisclosure provisions to protect the Company for a period of one year
following his termination.
On February 25, 1999, the Company established the terms of Mr.
Gellerstedt's compensation for 1999 and the details of the long-term incentive
arrangement provided for in his offer of employment. For 1999, Mr. Gellerstedt's
base salary will remain at $450,000. He will participate in the Bonus Plan for
1999 (discussed in more detail in the Compensation Committee Report) on the same
basis as the Company's other senior executives, except that his annual target
award will be 65% of his base salary. Under the long-term incentive arrangement,
Mr. Gellerstedt was granted 232,000 stock options with an exercise price equal
to the fair market value of the Company's stock on the date of grant. These
options become exercisable in 25% increments on each of the first four
anniversaries of the grant and have a ten-year term. Mr. Gellerstedt also was
granted 131,000 shares of performance-based restricted stock that may vest in
part or in full, or may be forfeited, based on the Company's growth in earnings
per share over the next three years. The grants of stock options and
performance-based restricted stock were made under the terms of the Company's
1999 Incentive Compensation Plan, contingent on the approval by shareholders of
that plan, which is sought under Proposal 2 of this proxy statement.
The Company and Mr. Gellerstedt have entered into discussions concerning
the provisions of a formal employment agreement. It is the intention of both
parties to finalize this agreement in early 1999.
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<PAGE> 21
Thomas R. Carmody. Effective November 7, 1997, the Company entered into an
agreement with Thomas R. Carmody pursuant to which Mr. Carmody served as the
Company's Interim President and Chief Executive Officer until March 30, 1998,
the effective date of Mr. Gellerstedt's appointment as President and Chief
Executive Officer of the Company. In exchange for his service, Mr. Carmody
received a salary of $142,252 for the period from January 1, 1998 through March
30, 1998. Mr. Carmody was also paid regular nonemployee director fees for the
period from January 1, 1997 through May 8, 1998. See "Table 1: Summary
Compensation Table."
Richard G. Smith. The Company entered into an agreement with Richard G.
Smith, dated July 25, 1995, pursuant to which Mr. Smith serves as Vice President
and Chief Financial Officer of the Company, specifying the terms of his
employment. The Company also entered into a separation agreement with Mr. Smith
dated February 14, 1998, which superseded and revoked the separation provisions
in the July 25, 1995 agreement. The separation agreement provides that, upon the
involuntary termination of Mr. Smith's employment by the Company without cause
(as defined in the separation agreement) within five years following the date of
the separation agreement, the Company will pay Mr. Smith severance pay equal to
$18,333.33 a month for a period of 18 months. In addition, the separation
agreement provides that upon a termination without cause, the committee
administering the 1991 Stock Incentive Plan (or a successor plan) will
immediately accelerate the vesting of any outstanding stock options held by Mr.
Smith on the date of his termination and will extend the term of exercisability
of those options until 12 months following the date of his termination.
Raymond J. Wilson. The Company entered into an agreement with Raymond J.
Wilson, dated May 8, 1997, pursuant to which Mr. Wilson serves as Corporate
Controller of the Company. Under that agreement, Mr. Wilson is entitled to
participate in the Company's management bonus plan. Mr. Wilson is also entitled
to participate in the Company's stock option plan. If the Company terminates Mr.
Wilson's employment without cause, the Company must provide Mr. Wilson with nine
months of salary.
John H. Karr. The Company entered into an agreement with John H. Karr
dated June 26, 1997, pursuant to which Mr. Karr serves as Treasurer of the
Company. Under that agreement, Mr. Karr is entitled to participate in the
Company's management bonus plan. Mr. Karr is also entitled to participate in the
Company's stock option plan, and was provided a special payment of $25,000 to
defray the expense of relocation. That payment must be repaid on a prorated
basis if Mr. Karr's employment with the Company is terminated within 25 months
of July 15, 1997. If the Company terminates Mr. Karr's employment without cause,
the Company must provide Mr. Karr with nine months of salary, outplacement
services at a cost of not more than $15,000, and, at the Company's election,
either fully vest any Company contributions on Mr. Karr's behalf in the
Company's Profit Sharing Plan and Employee Savings Plan or provide an additional
severance amount equal to the amount of any unvested contributions.
Christopher R. Williams. The Company entered into an agreement with
Christopher R. Williams, dated March 24, 1998, pursuant to which Mr. Williams
serves as Chief Information Officer for the Company. Under that agreement, Mr.
Williams is guaranteed to receive a minimum bonus for fiscal year 1998 of 35
percent of his 1998 earned salary. In addition, the agreement provided that
management would recommend a grant of 5,000 stock options to Mr. Williams for
1998. If the Company terminates Mr. Williams' employment without cause, the
Company must provide him with nine months of base salary plus outplacement
services at a cost of $15,000.
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<PAGE> 22
COMPENSATION AND NOMINATING COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1998, the members of the
Compensation Committee were Messrs. Huie (Chairman), Ackerman, Harris and
Stokely, and Mr. Miller replaced Mr. Ackerman on January 1, 1999. None of them
is or has ever been an officer or employee of the Company. There were no
interlocking relationships between any executive officers of the Company and any
entity whose directors or executive officers served on the Company's
Compensation Committee. The arrangement pursuant to which payments were made to
Mr. Northrop for certain services rendered by him is described above in
"Director Compensation." None of the other members of the Compensation Committee
engaged in transactions or had relationships requiring disclosure under Item 404
of Regulation S-K in the fiscal year ended December 31, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The arrangement pursuant to which payments were made to Mr. Northrop for
certain services rendered by him is described above in "Director Compensation."
There were no other transactions or relationships requiring disclosure under
Item 404 of Regulation S-K for the fiscal year ended December 31, 1998.
COMPENSATION AND NOMINATING COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
This report by the Compensation Committee of the Board of Directors
discusses the strategy and objectives according to which the Compensation
Committee makes decisions about compensation for the Company's executive
officers. The Compensation Committee is composed entirely of independent,
nonemployee directors.
COMPENSATION STRATEGY AND OBJECTIVES
As part of its annual duties and particularly in conjunction with the
Company's selection and employment of a new Chief Executive Officer, the
Compensation Committee reviewed the overall executive compensation program. The
Compensation Committee's main focus in structuring the compensation program for
the Company's executive officers is to enhance shareholder value. The
Compensation Committee views the executive compensation program as one of the
key means by which this goal will be accomplished.
The underlying objectives of the program support the development of a
capable and highly-qualified senior executive team. As a starting point, the
Compensation Committee believes it is critical to have a compensation program
that enables the Company to attract and retain talented executives. For this
reason, the Compensation Committee has adopted a philosophy of providing target
annual cash compensation opportunities at the median of the comparison group,
and in order to more effectively emphasize long-term performance for 1999, by
providing target long-term incentive compensation opportunities at the 75th
percentile of the comparison group. This approach supports the Committee's
determination that a significant portion of total compensation should consist of
short-term and long-term incentive pay that will only be received if aggressive
business and financial results are achieved. Further, it is the Compensation
Committee's view that the interests of executives should be more closely aligned
with those of shareholders, and that providing stock-based compensation is an
appropriate means of reaching this objective.
To ensure that the overall executive program is competitive and supports
the objectives outlined, the Compensation Committee believes it is important to
consider pay levels and practices at the companies with
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<PAGE> 23
whom the Company competes for talented executives. Each year, the Compensation
Committee compares the components of the Company's executive pay program with
those in place at a group of companies that manufacture durable goods (both
within and outside the industry). Once the companies are identified for the
comparison group, the applicable information relative to those companies is
adjusted for size differentials. The Compensation Committee relies upon the
assistance of professional consultants in the preparation of the comparison
group information. The Compensation Committee believes this comparison group
represents the Company's competitors for hiring executives, and recognizes that
the executive talent market is broader than either its direct competitors or the
companies included in the stock performance graph peer group.
The three primary components of executive pay -- base salary, annual
incentive compensation and long-term incentive compensation -- are discussed in
more detail in the following sections of this report.
EXECUTIVE OFFICER COMPENSATION
Base Salaries. For both the 1998 and 1999 fiscal years, the Compensation
Committee targeted base salaries for executive officers at the 50th percentile
of pay levels for comparable positions at the companies in the comparison group.
The Compensation Committee determines base salaries for executive officers after
considering the recommendations of the Chief Executive Officer. The Compensation
Committee recommends a base salary for the Chief Executive Officer to the Board
of Directors for its approval.
Salary levels are based on market pay levels and other relevant factors,
such as the Company's performance and the individual executive's performance,
experience, responsibilities and contribution potential. Salary levels may vary
above or below the market pay levels when all these factors are considered,
based on the Compensation Committee's subjective assessment of the factors
listed above.
In December 1998, the Compensation Committee reviewed market salary levels
for executive officers. The results of that analysis showed that the salaries
paid for 1998 were somewhat below the Company's 50th percentile objective of
that comparison group. Based on this analysis, the Compensation Committee
approved the Chief Executive Officer's recommendations to increase base salaries
for selected executives for fiscal year 1999. After considering these increases,
base salaries for the executive officers as a whole should be closer to, but
remain slightly below, the market 50th percentile.
Short-Term Incentive Compensation. Under the Company's Annual Management
Incentive Bonus Plan (the "Bonus Plan"), the Company's executive officers and
other key employees have the opportunity to earn annual cash bonuses based on
the degree to which specified performance goals are met. The goals established
for this program are consistent with the Company's business objectives for the
year. In this manner, the Bonus Plan clearly and directly links executive pay to
performance results achieved.
Under the Bonus Plan for 1998, the specific performance goals for the
Company were recommended by the Chief Executive Officer and approved by the
Compensation Committee. For the Chief Executive Officer and the Chief Financial
Officer, earnings per share was the sole basis for any awards that could be
earned for the year. For other executive officers, awards were weighted 75% on
company financial performance (actual adjusted income before interest and taxes)
and 25% on individual objectives.
The Compensation Committee established performance measures at "threshold",
"target" and "maximum" performance levels for each performance measure. Once the
threshold goals are met, awards earned may range from 5% to 100% of base salary
for the Chief Executive Officer, from 5% to 80% of base salary for the Chief
Financial Officer, and from 5% to 70% of base salary for other executives, based
on how actual
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<PAGE> 24
results compare to the goals set. In addition, performance between designated
levels is recognized by straight-line interpolation.
In determining the results achieved for 1998, the Compensation Committee
concluded that income or expense items stemming from any unusual and significant
activities, or that resulted from business unit consolidations, should be
excluded for purposes of calculating bonuses. The Compensation Committee also
believed it would be in the best interests of the shareholders to set a
threshold corporate performance level below which no bonuses would be earned
(regardless of other corporate or individual performance). For 1998, the
Compensation Committee established this performance threshold at a 12% return on
shareholders' equity, calculated after considering any adjustments described
above.
Actual results for 1998 were slightly above target levels for the
performance measures. Based on this, bonuses earned based on financial
performance were paid at slightly above target levels. Bonuses paid for the
individual portion of awards varied by executive, with all but one achieving
results that earned payments for this portion of the award that were between
target and maximum levels. Bonuses earned by named executive officers under the
Bonus Plan of 1998 are disclosed in "Table 1: Summary Compensation Table."
Several executive officers hired during 1997 and 1998 negotiated guaranteed
minimum bonuses for the 1998 year as one of the terms of their employment.
Actual amounts earned by each of these executives under the Bonus Plan, based on
the Company's results for the year as well as their individual performance,
exceeded the guaranteed amounts.
In developing the provisions of the Bonus Plan for 1999, the Compensation
Committee determined to make certain changes to the program. Awards for 1999
performance will be based solely on corporate and/or operating company financial
results achieved, rather than having a portion based on individual performance.
The Compensation Committee believes this change will more closely link executive
rewards with the results achieved for shareholders, particularly for senior
executives whose responsibilities should be focused on meeting shareholder
expectations.
Performance measures for 1999 awards will include economic profit in
addition to continuing the prior focus on revenues and earnings per share. For
this purpose, economic profit is the excess of after tax income before financing
costs over the cost of the invested capital used to generate that income,
assuming a weighted average cost of capital of 10% after taxes. Minor
adjustments to income are made to reverse goodwill amortization and other
noncash expense. The term "invested capital" means total assets less excess
cash, intercompany notes receivable, certain deferred tax assets and
interest-free current liabilities, plus adjustments to include the value of
significant leased assets and to state goodwill at cost. The inclusion of the
economic profit measure is intended to help ensure that executives' actions are
directed towards increasing shareholder value in each business unit.
Threshold, target and maximum levels of performance measures will be
established. Based on the level of achievement of the performance measures,
participants may earn a threshold, target or maximum award, based on a
percentage of base salary or stated dollar amount. To enhance the overall
competitiveness of the program, target awards were increased so they approximate
the 50th percentile of the market for all executive officers. Finally, the
Compensation Committee determined that it would be appropriate to strengthen the
performance aspects of the plan. To do so, awards for 1999 may vary from 20% of
target awards when a threshold level of performance is achieved to a maximum
award of 250%, which can only be earned if aggressive business goals are met.
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<PAGE> 25
Long-Term Incentive Compensation. The Compensation Committee strongly
believes that a significant portion of executive pay should be provided through
longer-term incentive compensation that promotes stock ownership and aligns the
interests of executives with those of shareholders.
Historically, the long-term incentive compensation program for executive
officers has been based primarily on grants of stock options. As part of its
overall review of the executive compensation program, the Compensation Committee
approved changes in the long-term incentive portion of the program. To further
improve the competitiveness of the overall program, and to emphasize the
importance of achieving long-term results, the Compensation Committee approved
the setting of target long-term incentive award opportunities for executives at
the 75th percentile for comparable positions at the companies in the comparison
group, as discussed earlier in this report. In addition to granting stock
options in December 1998, the Compensation Committee approved a program to begin
in 1999 that provides for cash payments to participants based on the extent to
which specified goals for economic profit are met in three-year performance
periods. For this plan, the term "economic profit" has the same meaning as
described in the Bonus Plan for 1999 under "Short Term Incentive Compensation"
above.
This new program is intended to reinforce the Company's strategic goal of
increasing shareholder value. It will require Company and operating unit
executives to meet aggressive economic profit goals to earn rewards. Specific
performance levels -- at threshold, target and maximum -- will be set for the
Company as a whole and for individual business units. As under the short-term
incentive plan, payments are highly leveraged and may vary significantly based
on the degree to which the established performance goals are met. Threshold
level performance will result in awards at 20% of target, whereas maximum level
performance will yield awards that are equal to 250% of target. To phase in the
plan, two partial performance periods and one full period began on January 1,
1999. The partial periods cover one and two-year performance cycles, and the
full period covers a three-year time period. On an ongoing basis, a new
three-year performance period will begin each year.
To determine the number of options to grant to each participant and the
size of each participant's target long-term cash incentive award, the
Compensation Committee has established award size guidelines or targets that
vary by level of responsibility. Each year, the target annualized long-term
award opportunities generally will be more heavily weighted toward stock options
and less to cash performance awards, although this mix may change from year to
year at the Compensation Committee's discretion. Actual awards also may vary
somewhat based on the Compensation Committee's judgment as to individual
performance and overall Company success, among other factors.
In December 1998, the Compensation Committee granted stock options to
executive officers and other key employees as permitted under the 1991 Stock
Incentive Plan. This plan provides that the Compensation Committee may make
grants of incentive or nonqualified stock options to selected key employees. The
stock options granted have a term of ten years, and most become exercisable in
25% increments annually beginning on the first anniversary of the grant. Stock
options also were granted to selected named executives who were hired during
1998 pursuant to those executives' starting compensation packages. Stock options
granted to named executive officers during the fiscal year ended December 31,
1998 and year-end option values are reflected in "Executive
Compensation -- Table 2: Options Grants in Last Fiscal Year" and "Executive
Compensation -- Table 3: Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Values." The 1991 Stock Incentive Plan also permits the award of
restricted stock to key employees. No restricted stock grants were made to named
executive officers (other than the Chief Executive Officer, as discussed below)
during 1998.
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<PAGE> 26
CHIEF EXECUTIVE OFFICER COMPENSATION
Two individuals served in the Chief Executive Officer position for the
Company during 1998. As indicated in the Summary Compensation Table, Mr. Carmody
(a retired Chief Executive Officer of the Company) provided services as Interim
Chief Executive Officer until March 30, 1998. Mr. Carmody performed these
services at the specific request of the Board of Directors, and details of his
compensation for the period of service were negotiated between the Compensation
Committee and Mr. Carmody. See "Executive Compensation -- Employment and Other
Agreements."
Mr. Gellerstedt joined the Company as President and Chief Executive Officer
on March 30, 1998. Upon hire, the Compensation Committee agreed to pay Mr.
Gellerstedt an annual base salary of $400,000 (which increased to $450,000 in
May 1998 upon his election as Chairman of the Board of Directors) and a minimum
guaranteed short-term incentive payment of $100,000 for 1998. Mr. Gellerstedt's
package also included signing incentives in the form of (1) an award of 11,142
shares of restricted stock (with value of approximately $250,000 and which
became vested and transferable as of December 31, 1998), and (2) a grant of
50,000 stock options with an exercise price of $22.4375 which became immediately
exercisable and have a term of 10 years. The Compensation Committee believes the
signing incentives awarded to Mr. Gellerstedt were competitive with those being
offered to newly-hired chief executive officers in comparable situations.
In October 1998, before any amounts under the Company's Bonus Plan were
earned or calculable, Mr. Gellerstedt recommended to the Compensation Committee
that his bonus for 1998 be limited to $100,000 and that any excess over $100,000
that the Compensation Committee might otherwise have considered granting to him
under the Bonus Plan formula be used, at the discretion of the Compensation
Committee, for merit bonuses to other employees. The Compensation Committee, in
exercising its sole right to determine bonuses, honored Mr. Gellerstedt's
recommendation and set his 1998 bonus under the Plan at $100,000. At the end of
the performance period, the actual bonus formula resulted in an excess of
$135,000, which the Compensation Committee granted as discretionary bonuses (in
addition to any bonuses earned under the 1998 Bonus Plan) to selected executives
based on their efforts during 1998 and contributions to overall results that
were viewed as substantial. The bonuses paid to the named executive officers are
disclosed in "Table 1: Summary Compensation Table."
As part of his offer of employment, the Compensation Committee agreed to
develop a long-term incentive arrangement for Mr. Gellerstedt designed to
increase his ownership in the Company upon the Board of Directors' acceptance of
his strategic plan for the Company. Mr. Gellerstedt's strategic plan was
approved by the Board of Directors in late 1998. In recognition of this
accomplishment, the Committee and the Board established the elements of Mr.
Gellerstedt's 1999 compensation package, and developed a long-term arrangement
designed to increase his ownership in the Company. The details of his 1999
compensation, and his long-term incentive arrangement, are discussed in the
Employment and Other Agreements section of this proxy statement.
CODE SECTION 162(M) POLICY
It is the responsibility of the Compensation Committee to address issues
raised by Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). That section limits the Company's ability to deduct annual compensation
in excess of $1,000,000 paid to its chief executive officer and/or the next four
most highly compensated executives. Certain compensation that qualifies as
"performance-based" may be exempt from the Code Section 162(m) limit. It is the
Compensation Committee's intent to preserve the
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<PAGE> 27
maximum deductions for the Company; however, the Compensation Committee reserves
the right to authorize nondeductible compensation if it believes that it is in
the Company's best interest.
The Compensation Committee wishes to extend its sincere appreciation to F.
Duane Ackerman, who provided keen insight and significant knowledge in his
service on the Compensation Committee, particularly in the 1998 fiscal year. Mr.
Ackerman resigned from the Board of Directors as of December 31, 1998, due to
other commitments. Mr. Miller has been appointed to fill Mr. Ackerman's position
on the Compensation Committee.
W. Stell Huie (Chairman)
Hollis L. Harris
C. Douglas Miller
William B. Stokely, III
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STOCK PERFORMANCE GRAPH
The following line graph compares the cumulative total shareholder return
on the Common Stock of the Company with the cumulative total return of companies
in the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index")
and in a peer group index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, THE S&P 500 INDEX AND A PEER GROUP INDEX
<TABLE>
<CAPTION>
AMERICAN
MEASUREMENT PERIOD BUSINESS S&P 500
(FISCAL YEAR COVERED) PRODUCTS, INC. INDEX PEER GROUP
<S> <C> <C> <C>
12/31/93 $100.00 $100.00 $100.00
12/31/94 92.36 101.32 99.95
12/31/95 182.87 139.40 131.45
12/31/96 165.53 171.40 167.01
12/31/97 146.37 228.59 152.92
12/31/98 163.89 293.91 142.23
</TABLE>
Assumes $100 invested on December 31, 1993 in the Company's Common Stock,
the S&P 500 Index, and the peer group index and also assumes dividend
reinvestment. The peer group index is composed of the following companies: Ennis
Business Forms, Inc., Moore Corporation Limited, New England Business Service,
Inc., The Reynolds and Reynolds Company ("Reynolds"), The Standard Register
Company and Wallace Computer Services, Inc.
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<PAGE> 29
PROPOSAL 2 -- APPROVAL AND ADOPTION OF THE
AMERICAN BUSINESS PRODUCTS, INC. 1999 INCENTIVE COMPENSATION PLAN
GENERAL
In December 1998, the Company's Board of Directors adopted the American
Business Products, Inc. 1999 Incentive Compensation Plan (the "ICP") to become
effective as of February 15, 1999, subject to the approval of our shareholders
at the Annual Shareholder Meeting.
The ICP is designed to replace the Company's existing 1991 Stock Incentive
Plan and 1993 Directors Stock Incentive Plan. In order to avoid further
shareholder dilution, the Company is not seeking additional new shares for the
ICP, but instead any shares authorized under those plans, as well as any shares
authorized under the Company's prior 1981 Stock Option Plan, that remain
available for issuance will be "transferred" to the ICP. In addition, any shares
previously granted as options and/or restricted stock under those plans that
become available again due to forfeiture or cancellation of those rights will
also become available for issuance under the ICP.
The purpose of the ICP is to encourage and enable eligible employees and
nonemployee directors to obtain a proprietary interest in the Company by
acquiring the Common Stock. The Company believes that the ICP will provide
eligible employees and nonemployee directors with an added incentive to
stimulate their efforts in promoting the growth, efficiency and profitability of
the Company and its related companies and to encourage them to continue in the
employ of the Company and its related companies. The ICP may also help to
attract outstanding employees and outside directors to the service of the
Company and its related companies.
The ICP has been designed to permit the Compensation Committee to provide
"performance-based" compensation to the Company's key employees in various
forms. In its discretion, the Compensation Committee may make awards under the
ICP based on the performance measures or combination of performance measures
described in the ICP. It is the Company's intent that this type of
performance-based award be exempt from the provisions of Section 162(m) of the
Code, which limit the amount of the Company's deductions for compensation in
excess of $1,000,000 to each of the top five executive officers. Shareholder
approval of the ICP is necessary for these awards to be exempt from those
provisions.
The following is a brief summary of the principal features of the ICP.
TYPES OF AWARDS
The ICP provides for the following types of awards:
- stock options;
- restricted stock;
- performance shares; and
- performance-based cash awards.
Stock options granted under the ICP may be incentive stock options ("ISOs"),
nonqualified stock options ("NSOs") and reload options. The Company intends that
ISOs granted under the ICP qualify as incentive stock options under Section 422
of the Code. NSOs are stock options that do not qualify as ISOs. Restricted
stock is an award of shares, often subject to vesting or trading restrictions.
Performance shares are generally
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<PAGE> 30
phantom shares of stock, often subject to vesting restrictions.
Performance-based cash awards may be short-term or long-term incentive awards,
payable in cash. Stock options, restricted stock, performance shares and
performance-based cash awards are collectively referred to hereunder as
"Awards."
ADMINISTRATION
The Compensation Committee of the Company's Board of Directors (the
"Committee") will administer the ICP. The Committee will have full discretionary
authority to decide to whom and when to grant an Award, the type of Award
granted, the number of shares of the Common Stock covered by the Award and the
terms, conditions, performance criteria, restrictions and other provisions of
the Award. The Committee will decide whether and to what extent Awards to key
employees will be structured to conform with Code sec.162(m) requirements
applicable to performance-based compensation. The Committee will interpret the
provisions of the ICP, establish and rescind any rules and regulations relating
to the ICP, decide the terms and provisions of any agreements made under the ICP
and determine how to administer the ICP. All decisions of the Committee and its
actions with respect to the ICP are final, binding and conclusive.
SHARES AVAILABLE
Initially, the maximum number of shares that may be issued under the ICP
will be 609,076 shares of the Common Stock. This number has been reached by
consolidating the shares that currently remain available under the Company's
existing 1981 Stock Incentive Plan, 1991 Stock Incentive Plan, and 1993
Directors Stock Incentive Plan. Of this number, a maximum of 600,000 shares may
be issued as ISOs and a maximum of 400,000 shares may be issued as restricted
stock. The Board determined that no further grants or awards will be made under
the prior plans after February 14, 1999, and the remaining available stock under
those plans would be made available only under the new ICP, subject to
shareholder approval. If the shareholders should fail to approve this proposal,
the existing plans shall continue in operation. This use of existing available
stock does not create any additional dilution for the shareholders of the Common
Stock.
The number of shares available under the ICP will be adjusted by shares of
the Common Stock subject to Awards under the ICP that are forfeited, canceled or
expired without the issuance of the Common Stock, shares of the Common Stock
tendered to the Company in payment of the exercise price of a stock option
and/or in satisfaction of income tax or other withholding obligations under the
ICP or the three prior plans, shares of Common Stock subject to option grants
(but not restricted stock awards) under the prior plans that are forfeited,
canceled or expired without the issuance of Common Stock, and shares of Common
Stock, to the extent authorized by the Company's Board of Directors for purposes
of the ICP, repurchased by the Company in the open market or in a private
transaction.
As of the record date (March 1, 1999), the fair market value of the Common
Stock that would be subject to Awards under the ICP was $18.25 per share.
ELIGIBILITY
Key employees and nonemployee directors of the Company and its related
companies are eligible to participate in the ICP. As of the record date (March
1, 1999), approximately 80 key employees and 10 nonemployee directors were
eligible to participate in the ICP.
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STOCK OPTIONS
Grant and Transferability of Stock Options. Stock options granted under
the ICP represent rights to purchase shares of the Common Stock within a fixed
period of time and at a specified price per share (the "exercise price"). The
Committee is authorized in its sole discretion to grant ISOs, NSOs or both for
the purchase of the Company's Common Stock. Only key employees may receive ISOs.
Unless the Committee specifies otherwise, an optionee may transfer a stock
option only by will or by the laws of descent and distribution. A maximum of
500,000 shares may be granted as stock options to any individual during any one
calendar year.
Exercise Price. An optionee does not pay any consideration for the grant
of a stock option. The exercise price of each stock option will be the fair
market value of the Common Stock on the date of grant (110% of the fair market
value of the Common Stock for an ISO optionee who owns more than 10% of the
voting power of all classes of stock of either the Company or any "parent" or
"subsidiary" of the Company as defined in Code sec.424). For purposes of
granting stock options, the term "fair market value" shall mean the closing
price on the date of grant. Notwithstanding any other provision of the ICP other
than the provisions related to adjustments due to corporate transactions, the
exercise price of a stock option may not be changed after its date of grant,
either by amendment, replacement, cancellation, regrant or any other method
which would have the effect of a repricing of the stock option.
Exercise of Stock Options. Each stock option granted under the ICP may be
exercised on such dates, during such periods and for such number of shares as
may be determined by the Committee. The Committee will specify in a stock option
agreement the manner in which stock options will become exercisable, as well as
any conditions, restrictions and contingencies to which the stock option may be
subject. Such conditions, restrictions and contingencies may consist of a
requirement of continuous service and/or the satisfaction of one or more
performance goals. However, upon an optionee's death, disability, or retirement
after age 60, any outstanding stock option will become immediately exercisable
for the full number of shares subject to the stock option. In the event of a
change of control of the Company (as defined in the ICP), all stock options
become immediately exercisable for the full number of shares. In addition, the
Committee always has the power to accelerate the exercisability of any stock
option granted under the ICP.
Upon the exercise of a stock option, the optionee must pay the exercise
price of the stock option. The exercise price may be paid in cash, by the
transfer to the Company of unrestricted shares of the Common Stock previously
acquired by the optionee, by broker-assisted cashless exercise, by any
combination of the foregoing methods or by any other form of payment permitted
by the Committee. An optionee will first have ownership rights as a shareholder
of the Company only when the optionee has paid the exercise price of the stock
option in full and the shares have been issued to the optionee.
Expiration Date. Although the Committee will decide the term of each stock
option, the term may generally not exceed ten years from the date of grant (or
five years from the date of grant for an ISO optionee who owns more than 10% of
the voting power of all classes of stock of either the Company or any "parent"
or "subsidiary" of the Company as defined in Code sec.424). The expiration date
of any stock option is the earliest to occur of:
- the tenth anniversary of the date of grant;
- the date three months following the date of the optionee's termination of
employment with the Company and all of its related companies for any
reason other than dismissal for cause, death, disability or retirement
after age 60;
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- the two-year anniversary of the optionee's termination of employment with
the Company and its related companies due to death, disability or
retirement after age 60; or
- the date of the optionee's termination of employment with the Company and
all of its related companies due to dismissal for cause (as defined in
the ICP).
If all or part of an ISO is not exercised within three months of the optionee's
termination of employment for any reason other than death or disability, to the
extent the option remains exercisable, the unexercised portion thereof will be
treated as an NSO. If all or part of an ISO is not exercised within one year
following the optionee's termination of employment due to death or disability,
to the extent the option remains exercisable, the unexercised portion thereof
will be treated as an NSO. The Committee at all times retains the authority to
extend the expiration date of a stock option as long as the extended expiration
date is not later than the tenth anniversary of the date of grant.
Reload Options. Unless the Committee specifies otherwise, each stock
option will be accompanied by one reload option. Reload options may be granted
only to individuals who are actively employed by the Company or a related
company at the time the grant is to be made. A reload option is a stock option
that is granted to an optionee who pays for all or part of a stock option with
shares of the Common Stock. A reload option is subject to all of the same terms
and conditions as the original stock option, except that the exercise price for
the reload option will be the fair market value of the Common Stock as of the
date of grant of such reload option.
RESTRICTED STOCK
The Committee may award restricted stock to key employees and nonemployee
directors in its discretion. Unless otherwise specified by the Committee,
restricted stock will generally become vested on the fourth anniversary of the
date of the Award. The Committee will specify in a restriction agreement the
manner in which restricted stock will vest and become nonforfeitable, as well as
any conditions, restrictions and contingencies to which the restricted stock may
be subject. Such conditions, restrictions and contingencies may consist of a
requirement of continuous service and/or the satisfaction of one or more
performance goals. A recipient of restricted stock will have immediate rights of
ownership in the shares of restricted stock, including the right to vote the
shares and the right to receive dividends with respect to the shares. However,
unless otherwise specified by the Committee, a recipient may not transfer shares
of restricted stock while such shares are still subject to restriction. Any
individual may not receive more than 250,000 shares of restricted stock in any
one calendar year.
Awards of restricted stock that remain subject to time-based vesting
schedules at the time of a recipient's death, disability or retirement after age
60 or upon a change in control of the Company (as defined in the ICP) will
become immediately vested and nonforfeitable. Awards of restricted stock that
remain subject to any other type of vesting schedule (such as satisfaction of
certain performance requirements) will become proportionately vested and
nonforfeitable, based on the portion of the performance period completed with
target level performance being deemed achieved as of the date of the recipient's
death, disability, or retirement after age 60, or the date of a change in
control of the Company (as defined in the ICP). If an Award does not have a
designated target level of performance, the performance level which, if met,
would result in the vesting of the lowest number of shares will be considered
the target level. If a recipient of a restricted stock Award terminates
employment for any reason other than death, disability or retirement after age
60, then any Awards of restricted stock that remain subject to restriction will
be forfeited. The Committee will always have the right to accelerate the vesting
of any restricted stock awarded under the ICP.
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The Committee will make Awards of restricted stock to nonemployee directors
of the Company in accordance with the following formula: upon initial election
to the Board of Directors, 200 shares; as of the first day of each year for
which the director is reelected or continues to serve as a director, 100 shares;
and as of the date of the annual shareholders meeting which follows an employee
director's retirement and continuance as a director, 200 shares. A nonemployee
director may not receive more than a total of 2,000 shares. The restricted stock
granted to nonemployee directors will not vest until the first anniversary of
the date of the Award, but the vesting will accelerate upon a director's
becoming disabled, reaching age 70 and retiring from the Board of Directors,
dying or ceasing to serve on the Board of Directors for any reason or upon a
change in control of the Company (as defined in the ICP). These provisions
related to nonemployee directors are a continuation of the provisions of the
1993 Directors Stock Incentive Plan, which previously was approved by the
shareholders.
PERFORMANCE SHARES
The Committee may award performance shares to key employees and nonemployee
directors in its sole discretion. A performance share is the right, subject to
such conditions, restrictions and contingencies as the Committee determines and
specifies in the performance share agreement, to receive one share of the Common
Stock in the future. When the Committee awards a performance share, it will
establish a bookkeeping account for the recipient to reflect the number of
performance shares awarded to the recipient. On each date that a dividend is
distributed by the Company on the Common Stock, the recipient's performance
share account will be credited with an additional whole or fractional number of
performance shares. The number of additional performance shares to be credited
will be determined by dividing the product of the dividend value times the
number of performance shares standing in the recipient's account on the dividend
record date by the fair market value of the Common Stock on the date of dividend
distribution. Any individual may not receive an Award of more than 250,000
shares of performance shares in any one calendar year.
The Committee will specify in a performance share agreement the manner in
which performance shares will vest and become nonforfeitable, as well as any
conditions, restrictions and contingencies to which the performance shares may
be subject. Such conditions, restrictions and contingencies may consist of a
requirement of continuous service and/or the satisfaction of one or more
performance goals. Unless otherwise specified by the Committee, a recipient may
not transfer performance shares, and all performance shares will be forfeited as
of the date of the optionee's termination of employment for any reason. When
performance shares vest, the participant will receive the same number of shares
of the Common Stock as the number of performance shares standing in the
participant's account.
Awards of performance shares that remain subject to any type of vesting
schedule (such as satisfaction of certain performance requirements) will become
proportionately vested and nonforfeitable, based on the portion of the
performance period completed with target level performance being deemed achieved
as of the date of the recipient's death, disability, or retirement after age 60
or the date of a change in control of the Company (as defined in the ICP). If an
Award does not have a designated target level of performance, the performance
level which, if met, would result in the vesting of the lowest number of shares
will be considered the target level. If a recipient of a performance share Award
terminates employment for any reason other than death, disability or retirement
after age 60, then any Awards of performance shares that remain subject to
restriction will be forfeited. The Committee will always have the right to
accelerate the vesting of any restricted stock awarded under the ICP.
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PERFORMANCE-BASED CASH AWARDS
The Committee may award performance-based cash awards to key employees and
nonemployee directors in its sole discretion. A performance-based cash award is
the right, subject to such conditions, restrictions and contingencies as the
Committee determines and specifies in the cash award agreement, to receive a
specified amount (or possible range of amounts) of cash in the future. An
individual may not receive payment (determined at the end of the applicable
performance period) of more than $2,500,000 in performance-based cash awards in
any one calendar year.
The Committee will specify in a performance-based cash award agreement (or
other documents communicating the award to the recipient) the performance
requirements, the time period on which the performance will be measured, and any
other conditions, restrictions and contingencies on the award. Conditions,
restrictions and contingencies may consist of a requirement of continuous
service and any other requirements as may be specified by the Committee. The
conditions may be based on short-term or long-term performance periods. A
recipient may not transfer performance-based cash awards.
In the event of a recipient's death, disability or retirement after age 60,
any Awards of performance-based cash awards that remain subject to any type of
vesting schedule (such as satisfaction of certain performance requirements), but
the performance period for which ends during the year, may become
proportionately vested and nonforfeitable, based on the portion of the
performance period completed, but only if performance measures have been met, as
measured at the end of the performance period. If a performance-based cash award
remains subject to a restriction, but the performance period for that Award does
not end during the year of the recipient's death, disability or retirement after
age 60, then such Award will be forfeited. Upon a change in control of the
Company (as defined in the ICP), any performance-based cash Awards that remain
subject to any type of vesting schedule (such as satisfaction of certain
performance requirements) but the performance period for which ends during the
year, will become proportionately vested and nonforfeitable, based on the
portion of the performance period completed with target level performance being
deemed achieved as of the date of the change in control of the Company. If an
Award does not have a designated target level of performance, the performance
level which, if met, would result in the vesting of the lowest cash amount will
be considered the target level. If a performance-based cash award remains
subject to a restriction upon a change in control, but the performance period
for that Award does not end during the year of the change in control, then such
Award will be forfeited. If a recipient of a performance-based cash Award
terminates employment for any reason other than death, disability or retirement
after age 60, then any performance-based cash Awards that remain subject to
restriction will be forfeited. The Committee will always have the right to
accelerate the vesting of any performance-based cash award under the ICP.
Within a reasonable period following the completion of the performance
period, the participant will receive a single sum cash payment of any
performance-based cash award earned for that period.
PERFORMANCE MEASURES.
It is the Company's intent that Awards made under the ICP may be structured
to comply with the "performance-based" compensation provisions of Code Section
162(m), at the Committee's discretion. Therefore, amounts payable with respect
to grants of options and/or awards of restricted stock, performance shares or
performance-based cash awards may be determined based on the attainment of
written performance goals approved by the Committee for a performance period
established by the Committee no more than 90 days after the commencement of the
performance period or, if less, the number of days which is equal to 25% of the
relevant performance period.
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The performance goals, which must be objective, will be based upon one or
more of the following performance measures: (i) earnings per share; (ii)
consolidated earnings before or after interest, taxes, depreciation and/or
amortization; (iii) net operating profit before or after interest, taxes,
depreciation and/or amortization; (iv) net operating income; (v) book value per
share; (vi) return on shareholders' equity; (vii) return on assets; (viii)
return on capital; (ix) capital structure; (x) profitability of an identifiable
business unit or product; (xi) maintenance or improvement of profit margins;
(xii) stock price; (xiii) market share; (xiv) gross or net revenues or sales;
(xv) costs; (xvi) cash flow; (xvii) working capital; (xviii) gross or net
profit; (xix) expense management; or (xx) economic profit. The foregoing
criteria may relate to the Company, one or more of its subsidiaries, one or more
of its divisions or units or any combination of the foregoing and may be applied
on an absolute basis, growth or decline basis, or be relative to one or more
peer group companies or indices, or any combination thereof, all as the
Committee determines. To the degree consistent with Code sec.162(m), the
performance goals may be calculated without regard to extraordinary items.
If the Committee elects to subject Awards to restrictions based on
performance measures, the ICP and Awards made under the ICP will meet the Code
sec.162(m) requirements for the exemption of performance-based compensation. If
at any time the membership of the Committee does not meet the requirements for
Code sec.162(m) compliance, a subcommittee may be formed to make certain
determinations and take actions on behalf of the Committee in order to meet the
requirements for compliance. Any payment of compensation with respect to an
Award which is intended to be performance-based compensation will be subject to
the written certification of the Committee that the performance measures were
satisfied. Shareholder approval of the ICP is necessary for the Awards to meet
the Code sec.162(m) exemption.
TERMINATION AND AMENDMENT
Generally, the ICP will remain in effect for ten years; however, the Board
of Directors may terminate or amend the ICP at any earlier time. The ICP will
remain in effect as long as any awards are outstanding. If the Board amends the
ICP, the amendment will not adversely affect the rights of individuals who have
outstanding awards unless such individuals agree to such amendment. The
Committee may amend any agreement under the ICP if the amended agreement is
signed by the Company and the applicable participant.
ADJUSTMENTS
If the Company is involved in a corporate transaction (including but not
limited to any recapitalization, reclassification, merger, consolidation,
split-up, spin-off, or combination/exchange of shares) which constitutes a
change in control of the Company under the ICP, then the Committee will make an
appropriate and equitable adjustment to the number and kind of shares that are
issuable under the ICP, will take action to adjust the number and kind of shares
of Stock subject to outstanding Awards, will take action to adjust the exercise
price of outstanding stock options, and will make any other equitable
adjustments.
Additionally, if the Company is involved in a corporate transaction which
does not constitute a change in control under the ICP, but which requires
shareholder approval, the Committee may make certain decisions regarding the
stock to which outstanding Awards pertain, the number of resulting Awards, and
the vesting and/or exercisability of the Awards.
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FEDERAL INCOME TAX CONSEQUENCES
The following is a brief general description of the consequences under the
Code of the receipt or exercise of awards under the ICP:
Incentive Stock Options. An optionee has no tax consequences upon grant
or, generally, upon exercise of an ISO. An optionee will recognize income when
he or she sells or exchanges the shares acquired upon exercise of an ISO. This
income will be taxed at the applicable capital gains rate if the sale or
exchange occurs after the expiration of the requisite holding periods.
Generally, the requisite holding periods expire two years after the date of
grant of the ISO and one year after the date of acquisition of the Common Stock
pursuant to the exercise of the ISO.
If an optionee disposes of the Common Stock acquired pursuant to exercise
of an ISO before the expiration of the requisite holding periods, the optionee
will recognize compensation income in an amount equal to the difference between
the exercise price and the lesser of (i) the fair market value of the shares on
the date of exercise and (ii) the price at which the shares are sold. This
amount will be taxed at ordinary income rates. If the sale price of the shares
is greater than the fair market value on the date of exercise, the difference
will be recognized as gain by the optionee and taxed at the applicable capital
gains rate. If the sale price of the shares is less than the exercise price, the
optionee will recognize a capital loss equal to the excess of the exercise price
over the sale price.
An optionee may have tax consequences upon exercise of an ISO if the
aggregate fair market value of shares of the Common Stock subject to ISOs which
first become exercisable by an optionee in any one calendar year exceeds
$100,000. If this occurs, the excess shares will be treated as though they are
subject to an NSO instead of an ISO. Upon exercise of an option with respect to
these shares, the optionee will have the tax consequences described below with
respect to the exercise of NSOs.
Finally, except to the extent that an optionee has recognized income with
respect to the exercise of an ISO (as described in the preceding paragraphs),
the amount by which the fair market value of a share of the Common Stock at the
time of exercise of the ISO exceeds the exercise price will be included in
determining an optionee's alternative minimum taxable income, and may cause the
optionee to incur an alternative minimum tax liability in the year of exercise.
There will be no tax consequences to the Company upon issuance or,
generally, upon exercise of an ISO. However, to the extent that an optionee
recognizes ordinary income upon exercise, as described above, the Company
generally will have a deduction in the same amount.
Nonqualified Stock Options. Neither the Company nor the optionee has
income tax consequences from the grant of NSOs. Generally, in the tax year when
an optionee exercises NSOs, the optionee recognizes ordinary income in the
amount by which the fair market value of the shares at the time of exercise
exceeds the exercise price for such shares. The Company generally will have a
deduction in the same amount as the ordinary income recognized by the optionee
in the Company's tax year in which or with which the optionee's tax year (of
exercise) ends.
Restricted Stock. A holder of restricted stock will recognize income upon
its receipt, but generally only to the extent that it is not subject to a
substantial risk of forfeiture. If the restricted stock is subject to
restrictions that lapse over a period of time, so that the holder becomes vested
in a portion of the shares as the restrictions lapse, the holder will recognize
income in any tax year only with respect to the shares that become
nonforfeitable during that year. The income recognized will be equal to the fair
market value of those shares, determined as of the time that the restrictions on
those shares lapse. That income generally will be taxable at
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ordinary income tax rates. The Company generally will be entitled to a deduction
in an amount equal to the amount of ordinary income recognized by the holder of
the restricted stock.
A holder of restricted stock may elect instead to recognize ordinary income
for the taxable year in which he or she receives an award of restricted stock in
an amount equal to the fair market value of all shares of restricted stock
awarded to him or her (even if the shares are subject to forfeiture). That
income will be taxable at ordinary income tax rates. Any such election must be
made within 30 days after the transfer of the restricted stock to the holder. At
the time of disposition of the shares, a holder who has made such an election
will recognize gain in an amount equal to the difference between the sales price
and the fair market value of the shares at the time of the award. Such gain will
be taxable at the applicable capital gains rate. The Company will generally be
entitled to a deduction in an amount equal to the amount of ordinary income
recognized by the holder at the time of his election.
Performance Shares. A recipient of performance shares will not recognize
income upon grant of the performance shares, as long as they are subject to a
substantial risk of forfeiture. If the performance shares are subject to
restrictions that lapse in increments over a period of time, so that the holder
becomes vested in a portion of the shares as the restrictions lapse, the holder
will recognize income in any tax year only with respect to the shares that
become nonforfeitable (and for which shares of the Common Stock are issued)
during that year. The income recognized will be equal to the fair market value
of the shares issued as determined at the time of share issuance. That income
generally will be taxable at ordinary income tax rates. The Company generally
will be entitled to a deduction in an amount equal to the amount of ordinary
income recognized by the holder of the performance shares.
Performance-Based Cash Awards. A recipient of a performance-based cash
award will not have any tax consequences upon grant of the award. At the close
of the performance period, payments under performance-based cash awards under
the ICP are made in cash. Therefore, the recipient will receive ordinary income
in the amount of the payment in the year in which the cash is paid.
Code Section 162(m) Limitation on Company Deductions. No federal income
tax deduction is allowed for compensation paid to a "covered employee" in any
taxable year of the Company to the extent that such compensation exceeds
$1,000,000. For this purpose, "covered employees" are generally the chief
executive officer of the Company and the four next most highly compensated
officers of the Company, and the term "compensation" generally includes gross
income, including taxable amounts resulting from the exercise of stock options
or stock appreciation rights or the receipt of restricted stock. This deduction
limitation does not apply to compensation that is (1) commission-based
compensation, (2) performance-based compensation, (3) compensation which would
not be includable in an employee's gross income, and (4) compensation payable
under a written binding contract in existence on February 17, 1993, and not
materially modified thereafter.
ERISA. The ICP is not, and is not intended to be, an employee benefit plan
or tax-qualified retirement plan. The ICP is not, therefore, subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Code
Section 401(a).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE PROPOSAL TO APPROVE AND ADOPT THE 1999 INCENTIVE COMPENSATION PLAN.
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SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the Commission thereunder require the Company's executive
officers and directors and persons who own more than ten percent of the
Company's Common Stock, as well as certain affiliates of such persons, to file
initial reports of ownership and changes in ownership with the Commission and
the Exchange. Executive officers, directors and persons owning more than ten
percent of the Company's Common Stock are required by Commission regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such reports received by it and written
representations from the reporting persons that no other reports were required
for those persons, to the Company's knowledge, during and with respect to the
fiscal year ended December 31, 1998, all filing requirements applicable to its
executive officers, directors, and beneficial owners of more than ten percent of
the Company's Common Stock were complied with in a timely manner, except that
Mr. William B. Stokely, III, Director, filed a Form 4 with the Commission on
March 10, 1998, which was due on February 10, 1998, reporting the purchase of
1,000 shares of the Common Stock on January 27, 1998.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals and director nominations intended to be presented at
the 2000 Annual Meeting of Shareholders of the Company must be submitted to the
Company in accordance with the procedures set forth in Article II, Section 1 and
Article III, Section 2, respectively, of the Bylaws of the Company. The effect
of these provisions is that shareholders must submit such proposals and
nominations in writing to the Company on or before December 1, 1999 in order for
such matters to be included in the Company's proxy materials for, and voted upon
at, the 2000 Annual Meeting. All such proposals and nominations should be
submitted on or before such date by certified mail, return receipt requested, to
the Secretary of the Company at 2100 RiverEdge Parkway, Suite 1200, Atlanta,
Georgia 30328.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company knows of no matters other than those
referred to in the accompanying Notice of Annual Meeting of Shareholders which
properly may come before the Annual Meeting. However, if any other matter should
be presented properly for consideration and voting at the Annual Meeting or any
adjournments thereof, it is the intention of the persons named as proxies on the
enclosed proxy card(s) to vote the shares represented by all valid proxy cards
in accordance with their judgment of what is in the best interests of the
Company.
By Order of the Board of Directors
/s/ JOHN H. KARR
John H. Karr
Treasurer and Assistant Secretary
Atlanta, Georgia
March 31, 1999
---------------------
The Company's 1998 Annual Report, which includes audited financial
statements, has been mailed to shareholders of the Company with these proxy
materials. The Annual Report does not form any part of the material for the
solicitation of proxies.
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ABSCM PROX98
<PAGE> 40
Appendix
AMERICAN BUSINESS PRODUCTS, INC.
1999 INCENTIVE COMPENSATION PLAN
<PAGE> 41
AMERICAN BUSINESS PRODUCTS, INC.
1999 INCENTIVE COMPENSATION PLAN
SECTION 1
PLAN INFORMATION
1.1 Purpose. American Business Products, Inc. (the "Company") has
established the American Business Products, Inc. 1999 Incentive Compensation
Plan (the "ICP") to further the growth and development of the Company. The ICP
encourages the employees and nonemployee directors of the Company and its
Related Companies to obtain a proprietary interest in the Company by owning its
stock. The ICP shall also provide employees and nonemployee directors with an
added incentive to stimulate their efforts in promoting the growth, efficiency
and profitability of the Company and its Related Companies and may also help to
attract outstanding employees and nonemployee directors to the service of the
Company and its Related Companies. Further, the ICP may encourage employees and
nonemployee directors to continue in the employ or service of the Company or a
Related Company.
1.2 Awards Available Under the ICP. The ICP permits Awards of Stock
Options, Restricted Stock, Performance Shares and Performance-Based Cash Awards.
The types of Stock Options permitted under the ICP are incentive stock options
("ISOs"), nonqualified stock options ("NSOs") and Reload Options. The Company
intends that ISOs granted under the ICP qualify as incentive stock options under
Code ss.422. NSOs are options that do not qualify as ISOs and are subject to
taxation under Code ss.83. Awards of Restricted Stock and/or Performance Shares
are subject to taxation under Code ss.83. Awards of Performance-Based Cash
Awards are subject to ordinary income taxation under Code ss.61.
1.3 Effective Date and Term of the ICP. The Board of Directors of the
Company adopted the ICP at its meeting on December 9, 1998, to become effective
as of February 15, 1999 ("the Effective Date"), contingent upon the approval of
the shareholders of the Company at the May 5, 1999 annual shareholders meeting.
Unless earlier terminated by the Company, the ICP shall remain in effect until
the tenth anniversary of the date the shareholders approve the ICP. If the ICP
is terminated earlier, then it shall remain in effect as long as any Awards are
outstanding.
1.4 Operation, Administration and Definitions. The operation and
administration of the ICP is subject to the provisions of this plan document.
Capitalized terms used in the ICP are defined in Section 2 below or may be
defined within the ICP.
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SECTION 2
PLAN DEFINITIONS
For purposes of the ICP, the terms listed below are defined as follows:
2.1 "1933 Act" means the Securities Act of 1933, as amended.
2.2 "1934 Act" means the Securities Exchange Act of 1934, as amended.
2.3 "Agreement" means a Stock Option Agreement, a Restricted Stock
Agreement, a Performance Share Agreement or a Performance-Based Cash Award
Agreement, as applicable, the terms and conditions of which have been
established by the Committee, and which has been entered into between the
Company and an individual Key Employee or Nonemployee Director of the Company.
2.4 "Award" means any award or benefit granted to any Participant under
the ICP, including, without limitation, the grant of Stock Options and the award
of Restricted Stock, Performance Shares and/or Performance-Based Cash Awards.
2.5 "Board" means the Board of Directors of the Company.
2.6 "Cause" means
(a) willful and continued failure to substantially perform his
duties with the Company within seven (7) days after a written demand
for substantial performance is delivered to the Key Employee which
identifies the manner in which the Company believes that the Key
Employee has not substantially performed his duties;
(b) unlawful or willful misconduct which is economically injurious
to the Company or to any entity in control of, controlled by or under
common control with the Company (and its successors);
(c) indictment for, conviction of, or plea of guilty or nolo
contendere to a felony; or
(d) habitual drug or alcohol abuse which impairs the Key Employee's
ability to perform the essential duties of his position.
2.7 "Change in Control" means:
(a) For purposes of the Plan, a "Change in Control" shall mean the
occurrence of any one of the following events (for purposes of this
subsection, the terms with an initial capital letter shall have the
meanings set forth in subsection (b) hereof unless otherwise defined in
the ICP):
(i) The acquisition by a Person, together with Affiliates and
Associates of such Person, whether by purchase, tender offer,
exchange, reclassification,
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recapitalization, merger or otherwise, of a sufficient number of shares
of Common Stock or Common Stock Equivalents to constitute the Person an
Acquiring Person; or
(ii) The acquisition by a Person (other than the
Curtis Investment Company, LLC), together with Affiliates and
Associates of such Person, of a number of shares of Common Stock (but
not less than 20 percent of the shares of Common Stock) equal to or
greater than the number of shares of Common Stock held by any Person
who or who together with all Affiliates and Associates of such Person,
is the Beneficial Owner of 30 percent or more of the shares of Common
Stock as of the effective date of the ICP; or
(iii) During any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
cease for any reason to constitute at least a majority thereof, unless
the election of each director who was not a director at the beginning
of such period has been approved in advance by a majority of the
Continuing Directors then in office; or
(iv) Any merger or consolidation the result of which
is that less than 70 percent of the common stock, Voting Securities or
other equity interests of the surviving or resulting corporation or
other Person shall be owned in the aggregate by the former shareholders
of the Company, other than Affiliates or Associates of any party to
such merger or consolidation, as the same shall have existed
immediately prior to such merger or consolidation; or
(v) The sale by the Company, in one transaction or a
series of related transactions, whether in liquidation, dissolution or
otherwise, of assets or earning power aggregating more than 50 percent
of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons.
(b) The following definitions shall apply in determining
when a Change in Control has occurred:
(i) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person,
shall become the Beneficial Owner of 30 percent or more of the shares
of Common Stock then outstanding, but shall not include the Company,
any Subsidiary of the Company, or any Person who or which, together
with all Affiliates and Associates of such Person, is the Beneficial
Owner of 30 percent or more of the shares of Common Stock as of the
effective date of the ICP, any employee benefit plan of the Company or
of any Subsidiary of the Company [if approved by a majority of the
Continuing Directors], or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such
plan.
(ii) "Affiliate" shall have the meaning ascribed to
such term in Rule 12b-2 of the General Rules and Regulations under the
1934 Act, as in effect on the effective date of the ICP.
(iii) "Associate" shall mean:
(A) Any corporation or organization, or parent
or subsidiary of
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such corporation or organization, of which a Person is an
officer, director or partner or is, directly or indirectly,
the Beneficial Owner of 10 percent or more of any class of
equity securities;
(B) Any trust or other estate in which a
Person has a beneficial interest of 10 percent or more or as
to which such Person serves as trustee or in a similar
fiduciary capacity; and
(C) Any brother or sister (whether by whole
or half blood), ancestor, lineal descendant or spouse of a
Person, or any such relative of such spouse.
(iv) "Beneficial Owner" shall mean, with respect to
any securities, any Person who, together with such Person's Affiliates
and Associates, directly or indirectly:
(A) Has the right to acquire such securities
(whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, a Person shall not be deemed
the Beneficial Owner of, or to Beneficially Own:
(1) Securities acquired by
participation in good faith in a firm commitment
underwriting by a Person engaged in business as an
underwriter of securities until the expiration of 40
days after the date of such acquisition; or
(2) Securities tendered pursuant to
a tender or exchange offer made by such Person or any
of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or
exchange; or
(3) Securities issuable upon
exercise of rights issued to all shareholders
generally, which rights are only exercisable upon
separation from the Common Stock, or securities
issuable upon exercise of rights that have separated
from the Common Stock upon the occurrence of events
specified in a rights agreement between the Company
and a rights agent;
(B) Has the right to vote or dispose of or
has Beneficial Ownership (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the 1934 Act) of
such securities, including pursuant to any agreement,
arrangement or understanding, whether or not in writing;
provided, a Person shall not be deemed the Beneficial Owner
of, or to Beneficially Own, any security under this
subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement,
arrangement or understanding:
(1) Arises solely from a revocable
proxy given in response to a public proxy or consent
solicitation made pursuant to, and in
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accordance with, the applicable provisions of the
General Rules and Regulations under the 1934 Act; and
(2) Is not also then reportable by
such Person on Schedule 13D under the 1934 Act (or
any comparable or successor report); or
(C) With respect to any securities which are
Beneficially Owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof), has any
agreement, arrangement or understanding (whether or not in
writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described herein or
disposing of any voting securities of the Company.
(vi) "Common Stock Equivalents" shall mean preferred
stock or other equity securities of the Company having the right to be
converted by the holders thereof into shares of Common Stock, or having
the right to vote generally for the election of directors and on other
matters. For purposes of determining the total amount of Common Stock
and Common Stock Equivalents owned by any Person, such Common Stock
Equivalents shall be equal to the number of shares into which they may
be converted by the holders thereof, or in the case of securities that
are not convertible having the right to vote, shall be equal to the
number of votes they are entitled to cast in elections for directors.
(vii) "Continuing Director" shall mean:
(A) Any member of the Board who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or a representative of an Acquiring Person or of any
such Affiliate or Associate, and was a member of the Board
prior to the effective date of the ICP; or
(B) Any Person who subsequently becomes a
member of the Board who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate
or Associate, if such Person's nomination for election or
election to the Board is recommended or approved by a majority
of the Continuing Directors.
(viii) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(ix) "Subsidiary" shall mean any corporation,
partnership, joint venture, trust or other entity more than 50 percent
of the Voting Securities of which are Beneficially Owned, directly or
indirectly, by a Person.
(x) "Voting Securities" shall mean any class of then
outstanding shares of stock or other beneficial interests entitled to
vote in election of directors or other Persons charged with management
of a Person.
2.7 "Code" means the Internal Revenue Code of 1986, as amended. A
reference to
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<PAGE> 46
any provision of the Code includes reference to any successor provision of the
Code.
2.8 "Committee" means the Compensation and Nominating Committee of the
Board of Directors of the Company.
2.9 "Common Stock" means the common stock, $2.00 par value per share,
of the Company.
2.10 "Company" means American Business Products, Inc.
2.11 "Disability" means a Participant's eligibility to receive
long-term disability benefits under a plan sponsored by the Company or one of
its Related Companies, or if no such plan is applicable, a Participant's
inability to engage in the essential functions of his or her duties due to a
medically-determinable physical or mental impairment, illness or injury, which
can be expected to result in death or to be of long-continued and indefinite
duration.
2.12 "Effective Date" means February 15, 1999, subject to shareholder
approval.
2.13 "Exercise Price" means the purchase price of the shares of Common
Stock underlying a Stock Option.
2.14 "Fair Market Value" means, as of any date of determination, the
closing sale price per share of the Common Stock as published in the Eastern
Edition of The Wall Street Journal report on the New York Stock Exchange
Composite Transactions (or other established exchange on which the Common Stock
is listed).
2.15 "ICP" means this American Business Products, Inc. 1999 Incentive
Compensation Plan.
2.16 "Incentive Stock Option" or "ISO" means an incentive stock option
within the meaning of Code ss.422.
2.17 "Key Employee" means any common law key employee of the Company or
a Related Company who is actively employed at the time Awards are made. However,
only employees of the Company and any "parent" or "subsidiary" of the Company
(as those terms are defined in Code ss.424) are eligible to receive ISOs.
2.18 "Nonemployee Director" means any individual serving as a member of
the Board of Directors of the Company or any of its Related Companies.
2.19 "Nonqualified Stock Option" or "NSO" means an option which is not
an incentive stock option within the meaning of Code ss.422(b).
2.20 "Optionee" means a Key Employee or Nonemployee Director who is
granted a Stock Option.
2.21 "Participant" means an Optionee or a Recipient.
2.22 "Performance-Based Cash Award" means an award of the right,
subject to such conditions, restrictions and contingencies as the Committee
determines, including specifically the
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satisfaction of specified Performance Measures, to receive a cash payment.
2.23 "Performance-Based Cash Award Agreement" means a written agreement
or other document signed and dated by the Committee (or its designee) and a
Recipient that specifies the terms and conditions of an Award of a
Performance-Based Cash Award.
2.24 "Performance Measures" means any one or more of the criteria or
measurements by which specific performance goals may be established and
performance may be measured, as determined by the Committee in its discretion,
pursuant to the provisions of Section 5.2.
2.25 "Performance Share" means an award of the right, subject to such
conditions, restrictions and contingencies as the Committee determines,
including specifically the satisfaction of specified Performance Measures, to
receive one share of Common Stock in the future.
2.26 "Performance Share Agreement" means a written agreement signed and
dated by the Committee (or its designee) and a Recipient that specifies the
terms and conditions of an Award of Performance Shares.
2.27 "Pricing Date" means the date on which a Stock Option is granted.
However, the Committee may specify as the Pricing Date in the Option Agreement
of an NSO the date on which the Optionee is hired or promoted (or some similar
event).
2.28 "Recipient" means a Key Employee or Nonemployee Director who is
awarded Restricted Stock, Performance Shares or Performance-Based Cash Awards.
2.29 "Related Company" means any member within the Company's controlled
group of corporations, as that term is defined in Code ss.1563(a), in addition
to any partnerships, joint ventures, limited liability companies, limited
liability partnerships or other entities in which the Company owns more than a
50 percent interest.
2.30 "Reload Option" means a Stock Option granted to an active employee
who is an Optionee who exercises a previously-held Stock Option by tendering
Common Stock for part or all of the Exercise Price or withholding amounts,
pursuant to the provisions of the ICP.
2.31 "Reporting Person" means a Key Employee or Nonemployee Director
who is subject to the reporting requirements of Section 16 of the 1934 Act.
2.32 "Restricted Stock" means an Award of Common Stock subject to such
conditions, restrictions and contingencies as the Committee determines,
including the satisfaction of specified Performance Measures.
2.33 "Restricted Stock Agreement" means a written agreement signed and
dated by the Committee (or its designee) and a Recipient that specifies the
terms and conditions of an Award of Restricted Stock.
2.34 "Stock Option" means an ISO, NSO or Reload Option, as applicable,
granted to a Key Employee or Nonemployee Director, as applicable, under the ICP.
2.35 "Stock Option Agreement" means a written agreement signed and
dated by the Committee (or its designee) and an Optionee that specifies the
terms and conditions of a Stock Option or Reload Option.
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SECTION 3
PLAN ADMINISTRATION
3.1 Administration. The Compensation Committee of the Board of
Directors of the Company (the "Committee") shall control and manage the
operation and administration of the ICP.
(a) The Committee may make one or more Awards under the ICP to
a Key Employee or a Nonemployee Director, who shall become a
Participant in the ICP. In addition, the Committee may make one or more
Awards under the ICP to an individual who has accepted an offer of
employment from the Company but who has not yet become a Key Employee,
providing that the Committee shall designate appropriate restrictions
on such Awards in the event the individual does not actually become a
Key Employee. The Committee shall decide to whom and when to grant an
Award, the type of Award that it shall grant and the number of shares
of Common Stock covered by the Award. The Committee shall also decide
the terms, conditions, performance criteria, restrictions and other
provisions of the Award. The Committee may grant a single Award or an
Award in combination with another Award(s) to a Participant. The
Committee may grant an Award as an alternate to or replacement of an
existing award under the ICP or under any other compensation plan or
arrangement of the Company or a Related Company, including a plan of
any entity acquired by the Company or a Related Company, but the
Committee may not increase or decrease the exercise price of any
existing Awards. In making Award decisions, the Committee may take into
account the nature of services rendered by the individual, the
individual's present and potential contribution to the Company's
success and such other factors as the Committee, in its sole
discretion, deems relevant.
(b) The Committee shall decide whether and to what extent
Awards under the ICP shall be structured to conform with Code ss.162(m)
requirements for the exemption applicable to performance-based
compensation. The Committee may take any action, establish any
procedures and impose any restrictions that it finds necessary or
appropriate to conform with Code ss.162(m). If every member of the
Committee does not meet the definition of "outside director" as defined
in Code ss.162(m), the Committee shall form a subcommittee of those
members who do meet that definition, and that subcommittee shall have
all authority and discretion to act as the Committee to make Awards
that conform with Code ss.162(m).
(c) The Committee shall interpret the ICP, establish and
rescind any rules and regulations relating to the ICP, decide the terms
and provisions of any Agreements made under the ICP, and determine how
to administer the ICP. The Committee shall also decide administrative
methods for the exercise of Stock Options. Each Committee decision
shall be final, conclusive and binding on all parties.
(d) The Committee shall act by a majority of its then members,
at a meeting of
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the Committee or by unanimous written consent. The Committee shall keep
adequate records concerning the ICP and the Committee's proceedings and
acts in such form and detail as the Committee may decide.
3.2 Delegation by Committee. Unless prohibited by applicable law or the
applicable rules of a stock exchange, the Committee may allocate all or some of
its responsibilities and powers to any one or more of its members. The Committee
may also delegate all or some of its responsibilities and powers to any person
or persons it selects. The Committee may revoke any such allocation or
delegation at any time.
3.3 Information to be Furnished to Committee. So that the Committee may
discharge its duties, it may require the Company, its Related Companies,
Participants and other persons entitled to benefits under the Plan to provide it
with certain data and information.
3.4 Indemnification. In addition to such other rights of
indemnification that they have as members of the Board or the Committee, the
Company shall indemnify the members of the Committee (and any designees of the
Committee, as permitted under Section 3.2), to the extent permitted by
applicable law, against reasonable expenses (including, without limitation,
attorney's fees) actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the ICP or any Award awarded
hereunder, and against all amounts paid by them in settlement thereof (provided
such settlement is approved to the extent required by and in the manner provided
by the articles of incorporation or the bylaws of the Company relating to
indemnification of the members of the Board) or paid by them in satisfaction of
a judgment in any such action, suit or proceeding, except in relation to such
matters as to which it is adjudged in such action, suit or proceeding that such
Committee member or members (or their designees) did not act in good faith and
in a manner reasonably believed to be in or not opposed to the best interests of
the Company.
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 Stock Subject to Awards.
Stock subject to Awards and other provisions of the ICP shall consist
of the following:
(a) authorized but unissued shares of Common Stock;
(b) shares of Common Stock held by the Company in its treasury; or
(c) shares of Common Stock purchased by the Company in the open
market.
4.2 Shares of Common Stock Subject to Awards.
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Subject to adjustment in accordance with the provisions of Section 7,
the maximum number of shares of Common Stock that may be issued under the ICP
shall equal the sum of:
(a) 609,076 shares of Common Stock, which represents the remaining
available shares under the American Business Products, Inc. 1981 Stock
Option Plan (the "1981 Plan"), the American Business Products, Inc.
1991 Stock Incentive Plan (the "1991 Plan") and the American Business
Products, Inc. 1993 Directors Stock Incentive Plan (the "Directors
Plan"), as of the Effective Date;
(b) the number of shares of Common Stock subject to Options and
Performance Shares awarded under the ICP which are forfeited, canceled
or expired without the issuance of Common Stock;
(c) the number of shares of previously-held Common Stock tendered
to the Company in payment of the Exercise Price and/or in satisfaction
of income tax or other withholding obligations under the ICP, the 1981
Plan, the 1991 Plan or the Directors Plan, other than Common Stock
tendered by any Reporting Person;
(d) the number of shares of Common Stock subject to option grants
(but not restricted stock awards) under the 1981 Plan, the 1991 Plan
and the Directors Plan which are forfeited, canceled or expired without
the issuance of Common Stock; and
(e) the number of shares of Common Stock, to the extent authorized
by the Board for purposes of the ICP, which are repurchased by the
Company in the open market or in a private transaction after the
Effective Date.
4.3 Maximum Number of Shares for Certain Types of Awards. Unless
increased by amendment to the ICP and approved by the shareholders of the
Company, the maximum number of shares that may be issued under ISOs is 600,000
shares and the maximum number of shares that may be issued as Restricted Stock
is 400,000 under the provisions of the ICP.
SECTION 5
PERFORMANCE-BASED COMPENSATION
5.1 Awards of Performance-Based Compensation. At its discretion, the
Committee may make Awards to Participants intended to comply with the
"performance-based" compensation provisions of Code Section 162(m). Therefore,
the number of option shares vesting or becoming transferable or amounts payable
with respect to grants of Stock Options, awards of Restricted Stock, Performance
Shares and/or Performance-Based Cash Awards may be determined based on the
attainment of written performance goals approved by the Committee for a
performance period. The performance goal shall state, in terms of an objective
formula or standard, the method of computing the amount of compensation payable
to the Participant if the goal is attained. The performance goals must be
established by the Committee in writing no more than 90 days after the
commencement of the performance period or, if less, the number of
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days which is equal to 25% of the relevant performance period. Performance goals
will be based on the attainment of one or more Performance Measures. To the
degree consistent with Code ss.162(m), the performance goals may be calculated
without regard to extraordinary items.
5.2 Performance Measures. The Performance Measures, upon which the
written performance goals shall be based, include one or more (or combinations)
of the following: (i) earnings per share; (ii) consolidated earnings before or
after interest, taxes, depreciation and/or amortization, (iii) net operating
profit before or after interest, taxes, depreciation and/or amortization, (iv)
net operating income, (v) book value per share, (vi) return on shareholders'
equity, (vii) return on assets, (viii) return on capital, (ix) capital
structure, (x) profitability of an identifiable business unit or product, (xi)
maintenance or improvement of profit margins, (xii) stock price, (xiii) market
share, (xiv) gross or net revenues or sales, (xv) costs, (xvi) cash flow, (xvii)
working capital, (xviii) gross or net profit, (xix) expense management or (xx)
economic profit. The foregoing Performance Measures may relate to the Company,
one or more of its subsidiaries, one or more of its divisions or units or any
combination of the foregoing and may be applied on an absolute basis, growth or
decline basis, or be relative to one or more peer group companies or indices, or
any combination thereof, all as the Committee determines. To the degree
consistent with Code ss.162(m), the performance goals may be calculated without
regard to extraordinary items.
5.3 Shareholder Approval. For Awards to constitute performance-based
compensation under Code ss.162(m), the material terms of Performance Measures on
which the performance goals are to be based must be disclosed to and
subsequently approved by the Company's shareholders prior to payment of the
compensation. Shareholder approval of the ICP is necessary for the Awards to
meet the Code ss.162(m) exemption.
5.4 Code ss.162(m) Committee and Committee Certification. Awards
intended to qualify for exemption as performance-based compensation shall be
granted by a committee of "outside directors" as defined in Code ss.162(m).
Pursuant to the provisions of Section 3.1(b) hereof, the Committee may establish
a Code ss.162(m) subcommittee, if necessary, to make such grants. Any payment of
compensation with respect to an Award which is intended to be performance-based
compensation will be subject to the written certification of the Code ss.162(m)
Committee that the Performance Measures were satisfied prior to the payment of
the performance-based compensation. This written certification may include the
approved minutes of the Committee meeting in which the certification is made.
SECTION 6
STOCK OPTIONS
6.1 Stock Option Agreement. When the Committee grants a Stock Option
hereunder, it shall prepare (or cause to be prepared) a Stock Option Agreement
that specifies the following terms:
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(a) the name of the Optionee;
(b) the total number of shares of Common Stock to which the
Stock Option pertains;
(c) the Exercise Price of the Stock Option;
(d) the date as of which the Committee granted the Stock
Option;
(e) the type of Stock Option granted;
(f) the requirements for the Stock Option to become
exercisable, such as continuous service, time-based schedule, period
and goals for Performance Measures to be satisfied, etc.; and
(g) whether Reload Options are available with respect to the
Stock Option and if so, any limitations on the granting of or number of
successive Reload Options that may be granted with regard to the Stock
Option and any Reload Options under the Stock Option.
6.2 Maximum Award Per Year. Subject to readjustment pursuant to Section
10.1 of the ICP, the maximum number of shares that may be awarded under Stock
Options to any individual during any one calendar year is 500,000 shares.
6.3 Exercise Price.
(a) Unless the Committee determines to grant a Stock Option at
a higher Exercise Price, the Exercise Price of each Stock Option shall
be 100% of the Fair Market Value of a share of Common Stock as of the
Pricing Date (110% of the Fair Market Value of a share of Common Stock
as of the Pricing Date for an ISO optionee who owns more than ten
percent of the voting power of all classes of stock of either the
Company or any "parent" or "subsidiary" of the Company as defined in
Code ss.424).
(b) Notwithstanding any other provision of the ICP to the
contrary (other than the provisions of Section 10.1 relating to
adjustments due to certain corporate transactions), (i) the Exercise
Price of a Stock Option may not be changed subsequent to the date of
grant of the Stock Option, and (ii) a Stock Option may not be replaced,
regranted or substituted subsequent to the date of grant if such action
shall have the effect of a "repricing" of the Stock Option.
6.4 Exercisability.
(a) General Schedule. Unless the Committee specifies otherwise
in the Stock Option Agreement, each Stock Option shall become
exercisable according to the following schedule:
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
AS OF THE FOLLOWING ANNIVERSARY OF THE THE STOCK OPTION SHALL BECOME
STOCK OPTION'S DATE OF GRANT: EXERCISABLE IN THE FOLLOWING PERCENTAGES:
- --------------------------------------------------------------------------------------------------
<S> <C>
One-year anniversary 25%
Two-year anniversary 25%
Three-year anniversary 25%
Four-year anniversary 25%
</TABLE>
Before the one-year anniversary of the date of grant, no part of the
Stock Option is exercisable. Once a portion of a Stock Option is
exercisable, that portion continues to be exercisable until the Stock
Option expires (as described in Section 6.5 hereof).
(b) Other Vesting Requirements. The Committee may impose any
other conditions, restrictions and contingencies on awards of Stock
Options. Such conditions, restrictions and contingencies may consist of
a requirement of continuous service and/or the satisfaction of
specified Performance Measures. The Committee may designate a single
goal criterion or multiple goal criteria for performance measurement
purposes.
(c) Accelerated Exercisability. The Committee shall always
have the power to accelerate the exercisability of any Stock Option
granted under the ICP. In the event of one of the following events, any
outstanding Stock Options shall immediately become fully exercisable
and shall remain exercisable until the expiration date of the Stock
Option (as described in Section 6.5 hereof):
(i) the Optionee's death;
(ii) the Optionee's Disability;
(iii) the Optionee's retirement after attainment of
age 60; or
(iv) a Change of Control of the Company.
6.5 Expiration Date.
(a) Latest Expiration Date. Unless the Committee specifies
otherwise in the Stock Option Agreement, subject to section (b) below,
the term of a Stock Option granted under the ICP begins on the date of
grant and ends ten years after the date of grant (or five years from
the date of grant for an ISO optionee who owns more than ten percent of
the voting power of all classes of stock of either the Company or any
"parent" or "subsidiary" of the Company as defined in Code ss.424).
(b) Accelerated Expiration Date. Unless the Committee
specifies otherwise in the Stock Option Agreement, the Expiration Date
of any Stock Option shall be the earliest to occur of the following:
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(i) The date ten years from the date of grant of
the Stock Option;
(ii) The date three (3) months following the date
of the Optionee's termination of employment
with the Company and all Related Companies
for any reason other than death, Disability,
retirement after attainment of age 60 or
discharge for Cause;
(iii) The date of the Optionee's termination of
employment with the Company and all Related
Companies due to discharge for Cause;
(iv) The two-year anniversary of the Optionee's
termination of employment with the Company
and all Related Companies due to death;
(v) The two-year anniversary of the Optionee's
termination of employment with the Company
and all Related Companies due to Disability;
or
(vi) The two-year anniversary of the Optionee's
termination of employment with the Company
and all Related Companies due to retirement
after attainment of age 60.
If all or part of an ISO is not exercised within three (3)
months after the date of the Optionee's termination of
employment for any reason except death and disability, but
remains exercisable, the unexercised portion thereof shall
automatically be treated as an NSO for the remainder of the
term of the Option. Similarly, if all or part of an ISO is not
exercised within one (1) year after the date of the Optionee's
termination of employment due to death or disability, but
remains exercisable, the unexercised portion thereof shall
automatically be treated as an NSO for the remainder of the
term of the Option.
The Committee shall always have the authority and discretion to extend
the Expiration Date of any Stock Option as long as the extended
Expiration Date is not later than the tenth anniversary of the date of
grant. To the extent the Committee extends the Expiration Date of an
ISO beyond any legal period for ISO tax treatment, the ISO shall
automatically convert to a NSO for the remainder of the extended
exercise period.
6.6 Minimum Exercise Amount. Unless the Committee specifies otherwise
in the Stock Option Agreement, an Optionee may exercise a Stock Option for less
than the full number of shares of Common Stock subject to the Stock Option.
However, such exercise may not be made for less than 100 shares or the total
remaining shares subject to the Stock Option. The Committee may in its
discretion specify other Stock Option terms, including restrictions on frequency
of exercise and periods during which Stock Options may not be exercised.
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6.7 Payment of Exercise Price. The Optionee must pay the full Exercise
Price for shares of Common Stock purchased upon the exercise of any Stock Option
at the time of such exercise by one of the following forms of payment:
(a) cash;
(b) by tendering previously-held shares of Common Stock which
have a value equal to the Exercise Price at the time of exercise. The
Optionee must have held the tendered shares of Common Stock for at
least six months prior to their tender. The Optionee may tender shares
of Common Stock either by attestation or by the delivery of a
certificate or certificates for shares duly endorsed for transfer to
the Company with medallion level signature guarantee by a member firm
of a national stock exchange, by a national or state bank, or by the
Company's credit union (or guaranteed or notarized in such other manner
as the Committee may require);
(c) broker-assisted cashless exercise; or
(d) any combination of the above forms or any other form of
payment permitted by the Committee.
6.8 Reload Options. Unless otherwise designated by the Committee in the
applicable Stock Option Agreement, each Stock Option shall be subject to one
Reload Option. The Committee may specify any limitations that shall apply to the
granting of the Reload Option. If it so desires, the Committee may permit
multiple, successive Reload Options for a Stock Option, and may designate such
in the Stock Option Agreement. Notwithstanding the terms of any Stock Option
Agreement, the Committee shall grant Reload Options only to Participants who are
actively employed in good standing by the Company or a Related Company at the
time the grant of the Reload Option is to be made. If the Committee has
designated a Stock Option as having an accompanying Reload Option, the Committee
shall grant a Reload Option for the same number of shares as is tendered by the
Optionee in payment of the Exercise Price and/or tax or other withholding
obligations upon exercise of the Stock Option. The Reload Option shall have the
same terms and conditions as the related original Stock Option, including the
expiration date of the original Stock Option, except that (i) the Exercise Price
for a Reload Option shall be the Fair Market Value of the Common Stock as of the
date of grant of such Reload Option, and (ii) the Reload Option shall become
fully exercisable six months after its date of grant.
6.9 Transferability. Unless the Committee specifies otherwise in the
Stock Option Agreement, an Optionee may transfer Stock Options under the ICP
only by the laws of descent and distribution. After the death of an Optionee,
only the executor or administrator of the Optionee's estate may exercise an
outstanding Stock Option.
6.10 Rights as a Shareholder. An Optionee shall first have rights as a
shareholder of the Company with respect to shares of Common Stock covered by a
Stock Option only when the Optionee has paid the Exercise Price in full and the
shares have been issued to the Optionee.
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SECTION 7
RESTRICTED STOCK
7.1 Restricted Stock Agreement. When the Committee awards Restricted
Stock hereunder, it shall prepare (or cause to be prepared) a Restricted Stock
Agreement that specifies the following terms:
(a) the name of the Recipient;
(b) the total number of shares of Common Stock to which the
Award of Restricted Stock pertains;
(c) a description of any restrictions applicable to the
Restricted Stock; and
(d) the date as of which the Committee awarded the Restricted
Stock.
7.2 Maximum Award Per Year. Subject to readjustment pursuant to Section
10.1 of the ICP, the maximum number of shares that may be awarded as Restricted
Stock to any individual during any one calendar year is 250,000 shares.
7.3 Vesting. Unless the Committee specifies in the Restricted Stock
Agreement that an alternative vesting schedule shall apply, that other vesting
requirements shall apply or that no vesting requirements shall apply, an Award
of Restricted Stock shall become vested and nonforfeitable on the fourth
anniversary of the date of grant, and before the fourth anniversary of the date
of the Award, no portion of the Restricted Stock shall be vested.
7.4 Other Vesting Requirements. The Committee may impose any other
conditions, restrictions and contingencies on awards of Restricted Stock. Such
conditions, restrictions and contingencies may consist of a requirement of
continuous service and/or the satisfaction of specified Performance Measures.
The Committee may designate a single goal criterion or multiple goal criteria
for performance measurement purposes.
7.5 Accelerated Vesting. The Committee shall always have the right to
accelerate vesting of any Restricted Stock awarded under this ICP.
(a) In the event of one of the following events, any
outstanding Awards of Restricted Stock which remain subject to vesting
requirements shall immediately become vested pursuant to the provisions
of subsection (b) hereof:
(i) the Recipient's death;
(ii) the Recipient's Disability;
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(iii) the Recipient's retirement after attainment
of age 60; or
(iv) a Change in Control of the Company.
(b) If an outstanding Award of Restricted Stock remains
subject only to a time-based vesting schedule (i.e., one that requires
only that the Recipient remain employed for the passage of a specified
time period), then such Award shall immediately become fully vested and
nonforfeitable upon one of the events in subsection (a) above. If an
outstanding Award of Restricted Stock remains subject to any other type
of vesting schedule or requirement (e.g., a performance-based
schedule), then upon one of the events in subsection (a) above, a
proportion of the shares subject to such Award shall become vested and
nonforfeitable, equal to the proportion of the time completed through
the date of the applicable event to the performance measurement period
for the Award, with target performance level deemed to be achieved as
of the date of the applicable event. In the event an Award was
originally scheduled without a designated target performance level
(e.g., a single performance level or minimum and maximum performance
levels), then the performance level that, if met, would have resulted
in the least number of shares becoming vested shall be treated as the
target level.
7.6 Termination of Employment. Unless the Committee decides otherwise,
all shares of Restricted Stock which remain subject to restriction upon the
Recipient's termination of employment for any reason other than the events
listed in Section 7.5(a) shall lapse and be forfeited by the Recipient.
7.7 Formula Awards to Nonemployee Directors. Each Nonemployee Director
shall receive an Award of Restricted Stock, according to the following terms and
conditions:
(a) Number of Shares. Shares of Restricted Stock shall be
awarded to the Nonemployee Directors according to the following
formula:
(i) As of the date of his initial election to
the Board, each Nonemployee Director shall
be awarded 200 shares of Restricted Stock;
(ii) As of the date of the annual shareholders
meeting which follows an employee director's
retirement after age 60 as an employee of
the Company and continuance of his role as a
Nonemployee Director, such Nonemployee
Director shall be awarded 200 shares of
Restricted Stock; and
(iii) As of the date of the annual shareholders
meeting at the beginning of each year for
which a Nonemployee Director is reelected or
continues to serve as a director of the
Company, the Nonemployee Director shall be
awarded 100 shares of Restricted Stock.
(b) Limitation on Awards under Formula. Each Nonemployee
Director shall
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receive no more than a total of 2,000 shares of Restricted Stock under
the formula provisions of this Section 7.6 of the ICP and under the
Company's 1993 Directors Stock Incentive Plan (which has been replaced
by the ICP).
(c) Vesting of Formula Awards. Any shares of Restricted Stock
awarded to a Nonemployee Director under the provisions of this Section
7.6 shall become vested and nonforfeitable on the earlier of: (A) the
first anniversary of the date of the Award; (B) the date on which the
Board determines, on the basis of medical evidence, that the
Nonemployee Director has become totally and permanently disabled; (C)
the date the Nonemployee Director has attained age 70 and retired from
service on the Board; (D) the date of death of the Nonemployee
Director; (E) the date the Nonemployee Director ceases to serve on the
Board for any reason; or (F) a Change in Control of the Company.
7.8 Delivery of Restricted Stock.
(a) Issuance. The Company shall issue the shares of Restricted
Stock within a reasonable period of time after execution of the
Restricted Stock Agreement; provided, if any law or regulation requires
the Company to take any action (including, but not limited to, the
filing of a registration statement under the 1933 Act and causing such
registration statement to become effective) with respect to such shares
before the issuance thereof, then the date of delivery of the shares
shall be extended for the period necessary to take such action.
(b) Legend. Unless the certificate representing shares of the
Restricted Stock are deposited with a custodian (as described in
subparagraph (c) hereof), each certificate shall bear the following
legend (in addition to any other legend required by law):
"The transferability of this certificate and the
shares represented hereby are subject to the
restrictions, terms and conditions (including
forfeiture and restrictions against transfer)
contained in the American Business Products, Inc.
1999 Incentive Compensation Plan and a Restricted
Stock Agreement dated __________, ____, between
________________ and American Business Products, Inc.
The Plan and the Restriction Agreement are on file in
the office of the Corporate Secretary of American
Business Products, Inc."
Such legend shall be removed or canceled from any
certificate evidencing shares of Restricted Stock as
of the date that such shares become nonforfeitable.
(c) As an alternative to delivering a stock certificate to the
Recipient, the Committee may deposit or transfer such shares
electronically to a custodian designated by the Committee. The
Committee shall cause the custodian to issue a receipt for the shares
to the Recipient for any Restricted Stock so deposited. The custodian
shall hold the shares and deliver the same to the Recipient in whose
name the Restricted Stock evidenced thereby are registered only after
such shares become nonforfeitable.
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7.9 Transferability. Unless the Committee specifies otherwise in the
Restricted Stock Agreement, a Recipient may not sell, exchange, transfer,
pledge, hypothecate or otherwise dispose of shares of Restricted Stock awarded
under this ICP while such shares are still subject to restriction.
7.10 Effect of Restricted Stock Award. A Recipient of Restricted Stock
shall have immediate rights of ownership in the shares of Restricted Stock,
including the right to vote the shares and the right to receive dividends with
respect to the shares.
SECTION 8
PERFORMANCE SHARES
8.1 Performance Share Agreement. When the Committee awards Performance
Shares hereunder, the Committee shall prepare (or cause to be prepared) a
Performance Share Agreement that specifies the following terms:
(a) the name of the Recipient;
(b) the total number of Performance Shares awarded;
(c) the period over which performance is to be measured;
(d) the Performance Measures upon satisfaction of which the
Performance Shares are to become vested and nonforfeitable; and
(e) the date as of which the Committee awarded the Performance
Shares.
8.2 Maximum Award Per Year. Subject to readjustment pursuant to Section
10.1 of the ICP, the maximum number of shares that may be awarded as Performance
Shares to any individual during any one calendar year is 250,000 shares.
8.3 Performance Share Account. When the Committee awards Performance
Shares hereunder, the Company shall establish a bookkeeping account for the
Recipient which shall accurately reflect the number of Performance Shares
awarded to the Recipient.
8.4 Dividends. On each date on which a dividend is distributed by the
Company on shares of Common Stock (whether paid in cash, Common Stock or other
property), the Recipient's Performance Share account shall be credited with an
additional whole or fractional number of Performance Shares. The number of
additional Performance Shares to be credited shall be determined by dividing the
product of the dividend value times the number of Performance Shares standing in
the Recipient's account on the dividend record date by the Fair Market Value of
the Common Stock on the date of the distribution of the dividend (i.e., dividend
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amount x number of whole and fractional Performance Shares as of the dividend
record date/Fair Market Value of Common Stock as of dividend distribution
date). Accounts shall be maintained and determinations shall be calculated to
three decimal places.
8.5 Vesting. The Committee shall specify in the Performance Share
Agreement the manner in which Performance Shares shall vest and become
nonforfeitable, as well as any conditions, restrictions and contingencies to
which the Performance Shares are subject. Such conditions, restrictions and
contingencies may consist of a requirement of continuous service and the
satisfaction of specified Performance Measures. The Committee may designate a
single goal criterion or multiple goal criteria for performance measurement
purposes.
8.6 Accelerated Vesting. The Committee shall always have the right to
accelerate vesting of any Performance Shares awarded under this ICP.
(a) In the event of one of the following events, any
outstanding Awards of Performance Shares which remain subject to
vesting requirements shall immediately become vested pursuant to the
provisions of subsection (b) hereof:
(i) the Recipient's death;
(ii) the Recipient's Disability;
(iii) the Recipient's retirement after attainment of
age 60; or
(iv) a Change in Control of the Company.
(b) If an outstanding Award of Performance Shares remains
subject to performance criteria, then upon one of the events in
subsection (a) above, a proportion of the shares subject to such Award
shall become vested and nonforfeitable, equal to the proportion of the
time completed through the date of the applicable event to the
performance measurement period for the Award, with target performance
level deemed to be achieved as of the date of the applicable event. In
the event an Award was originally scheduled without a designated target
performance level (e.g., a single performance level or minimum and
maximum performance levels), then the performance level that, if met,
would have resulted in the least number of shares becoming vested shall
be treated as the target level.
8.7 Termination of Employment. Unless the Committee decides otherwise,
all shares of Performance Shares which remain subject to restriction upon the
Recipient's termination of employment for any reason other than the events
listed in Section 8.6(a) shall lapse and be forfeited by the Recipient.
8.8 Delivery of Common Stock. Upon vesting, Performance Shares shall be
converted into Common Stock and the Common Stock shall be issued to the
Recipient. Any fractional Performance Share which becomes vested shall be paid
to the Recipient in cash based upon the Fair Market Value of an equivalent
fraction of a share of the Common Stock on such date.
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8.9 Transferability. A Recipient may not sell, exchange, transfer,
pledge, hypothecate or otherwise dispose of Performance Shares awarded under
this ICP.
8.10 Waiver of Restrictions. The Committee may elect, in its sole
discretion, to waive any or all restrictions with respect to an award of
Performance Shares.
SECTION 9
PERFORMANCE-BASED CASH AWARDS
9.1 Performance-Based Cash Awards. When the Committee awards
Performance-Based Cash Awards hereunder, the Committee shall prepare (or cause
to be prepared) a Performance-Based Cash Award Agreement or other document(s)
that specifies the following terms:
(a) the name of the Recipient;
(b) the amount or range of amounts of the Performance-Based
Cash Award;
(c) the period over which performance is to be measured, which
may be of a short-term or long-term duration;
(d) the Performance Measures upon satisfaction of which the
Performance-Based Cash Award is to become vested and payable to the
Recipient; and
(e) the date as of which the Committee awarded the
Performance-Based Cash Award.
9.2 Maximum Award Per Year. The maximum dollar amount that may be
payable to any individual during any one calendar year under Performance-Based
Cash Awards is $2,500,000.
9.3 Vesting. The Committee shall specify in the Performance-Based Cash
Award or other document communicated to the Recipient the manner in which the
award shall vest and become payable, as well as any conditions, restrictions and
contingencies to which the award is subject. Such conditions, restrictions and
contingencies may consist of a requirement of continuous service and the
satisfaction of specified Performance Measures. The Committee may designate a
single goal criterion or multiple goal criteria for performance measurement
purposes.
9.4 Accelerated Vesting. The Committee shall always have the right to
accelerate vesting of any Performance-Based Cash Awards awarded under this ICP.
(a) In the event of one of the following events, any
outstanding Performance-Based Cash Awards which remain subject to
vesting requirements shall become vested
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pursuant to the provisions of subsections (b) and (c) hereof:
(i) the Recipient's death;
(ii) the Recipient's Disability;
(iii) the Recipient's retirement after attainment
of age 60; or
(iv) a Change in Control of the Company.
(b) In the event of one of the events in subparagraphs (i),
(ii) or (iii) of subsection (a) above, if an outstanding
Performance-Based Cash Award remains subject to performance criteria,
but the performance measurement period for such Award ends during the
year in which such event occurs, then a proportion of the cash amount
subject to such an Award may become vested and nonforfeitable if the
performance measures are met, as measured at the end of the performance
measurement period. The proportion of the cash amount which shall
become vested if the performance criteria is met is equal to the
proportion of the time completed through the date on which such event
occurs to the performance measurement period for the Award. [Example:
Award granted on December 31, 2002 with performance measurement period
ending December 31, 2005; Recipient dies on July 1, 2005; performance
is measured at end of 2005, and if met, Recipient's estate shall
receive 30/36 of the cash award at whichever level determined by the
performance achieved.] If an outstanding Performance-Based Cash Award
remains subject to performance criteria and the performance period for
such Award does not end in the year in which an event in subparagraphs
(i), (ii) or (iii) occurs, then such Award shall lapse and be forfeited
by the Recipient. [Example: If the Award granted with performance
measurement period ending December 31, 2005, and Recipient dies in
December, 2004, the entire Award is forfeited.]
(c) If an outstanding Performance-Based Cash Award remains
subject to performance criteria, but the performance measurement period
for such Award ends during the year in which a Change in Control of the
Company occurs, then a proportion of the cash amount subject to such
Award shall become immediately vested and nonforfeitable, equal to the
proportion of the time completed through the date of the Change in
Control to the performance measurement period for the Award, with
target performance level deemed to be achieved as of the date of the
Change in Control. In the event an Award was originally scheduled
without a designated target performance level (e.g., a single
performance level or minimum and maximum performance levels), then the
performance level that, if met, would have resulted in the least amount
of cash becoming vested shall be treated as the target level. If an
outstanding Performance-Based Cash Award remains subject to performance
criteria and the performance period for such Award does not end in the
year in which a Change in Control of the Company occurs, then such
Award shall lapse and be forfeited by the Recipient.
9.5 Termination of Employment. Unless the Committee decides otherwise,
upon the Recipient's termination of employment due to any reason other than
those listed in Section 9.4(a), the Recipient shall forfeit all rights under any
outstanding Performance-Based Cash Awards.
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9.6 Timing and Form of Payment. Upon completion of the time period and
satisfaction of the Performance Measures specified for the Performance-Based
Cash Award, the Recipient shall be entitled to payment of the amount specified
in the award (or a pro rata portion as determined by the Committee under the
provisions of Section 9.3 and 9.4), determined as a function of the satisfaction
of the level of Performance Measures which has been achieved. All
Performance-Based Cash Awards shall be payable in cash as soon as practicable
following the end of the performance period.
9.7 Transferability. A Recipient may not sell, exchange, transfer,
pledge, hypothecate or otherwise dispose of a Performance-Based Cash Award
awarded under this ICP.
9.8 Waiver of Restrictions. The Committee may elect, in its sole
discretion, to waive any or all restrictions with respect to an award of a
Performance-Based Cash Award.
SECTION 10
PLAN OPERATION
10.1 Certain Corporate Transactions.
(a) Recapitalization. If the Company is involved in a
corporate transaction (including, without limitation, any
recapitalization, reclassification, reverse or forward stock split,
stock dividend, extraordinary cash dividend, merger, consolidation,
split-up, spin-off, combination or exchange of shares) which
constitutes a Change of Control, then the Committee shall adjust Awards
to preserve the benefits or potential benefits of the Awards as
follows:
(i) The Committee shall take action to adjust
the number and kind of shares of Common
Stock that are issuable under the ICP;
(ii) The Committee shall take action to adjust
the number and kind of shares of Common
Stock subject to outstanding Awards;
(iii) The Committee shall take action to adjust
the Exercise Price of outstanding Stock
Options; and
(iv) The Committee shall make any other equitable
adjustments.
Only whole shares of Common Stock shall be issued in making the above
adjustments. Further, the number of shares available under the ICP or
the number of shares of Common Stock subject to any outstanding Awards
shall be the next lower number of shares, so that fractions are rounded
downward. Any adjustment to or assumption of ISOs under this Section
shall be made in accordance with Code ss.424. If the Company issues any
rights or warrants to subscribe for additional shares pro rata to
holders of outstanding shares of the class or classes of stock then set
aside for the ICP, then each Optionee shall be entitled to the same
rights or warrants on the same basis as holders of
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outstanding shares with respect to such portion of the Optionee's Stock
Option as is exercised on or prior to the record date for determining
shareholders entitled to receive or exercise such rights or warrants.
(b) Reorganization. If the Company is part of any
reorganization involving merger, consolidation, acquisition of the
stock or acquisition of the assets of the Company which requires
shareholder approval but does not constitute a Change of Control, the
Committee, in its discretion, may decide that:
(i) any Stock Option granted but not yet
exercised shall pertain to and apply, with
appropriate adjustment as determined by the
Committee, to the securities of the
resulting corporation to which a holder of
the number of shares of the Common Stock
subject to such Stock Option would have been
entitled;
(ii) any or all outstanding Stock Options granted
hereunder shall become immediately fully
exercisable (to the extent permitted under
federal or state securities laws);
(iii) any or all Stock Options granted hereunder
shall become immediately fully exercisable
(to the extent permitted under federal or
state securities laws) and shall be
terminated after giving at least 30 days'
notice to the Participants to whom such
Stock Options have been granted; and/or
(iv) any or all awards of Restricted Stock,
Performance Shares and Performance-Based
Cash Awards hereunder shall become
immediately fully vested, nonforfeitable
and/or payable.
(c) Limits on Adjustments. Any issuance by the Company of
stock of any class other than the Common Stock, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number
or price of shares of the Common Stock subject to any Stock Option,
except as specifically provided otherwise in this ICP. The grant of
Awards pursuant to the ICP shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to
merge, consolidate or dissolve, or to liquidate, sell or transfer all
or any part of its business or assets. All adjustments the Committee
makes under this ICP shall be conclusive.
10.2 Compliance with Other Laws and Regulations. Distribution of shares
of Common Stock under the ICP shall be subject to the following:
(a) Notwithstanding any other provision of the ICP, the
Company shall not be required to issue any shares of Common Stock under
the ICP unless such issuance complies with all applicable laws
(including, without limitation, the requirements of the 1933 Act and
Section 16 of the 1934 Act) and the applicable requirements of any
securities exchange or similar entity. For Reporting Persons, the
Company believes that
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the ICP and all transactions under the ICP comply with all applicable
conditions of Rule 16b-3 under the 1934 Act. If any provision of the
ICP, or action by the Committee, fails to so comply, then the Committee
shall declare such provision or action null and void ab initio.
(b) When the ICP provides for issuance of Common Stock, the
Company may issue shares of Common Stock on a noncertificated basis as
long as it is not prohibited by applicable law or the applicable rules
of any stock exchange.
(c) The Company may require a Participant to submit evidence
that the Participant is acquiring shares of Common Stock for investment
purposes.
10.3 Tax Withholding. The Participant must pay to the Company an amount
necessary to cover all applicable income tax and other withholdings before the
Company shall issue Common Stock under the ICP. The Participant may satisfy the
withholding requirements by any one or combination of the following methods:
(a) cash;
(b) tendering shares of Common Stock which are part of the
Award; or
(c) tendering previously-held shares of Common Stock which the
Participant has owned for at least six months.
10.4 Limitation of Implied Rights. The ICP is not a contract of
employment. A Key Employee selected as a Participant shall not have the right to
be retained as an employee of the Company or any Related Company and shall not
have any right or claim under the ICP, unless such right or claim has
specifically accrued under the terms of the ICP.
10.5 Conditions of Participation in the ICP. When the Committee makes
an Award, it shall require a Participant to enter into an Agreement in a form
specified by the Committee, agreeing to the terms and conditions of the Award
and to such additional terms and conditions, not inconsistent with the terms and
conditions of the ICP, as the Committee may, in its sole discretion, prescribe.
If there is a conflict between any provision of an Agreement and the ICP, the
ICP shall control.
10.6 Evidence. Anyone required to give evidence under the ICP may give
such evidence by certificate, affidavit, document or other information which the
person acting on the evidence considers pertinent, reliable and signed, made or
presented by the proper party or parties.
10.7 Amendment and Termination of the ICP and Agreements. The Board may
amend or terminate the ICP at any time. No such amendment or termination shall
adversely affect, in any way, the rights of individuals who have outstanding
Awards unless such individuals consent to such amendment or termination. The
Committee may amend any Agreement which it previously has authorized under the
ICP if the amended Agreement is signed by the Company and the applicable
Participant; provided, however, that the Committee may not amend any Stock
Option Agreement in any manner that would constitute an increase or decrease of
the exercise
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price per share or otherwise constitute a "repricing" of the Stock Option.
10.8 Action by Company or Related Company. The board of directors of
the Company or any Related Company shall take any action required or permitted
to be taken by resolution.
10.9 Gender and Number; Headings. Words in any gender shall include any
other gender, words in the singular shall include the plural and the plural
shall include the singular. The headings in this ICP are for convenience of
reference. Headings are not a part of the ICP and shall not be considered in the
construction hereof.
10.10 Legal References. Any reference in this ICP to a provision of law
which is later revised, modified, finalized or redesignated, shall automatically
be considered a reference to such revised, modified, finalized or redesignated
provision of law.
10.11 Notices. In order for a Participant or other individual to give
notice or other communication to the Committee, the notice or other
communication shall be in the form specified by the Committee and delivered to
the location designated by the Committee in its sole discretion.
10.12 Governing Law. The ICP is governed by and shall be construed in
accordance with the laws of the State of Georgia.
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<PAGE> 67
ADOPTED BY BOARD OF DIRECTORS ON DECEMBER 8, 1998
APPROVED BY SHAREHOLDERS ON _____ ______, 1999
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AMERICAN BUSINESS PRODUCTS, INC.
Dear Shareholder:
Please take note of the important information enclosed with this proxy
ballot. Your vote is very important and we would appreciate your taking a few
minutes to review the 1998 Annual Report and the Proxy Statement, which provide
background on the proposals being considered at this year's Annual Meeting.
Please read them carefully and decide how you would like to vote.
Please mark the boxes on the attached voting instruction card to vote your
shares. Then sign and date the card, detach it and return your proxy vote in
the enclosed postage paid envelope.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Larry L. Gellerstedt, III
Chairman, Chief Executive Officer
and President
<PAGE> 69
AMERICAN BUSINESS PRODUCTS, INC.
COMMON STOCK
RECORD DATE SHARES:
1. The election as directors of the three nominees listed below to serve
until the 2002 Annual Meeting of Shareholders or until their
respective successors are elected and qualified.
[ ] For All Nominees [ ] Withhold [ ] For All Except
HENRY CURTIS VII, C. DOUGLAS MILLER and G. HAROLD NORTHROP
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name(s) of the nominee(s).
Your shares will be voted for the remaining nominee(s).
2. Approval and adoption of the American Business Products, Inc. 1999
Incentive Compensation Plan.
[ ] For [ ] Against [ ] Abstain
In their discretion, the proxies are authorized to vote upon such
other business that properly may come before the Annual Meeting and any
adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" EACH OF THE LISTED NOMINEES
AND PROPOSALS.
Please be sure to sign and date this Proxy. Date:
----------------
Mark box at right if an address change
or comment has been noted on the
reverse side of this card. [ ]
- ------------------------- -------------------------
Shareholder sign here Co-owner sign here
<PAGE> 70
AMERICAN BUSINESS PRODUCTS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE 1999 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Henry Curtis VII and G. Harold
Northrop, and each of them, proxies, with full powers of substitution, to act
for and in the name of the undersigned to vote all shares of Common Stock of
American Business Products, Inc. (the "Company") which the undersigned is
entitled to vote at the 1999 Annual Meeting of Shareholders, to be held at The
Cobb Galleria Centre, Two Galleria Parkway, Atlanta, Georgia, on Wednesday, May
5, 1999 at 11:00 a.m., Atlanta time, and at any and all adjournments thereof,
as indicated below. Receipt of the Notice of Meeting and the accompanying Proxy
Statement hereby is acknowledged.
THIS PROXY CARD WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY CARD WILL BE VOTED "FOR" EACH OF THE NOMINEES AND EACH OF
THE PROPOSALS LISTED ON THE REVERSE SIDE OF THIS PROXY CARD. IF ANY OTHER
BUSINESS IS PROPERLY PRESENTED AT THE ANNUAL MEETING, THIS PROXY CARD
WILL BE VOTED BY THE PROXIES IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED TO A VOTE OF THE
SHAREHOLDERS AT THE ANNUAL MEETING.
If the undersigned elects to withdraw this proxy card on or before the
time of the Annual Meeting or any adjournments thereof by notifying the
Secretary of the Company in writing at or prior to the Annual Meeting of the
decision of the undersigned to withdraw this proxy card, then the power of said
proxies shall be deemed terminated and of no further force and effect. The
undersigned may withdraw this proxy card in the manner described above, or by
submitting a duly executed and later dated proxy card to the Secretary, or by
appearing and voting in person at the Annual Meeting all shares of Common Stock
of the Company owned by the undersigned as of the record date (March 1, 1999).
PLEASE VOTE, DATE AND SIGN ON THE REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please mark, date and sign exactly as your name appears on the proxy
card. When shares are held jointly, both holders should sign. When signing as
attorney, executor, administrator, trustee, custodian or guardian, please give
your full title. If the holder is a corporation or partnership, the full
corporate or partnership name should be signed by a duly authorized officer.
<TABLE>
<CAPTION>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
<S> <C>
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<PAGE> 71
AMERICAN BUSINESS PRODUCTS, INC.
Dear Fellow Employee:
This proxy ballot represents shares of American Business Products,
Inc. Common Stock, which are owned for your benefit through participation in
the American Business Products, Inc. Profit Sharing Retirement Plan. If you
invest through the American Business Products, Inc. Employee Savings Plan
("ESP"), it also includes shares of ABP Common Stock credited to your "ESP"
account. As a participant in either or both of these plans, you have the right
as a beneficial owner to direct the vote of the shares allocated to your
account at the Annual Meeting of Shareholders, which will be held May 5, 1999.
Your vote, as a beneficial owner, is very important and we would
appreciate your taking a few minutes to review the 1998 Annual Report and the
Proxy Statement, which provide background on the proposals being considered at
this year's Annual Meeting. Read them carefully and decide how you want to
vote. Then mark the boxes on the attached voting instruction card instructing
the Trustees how to vote shares allocated to your account. Then sign and date
the card, detach it and return your proxy vote in the enclosed postage-paid
envelope.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Larry L. Gellerstedt, III
Chairman, Chief Executive Officer
and President
<PAGE> 72
AMERICAN BUSINESS PRODUCTS, INC.
EMPLOYEE SAVINGS PLAN
PROFIT SHARING RETIREMENT PLAN
1. The election as directors of the three nominees listed below to serve
until the 2002 Annual Meeting of Shareholders or until their
respective successors are elected and qualified.
[ ] For All Nominees [ ] Withhold [ ] For All Except
HENRY CURTIS VII, C. DOUGLAS MILLER and G. HAROLD NORTHROP
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name(s) of the nominee(s).
Your shares will be voted for the remaining nominee(s).
2. Approval and adoption of the American Business Products, Inc. 1999
Incentive Compensation Plan.
[ ] For [ ] Against [ ] Abstain
In their discretion, the proxies are authorized to vote upon such
other business that properly may come before the Annual Meeting and any
adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" EACH OF THE LISTED NOMINEES AND
PROPOSALS.
Please be sure to sign and date this Proxy. Date:
------------
Mark box at right if an address change
or comment has been noted on the reverse
side of this card. [ ]
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Participant sign here
<PAGE> 73
AMERICAN BUSINESS PRODUCTS, INC.
EMPLOYEE SAVINGS PLAN AND PROFIT SHARING RETIREMENT PLAN
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1999
ANNUAL MEETING OF SHAREHOLDERS
PURSUANT TO THE TERMS OF THE AMERICAN BUSINESS PRODUCTS, INC.
EMPLOYEE SAVINGS PLAN (THE "SAVINGS PLAN") AND THE AMERICAN BUSINESS PRODUCTS,
INC. PROFIT SHARING RETIREMENT PLAN (THE "PROFIT SHARING PLAN"), THE SHARES OF
COMMON STOCK TO WHICH THIS PROXY CARD RELATES MAY NOT BE VOTED IN PERSON AT
THE ANNUAL MEETING.
The undersigned hereby appoints Larry L. Gellerstedt, III and John H.
Karr (as the Trustees of the Savings Plan and the Profit Sharing Plan), and
each of them, proxies, with full powers of substitution, to act for and in the
name of the undersigned to vote all shares of Common Stock of American Business
Products, Inc. attributable to the undersigned's account pursuant to the
Savings Plan and/or Profit Sharing Plan which the undersigned is entitled to
vote in connection with the 1999 Annual Meeting of Shareholders, to be held at
The Cobb Galleria Centre, Two Galleria Parkway, Atlanta, Georgia, on Wednesday,
May 5, 1999 at 11:00 a.m. Atlanta time, and at any and all adjournments
thereof, as indicated below. Receipt of the Notice of Meeting and the
accompanying Proxy Statement hereby is acknowledged.
THIS PROXY CARD WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY CARD WILL BE VOTED WITH REGARD TO THE PROPOSALS LISTED
ON THE REVERSE SIDE HEREOF IN ACCORDANCE WITH THE TERMS OF THE SAVINGS PLAN
AND THE PROFIT SHARING PLAN AS MORE FULLY DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT. If any other business is properly presented at the Annual Meeting,
this proxy card will be voted by the proxies in their best judgment as Trustees
of the Plans. At the present time, the Board of Directors knows of no other
business to be presented to a vote of the shareholders at the Annual Meeting.
If the undersigned elects to withdraw this proxy card on or before
the time of the Annual Meeting or any adjournments thereof and notifies the
Trustees at or prior to the Annual Meeting of the decision of the undersigned
to withdraw this proxy card, then the power of said proxies shall be deemed
terminated and of no further force and effect. The undersigned may withdraw
this proxy card in the manner described above or by submitting to the Trustees
a duly executed and later dated proxy card.
PLEASE VOTE, DATE AND SIGN AND ON THE REVERSE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
Please mark, date and sign exactly as your name appears on the proxy card. When
signing as attorney, executor, administrator, trustee, custodian or guardian,
please give your full title.
<TABLE>
<CAPTION>
<S> <C>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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