<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
METROMAIL CORPORATION
(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:
(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>
LOGO
360 EAST 22ND STREET
LOMBARD, ILLINOIS 60148-4989
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 1997
----------------
Dear Stockholder:
The Annual Meeting of Stockholders of Metromail Corporation, a Delaware
corporation, will be held on Thursday, April 24, 1997, at 8:00 a.m., Chicago
time, at The DuPage Club, 1901 South Meyers Road, Oakbrook Terrace, Illinois
60181, for the following purposes, all of which are set forth more completely
in the accompanying proxy statement:
(1) To elect one person to the Board of Directors;
(2) To approve the Amended and Restated Metromail Corporation 1996 Stock
Incentive Plan;
(3) To approve the Metromail Corporation 1997 Employee Stock Purchase
Plan; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
In accordance with the Company's by-laws and resolution of the Board of
Directors, only stockholders of record at the close of business on March 3,
1997 will be entitled to notice of and to vote at the meeting.
A proxy statement and proxy card with respect to the meeting are enclosed.
The Annual Report of the Company for the year ended December 31, 1996 is also
enclosed.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE,
WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
LOGO
Thomas J. Quarles
Secretary
Lombard, Illinois
March 21, 1997
<PAGE>
LOGO
360 EAST 22ND STREET
LOMBARD, ILLINOIS 60148-4989
----------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Metromail Corporation, a Delaware corporation (the
"Company"), of proxies for use at the Annual Meeting of Stockholders of the
Company to be held on April 24, 1997, at 8:00 a.m., Chicago time, at The
DuPage Club, 1901 South Meyers Road, Oakbrook Terrace, Illinois 60181, and at
any adjournment(s) thereof. The approximate date on which this Proxy Statement
and the enclosed proxy are first being mailed to stockholders is March 21,
1997.
VOTING RIGHTS AND PROCEDURES
The Company's common stock, par value $.01 per share (the "Common Stock"),
is the only issued and outstanding class of stock. At the close of business on
March 3, 1997 (the "Record Date"), the Company had issued and outstanding
22,257,100 shares of Common Stock. Each share entitles the holder thereof to
one vote on each matter submitted to a vote of stockholders. Only holders of
record of the Common Stock on the Record Date are entitled to notice of and to
vote at the Annual Meeting or any adjournment(s) thereof.
Shares represented by an effective proxy given by a stockholder will be
voted as directed by the stockholder. A stockholder who submits a proxy on the
accompanying form has the right to revoke it at any time prior to its use by
delivering a written notice to the Secretary of the Company, by executing a
later-dated proxy or by attending the Annual Meeting and voting in person.
With respect to each matter specified in the notice of the Annual Meeting, a
stockholder may (i) vote "FOR" the matter, (ii) vote "AGAINST" the matter, or
(iii) "ABSTAIN" from voting on the matter. Stockholders are urged to indicate
their vote on each matter in the space provided. If a properly executed proxy
form is returned to the Company and no space is marked, it will be voted by
the persons therein named at the meeting: (i) "FOR" the election of the
director recommended by the Board of Directors; (ii) "FOR" the approval of the
Amended and Restated Metromail Corporation 1996 Stock Incentive Plan (the
"1996 Plan"); (iii) "FOR" the approval of the Metromail Corporation 1997
Employee Stock Purchase Plan (the "Stock Purchase Plan"); and (iv) in their
discretion, upon such other business as may properly come before the meeting.
Whether or not you plan to attend the meeting, please complete, sign, date and
return your proxy card in the enclosed envelope, which requires no postage if
mailed in the United States.
A proxy submitted by a stockholder may indicate that all or a portion of the
shares represented by such proxy are not being voted by such stockholder with
respect to a particular matter. This could occur, for example, when a broker
is not permitted to vote stock held in street name on certain matters in the
absence of instructions from the beneficial owner of such stock. The shares
subject to any such proxy which are not being voted with respect to a
particular matter (the "non-voted shares") will be considered shares not
present and entitled to vote on such matter, although such shares may be
considered present and entitled to vote for other purposes and will count for
purposes of determining the presence of a quorum. Abstentions will likewise be
considered present and entitled to vote for purposes of determining the
presence of a quorum.
The presence, either in person or by proxy, of the holders of a majority of
the shares entitled to vote will constitute a quorum at the Annual Meeting.
The director will be elected by the affirmative vote of a plurality of the
votes cast in the election of directors, provided a quorum is present.
Stockholders are not allowed to cumulate their votes in the election of
directors. Abstentions and non-voted shares are not treated as votes cast and
therefore will not affect the outcome of the election of directors. Approval
of the 1996 Plan and the Stock Purchase Plan will require the affirmative vote
of the holders of a majority of the shares present in person or by
<PAGE>
proxy at the meeting and entitled to vote on such proposal, provided a quorum
is present. Abstentions are treated as being present and entitled to vote at
the meeting and therefore will have the effect of a vote against approval of
the 1996 Plan and the Stock Purchase Plan. Non-voted shares are not treated as
present and entitled to vote at the meeting and therefore will have no effect
on the approval of the 1996 Plan or the Stock Purchase Plan.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the Annual Meeting and such election
inspectors will determine whether or not a quorum is present.
The Company will bear all costs of soliciting proxies, including charges
made by brokers and other persons holding stock in their names or in the names
of nominees for reasonable expenses incurred in sending proxy material to
beneficial owners and obtaining their proxies. In addition to solicitation by
mail, directors, officers and employees of the Company may solicit proxies
personally and by telephone and facsimile, all without extra compensation. The
Company has retained Morrow & Co., Inc. to assist in the solicitation of
proxies for a fee of $6,000, plus reasonable out-of-pocket expenses.
ELECTION OF DIRECTOR
The Company's Certificate of Incorporation provides for three classes of
directors of as nearly equal size as possible, and further provides that the
total number of directors shall be determined by resolution adopted by a
majority of the directors, except that the total number of directors shall not
be less than one nor more than fifteen. The term of each class of directors is
three years and the term of one class expires each year in rotation.
The term of the sole director in the First Class expires at the 1997 annual
election to be held at the Annual Meeting. At the present time it is intended
that shares represented by the enclosed proxy will be voted "FOR" the election
of Jonathan P. Ward for a three-year term expiring at the 2000 annual
election. Mr. Ward is now serving as a director of the Company. Mr. Ward has
indicated his willingness to serve if elected, and the Board of Directors has
no reason to believe that Mr. Ward will be unavailable for election, but if
such a situation should arise, the proxy will be voted in accordance with the
best judgment of the proxyholder for such person or persons as may be
designated by the Board of Directors, unless the stockholder has directed
otherwise.
The affirmative vote of a plurality of the votes cast in the election of
directors is required to elect Mr. Ward as a director of the First Class.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF JONATHAN P.
WARD AS A DIRECTOR OF THE FIRST CLASS.
INFORMATION ABOUT DIRECTORS AND NOMINEE FOR DIRECTOR
Director of the First Class
Nominated for election at the 1997 Annual Meeting for Term Expiring in 2000
Jonathan P. Ward has been a director of the Company since February 1996 and
has been Executive Vice President and Sector President, Commercial Print
Sector of R. R. Donnelley & Sons Company ("R. R. Donnelley") since January
1995. Mr. Ward joined R. R. Donnelley in 1977 and has held a number of
positions, including Sector President, Commercial Print Sector of R. R.
Donnelley in 1994, President, Merchandise Media of R. R. Donnelley from 1992
to 1994 and President, Financial Services of R. R. Donnelley in 1991. Mr. Ward
is also a member of the board of directors of Siegwerk, Inc. Age 42.
Directors of the Second Class
Terms Expire in 1998
Susan L. Henricks has been a director of the Company since January 1996 and
has been President and Chief Executive Officer of the Company since July 1995.
She was President of the Company from May 1995 until
2
<PAGE>
July 1995. Ms. Henricks joined the Company in 1986 and served as Reference and
Information Services Division President from 1990 to May 1995, Senior Vice
President, Information Services, in 1989, Vice President, Data Processing in
1988 and Vice President of Production from 1986 to 1988. Prior to joining the
Company, she held various positions with CNA Insurance Company, Centerre Bank,
N.A. and The Signature Group. Age 46.
Robert C. McCormack has been a director of the Company since August 1996.
Mr. McCormack is a founding partner of Trident Capital Inc., a private equity
investment firm that invests in information and business services companies.
Prior to founding Trident Capital, he served as Assistant Secretary of the
Navy (financial management) and Comptroller of the Navy from 1990 to 1993.
From 1987 to 1990, he also served as Deputy Under Secretary of Defense for
Acquisitions (acting), Deputy Under Secretary of Defense for Industrial and
International Programs and Deputy Assistant Secretary of Defense for
Production Support. From 1981 to 1987, Mr. McCormack was vice president,
principal and managing director of Morgan Stanley & Co. Incorporated. He is
also a member of the board of directors of Illinois Tool Works, Inc. and DeVry
Inc. Age 57. Chairman of the Human Resources and Audit Committees.
Directors of the Third Class
Terms Expire in 1999
Barton L. Faber has been Chairman of the Company since January 1996 and a
director of the Company since July 1995. He served as President, Information
Resources of R. R. Donnelley from January 1995 to June 1996. From September
1989 until January 1995, he was President, Information Services of R. R.
Donnelley. Prior to that time, he was Vice President and Director, Information
Services of R. R. Donnelley in 1989, Vice President, Corporate Development of
R. R. Donnelley from April 1985 until 1989 and Group Manager, Business
Development and Analysis of R. R. Donnelley from the time he joined R. R.
Donnelley in January 1985 until April 1985. Prior to joining R. R. Donnelley,
he held various positions with Mobil Oil Corporation and Ramada Europe. Mr.
Faber is also a member of the board of directors of Dataware Technologies,
Inc., Document Sciences Corporation, GeoSystems Global Corporation and Xeikon
N.V. Age 49.
Peter F. Murphy has been a director of the Company since February 1996 and
has been Vice President and Corporate Controller of R. R. Donnelley since
April 1995. From June 1994 until April 1995, Mr. Murphy was Director,
Financial Reporting of R. R. Donnelley. Prior to joining R. R. Donnelley, he
was with Kraft General Foods, Inc. where he served as Assistant Controller-
International from May 1992 until May 1994 and Assistant Corporate Controller
from 1989 until 1992, and was general practice manager with Coopers & Lybrand
from 1983 until 1989. Age 41.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors has two standing committees: the Human Resources
Committee and the Audit Committee. The Board of Directors does not have a
Nominating Committee or any committee performing similar functions. Since
consummation of the Company's initial public offering of Common Stock (the
"IPO") on June 19, 1996, the Board of Directors met five times during 1996.
Other than Mr. Ward, each director was present for 75% or more of the total
number of meetings of the Board of Directors. Neither the Human Resources
Committee nor the Audit Committee met during 1996.
The Human Resources Committee makes recommendations to the Board of
Directors regarding the selection, retention and compensation of senior
officers of the Company, the overall compensation strategy of the Company, the
compensation of non-employee directors and management succession. The Human
Resources Committee also is responsible for administering and making grants
under the 1996 Plan and the Company's 1996 Broad-Based Employee Stock Plan and
will be responsible for administering the Stock Purchase Plan, if such plan is
approved by the stockholders at the Annual Meeting.
The Audit Committee will be responsible for reviewing with management the
financial controls, accounting and audit and reporting activities of the
Company. The Audit Committee will review the qualifications of the
3
<PAGE>
Company's independent auditors, make recommendations to the Board of Directors
as to the selection of independent auditors, review the scope, fees and
results of any audit and review non-audit services and related fees provided
by the independent auditors. The Audit Committee will also review and report
to the Board of Directors regarding the implementation of the Company's
Standards of Ethics and Business Conduct and the Company's Fair Information
Practices Group.
BENEFICIAL OWNERSHIP OF COMMON STOCK
OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of the outstanding Common Stock by all persons known to
the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock as of December 31, 1996. The information set forth below is based
on information available to the Company and a review of statements filed with
the Securities and Exchange Commission (the "Commission") pursuant to Sections
13(d) and 13(g) of the Securities Exchange Act of 1934 (the "Exchange Act").
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
NAME AND ADDRESS BENEFICIALLY OWNED SHARES OWNED
---------------- ------------------ -------------
<S> <C> <C>
R. R. Donnelley & Sons Company.......... 8,600,000 38.5%
77 West Wacker Drive
Chicago, Illinois 60601
J. W. Seligman & Co. Incorporated....... 2,509,814 11.2%
100 Park Avenue
New York, New York 10017
FMR Corp................................ 1,568,800 7.0%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
beneficial ownership of the outstanding Common Stock as of December 31, 1996
by (i) each director of the Company, (ii) each of the five executive officers
of the Company named in the table under "Compensation of Directors and
Executive Officers--Summary Compensation Table," and (iii) all directors and
officers of the Company as a group. Unless otherwise indicated, all persons
listed have sole voting and dispositive power over the shares beneficially
owned.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
NAME BENEFICIALLY OWNED(1) SHARES OWNED(1)
---- --------------------- ---------------
<S> <C> <C>
Barton L. Faber.................... 20,000(2) *
Susan L. Henricks.................. 19,500(2) *
Ronald G. Eidell................... 7,000 *
Robert C. McCormack................ 13,200(3) *
Peter F. Murphy.................... 1,000(3) *
Tery R. Larrew..................... 500 *
Thomas J. Quarles.................. 1,000 *
Jonathan P. Ward................... 1,000(3) *
Directors and executive officers as
a group (12 persons).............. 66,700(4) *
</TABLE>
- --------
*Less than 1%.
4
<PAGE>
(1) Calculated pursuant to Rule 13d-3 under the Exchange Act. None of the
persons set forth in the table holds options to purchase Common Stock that
are exercisable within 60 days.
(2) Includes 17,000 shares of restricted Common Stock that vest in 25%
increments on each of the first four anniversaries of June 19, 1996.
(3) Includes 1,000 shares of restricted Common Stock that vest on September 1,
1999.
(4) Includes the shares of restricted Common Stock described in notes (2) and
(3) above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors, officers
and certain stockholders to file with the Commission an initial statement of
beneficial ownership and certain statements of changes in beneficial ownership
of equity securities of the Company. During 1996, each of Ms. Susan Henricks,
Messrs. Philip Bonello, Ronald Eidell, Barton Faber, Kenneth Glowacki, Tery
Larrew, Peter Murphy, Michael Reynolds, Mac Rodgers, Thomas Quarles and
Jonathan Ward and R. R. Donnelley were late in filing their initial statement
of beneficial ownership.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the Company's
Chairman and the other four most highly compensated executive officers of the
Company serving as such on December 31, 1996. Information for prior years is
omitted in accordance with the rules of the Commission.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------- -------------------------------
AWARDS PAYOUTS
OTHER ----------------------- ------- ALL
ANNUAL RESTRICTED SECURITIES OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS SATION AWARD(S) OPTIONS/SARS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($)(2) (#)(3) ($) ($)
------------------ ---- ------- ------- ------- ---------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barton L. Faber......... 1996 310,008 106,764(5) 13,033 357,000 170,000 -0- 7,864(7)
Chairman (4) 1995 275,000 100,047 10,016 286,875 13,500 220,559(6) 4,665
Susan L. Henricks....... 1996 245,667 118,620(5) 8,694 357,000 170,000 -0- 6,412(7)
President and 1995 216,233 70,420 6,716 286,875 12,000 -0- -0-
Chief Executive Officer
Ronald G. Eidell........ 1996 123,149(8) 67,949 9,917 -0- 64,000 -0- 5,271(7)
Senior Vice President
and
Chief Financial Officer
Tery R. Larrew.......... 1996 156,000 113,568 8,985 -0- 50,000 -0- -0-
President, Database 1995 147,710 109,008 2,583 -0- 6,000 -0- -0-
Marketing Services and
President,
Customer Insight
Company
Thomas J. Quarles....... 1996 123,149(8) 67,949 9,383 -0- 70,000 -0- -0-
Senior Vice President,
General Counsel, Chief
Administrative
Officer and Secretary
</TABLE>
- --------
(1) Includes the employer matched contribution for the March 1996 and March
1995 purchase of shares of R. R. Donnelley common stock under the
R. R. Donnelley Stock Purchase Plan equal to 50% of the amount contributed
by the employee toward the purchase of R. R. Donnelley common stock for
the employee's account and a cash payment equal to 20% of the amount the
employee contributed to assist in the payment of taxes owed by the
employee as a result of the matched contribution. As of the completion of
the IPO, the Company ceased to participate in the R. R. Donnelley Stock
Purchase Plan.
(2) All 1996 amounts reflect the value of restricted stock awards of Company
Common Stock and all 1995 amounts reflect the value of restricted stock
awards of R. R. Donnelley common stock. As of December 31,
5
<PAGE>
1996, both Mr. Faber and Ms. Henricks held 17,000 shares of restricted
Company Common Stock valued at $310,250 in the aggregate. Values of
restricted stock awards shown in the Summary Compensation Table are based
on the closing price of the Company Common Stock or R. R. Donnelley common
stock on the respective dates of grant. Values of restricted stock awards
as of December 31, 1996 as disclosed in this footnote are based on the
closing price of the Company Common Stock as of December 31, 1996.
Dividends are paid on restricted Company Common Stock at the same rate and
at the same time as on the Company Common Stock. Such restricted Company
Common Stock vests in annual 25% increments on each of the first four
anniversaries of June 19, 1996.
(3) The security underlying the stock options reflected in this column for
1996 is Company Common Stock and for 1995 is R. R. Donnelley common stock.
(4) Until June 19, 1996, the compensation of Mr. Faber was paid by
R. R. Donnelley.
(5) The 1996 bonus for Mr. Faber includes a $43,943 bonus earned in 1996 under
the R. R. Donnelley bonus plan. The 1996 bonus for Ms. Henricks includes a
$33,511 bonus earned in 1996 under the R. R. Donnelley bonus plan.
(6) Dollar value of payout by R. R. Donnelley on long-term performance award
granted by R. R. Donnelley in 1993.
(7) Premiums paid by the Company in connection with whole life insurance
policies which are owned by Ms. Henricks and Messrs. Faber and Eidell,
respectively.
(8) Reflects salary paid by the Company for the period beginning on June 19,
1996 (the effective date of the employment agreements of Messrs. Eidell
and Quarles) and ending December 31, 1996. Prior to June 19, 1996, Messrs.
Eidell and Quarles were employees of R. R. Donnelley.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information for the individuals named in the
Summary Compensation Table regarding grants in 1996 of options to purchase
Common Stock.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
-------------------------------------------------------------- -------------------
NUMBER OF % OF TOTAL EXERCISE
SECURITIES UNDERLYING OPTIONS GRANTED TO PRICE EXPIRATION
NAME OPTIONS GRANTED (#)(2) EMPLOYEES IN 1996 ($/SHARE) DATE 5%($) 10%($)
---- ---------------------- ------------------ --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Barton L. Faber......... 170,000 13.0% $20.50 6/18/06 2,191,698 5,554,192
Susan L. Henricks....... 170,000 13.0% $20.50 6/18/06 2,191,698 5,554,192
Ronald G. Eidell........ 64,000 4.9% $20.50 6/18/06 825,110 2,090,990
Tery R. Larrew.......... 50,000 3.8% $20.50 6/18/06 644,617 1,633,586
Thomas J. Quarles....... 70,000 5.3% $20.50 6/18/06 902,464 2,287,020
</TABLE>
- --------
(1) The potential realizable dollar value of a grant is the product of: (a)
the difference between (i) the product of the per-share market price at
the time of the grant and the sum of 1 plus the stock appreciation rate
compounded annually over the term of the option (here, 5% and 10%), and
(ii) the per-share exercise price of the option; and (b) the number of
securities underlying the grant at fiscal year-end.
(2) Each of the options becomes exercisable in four annual 25% installments on
each of the first four anniversaries of the date of grant, unless the
vesting schedule is accelerated to become fully exercisable upon a change
of control as defined in the 1996 Plan or after the first anniversary of
the date of grant upon death, retirement or disability.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN 1996 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for the individuals named in the
Summary Compensation Table regarding their holdings of unexercised options to
purchase Common Stock as of December 31, 1996. None of the named individuals
exercised options to purchase Common Stock in 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE OPTIONS AT DECEMBER 31, 1996 AT DECEMBER 31, 1996 ($)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ------------ ---------------------------- -------------------------
<S> <C> <C> <C> <C>
Barton L. Faber......... -0- -0- -0-/170,000 -0-
Susan L. Henricks....... -0- -0- -0-/170,000 -0-
Ronald G. Eidell........ -0- -0- -0-/ 64,000 -0-
Tery R. Larrew.......... -0- -0- -0-/ 50,000 -0-
Thomas J. Quarles....... -0- -0- -0-/ 70,000 -0-
</TABLE>
RETIREMENT BENEFITS
Under the Metromail Corporation Pension Plan (the "Pension Plan"), employees
who met the eligibility requirements accrued in 1996 an annual retirement
benefit computed at the rate of 1.5% on compensation up to "covered
compensation," and 2% on compensation in excess of "covered compensation" but
not in excess of $150,000 (the maximum amount of compensation for 1996 on
which benefits can accrue under current law). The compensation covered by the
Pension Plan includes wages and salaries, supplementary compensation and
commissions. An employee's "covered compensation" for a year is the average of
the Social Security wage bases for the 35-year period ending with such year.
Benefits are paid monthly after retirement for the life of the participant
(straight life annuity amount) or, if the participant is married or has
elected an optional benefit form, in an actuarially reduced amount for the
life of the participant and the participant's surviving spouse or other
surviving person named as a contingent member. Benefits under the Pension Plan
are limited to the extent required by provisions of the Internal Revenue Code
and the Employee Retirement Income Security Act of 1974. If payment of actual
retirement benefits is limited by such provisions, an amount equal to any
reduction in retirement benefits will be paid as a supplemental benefit under
the Unfunded Supplemental Benefit Plan adopted by the Board of Directors in
1995.
The following table contains information concerning annual benefits payable
pursuant to the Pension Plan on a straight life annuity basis upon retirement
at age 65 for the individuals named in the Summary Compensation Table. These
benefits include the annual benefits to be paid at age 65 computed on service
through December 31, 1996, estimated additional annual benefits which may be
earned in the future, assuming the individuals continue in the Company's
employ to age 65 and current compensation levels remain unchanged, and total
estimated annual benefits on retirement at age 65.
<TABLE>
<CAPTION>
ESTIMATED ADDITIONAL
ANNUAL BENEFITS ON
RETIREMENT AT AGE 65 TOTAL ESTIMATED ANNUAL
FOR SERVICE AFTER BENEFITS COMPUTED ON
ANNUAL BENEFITS TO BE 1996 ASSUMING SERVICE THROUGH
PAID AT AGE 65 ON THE CONTINUATION OF DECEMBER 31, 1996 PLUS
BASIS OF SERVICE THROUGH EMPLOYMENT UNTIL AGE BENEFITS WHICH MAY BE
INDIVIDUAL DECEMBER 31, 1996 ($) 65 ($) EARNED IN FUTURE ($)
---------- ------------------------ -------------------- ----------------------
<S> <C> <C> <C>
Barton L. Faber......... 3,307 123,350 126,657
Susan L. Henricks....... 32,540 111,342 143,882
Ronald G. Eidell........ 2,453 75,355 77,808
Tery R. Larrew (1)...... -0- -0- -0-
Thomas J. Quarles....... 2,453 119,265 121,718
</TABLE>
- --------
(1) Mr. Larrew is not covered by the Pension Plan.
7
<PAGE>
COMPENSATION OF DIRECTORS
Pursuant to the 1996 Plan, on September 1 of each year beginning on
September 1, 1996, directors who are not employees of the Company ("non-
employee directors") are granted an option to purchase 5,000 shares of Common
Stock at a price equal to the fair market value of a share of Common Stock on
the date of grant. At their election, non-employee directors also receive
annually either (i) a cash retainer equal to $15,000, payable quarterly in
arrears, or (ii) an option to purchase 2,500 shares of Common Stock at a price
equal to the fair market value of a share of the Common Stock on the date of
grant, which option is granted on September 1 of each year. All such option
grants become exercisable on the first anniversary of the date of grant. Each
non-employee director also receives a one-time grant of 1,000 shares of
restricted Common Stock, which shares vest on the third anniversary of the
date of grant so long as such person is still serving as a director of the
Company at that time. Each current non-employee director received such grant
on September 1, 1996. Each future non-employee director will be granted the
restricted shares and the options described above on the date on which such
person is first elected or begins to serve as a non-employee director.
Beginning on September 1, 1997 pursuant to the Metromail Corporation
Directors' Deferred Retainer Plan, directors may elect to defer receipt of
their cash retainer, if any, until a date not to exceed the date on which they
cease to be directors of the Company. During any such deferral period, the
deferred cash retainer will accrue interest at a rate equal to the return on
five-year U.S. Treasury obligations.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Faber entered into a four-year employment agreement with the Company
commencing on June 19, 1996, the date of the closing of the IPO. The agreement
provides for an annual base salary of $310,000 with a pro-rated bonus
opportunity for 1996 to earn up to 100% of base salary if certain pre-
established net income criteria are met by the Company. Bonus opportunities
for 1997 and later years will be determined by the Board of Directors of the
Company or a committee of the Board. Under the terms of the Agreement, Mr.
Faber was granted ten-year options to purchase 170,000 shares of Common Stock
at a purchase price of $20.50 per share of Common Stock and 17,000 shares of
restricted Common Stock pursuant to the 1996 Plan.
Ms. Henricks entered into a four-year employment agreement with the Company
commencing on June 19, 1996. The agreement provides for an annual base salary
of $255,000 with a pro-rated bonus opportunity for 1996 to earn up to 90% of
base salary if certain pre-established net income criteria are met by the
Company. Bonus opportunities for 1997 and later years will be determined by
the Board of Directors of the Company or a committee of the Board. Under the
terms of the agreement, Ms. Henricks was granted ten-year options to purchase
170,000 shares of Common Stock at a purchase price of $20.50 per share of
Common Stock and 17,000 shares of restricted Common Stock pursuant to the 1996
Plan.
Mr. Eidell entered into a four-year employment agreement with the Company
commencing on June 19, 1996. The agreement provides for an annual base salary
of $230,000 with a pro-rated bonus opportunity for 1996 to earn up to 90% of
base salary if certain pre-established net income criteria are met by the
Company. Bonus opportunities for 1997 and later years will be determined by
the Board of Directors of the Company or a committee of the Board. Under the
terms of the agreement, Mr. Eidell was granted ten-year options to purchase
64,000 shares of Common Stock at a purchase price of $20.50 per share of
Common Stock pursuant to the 1996 Plan.
Mr. Quarles entered into a four-year employment agreement with the Company
commencing on June 19, 1996. The agreement provides for an annual base salary
of $230,000 with a pro-rated bonus opportunity for 1996 to earn up to 90% of
base salary if certain pre-established net income criteria are met by the
Company. Bonus opportunities for 1997 and later years will be determined by
the Board of Directors of the Company or a committee of the Board. Under the
terms of the agreement, Mr. Quarles was granted ten-year options to purchase
70,000 shares of Common Stock at a purchase price of $20.50 per share of
Common Stock pursuant to the 1996 Plan.
Each of Mr. Faber's and Ms. Henricks' employment agreements provides for a
severance payment equal to (i) one and one-half times base salary (one times
base salary for each of Messrs. Eidell and Quarles) minus the
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amount of any disability benefits where termination is by reason of disability
or (ii) one and one-half times base salary (one times base salary for each of
Messrs. Eidell and Quarles) where termination is by the Company for any reason
other than for cause or by the executive upon breach by the Company of the
agreement or for good reason. A severance payment will not be payable where
termination is by the Company for cause, by the executive for any reason other
than upon breach by the Company of the agreement or for good reason, or by
reason of the executive's retirement or death. Each agreement also contains
customary provisions providing for the non-disclosure of confidential
information. Each of Mr. Faber's and Ms. Henricks' agreements contains an
agreement not to compete with the Company for a period of 18 months after the
termination of the agreement. Each of Mr. Eidell's and Mr. Quarles' agreements
contains an agreement not to compete with the Company for a period of 12
months after the termination of the agreement.
Mr. Larrew entered into an employment agreement with Customer Insight
Company, a wholly-owned subsidiary of the Company ("CIC"), in connection with
the Company's acquisition of CIC in 1994. The agreement provides for Mr.
Larrew's employment by CIC as its President and a director through December
31, 1997. The agreement provides Mr. Larrew with a minimum annual salary of
$136,260 and the opportunity to earn a pro-rated bonus up to 100% of his
annual salary upon satisfaction of certain revenue, profit, customer
satisfaction and pre-determined operations objectives relative to CIC. In
addition, the agreement requires CIC to pay Mr. Larrew a retention bonus equal
to $300,000 if Mr. Larrew is employed by CIC on the third anniversary of CIC's
acquisition by the Company. Pursuant to the agreement, R. R. Donnelley granted
Mr. Larrew stock options for 8,000 shares of R. R. Donnelley common stock.
Pursuant to the agreement, Mr. Larrew agreed not to compete with CIC or any
affiliate of CIC within North America and Europe during the term of the
agreement and, upon the prior written notice from CIC and the payment of
$100,000 in four quarterly installments, for one year after the termination of
the agreement.
Each of Ms. Henricks and Messrs. Faber, Eidell, Larrew and Quarles have
entered into Management Agreements with the Company which provide severance
benefits in the event of a change in control (as defined in the agreements) of
the Company followed by termination of employment. These agreements provide
that if the executive's employment is terminated following a change in control
of the Company unless such termination is (a) by the Company for cause (as
defined in the agreements), (b) as a consequence of death or disability (as
defined in the agreements), or (c) by the executive without Good Reason (as
defined in the agreements), the executive will receive certain payments and
benefits. These payments and benefits include (i) a lump sum payment equal to
up to three times (two times in the case of Mr. Larrew's agreement) the
executive's current planned compensation (salary and bonus), (ii) an amount in
cash equal to three years (two years in the case of Mr. Larrew's agreement) of
additional accrued benefits under the Pension Plan and (iii) life, disability,
accident and health insurance benefits for a period of 36 months (24 months in
the case of Mr. Larrew's agreement) after termination of employment. These
agreements also provide that if, after a change in control of the Company, any
compensation paid to the executive, whether or not pursuant to such agreement,
is subject to the federal excise tax on "excess parachute payments," the
Company will pay to the executive such additional amount as may be necessary
so that the executive realizes, after the payment of such excise tax and any
income tax or excise tax on such additional amount, the amount of such
compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, each of Barton L. Faber, Chairman, and Susan L. Henricks,
President and Chief Executive Officer, were members of the Company's Board of
Directors and participated in deliberations concerning executive officer
compensation.
REPORT ON EXECUTIVE COMPENSATION
1996 Compensation of Executive Officers.
Prior to the IPO, the Company was a wholly-owned subsidiary of R. R.
Donnelley and the levels of compensation for Ms. Henricks and Mr. Faber were
principally determined by the Human Resources Committee
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of R. R. Donnelley, and Mr. Larrew's compensation was principally based on his
employment agreement with CIC which was entered into in 1994 in connection
with the Company's purchase of CIC. Prior to completion of the IPO, Messrs.
Eidell and Quarles were employees of R. R. Donnelley.
After the IPO, each of the executive officers named in the Summary
Compensation Table (other than Mr. Larrew) was compensated pursuant to a four-
year employment agreement with the Company providing for a minimum annual base
salary and a pro-rated bonus opportunity for 1996 if certain pre-established
1996 net income criteria were met by the Company. The agreements also set
forth the number of options to purchase shares of Common Stock granted in 1996
to the executive officers and, with respect to Mr. Faber and Ms. Henricks, the
number of shares of restricted Common Stock granted in 1996. The terms of the
agreements were determined in accordance with the principles set forth by the
Human Resources Committee of R. R. Donnelley and were approved by the Board of
Directors of the Company in March 1996. The stock options and awards of
restricted Common Stock were also approved by the Board of Directors in order
to align the interests of management more closely with those of the
stockholders of the Company by increasing stock ownership by management and
tying a meaningful portion of compensation to the performance of the Common
Stock.
In connection with the compensation of executive officers for 1996, the
Human Resources Committee of R. R. Donnelley also gave the Company the ability
to grant discretionary cash bonuses to certain employees, including the
executive officers named in the Summary Compensation Table. Messrs. Eidell,
Larrew and Quarles all received such grants in 1996, which were approved by
the Board of Directors.
Mr. McCormack became a member of the Board of Directors in August 1996.
Accordingly, he only participated in the compensation decisions made by the
Board subsequent to such date.
Formation of Human Resources Committee
In August 1996, the Board of Directors adopted a resolution designating the
Human Resources Committee (the "Committee"). The Committee makes
recommendations to the Board of Directors regarding the selection, retention
and compensation of senior officers of the Company, including the executive
officers named in the Summary Compensation Table (the "named executive
officers"), the overall compensation strategy of the Company, the compensation
of non-employee directors and management succession. The Committee also is
responsible for administering the 1996 Plan and the 1996 Broad-Based Employee
Stock Plan and is responsible for making grants under each of those plans and
will be responsible for administering the Stock Purchase Plan, if such plan is
approved by the stockholders at the Annual Meeting. Mr. McCormack is currently
the only member of the Committee. The Board of Directors intends to add
another independent director in 1997 and to appoint such director to the
Committee.
Compensation Policy Regarding Executive Officers
Beginning in 1997, the Committee is responsible for making recommendations
to the Board of Directors regarding the annual salary, short-term cash and
long-term stock incentive compensation, and other compensation of executive
officers, including the named executive officers. The Board of Directors
expects that the Committee will make recommendations regarding (i) the
establishment of the target percentage of each executive officer's total
compensation package that is comprised of salary, short-term cash and long-
term stock incentive compensation, and other compensation, (ii) the base
salary of each executive officer, and (iii) the establishment of performance
criteria under annual and long-term awards that tie such awards to the
Company's performance. The Committee will also determine the size and terms of
any stock option or other stock-based awards made under the 1996 Plan. A
report on 1997 compensation is expected to be made in the Company's proxy
statement for the 1998 annual meeting of stockholders.
Tax laws limit the deduction a publicly-held corporation is allowed for
compensation paid to the chief executive officer and to the four most highly
compensated executive officers other than the chief executive officer.
Generally, amounts paid in excess of $1 million to a covered executive, other
than performance-based
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compensation, cannot be deducted. The Company will consider ways to maximize
the deductibility of executive compensation but has reserved the right to
compensate executive officers in a manner commensurate with performance and
the competitive environment for executive talent. As a result, some portion of
executive compensation paid to an executive officer whose compensation is
subject to the deduction limits described above may not be deductible by the
Company.
Compensation of Chairman
Prior to the IPO, the level of compensation for Mr. Faber was principally
determined by the Human Resources Committee of R. R. Donnelley. After the IPO,
Mr. Faber's 1996 compensation was determined in accordance with his employment
agreement with the Company, which became effective on June 19, 1996, the
closing date of the IPO. As stated above, the terms of Mr. Faber's employment
agreement were determined in accordance with the principles set forth by the
Human Resources Committee of R. R. Donnelley and were approved by the Board of
Directors of the Company in March 1996. Under the employment agreement, Mr.
Faber was paid an annualized base salary of $310,000 with a pro-rated bonus
opportunity for 1996 to earn up to 100% of his annual base salary if certain
pre-established 1996 net income criteria were met by the Company. In 1996, the
Company's net income exceeded the minimum net income target, resulting in a
pro-rated bonus payment by the Company to Mr. Faber equal to $62,821.
Under his employment agreement, Mr. Faber was granted options to purchase
170,000 shares of Common Stock, including options to purchase 20,000 shares of
Common Stock as consideration for the cancellation of 5,000 shares of R. R.
Donnelley restricted common stock. In addition, in 1996 Mr. Faber was granted
17,000 shares of restricted Common Stock. As stated above, the stock options
and award of restricted Common Stock were approved by the Board of Directors
in order to align the interests of Mr. Faber more closely with those of the
stockholders of the Company by increasing his stock ownership and tying a
meaningful portion of his compensation to the performance of the Company's
Common Stock.
This report has been prepared by the following members of the Board of
Directors:
Barton L. Faber
Susan L. Henricks
Robert C. McCormack
Peter F. Murphy
Jonathan P. Ward
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PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common Stock
with the cumulative total return on the Standard & Poor's 500 Stock Index (a
broad market index) and the Dow Jones Industrial and Commercial Services Index
(an industry index) for the period from June 14, 1996, the date upon which the
Common Stock began trading on the New York Stock Exchange, through January 31,
1997. These comparisons assume an initial investment of $100 and the
reinvestment of dividends.
PERFORMANCE GRAPH
LOGO
The data points for the above graph are as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/14/96 6/30/96 7/31/96 8/31/96 9/30/96 10/31/96 11/30/96 12/31/96 1/31/97
------- ------- ------- ------- ------- -------- -------- -------- -------
Standard & Poor's 500... 100 100.7 96.1 97.9 103.2 105.9 113.7 111.2 118.1
Metromail............... 100 101.1 87.6 79.1 97.7 83.1 104.5 82.5 93.2
Dow Jones Industrial &
Commercial Services.... 100 94.9 89.7 91.4 95.7 93.6 89.3 86.4 82.7
</TABLE>
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<PAGE>
CERTAIN TRANSACTIONS
Prior to completion of the IPO, the Company was a wholly-owned subsidiary of
R. R. Donnelley. Since its acquisition by R. R. Donnelley in mid-1987, the
Company funded its operations, capital expenditures and acquisitions in part
through borrowings from a subsidiary of R. R. Donnelley. Approximately $247.4
million of the net proceeds of $267.4 million from the IPO were used to repay
amounts owed by the Company to R. R. Donnelley and its subsidiaries. As of
December 31, 1996, the Company had no outstanding indebtedness to R. R.
Donnelley and R. R. Donnelley owned approximately 38.5% of the outstanding
Common Stock. In addition, Messrs. Ward and Murphy, who are directors of the
Company, are employees of R. R. Donnelley. Mr. Ward is Executive Vice
President and Sector President, Commercial Print Sector of R. R. Donnelley and
Mr. Murphy is Vice President and Corporate Controller of R. R. Donnelley.
Prior to completion of the IPO, the Company obtained certain services from,
and provided certain services to, R. R. Donnelley, participated in a number of
employee benefit plans maintained by R. R. Donnelley and was included as part
of R. R. Donnelley's federal income tax and certain other tax returns. In
connection with the IPO, the Company entered into certain agreements with
R. R. Donnelley relating to these matters. None of these agreements resulted
from "arm's length" negotiations.
Pursuant to a Transition Services Agreement between R. R. Donnelley and the
Company, R. R. Donnelley or its affiliates agreed to perform certain legal,
environmental, real estate, risk management and tax services for the Company,
and the Company agreed to furnish R. R. Donnelley certain financial
information. The Transition Services Agreement was in effect until December
31, 1996, except with respect to tax services, the provision of which ended on
January 31, 1997. The Company and R. R. Donnelley have agreed to extend the
term of the Transition Services Agreement until June 30, 1997 with respect to
the provision by R. R. Donnelley of certain legal services to the Company.
Total payments by the Company to R. R. Donnelley for services performed
pursuant to the Transition Services Agreement were approximately $0.2 million
in 1996.
Pursuant to a Sales Agreement between R. R. Donnelley and the Company, R. R.
Donnelley agreed that, to the extent R. R. Donnelley identifies certain
opportunities for sales of services of the type that the Company provides from
among R. R. Donnelley's current and prospective customers, it will obtain
detailed requirements regarding the sales opportunity and, prior to soliciting
any competitor of the Company to provide the services, request a quotation
from the Company for the Company's terms of providing the services. If the
Company furnishes a quotation and if R. R. Donnelley successfully sells the
services of the Company to the customer, R. R. Donnelley will, following
performance of the services, invoice and seek to collect the amounts owed from
the customer for the services provided by the Company. Upon collection of such
amounts from the customer, R. R. Donnelley will pay over the collected amount
less two percent. The initial term of the Sales Agreement will end on December
31, 1998. During 1996, sales by R. R. Donnelley of the Company's products and
services approximated $21.8 million.
Pursuant to a Benefit Administration Services Agreement between R. R.
Donnelley and the Company, (i) R. R. Donnelley permitted the Company to
continue to participate in the welfare plans of R. R. Donnelley until the
Company had established its own welfare plans; (ii) the Company assumed the
liability to provide retiree medical and life insurance benefits with respect
to active employees who had not satisfied the age and service eligibility
requirements to receive such benefits as of the completion of the IPO, and
R. R. Donnelley retained the liability to provide retiree medical and life
insurance benefits to all active and terminated employees who had met the age
and service requirements for eligibility as of the completion of the IPO; and
(iii) the Company ceased being a participant in the R. R. Donnelley stock
purchase plan.
The Benefit Administration Services Agreement provided that the Company
would reimburse R. R. Donnelley for (i) the actual cost of benefits provided
under R. R. Donnelley's employee benefit plans for Company employees during
the period in which the Company continued to participate in such plans
following the IPO and (ii) the Company's pro rata share of administration and
plan asset management expenses incurred in the operation of these plans during
such period. The Company established its own welfare plans as of July 1,
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<PAGE>
1996 but received administrative support for such plans from R. R. Donnelley
through December 31, 1996. During 1996, the Company paid R. R. Donnelley
approximately $6.3 million in connection with benefits and administration of
such benefits.
Pursuant to a Data Center Services Agreement between R. R. Donnelley and the
Company, the Company provides to R. R. Donnelley general computer and data
processing services, including mainframe processing and technical software
systems support and data processing for R. R. Donnelley's internal business
purposes. The Data Center Services Agreement will be in effect until December
31, 1998. After December 31, 1998, the Data Center Services Agreement will
automatically renew unless terminated by either party upon six months' notice.
Pursuant to the Data Center Services Agreement, R. R. Donnelley agreed to pay
the Company an annualized fee of $4.3 million for the Company's services under
the agreement during the period ended on December 31, 1996 and, thereafter,
the yearly fee would be adjusted according to changes in R. R. Donnelley's
service needs and increased by an amount equal to the average published
consumer price index increase for the preceding 12 months, measured at
September 30 of each year, provided that such increases would not exceed six
percent per year. In 1996, R. R. Donnelley paid approximately $4.0 million to
the Company in connection with such services.
Prior to completion of the IPO, the Company was included in the consolidated
federal income tax return of R. R. Donnelley and filed on a combined basis
with R. R. Donnelley in certain states. Thus, rather than paying income taxes
directly in these jurisdictions, the Company made tax sharing payments to
R. R. Donnelley pursuant to R. R. Donnelley's tax allocation policy. In
general, R. R. Donnelley's tax allocation policy provided that the
consolidated or combined tax liability was allocated among the entities in the
consolidated or combined group based principally upon taxable income, credits,
preferences and other amounts directly related to each entity. Upon completion
of the IPO, the Company no longer was permitted to be included in such
consolidated and combined tax returns. Instead, it began to file its own
federal, state and local income tax returns and pay its own taxes on a
separate company basis. Pursuant to a Tax Allocation and Indemnification
Agreement between R. R. Donnelley and the Company, however, the Company
remained obligated to pay to R. R. Donnelley any income taxes shown on such
consolidated and combined tax returns, generally to the extent attributable to
the Company, for the tax period (the "Interim Period") beginning on January 1,
1996 and ending on June 19, 1996 (to the extent that it has not previously
paid such amounts to R. R. Donnelley). In addition, the Tax Allocation and
Indemnification Agreement provides that if the income tax liability shown on
any such consolidated or combined tax return for the Interim Period and
attributable to the Company is adjusted as a result of an action of a taxing
authority or a court, then the Company would pay to R. R. Donnelley the full
amount of any increase in such tax liability (together with any applicable
interest and penalties). Under federal regulations, the Company will be
subject to several liability for the consolidated federal income taxes for any
tax year (including the Interim Period) in which it was a member of the R. R.
Donnelley federal consolidated group (whether or not such taxes are
attributable to the Company). R. R. Donnelley has agreed to indemnify the
Company against such liability and any similar liability under state and local
law. R. R. Donnelley has also agreed to indemnify the Company against any
increase in the Company's income taxes (whether or not related to taxes paid
on a consolidated or combined basis) for periods prior to January 1, 1996 that
results from an action of a taxing authority or a court (except to the extent
such increase provides tax benefits to the Company for periods beginning on or
after January 1, 1996, in which case the sum of such tax benefits will be
retained by R. R. Donnelley or paid by the Company to R. R. Donnelley). During
1996, the Company did not pay any amounts to R. R. Donnelley pursuant to the
Tax Allocation and Indemnification Agreement.
On February 24, 1997, the Board of Directors of the Company adopted a
stockholder rights plan (the "Rights Plan"). Contemporaneously with the
adoption of the Rights Plan, the Company entered into a Registration Rights
Agreement and a Letter Agreement with R. R. Donnelley. Pursuant to the
Registration Rights Agreement, the Company granted R. R. Donnelley, among
other things, the right to four demands for the registration of the Common
Stock owned by it under the federal securities laws and the right to be
included in other registrations of the Common Stock on behalf of the Company
or others. In consideration of the grant of such registration rights, R. R.
Donnelley entered into the Letter Agreement whereby it agreed, among other
things, not to oppose the adoption of the Rights Plan and not to seek the
redemption of the rights or the
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<PAGE>
termination of the Rights Plan. In addition, the Letter Agreement sets forth
the number of directors of the Company that R. R. Donnelley is entitled to
elect based on the level of R. R. Donnelley's ownership in the Company.
APPROVAL OF THE 1996 PLAN
GENERAL
The Board of Directors is proposing for stockholder approval the 1996 Plan.
In connection with the IPO, the Board adopted and R. R. Donnelley, as the
Company's then sole stockholder, approved the 1996 Plan and the Metromail
Corporation 1996 Broad-Based Employee Stock Plan. Under those plans, an
aggregate of 1,600,000 shares of Common Stock were available primarily for the
grant of incentive compensation awards in connection with the IPO. On January
30, 1997, the Board adopted an amendment to the 1996 Plan providing for an
additional 1,100,000 shares of Common Stock to be available for incentive
compensation awards under the 1996 Plan. This proposal to approve the 1996
Plan, as so amended, is being submitted to stockholders for the purpose of
satisfying the stockholder approval requirement for performance-based
compensation under section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). If stockholder approval of the 1996 Plan is not obtained,
the amendment providing for an additional 1,100,000 shares of Common Stock to
be available under the 1996 Plan will not become effective. Reference is made
to Exhibit A to this Proxy Statement for the complete text of the 1996 Plan
which is summarized below.
The purpose of the 1996 Plan is to provide incentives to management and other
persons, including non-employee directors of the Company, through rewards based
upon the ownership or performance of the Common Stock. Under the 1996 Plan, the
Company may grant options to purchase Common Stock, including "incentive stock
options" within the meaning of section 422 of the Code, restricted stock, stock
units and cash awards. Non-qualified options to purchase 5,000 shares of Common
Stock are also granted automatically to non-employee directors on September 1
of each year, and awards of 1,000 shares of restricted Common Stock were
granted to each non-employee director on September 1, 1996, and will be granted
to any future non-employee director as of the date on which such non-employee
director is elected to, or begins to serve on, the Board. A non-employee
director may also elect to receive on September 1 of each year, in lieu of an
annual cash retainer fee payable by the Company for services as a director for
the one-year period beginning on September 1, a non-qualified option to
purchase 2,500 shares of Common Stock. Three non-employee directors and
approximately 100 employees are eligible to participate in the 1996 Plan.
DESCRIPTION OF THE 1996 PLAN
Administration. The 1996 Plan is administered by the Committee. Subject to
the express provisions of the 1996 Plan, and except for those options and
awards of restricted Common Stock granted to non-employee directors described
above, the Committee has the authority to select eligible officers and other
key management employees or agents of, and consultants and advisors to, the
Company, its subsidiaries and any other entity designated by the Board or the
Committee in which the Company has a direct or indirect equity interest, and
non-employee directors for participation in the 1996 Plan and determine all of
the terms and conditions of each grant and award. Each grant and award will be
evidenced by a written agreement containing such provisions not inconsistent
with the 1996 Plan as the Committee shall approve. The Committee has the
authority to prescribe rules and regulations for administering the 1996 Plan
and to decide questions of interpretation of any provision of the 1996 Plan.
Except with respect to grants to officers of the Company who are subject to
Section 16 of the Exchange Act or a person whose compensation is likely to be
subject to the $1 million deduction limit under section 162(m) of the Code
(described below under "Federal Income Tax Consequences"), the Committee may
delegate some or all of its power and authority to administer the 1996 Plan to
the Chairman or other executive officer of the Company.
Available Shares. As described above, 1,600,000 shares of Common Stock are
currently available for incentive compensation awards under the 1996 Plan and
the 1996 Broad-Based Employee Stock Plan. If the
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<PAGE>
proposal is approved by stockholders, an additional 1,100,000 shares of Common
Stock will be available under the 1996 Plan. The total 2,700,000 shares of
Common Stock that would be available under the 1996 Plan would be reduced by
(i) the number of shares of Common Stock subject to stock options granted
under the 1996 Broad-Based Employee Stock Plan and (ii) the number of shares
of Common Stock issued pursuant to the Stock Purchase Plan, if such plan is
approved by the stockholders at the Annual Meeting. The number of shares
available under the 1996 Plan is subject to adjustment in the event of a stock
split, stock dividend, recapitalization, reorganization, merger or other
similar event or change in the Company's capitalization. In general, shares
subject to a grant or award which for any reason are not issued or delivered,
including by reason of the expiration, termination, cancellation or forfeiture
of all or a portion of a grant or award or by reason of the delivery or
withholding of shares to pay all or a portion of the exercise price of an
option or to satisfy tax withholding obligations, will again be available
under the 1996 Plan. The maximum number of shares of Common Stock with respect
which (i) options may be granted during any three-year period to any person is
250,000, and (ii) fixed awards in the form of restricted Common Stock may be
granted under the 1996 Plan is 200,000 in the aggregate, in each case subject
to adjustment in the event of a stock split, stock dividend, recapitalization,
reorganization, merger or other similar event or change in the Company's
capitalization.
Change in Control. In the event (i) a person (subject to certain exceptions)
becomes the beneficial owner of 50% or more of the voting power of the
Company's outstanding securities, (ii) during any period of twenty-four
consecutive months beginning on June 19, 1996, individuals who at the
beginning of such period constitute the Board and any new director whose
election was approved by at least two-thirds of the directors still in office
who either were directors at the beginning of the period or whose election was
previously so approved, cease to constitute a majority of the Board or (iii)
the stockholders approve a merger or consolidation with any other corporation
(unless the Company's stockholders and any employee benefit plan of the
Company receive 50% or more of the voting stock of the surviving company or
unless the merger or consolidation implements a recapitalization in which no
person acquires more than 50% of the combined voting power of the Company's
outstanding securities) or the stockholders approve a complete liquidation of
the Company or sale of all or substantially all of the Company's assets, all
options will be fully and immediately exercisable, the highest level of
achievement will be deemed to be met with respect to performance awards of
restricted Common Stock, stock units or cash and such performance awards will
be fully and immediately vested and the period of continued employment for all
fixed awards of restricted Common Stock, stock units or cash will be deemed
completed and such fixed awards will be fully and immediately vested.
Effective Date, Termination and Amendment. The 1996 Plan became effective on
June 19, 1996, the date of the closing of the IPO. If the 1996 Plan is
approved by stockholders, the proposal to make an additional 1,100,000 shares
of Common Stock available under the 1996 Plan will become effective as of the
date of stockholder approval. The 1996 Plan will terminate when shares of
Common Stock are no longer available under the 1996 Plan, unless terminated
earlier by the Board. The Board may amend the 1996 Plan at any time except
that no amendment may be made without stockholder approval if stockholder
approval would be required by applicable law, rule or regulation or such
amendment would increase the maximum number of shares of Common Stock
available under the 1996 Plan.
Stock Options. The period for the exercise of a non-qualified stock option
(other than options automatically granted to non-employee directors) and the
option exercise price will be determined by the Committee; provided that the
option exercise price will not be less than the fair market value of a share
of Common Stock on the date of grant.
No incentive stock option will be exercisable more than ten years after its
date of grant, unless the recipient of the incentive stock option owns greater
than ten percent of the voting power of all shares of capital stock of the
Company (a "ten percent holder"), in which case the option will be exercisable
for no more than five years after its date of grant. If the recipient of an
incentive stock option is a ten percent holder, the option exercise price will
be the price required by the Code, currently 110% of fair market value.
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<PAGE>
Beginning on September 1, 1996, non-employee directors are automatically
granted, on each September 1, non-qualified options to purchase 5,000 shares
of Common Stock at an exercise price per share equal to the fair market value
of a share of Common Stock on the date of grant ("automatic options").
Beginning on September 1, 1996, a non-employee director may also elect to
receive on September 1 of each year, in lieu of an annual cash retainer fee
payable by the Company for services as a director, a non-qualified option to
purchase 2,500 shares of Common Stock ("elective options"). Automatic options
and elective options will become exercisable on the first anniversary of the
date of grant and expire on the tenth anniversary of the date of grant.
Upon exercise, an option exercise price may be paid in cash or by the
delivery of previously owned shares of Common Stock, as determined by the
Committee. With respect to options other than automatic options and elective
options, in the event of termination of employment by reason of retirement or
total and permanent disability, each option will be exercisable to the extent
set forth in the agreement evidencing such option for a period of no more than
five years after the date of such termination of employment, but in no event
after the expiration of such option. In the event of termination of employment
by reason of death or any reason other than retirement or total and permanent
disability, each option will be exercisable to the extent set forth in the
agreement evidencing such option for a period of 90 days after the date of
death or date of such termination of employment, but in no event after the
expiration of such option. With respect to automatic options and elective
options, in the event of termination of service on the Board for any reason
other than death, each such option will be exercisable to the extent set forth
in the agreement evidencing such option for a period of no more than one year
after the date of such termination of service on the Board, but in no event
after the expiration of such option; provided, however, that if the optionee's
service as a director terminates (i) after at least three but less than six
years of service as a director, such options may be exercised for a period of
no more than two years after the date of such termination of service on the
Board, (ii) after at least six but less than nine years of service as a
director, such options may be exercised for a period of no more than three
years after the date of such termination of service on the Board, and (iii)
after nine or more years of service as a director, such options may be
exercised for a period of no more than four years after the date of such
termination of service on the Board. In the event of termination of service on
the Board by reason of death, each automatic option and elective option will
be exercisable to the extent set forth in the agreement evidencing such option
for a period of 90 days after the date of death, but in no event after the
expiration of such option.
Performance Awards and Fixed Awards. Under the 1996 Plan, bonus awards,
whether performance awards or fixed awards, may be made in the form of (i)
cash, whether in an absolute amount or as a percentage of compensation, (ii)
stock units, each of which is substantially the equivalent of a share of
Common Stock but for the power to vote and, subject to the Committee's
discretion, the entitlement to an amount equal to dividends or other
distributions otherwise payable on a like number of shares of Common Stock and
(iii) shares of Common Stock issued to the eligible person but forfeitable and
with restrictions on transfer.
Performance awards may be made in terms of a stated potential maximum dollar
amount, percentage of compensation or number of units or shares, with the
actual amount, percentage or number to be determined by reference to the level
of achievement of corporate, business unit, division, individual or other
specific objectives over a performance period of not less than one nor more
than ten years, as determined by the Committee. Fixed awards are not
contingent on the achievement of specific objectives, but are contingent on
the participant's continuing in the Company's employ for a period specified in
the award. Awards of 1,000 shares of restricted Common Stock were granted to
non-employee directors on September 1, 1996 and will be granted to any future
non-employee director as of the date on which such non-employee director is
elected to, or begins to serve on, the Board.
If shares of restricted Common Stock are subject to a bonus award, the
participant will have the right, unless and until such award is forfeited or
unless otherwise determined by the Committee at the time of grant, to vote the
shares and to receive dividends thereon from the date of grant and the right
to participate in any capital adjustment applicable to all holders of Common
Stock; provided, however, that a distribution with respect to shares of Common
Stock, other than regular quarterly cash dividends, shall be deposited with
the Company and shall be subject to the same restrictions as the shares of
Common Stock with respect to which such distribution
17
<PAGE>
was made. Upon termination of any applicable restriction period, including, if
applicable, the satisfaction or achievement of applicable performance
objectives, a certificate evidencing ownership of the shares of Common Stock
will be delivered to the holder of such award.
If stock units are credited to a participant pursuant to a bonus award,
then, subject to the Committee's discretion, amounts equal to dividends and
other distributions otherwise payable on a like number of shares of Common
Stock after the crediting of the units will be credited to an account for the
participant and held until the award is forfeited or paid out. Interest shall
be credited on the account annually at a rate equal to the return on five-year
U.S. Treasury obligations.
The Committee may provide for early vesting of an award in the event of the
participant's death, permanent and total disability or retirement. At the time
of vesting, (i) the award, if in units, will be paid to the participant either
in shares of Common Stock equal to the number of units, in cash equal to the
fair market value of such shares or in such combination thereof as the
Committee determines, and the participant's account to which dividend
equivalents, other distributions and interest have been credited will be paid
in cash, (ii) the award, if a cash bonus award, will be paid to the
participant either in cash, in shares of Common Stock with a then fair market
value equal to the amount of such award or in such combination thereof as the
Committee determines and (iii) shares of restricted Common Stock issued
pursuant to an award will be released from the restrictions.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the U.S. federal income tax
consequences generally arising with respect to grants and awards under the
1996 Plan.
Stock Options. A participant will not recognize any income upon the grant of
a stock option. A participant will recognize compensation taxable as ordinary
income (and subject to income tax withholding) upon exercise of a non-
qualified stock option equal to the excess of the fair market value of the
shares purchased over their exercise price, and the Company will be entitled
to a corresponding deduction. A participant will not recognize any income
(except for purposes of the alternative minimum tax) upon exercise of an
incentive stock option. If the shares acquired by exercise of an incentive
stock option are held for the longer of two years from the date the option was
granted and one year from the date it was exercised, any gain or loss arising
from a subsequent disposition of such shares will be taxed as long-term
capital gain or loss, and the Company will not be entitled to any deduction.
If, however, such shares are disposed of within such period, then in the year
of such disposition the participant will recognize compensation taxable as
ordinary income equal to the excess of the lesser of the excess of (A) either
(i) the amount realized upon such disposition and (ii) the fair market value
of such shares on the date of exercise, over (B) the exercise price, and the
Company will be entitled to a corresponding deduction.
Restricted Common Stock and Stock Units. A participant will not recognize
any income at the time of the grant of shares of restricted Common Stock
(unless the participant makes an election to be taxed at the time the
restricted Common Stock is granted) or stock units, and the Company will not
be entitled to a tax deduction at such time. A participant will recognize
compensation taxable as ordinary income at the time the restrictions lapse on
restricted Common Stock (if such election was not made) and stock units in an
amount equal to the excess of the fair market value of the shares or units at
such time over the amount, if any, paid for such shares or units. The amount
of ordinary income recognized by a participant is deductible by the Company as
compensation expense, except to the extent the deduction limit of section
162(m) of the Code (described below) applies. In addition, a participant
receiving dividends with respect to restricted Common Stock for which the
above-described election has not been made and prior to the time the
restrictions lapse will recognize compensation taxable as ordinary income
(subject to income tax withholding), rather than dividend income, in an amount
equal to the dividends paid and the Company will be entitled to a
corresponding deduction, except to the extent the deduction limit of section
162(m) of the Code applies. A participant will recognize compensation taxable
as ordinary income (subject to income tax withholding) when amounts
attributable to stock units are paid (or made available) and the Company will
be entitled to a corresponding deduction, except to the extent the deduction
limit of section 162(m) of the Code applies.
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<PAGE>
Cash Bonus Awards. A participant will not recognize any income upon the
grant of a bonus award payable in cash and the Company will not be entitled to
a tax deduction at such time. At the time such award is paid (or made
available), the participant will recognize compensation taxable as ordinary
income (subject to income tax withholding) in an amount equal to any cash paid
by the Company, and the Company will be entitled to a corresponding deduction,
except to the extent the deduction limit of section 162(m) of the Code
applies.
Section 162(m) of the Code. Section 162(m) of the Code generally limits to
$1 million the amount that a publicly held corporation is allowed each year to
deduct for the compensation paid to each of the corporation's chief executive
officer and the corporation's four most highly compensated executive officers
other than the chief executive officer. However, "performance-based"
compensation is not subject to the $1 million deduction limit. Based on
certain regulations issued by the U.S. Department of the Treasury, certain
compensation under the 1996 Plan, such as that payable with respect to
options, is not expected to be subject to the $1 million deduction limit, but
other compensation payable under the 1996 Plan, such as any restricted Common
Stock award that is not subject to a performance condition to vesting, would
be subject to such limit.
DETERMINABLE PLAN BENEFITS
The following table sets forth information regarding all awards granted
under the 1996 Plan during 1996. On January 31, 1997, the closing sale price
of the Common Stock, as reported in the New York Stock Exchange Composite
Transactions, was $20.625 per share.
AMENDED AND RESTATED METROMAIL CORPORATION 1996 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
DOLLAR NUMBER
VALUE OF
POSITION ($) UNITS
-------- ------- -------
<S> <C> <C>
Barton L. Faber....................................... -- 170,000(1)
357,000 17,000(2)
Susan L. Henricks..................................... -- 170,000(1)
357,000 17,000(2)
Ronald G. Eidell...................................... -- 64,000(1)
Tery R. Larrew........................................ -- 50,000(1)
Thomas J. Quarles..................................... -- 70,000(1)
Executive officers as a group (9 persons)............. -- 724,000(1)
714,000 34,000(2)
Non-Employee Directors as a group (3 persons)......... -- 17,500(3)
52,500 3,000(4)
All employees as a group, excluding executive officers
(90 persons)......................................... -- 427,000(5)
</TABLE>
- --------
(1) Represents options to purchase shares of Common Stock granted on the
closing date of the IPO. The option exercise price per share is $20.50.
(2) Represents shares of restricted Common Stock granted on the closing date
of the IPO. The dollar value is based on the closing price of the Common
Stock on the date of grant.
(3) Represents options to purchase shares of Common Stock granted on September
1, 1996. The option exercise price per share is $17.5625.
(4) Represents shares of restricted Common Stock granted on September 1, 1996.
The dollar value is based on the closing price of the Common Stock on the
date of grant.
(5) Represents 423,500 options to purchase shares of Common Stock granted on
the closing date of the IPO and 3,500 options to purchase shares of Common
Stock granted on August 27, 1996. The option exercise price per share for
the options granted on the closing date of the IPO is $20.50 and the
option exercise price per share for the options granted on August 27, 1996
is $18.1875.
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<PAGE>
The affirmative vote of the holders of a majority of the shares present in
person or by proxy at the 1997 Annual Meeting and entitled to vote on the
proposal to approve the 1996 Plan is required to approve the 1996 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED AND
RESTATED METROMAIL CORPORATION 1996 STOCK INCENTIVE PLAN.
APPROVAL OF THE STOCK PURCHASE PLAN
GENERAL
The Board of Directors is proposing for stockholder approval the Stock
Purchase Plan. The purpose of the Stock Purchase Plan is to encourage and
facilitate the purchase of Common Stock by eligible employees of the Company
and its subsidiaries and to provide an additional incentive to promote the
best interests of the Company and its subsidiaries and an additional
opportunity to participate in their economic progress. The Stock Purchase Plan
was adopted by the Board on January 30, 1997 and, if approved by the
stockholders, will become effective July 1, 1997. Reference is made to Exhibit
B to this Proxy Statement for the complete text of the Stock Purchase Plan
which is summarized below.
DESCRIPTION OF THE STOCK PURCHASE PLAN
Administration, Amendment and Termination. The Stock Purchase Plan will be
administered by the Committee. Subject to the express provisions of the Stock
Purchase Plan, the Committee will have complete authority to interpret the
Stock Purchase Plan, to prescribe, amend and rescind rules and regulations
relating to it and to make all other determinations necessary or advisable for
the administration of the Stock Purchase Plan. The Board or the Committee may
at any time, and from time to time, amend the Stock Purchase Plan in any
respect, except that, without stockholder approval, no amendment may be made
changing the number of shares to be reserved under the Stock Purchase Plan
(unless certain changes occur in the Company's capital structure as described
in the Stock Purchase Plan), or that would otherwise require stockholder
approval under applicable law.
The Stock Purchase Plan will terminate upon the purchase by participants of
all shares that may be issued under the Stock Purchase Plan or any earlier
time in the discretion of the Board.
Eligibility. In general, any employee of the Company or any of its
subsidiaries that has adopted the Stock Purchase Plan with the prior approval
of the Company (the "Participating Companies") is eligible to participate in
the Stock Purchase Plan as of the effective date of the Stock Purchase Plan if
such employee (a) has been continuously employed by the Participating
Companies for at least six months; (b) is customarily employed by the
Participating Companies for more than 20 hours per week; and (c) is
customarily employed by the Participating Companies for more than five months
in any calendar year prior to the beginning of a Purchase Period under the
Stock Purchase Plan (a "Participant"). Under the Stock Purchase Plan, the
Purchase Period begins on July 1, 1997, and on the first day of each calendar
quarter thereafter. Approximately 2,440 employees would have been eligible to
participate in the Stock Purchase Plan as of March 1, 1997.
Available Shares. The maximum number of shares of Common Stock available for
purchase under the Stock Purchase Plan will be 300,000 shares, subject to
adjustment in the event of certain changes to the Company's capital structure,
as described in the Stock Purchase Plan. Notwithstanding anything to the
contrary in the Stock Purchase Plan, no employee can purchase Common Stock
under the Stock Purchase Plan if such employee, immediately after the grant of
the option, would own stock (including shares then purchasable under the Stock
Purchase Plan) possessing five percent or more of the total combined voting
power or value of all classes of issued and outstanding stock of the Company
or any of its subsidiaries. In addition, no Participant can purchase Common
Stock under the Stock Purchase Plan and all other employee stock purchase
plans (within the meaning of section 423 of the Code) of the Company and its
subsidiaries with an aggregate fair market value (determined
20
<PAGE>
as of the beginning of each Purchase Period) in excess of $25,000. In
addition, an employee will not be permitted to purchase more than 400 shares
of Common Stock during any Purchase Period.
Stock Purchases. Prior to the first day of each Purchase Period for which an
employee is eligible to participate in the Stock Purchase Plan, an employee
may file an election specifying his or her chosen rate of payroll deduction
contributions. Under the Stock Purchase Plan, an employee may elect to make
payroll deduction contributions in an amount equal to a whole percentage not
less than one and not more than ten percent of the employee's compensation (as
defined in the Stock Purchase Plan) for each payroll period, beginning with
the first pay date which occurs on or after the entry date as of which such
employee commences participation in the Stock Purchase Plan.
The Committee will cause to be established a separate "Purchase Account" on
behalf of each Participant to hold payroll deduction contributions made under
the Stock Purchase Plan. Subject to a Participant's right of abandonment
described below, the balance of each Participant's Purchase Account will be
applied on the last day of each Purchase Period to purchase the number of
whole shares of Common Stock determined by dividing the balance of such
Participant's Purchase Account as of such date by the Purchase Price. The
"Purchase Price" under the Stock Purchase Plan is, with respect to a Purchase
Period, the lesser of 85% of the fair market value of a share of Common Stock
on the first day of such Purchase Period and 85% of the fair market value of a
share of Common Stock on the last day of such Purchase Period.
Following each Purchase Date, the Company will purchase or issue Common
Stock (including, at the option of the Company, shares issued out of
treasury), in its sole discretion, on behalf of each Participant.
FEDERAL INCOME TAX CONSEQUENCES
The Company believes that the Stock Purchase Plan qualifies under section
423 of the Code as an employee stock purchase plan. Under section 423 the
Participant does not recognize any taxable income at the time Common Stock is
purchased under the Stock Purchase Plan. The following is a brief summary of
certain of the U.S. federal income tax consequences generally arising with
respect to purchases made under the Stock Purchase Plan.
If a Participant disposes of shares of Common Stock within two years after
the first day of the Purchase Period during which such shares were purchased
(a "disqualifying disposition"), the Participant will recognize compensation
taxable as ordinary income (and subject to tax withholding) in the amount of
the excess of the fair market value of such shares over the Purchase Price of
such shares. The Participant's cost basis in the shares will be increased by
the amount of such ordinary compensation income. If the amount realized upon
such disposition exceeds the Participant's cost basis in the shares of Common
Stock (as so increased), the Participant will recognize capital gain in the
amount of the difference between the amount realized and such adjusted cost
basis. Under current tax law, gain on capital assets held for less than one
year is treated as "short-term" capital gain which is not eligible for certain
preferential tax treatment afforded "long-term" capital gain. In the event the
amount realized is less than the cost basis in the shares of Common Stock (as
so increased), the Participant will recognize capital loss from such
disposition in the amount of the difference between the adjusted cost basis
and the amount realized.
If a Participant disposes of shares of Common Stock two years or more after
the first day of the Purchase Period during which such shares were purchased
(a "qualifying disposition"), the tax treatment will be different. The
Participant will recognize compensation taxable as ordinary income (and
subject to tax withholding) in the amount of the lesser of (i) the excess of
the fair market value of the shares for such date over the Purchase Price, and
(ii) the excess of the amount realized from such disposition over the Purchase
Price of the shares. The Participant's cost basis in the shares of Common
Stock will be increased by the amount of such ordinary compensation income. In
addition, the Participant will recognize long-term capital gain equal to the
difference (if any) between the amount realized upon such disposition and the
cost basis in the shares (as so increased). In
21
<PAGE>
the event the amount realized from such disposition is less than the Purchase
Price, the Participant will recognize long-term capital loss in the amount of
the difference between the Purchase Price and the amount realized.
The Company will not be entitled to a deduction for any excess of the fair
market value of the shares of Common Stock over the Purchase Price, except to
the extent the Participant recognizes ordinary compensation income upon a
disqualifying disposition.
The affirmative vote of the holders of a majority of the shares present in
person or by proxy at the 1997 Annual Meeting and entitled to vote on the
proposal to approve the Stock Purchase Plan is required to approve the Stock
Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE METROMAIL
CORPORATION 1997 EMPLOYEE STOCK PURCHASE PLAN.
INDEPENDENT AUDITORS
The Company has not selected its independent public accountants for the year
ending December 31, 1997. It is expected that this selection will be made at
the meeting of the Board of Directors to be held in April 1997, after the
Audit Committee has reviewed the audit proposal for such year. After such
review, the Audit Committee will recommend the selection of accountants for
1997 to the Board of Directors, which will make the final selection.
Arthur Andersen LLP served as the Company's independent auditors for the
year ended December 31, 1996. Representatives of that firm are expected to
attend the Annual Meeting, will have an opportunity to make a statement, if
they wish to do so, and will be available to answer appropriate questions from
stockholders at that time.
OTHER MATTERS
The Board of Directors is not aware of any other business that may come
before the Annual Meeting. However, if additional matters properly come before
the meeting, proxies will be voted at the discretion of the proxyholders.
STOCKHOLDER PROPOSALS
The Company currently contemplates that the 1998 Annual Meeting of
Stockholders will be held in April of 1998. Stockholder proposals intended to
be presented at that meeting must be received by the Company not later than
November 21, 1997, at its principal executive offices, Attention: Thomas J.
Quarles, Secretary, in order to be considered for inclusion in the Company's
proxy statement and form of proxy relating to that annual meeting.
The Company's By-laws provide that stockholders seeking to bring business
before a meeting of stockholders, or to nominate candidates for election as
directors at a meeting of stockholders, must provide timely notice thereof in
writing. To be timely, a stockholder's notice must be delivered to, or mailed
and received at, the principal executive office of the Company, by the
Secretary, not less than 60 days nor more than 90 days prior to the scheduled
meeting (or, if less than 70 days' notice of the meeting is given or made to
stockholders, not later than the close of business on the tenth day following
the earlier of (i) the day on which such notice of the date of the meeting was
mailed, or (ii) the day on which public disclosure of the date of such meeting
was made). The notice is required to contain certain information about the
nominee or proposal and the stockholder making the nomination or proposal. A
nomination or proposal that does not comply with the above procedure will be
disregarded.
22
<PAGE>
ADDITIONAL INFORMATION
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1996 is being provided to stockholders with this Proxy Statement.
By Order of the Board of Directors,
LOGO
Thomas J. Quarles
Secretary
Lombard, Illinois
March 21, 1997
23
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
METROMAIL CORPORATION
1996 STOCK INCENTIVE PLAN
JANUARY 30, 1997
I. GENERAL
1. Plan. To provide incentives to management and other persons through
rewards based upon the ownership or performance of the common stock of
Metromail Corporation (the "Company"), the Committee hereinafter designated,
may grant cash or bonus awards, stock options, or combinations thereof, to
eligible persons, on the terms and subject to the conditions stated in the
Plan. For purposes of the Plan, references to employment by the Company also
mean employment by a majority-owned subsidiary of the Company and employment
by any other entity designated by the Board or the Committee in which the
Company has a direct or indirect equity interest.
2. Eligibility. Officers and other key management employees of, agents of,
consultants to and advisors to, the Company, its subsidiaries, and any other
entity designated by the Board or the Committee in which the Company has a
direct or indirect equity interest, and directors of the Company who are not
employees of the Company ("Non-Employee Directors"), shall be eligible, upon
selection by the Committee, to receive cash or bonus awards or stock options,
either singly or in combination, as the Committee, in its discretion, shall
determine. Non-Employee Directors shall also be eligible to participate in the
Plan in accordance with Article IV.
3. Limitation on Shares to be Issued. Subject to adjustment as provided in
Section 5 of this Article I, 2,700,000 million shares of common stock ("common
stock") shall be available under the Plan, reduced by (i) the aggregate number
of shares of common stock which become subject to outstanding stock options
under the terms of the Metromail Corporation 1996 Broad-Based Employee Stock
Plan, (ii) the aggregate number of shares of common stock sold under the terms
of the Metromail Corporation 1997 Employee Stock Purchase Plan, and (iii) the
aggregate number of shares of common stock which become subject to outstanding
bonus awards and stock options under this Plan. Shares subject to a grant or
award under either the Metromail Corporation 1996 Broad-Based Employee Stock
Plan, the Metromail Corporation 1997 Employee Stock Purchase Plan or this Plan
which for any reason are not sold, issued or delivered, including by reason of
the expiration, termination, cancellation or forfeiture of all or a portion of
the grant or award or by reason of the delivery or withholding of shares to
pay all or a portion of the exercise price or to satisfy tax withholding
obligations, shall again be available for future grants and awards hereunder.
For the purpose of complying with Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the rules and regulations thereunder,
the maximum number of shares of common stock with respect to which options may
be granted during any three-year period to any person shall be 250,000,
subject to adjustment as provided in Section 5 of this Article I. The maximum
number of shares of common stock with respect to which fixed awards in the
form of restricted stock may be granted hereunder is 200,000 in the aggregate,
subject to adjustment as provided in Section 5 of this Article I
Shares of common stock to be issued may be authorized and unissued shares of
common stock, treasury stock or a combination thereof.
4. Administration of the Plan. The Plan shall be administered by a Committee
designated by the Board of Directors (the "Committee"). Each member of the
Committee shall be (i) an "outside director" within the meaning of Section
162(m) of the Code and (ii), a "Non-Employee Director" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Committee shall, subject to
A-1
<PAGE>
the terms of the Plan, select eligible persons for participation; determine
the form of each grant and award, either as cash, a bonus award or stock
options or a combination thereof; and determine the number of shares or units
subject to the grant or award, the fair market value of the common stock or
units when necessary, the time and conditions of vesting, exercise or
settlement, and all other terms and conditions of each grant and award,
including, without limitation, the form of instrument evidencing the grant or
award. The Committee may establish rules and regulations for the
administration of the Plan, interpret the Plan, and impose, incidental to a
grant or award, conditions with respect to competitive employment or other
activities not inconsistent with the Plan. All such rules, regulations,
interpretations and conditions shall be conclusive and binding on all parties.
Each grant and award shall be evidenced by a written instrument and no grant
or award shall be valid until an agreement is executed by the Company and the
recipient thereof and, upon execution by each party and delivery of the
agreement to the Company, such grant or award shall be effective as of the
effective date set forth in the agreement.
The Committee may delegate some or all of its power and authority hereunder
to the Chairman or other executive officer of the Company as the Committee
deems appropriate; provided, however, that the Committee may not delegate its
power and authority with regard to (i) the selection for participation in the
Plan of (A) an employee who is a "covered employee" within the meaning of
Section 162(m) of the Code or who, in the Committee's judgment, is likely to
be a covered employee at any time during the period a grant or award hereunder
to such employee would be outstanding or (B) an officer or other person
subject to Section 16 of the Exchange Act or (ii) decisions concerning the
timing, pricing or amount of a grant or award to such an employee, officer or
other person.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the
Committee present at any meeting at which a quorum is present or (ii) acts
approved in writing by all of the members of the Committee without a meeting.
5. Adjustments. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of common stock other than a regular
cash dividend, the number and class of securities available under the Plan,
the number and class of securities subject to each outstanding bonus award,
the number and class of securities subject to each outstanding stock option,
the purchase price per security and the number and class of securities subject
to each option and restricted stock award to be granted to Non-Employee
Directors pursuant to Article IV shall be appropriately adjusted by the
Committee, such adjustments to be made in the case of outstanding stock
options without a change in the aggregate purchase price. If any such
adjustment would result in a fractional security being (i) available under the
Plan, such fractional security shall be disregarded, or (ii) subject to an
outstanding grant or award under the Plan, the Company shall pay the holder
thereof, in connection with the first vesting, exercise or settlement of such
grant or award in whole or in part occurring after such adjustment, an amount
in cash determined by multiplying (i) the fraction of such security (rounded
to the nearest hundredth) by (ii) the excess, if any, of (A) the fair market
value on the date of such vesting, exercise or settlement over (B) the
exercise price, if any, of such grant or award.
6. Effective Date and Term of Plan. The Plan shall be submitted to the sole
stockholder of the Company for approval and, if approved, shall become
effective as of the closing date of the Company's initial public offering of
common stock. The Plan shall terminate when shares of common stock are no
longer available under the Plan unless terminated prior thereto by action of
the Board. No further grants or awards shall be made under the Plan after
termination, but termination shall not affect the rights of any participant
under any grants or awards made prior to termination.
7. Amendments. The Plan may be amended or terminated by the Board in any
respect except that no amendment may be made without stockholder approval if
stockholder approval is required by applicable law, rule or regulation,
including Section 162(m) of the Code, or such amendment would increase
(subject to Section 5 of this Article I) the maximum number of shares
available under the Plan. No amendment may impair the rights of a holder of an
outstanding grant or award without the consent of such holder.
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II. BONUS AWARDS
1. Form of Award. Bonus awards, whether performance awards or fixed awards,
may be made to eligible persons in the form of (i) cash, whether in an
absolute amount or as a percentage of compensation, (ii) stock units, each of
which is substantially the equivalent of a share of common stock but for the
power to vote and, subject to the Committee's discretion, the entitlement to
an amount equal to dividends or other distributions otherwise payable on a
like number of shares of common stock, (iii) shares of common stock issued to
the eligible person but forfeitable and with restrictions on transfer in any
form as hereinafter provided or (iv) any combination of the foregoing.
2. Performance Awards. Awards may be made in terms of a stated potential
maximum dollar amount, percentage of compensation or number of units or
shares, with the actual such amount, percentage or number to be determined by
reference to the level of achievement of corporate, sector, business unit,
division, individual or other specific objectives over a performance period of
not less than one nor more than ten years, as determined by the Committee. No
rights or interests of any kind shall be vested in an individual receiving a
performance award until the conclusion of the performance period and the
determination of the level of achievement specified in the award, and the time
of vesting, if any, thereafter shall be as specified in the award.
3. Fixed Awards. Awards may be made which are not contingent on the
achievement of specific objectives, but are contingent on the participant's
continuing in the Company's employ for a period specified in the award.
4. Rights with Respect to Restricted Shares. If shares of restricted common
stock are subject to an award, the participant shall have the right, unless
and until such award is forfeited or unless otherwise determined by the
Committee at the time of grant, to vote the shares and to receive dividends
thereon from the date of grant and the right to participate in any capital
adjustment applicable to all holders of common stock; provided, however, that
a distribution with respect to shares of common stock, other than a regular
quarterly cash dividend, shall be deposited with the Company and shall be
subject to the same restrictions as the shares of common stock with respect to
which such distribution was made.
During the restriction period, a certificate or certificates representing
restricted shares shall be registered in the holder's name and may bear a
legend, in addition to any legend which may be required under applicable laws,
rules or regulations, indicating that the ownership of the shares of common
stock represented by such certificate is subject to the restrictions, terms
and conditions of the Plan and the agreement relating to the restricted
shares. All such certificates shall be deposited with the Company, together
with stock powers or other instruments of assignment (including a power of
attorney), each endorsed in blank with a guarantee of signature if deemed
necessary or appropriate, which would permit transfer to the Company of all or
a portion of the shares of common stock subject to the award in the event such
award is forfeited in whole or in part. Upon termination of any applicable
restriction period, including, if applicable, the satisfaction or achievement
of applicable objectives, and subject to the Company's right to require
payment of any taxes, a certificate or certificates evidencing ownership of
the requisite number of shares of common stock shall be delivered to the
holder of such award.
5. Rights with Respect to Stock Units. If stock units are credited to a
participant pursuant to an award, then, subject to the Committee's discretion,
amounts equal to dividends and other distributions otherwise payable on a like
number of shares of common stock after the crediting of the units (unless the
record date for such dividends or other distributions precedes the date of
grant of such award) shall be credited to an account for the participant and
held until the award is forfeited or paid out. Interest shall be credited on
the account annually at a rate equal to the return on five year U.S. Treasury
obligations.
6. Vesting and Resultant Events. The Committee may, in its discretion,
provide for early vesting of an award in the event of the participant's death,
permanent and total disability or retirement. At the time of vesting, (i) the
award, if in units, shall be paid to the participant either in shares of
common stock equal to the number of units, in cash equal to the fair market
value of such shares, or in such combination thereof as the Committee shall
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determine, and the participant's account to which dividend equivalents, other
distributions and interest have been credited shall be paid in cash, (ii) the
award, if a cash bonus award, shall be paid to the participant either in cash,
or in shares of common stock with a then fair market value equal to the amount
of such award, or in such combination thereof as the Committee shall determine
and (iii) shares of restricted common stock issued pursuant to an award shall
be released from the restrictions.
III. STOCK OPTIONS
1. Grants of Options. Options to purchase shares of common stock may be
granted to such eligible persons as may be selected by the Committee. These
options may, but need not, constitute "incentive stock options" under Section
422 of the Code or any other form of option under the Code. An incentive stock
option may not be granted to any person who is not an employee of the Company
or any subsidiary (as defined in Section 424 of the Code). To the extent that
the aggregate fair market value (determined as of the date of grant) of shares
of common stock with respect to which options designated as incentive stock
options are exercisable for the first time by a participant during any
calendar year (under the Plan or any other plan of the Company, or any parent
or subsidiary) exceeds the amount (currently $100,000) established by the
Code, such options shall not constitute incentive stock options.
2. Number of Shares and Purchase Price. The number of shares of common stock
subject to an option and the purchase price per share of common stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of common stock shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of the option; provided further, that if an incentive stock
option shall be granted to any person who, on the date of grant of such
option, owns capital stock possessing more than ten percent of the total
combined voting power of all classes of capital stock of the Company (or of
any parent or subsidiary) (a "Ten Percent Holder"), the purchase price per
share of common stock shall be the price (currently 110% of fair market value)
required by the Code in order to constitute an incentive stock option.
3. Exercise of Options. The period during which options granted hereunder
may be exercised shall be determined by the Committee; provided, however, that
no incentive stock option shall be exercised later than ten years after its
date of grant; provided further, that if an incentive stock option shall be
granted to a Ten Percent Holder, such option shall not be exercisable more
than five years after its date of grant. The Committee may, in its discretion,
establish performance measures which shall be satisfied or met as a condition
to the grant of an option or to the exercisability of all or a portion of an
option. The Committee shall determine whether an option shall become
exercisable in cumulative or non-cumulative installments and in part or in
full at any time. An exercisable option, or portion thereof, may be exercised
only with respect to whole shares of common stock.
An option may be exercised (i) by giving written notice to the Company
specifying the number of whole shares of common stock to be purchased and
accompanied by payment therefor in full (or arrangement made for such payment
to the Company's satisfaction) either (A) in cash, (B) in previously owned
whole shares of common stock (which the optionee has held for at least six
months prior to delivery of such shares or which the optionee purchased on the
open market and for which the optionee has good title free and clear of all
liens and encumbrances) having a fair market value, determined as of the date
of exercise, equal to the aggregate purchase price payable by reason of such
exercise, (C) in cash by a broker-dealer acceptable to the Company to whom the
optionee has submitted an irrevocable notice of exercise or (D) a combination
of (A) and (B) and (ii) by executing such documents as the Company may
reasonably request. The Committee shall have sole discretion to disapprove of
an election pursuant to any of clauses (B)-(D). Any fraction of a share of
common stock which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the
optionee. No certificate representing common stock shall be delivered until
the full purchase price therefor has been paid.
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4. Termination of Employment or Service. An option may be exercised during
the optionee's continued employment with the Company or during the optionee's
continued provision of services to the Company, and, unless otherwise
determined by the Committee as set forth in the agreement relating to the
option, for a period not in excess of ninety days following termination of
employment or the provision of services, as the case may be, and only within
the original term of the option; provided, however, that if employment of the
optionee by the Company or the provision of services by the optionee to the
Company shall have terminated by reason of retirement or total and permanent
disability, then the option may be exercised to the extent set forth in the
agreement relating to the option for a period not in excess of five years
following termination of employment or the provision of services, but not
after the expiration of the term of the option. In the event of the death of
an optionee (i) during employment or the term in which services are being
provided, (ii) within a period not in excess of five years after termination
of employment or the term in which services are being provided by reason of
retirement or total and permanent disability or (iii) within ninety days after
termination of employment or the term in which services are being provided for
any other reason, outstanding options held by such optionee at the time of
death may be exercised to the extent set forth in the agreement relating to
the option by the executor, administrator, personal representative,
beneficiary or similar persons of such deceased optionee within ninety days of
the date of death, but in each case only within the original term of the
option.
IV. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
1. Eligibility. Each Non-Employee Director shall be granted options to
purchase shares of common stock and fixed awards in the form of restricted
stock in accordance with this Article IV. Options granted under this Article
IV shall not constitute incentive stock options.
2. Grants of Stock Options. Each Non-Employee Director shall be granted
options to purchase shares of common stock as follows:
(a) Non-Elective Grants. On September 1 of each year beginning September
1, 1996 (or, if a person is not a Non-Employee Director on the applicable
September 1, on the date on which such person is first elected or begins to
serve as a Non-Employee Director other than by reason of termination of
employment), each person who is a Non-Employee Director on such date shall
be granted an option to purchase 5,000 shares of common stock (which amount
shall be pro-rated if such Non-Employee Director is first elected or begins
to serve as a Non-Employeee Director on a date other than the applicable
September 1) at a purchase price per share equal to the fair market value
of a share of common stock on the date of grant of such option.
(b) Elective Grants. On September 1 of each year beginning September 1,
1996, options to purchase 2,500 shares of common stock shall be granted to
each Non-Employee Director who, prior to such date, files with the Company
a written election to receive options to purchase common stock in lieu of
all of such Non-Employee Director's annual cash retainer fee payable by the
Company to such Non-Employee Director for services as a Director of the
Company for the one-year period beginning on such September 1 ("Annual
Retainer"). In the event a person is not a Non-Employee Director on the
applicable September 1, if such person files with the Company, not later
than the fifth business day after which such person is first elected or
begins to serve as a Non-Employee Director other than by reason of
termination of employment, a written election to receive options to
purchase common stock in lieu of all of such Non-Employee Director's Annual
Retainer payable with respect to the remainder of such one-year period,
options to purchase that number of shares of common stock set forth in the
following sentence shall be granted to such Non-Employee Director on the
tenth business day after the date such written election is filed with the
Company. The number of shares (rounded to the nearest whole number) of
common stock underlying such Non-Employee Director's options granted
pursuant to the preceding sentence shall be determined by multiplying 2,500
by a fraction, the numerator of which is the number of days from and
including the date on which such person was first elected or began to serve
as a Non-Employee Director to and including the following August 31, and
the denominator of which is 365. An election pursuant to this subsection
2(b) shall be irrrevocable on and after the second business day prior to
the date of grant of the options.
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The purchase price per share of common stock subject to an option granted
pursuant to this subsection 2(b) shall equal the fair market value of a
share of common stock on the date of grant of such option.
(c) Option Period and Exercisability. Except as otherwise provided in
Section 3 of Article V of the Plan, each option granted under this Article
IV shall not be exercisable during the first year following its date of
grant. Thereafter, such option shall be fully exercisable on and after the
first anniversary of its date of grant. Each option granted under this
Article IV shall expire ten years after its date of grant. An exercisable
option, or portion thereof, may be exercised in whole or in part only with
respect to whole shares of common stock. Options granted under this Article
IV shall be exercisable in accordance with the second paragraph of Section
3 of Article III.
(d) Termination of Directorship. An option granted under this Article IV
may be exercised during the optionee's continued service as a Director of
the Company and for a period not in excess of one year following
termination of service as a Director of the Company other than by reason of
death and only within the original term of the option; provided, however,
that if the optionee's service as a Director of the Company shall have
terminated (i) after at least three but less than six years of service as a
Director of the Company, such option may be exercised for a period not in
excess of two years following such termination of service, (ii) after at
least six but less than nine years of service as a Director of the Company,
such option may be exercised for a period not in excess of three years
following such termination of service, and (iii) after nine or more years
of service as a Director of the Company, such option may be exercised for a
period not in excess of four years following such termination of service,
but in each case only within the original term of the option. In the event
of the death of an optionee (i) while such optionee is serving as a
Director of the Company or (ii) after termination of service as a Director
of the Company and during the period in which an option is exercisable as
determined in accordance with the preceding sentence, any outstanding
option granted under this Article IV which is exercisable on the date of
the optionee's death may be exercised to the extent then exercisable by the
executor, administrator, personal representative, beneficiary or similar
person of such deceased optionee within 90 days of the date of death, but
in each case only within the original term of the option.
3. Grants of Restricted Stock Awards. Each Non-Employee Director shall be
granted fixed awards in the form of restricted stock as follows:
(a) Time of Grant. On September 1, 1996 (or, if a person is not a Non-
Employee Director on September 1, 1996 on the date on which such person is
first elected or begins to serve as a Non-Employee Director other than by
reason of termination of employment), each person who is a Non-Employee
Director on such date shall be granted a restricted stock award of 1,000
shares of common stock.
(b) Vesting and Forfeiture. Except as otherwise provided in Section 3 of
Article V of the Plan, the shares of common stock covered by a restricted
stock award granted under this Article IV shall vest on the date of the
third anniversary of the date of grant of such award, provided, however,
the shares of common stock covered by such award shall be forfeited to and
become the property of the Company if prior to vesting the holder of such
award shall terminate service as a Director of the Company.
(c) Restrictions on Transfers. Until the shares of common stock covered
by a restricted stock award under this Article IV have become vested and
until the date which is 30 days after the termination of service as a
Director of the Company of the holder of such award, neither such award nor
any shares of common stock covered by such award nor any rights thereunder
(i) may be transferred or assigned by such holder other than by will or the
laws of descent and distribution or (ii) shall be subject to execution,
attachment or other process, and no person shall be entitled to exercise
any rights of such holder under such award by virtue of any attempted
execution, attachment or other process. Any transfer other than by will or
the laws of descent and distribution or any attempted assignment, pledge or
hypothocation, whether or not by operation of laws, shall be void.
Notwithstanding the foregoing, in the event the shares of common stock
covered by a restricted stock award under this Article IV vest as a result
of a Change of Control, the Company shall, no later than five business days
after the Acceleration Date, deliver to the holder one or more certificates
for the vested shares, free of any restrictive legends, and destroy any
stock powers relating
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to the vested shares. The Company shall be entitled to hold the certificate
or certificates for shares of common stock covered by a restricted stock
award under this Article IV until the restrictions on transfer set forth in
this Article IV shall have lapsed.
(d) Rights as a Shareholder. The holder of a restricted stock award under
this Article IV shall have the right to vote the shares of common stock
covered by such award and to receive dividends, if any, thereon, unless and
until such shares are forfeited pursuant to subparagraph 3(b).
V. OTHER
1. Non-Transferability of Options. No option shall be transferable other
than (i) by will, the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Company or (ii) as
otherwise set forth in the agreement relating to such option. Each option may
be exercised during the participant's lifetime only by the participant or the
participant's guardian, legal representative or similar person. Except as
permitted by the second preceding sentence, no option may be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of any option, such award
and all rights thereunder shall immediately become null and void.
2. Tax Withholding. The Company shall have the right to require, prior to
the issuance or delivery of any shares of common stock or the payment of any
cash pursuant to a grant or award hereunder, payment by the holder thereof of
any Federal, state, local or other taxes which may be required to be withheld
or paid in connection therewith. An agreement may provide that (i) the Company
shall withhold whole shares of common stock which would otherwise be delivered
to a holder, having an aggregate fair market value determined as of the date
the obligation to withhold or pay taxes arises in connection therewith (the
"Tax Date"), or withhold an amount of cash which would otherwise be payable to
a holder, in the amount necessary to satisfy any such obligation or (ii) the
holder may satisfy any such obligation by any of the following means: (A) a
cash payment to the Company, (B) delivery to the Company of previously owned
whole shares of common stock (which the holder has held for at least six
months prior to the delivery of such shares or which the holder purchased on
the open market and for which the holder has good title, free and clear of all
liens and encumbrances) having an aggregate fair market value determined as of
the Tax Date, (C) authorizing the Company to withhold whole shares of common
stock which would otherwise be delivered having an aggregate fair market value
determined as of the Tax Date or withhold an amount of cash which would
otherwise be payable to a holder, (D) in the case of the exercise of an
option, a cash payment by a broker-dealer acceptable to the Company to whom
the optionee has submitted an irrevocable notice of exercise or (E) any
combination of (A), (B) and (C); provided, however, that the Committee shall
have sole discretion to disapprove of an election pursuant to any of clauses
(B)-(E). An agreement relating to a grant or award hereunder may provide for
shares of common stock to be delivered or withheld having an aggregate fair
market value in excess of the minimum amount required to be withheld, but not
in excess of the amount determined by applying the holder's maximum marginal
tax rates. Any fraction of a share of common stock which would be required to
satisfy such an obligation shall be disregarded and the remaining amount due
shall be paid in cash by the holder.
3. Acceleration Upon Change in Control. If while any performance award or
fixed award granted under Article II or IV or any stock option granted under
Article III or IV is outstanding --
(a) any "person," as such term is defined in Section 3(a)(9) of the
Exchange Act, as modified and used in Section 13(d) and 14(d) thereof (but
not including (i) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
of the Company) (hereinafter a "Person") is or becomes the beneficial
owner, as defined in Rule 13d-3 of the Exchange Act, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly
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from the Company or its affiliates, excluding an acquisition resulting from
the exercise of a conversion or exchange privilege in respect of
outstanding convertible or exchangeable securities) representing 50% or
more of the combined voting power of the Company's then outstanding
securities; or
(b) during any period of twenty-four (24) consecutive months (not
including any period prior to the effective date of the Plan), individuals
who at the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has entered into
any agreement with the Company to effect a transaction described in Clause
(a), (c) or (d) of this Section) whose election by the Board or nomination
for election by the Company's stockholders was approved by a vote of at
least two-thirds ( 2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, at least 50% of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in
which no Person acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets, (any of such
events being hereinafter referred to as a "Change in Control"), then from
and after the date on which public announcement of the acquisition of such
percentage shall have been made, or the date on which the change in the
composition of the Board set forth above shall have occurred, or the date
of any such stockholder approval of a merger, consolidation, plan of
complete liquidation or an agreement for the sale of the Company's assets
as described above occurs (the applicable date being hereinafter referred
to as the "Acceleration Date"), (i) with respect to such performance
awards, the highest level of achievement specified in the award shall be
deemed met and the award shall be immediately and fully vested, (ii) with
respect to such fixed awards, the period of continued employment or
provision of services, as the case may be, specified in the award upon
which the award is contingent shall be deemed completed and the award shall
be immediately and fully vested and (iii) with respect to such options, all
such options, whether or not then exercisable in whole or in part, shall be
fully and immediately exercisable.
4. Restrictions on Shares. Each grant and award made hereunder shall be
subject to the requirement that if at any time the Company determines that the
listing, registration or qualification of the shares of common stock subject
thereto upon any securities exchange or under any law, or the consent or
approval of any governmental body, or the taking of any other action is
necessary or desirable as a condition of, or in connection with, the delivery
of shares thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company.
The Company may require that certificates evidencing shares of common stock
delivered pursuant to any grant or award made hereunder bear a legend
indicating that the sale, transfer or other disposition thereof by the holder
is prohibited except in compliance with the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
5. No Right of Participation or Employment. No person shall have any right
to participate in the Plan. Neither the Plan nor any grant or award made
hereunder shall confer upon any person any right to continued employment or
engagement for services by the Company, any subsidiary or any affiliate of the
Company or affect in any manner the right of the Company, any subsidiary or
any affiliate of the Company to terminate the employment or engagement for
services of any person at any time without liability hereunder.
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6. Rights as Stockholder. No person shall have any right as a stockholder of
the Company with respect to any shares of common stock or other equity
security of the Company which is subject to a grant or award hereunder unless
and until such person becomes a stockholder of record with respect to such
shares of common stock or equity security.
7. Governing Law. The Plan, each grant and award hereunder and the related
agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United
States, shall be governed by the laws of the State of Delaware and construed
in accordance therewith without giving effect to principles of conflicts of
laws.
8. Approval of Plan. The Plan and all grants and awards made hereunder shall
be null and void if the adoption of the Plan is not approved by the sole
stockholder of the Company.
9. Foreign Eligible Persons. Without amending this Plan, the Committee may
grant options to eligible persons who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in the judgment
of the Committee be necessary or desirable to foster and promote achievement
of this Plan and, in furtherance of such purposes the Committee may make such
modifications, amendments, procedures, subplans and the like as may be
necessary or advisable to comply with provisions of laws in other countries or
jurisdictions in which the Company or its subsidiaries operates or has
employees, agents, consultants or advisors.
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EXHIBIT B
METROMAIL CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Metromail Corporation 1997 Employee Stock
Purchase Plan (the "Plan") is to provide employees of Metromail Corporation, a
Delaware corporation (the "Company"), and its Subsidiary Companies (as defined
in Section 13) added incentive to remain employed by such companies and to
encourage increased efforts to promote the best interests of such companies by
permitting eligible employees to purchase shares of the common stock of the
Company ("Common Shares") at below-market prices. The Plan is intended to
qualify as an "employee stock purchase plan" under section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). The Company and its Subsidiary
Companies that, from time to time, adopt the Plan are sometimes hereinafter
called collectively the "Participating Companies."
2. Eligibility. Participation in the Plan shall be open to each employee of
the Participating Companies (an "Eligible Employee") (a) who has been
continuously employed by the Participating Companies for at least six months,
(b) whose customary employment by the Participating Companies is greater than
20 hours per week; and (c) whose customary employment by the Participating
Companies is more than five months in any calendar year. No right to purchase
Common Shares hereunder shall accrue under the Plan in favor of any person who
is not an Eligible Employee as of the first day of a Purchase Period (as
defined in Section 3). Notwithstanding anything contained in the Plan to the
contrary, no Eligible Employee shall acquire a right to purchase Common Shares
hereunder (i) if, immediately after receiving such right, such employee would
own 5% or more of the total combined voting power or value of all classes of
stock of the Company or any Subsidiary Company (including any stock
attributable to such employee under section 424(d) of the Code), or (ii) if
for a given calendar year such right would permit such employee's aggregate
rights to purchase stock under all employee stock purchase plans of the
Company and its Subsidiary Companies exercisable during such calendar year to
accrue at a rate which exceeds $25,000 of fair market value of such stock for
such calendar year, all determined in the manner provided by section 423(b)(8)
of the Code. In addition, the number of Common Shares which may be purchased
by any Eligible Employee during any Purchase Period shall not exceed 400
shares.
3. Effective Date of Plan; Purchase Periods. The Plan shall become effective
on July 1, 1997 or on such later date as may be specified by the Board of
Directors (the "Board") of the Company or the Committee (as defined in Section
11). The Plan shall cease to be effective unless, within 12 months before or
after the date of its adoption by the Board, it has been approved at a duly-
called meeting of the stockholders of the Company.
A "Purchase Period" shall consist of the three month period beginning on
each July 1, October 1, January 1, and April 1, each commencing on or after
the effective date and prior to termination of the Plan.
4. Basis of Participation. (a) Payroll Deduction. Each Eligible Employee
shall be entitled to enroll in the Plan as of the first day of any Purchase
Period which begins after such employee has become an Eligible Employee.
To enroll in the Plan, an Eligible Employee shall execute and deliver a
payroll deduction authorization (the "Authorization") to the Company or its
designated agent. The Authorization shall become effective on the first day of
the Purchase Period following the execution and delivery of such
Authorization. Each Authorization shall direct that payroll deductions be made
by the employee's employer for each payroll period during which the employee
is a participant in the Plan. The amount of each payroll deduction specified
in an Authorization for each such payroll period shall be a whole percentage
amount or a whole dollar amount, as determined by the Committee, in either
case not to exceed 10%, or such lesser percentage as may be determined by the
Committee, of the participant's current regular wage or salary (before
withholding or other deductions) paid to him by any of the Participating
Companies.
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Payroll deductions (and any other amount paid under the Plan) shall be made
for each participant in accordance with his Authorization until his
participation in the Plan terminates, his Authorization is revised or the Plan
terminates, all as hereinafter provided.
A participant may not change the amount of his payroll deduction during any
Purchase Period, except that a participant may elect to terminate his
participation in the Plan as provided in Section 7 or 8.
Payroll deductions shall be credited to a purchase account established on
the books of the participant's employer on behalf of each participant (a
"Purchase Account"). At the end of each Purchase Period, the amount in each
participant's Purchase Account will be applied to the purchase from the
Company of the number of Common Shares determined by dividing such amount by
the Purchase Price (as defined in Section 5) for such Purchase Period. No
interest shall accrue at any time for any amount credited to a Purchase
Account of a participant.
(b) Other Methods of Participation. The Committee may, in its discretion,
establish additional procedures whereby Eligible Employees may participate in
the Plan by means other than payroll deduction, including, but not limited to,
delivery of funds by participants in a lump sum or automatic charges to
participants' bank accounts. Such other methods of participating shall be
subject to such rules and conditions as the Committee may establish. The
Committee may at any time amend, suspend or terminate any participation
procedures established pursuant to this paragraph without prior notice to any
participant or Eligible Employee.
5. Purchase Price. The purchase price (the "Purchase Price") per Common
Share hereunder for any Purchase Period shall be the lesser of 85% of the fair
market value of a Common Share on the first day of such Purchase Period and
85% of the fair market value of a Common Share on the last day of such
Purchase Period. If such sum results in a fraction of one cent, the Purchase
Price shall be increased to the next higher full cent. The fair market value
of a Common Share on a given day shall be deemed to be the closing sale price
per share for the Common Shares on the New York Stock Exchange on such day or,
if there shall be no such sale of Common Shares on such day, then on the next
preceding day on which there shall have been such a sale. In no event,
however, shall the Purchase Price be less than the par value of the Common
Shares.
6. Issuance of Shares. The Common Shares purchased by each participant shall
be considered to be issued and outstanding to his credit as of the close of
business on the last day of each Purchase Period. The total number of Common
Shares purchased by all participants during each Purchase Period shall be
issued, as of the last day in such Purchase Period, to a nominee or agent for
the benefit of the participants. A participant will be issued a certificate
for his shares when his participation in the Plan is terminated, the Plan is
terminated or upon request, but in the last case only in denominations of at
least 25 shares.
After the close of each Purchase Period, a report will be sent to each
participant stating the entries made to his Purchase Account, the number of
Common Shares purchased and the applicable Purchase Price.
7. Termination of Participation. A participant may elect at any time to
terminate his participation in the Plan, provided such termination is received
by the participant's employer in writing prior to the last business day of the
Purchase Period for which such termination is to be effective. Upon any such
termination, the participant's employer shall promptly deliver to such
participant cash in an amount equal to the balance to his credit in his
Purchase Account on the date of such termination, one or more certificates for
the number of full Common Shares held for his benefit, and the cash equivalent
for any fractional share so held. Such cash equivalent shall be determined by
multiplying the fractional share by the fair market value of a Common Share on
the last day of the Purchase Period immediately preceding such termination,
determined as provided in Section 5.
If the participant dies, terminates his employment with the Participating
Companies for any reason, or otherwise ceases to be an Eligible Employee, his
participation in the Plan shall immediately terminate. Upon such terminating
event, cash in an amount equal to the balance to his credit in his Purchase
Account on the date of such termination, one or more certificates for the
number of full Common Shares held for his benefit, and the
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cash equivalent of any fractional share so held, determined as provided above
in this Section 7, shall be delivered promptly to such participant or his
legal representative, as the case may be.
8. Termination or Amendment of the Plan. The Company, by action of the Board
or the Committee, may terminate the Plan at any time. Notice of termination
shall be given to all participants, but any failure to give such notice shall
not impair the effectiveness of the termination.
Without any action being required, the Plan will terminate in any event when
the maximum number of Common Shares to be sold under the Plan (as provided in
Section 12) has been purchased. Such termination shall not impair any rights
which under the Plan shall have vested on or prior to the date of such
termination. If at any time the number of shares remaining available for
purchase under the Plan are not sufficient to satisfy all then-outstanding
purchase rights, the Board may determine an equitable basis of apportioning
available shares among all participants.
The Board or the Committee may amend the Plan from time to time in any
respect for any reason; provided, however, no such amendment shall (a)
materially adversely affect any purchase rights outstanding under the Plan
during the Purchase Period in which such amendment is to be effected, (b)
increase the maximum number of Common Shares which may be purchased under the
Plan, (c) decrease the Purchase Price of the Common Shares for any Purchase
Period below the lesser of 85% of the fair market value thereof on the first
day of such Purchase Period and 85% of such fair market value on the last day
of such Purchase Period or (d) adversely affect the qualification of the Plan
under section 423 of the Code.
Upon termination of the Plan, the respective cash balance, if any, to the
credit of each participant in his Purchase Account, one or more certificates
for the number of full Common Shares held for his benefit, and the cash
equivalent of any fractional share so held, determined as provided in Section
7, shall be promptly distributed to such participant.
9. Non-Transferability. Rights acquired under the Plan are not transferable
and may be exercised only by a participant. Common Shares purchased under the
Plan by an Officer are not transferable for six months following the date of
such purchase and, notwithstanding any other provision of the Plan, no
certificate representing any Common Shares subject to such restriction on
transfer shall be issued except as provided in the third sentence of Section
6.
10. Stockholder's Rights. No Eligible Employee or participant shall by
reason of the Plan have any rights of a stockholder of the Company until and
to the extent he shall acquire Common Shares as herein provided.
11. Administration of the Plan. The Plan shall be administered by the Human
Resources Committee of the Board (the "Committee"), provided that the Board
may otherwise appoint (A) the Board or (B) a committee consisting of two or
more members of the Board, each of whom is a Non-Employee Director (within the
meaning of Rule 16b-3(b) promulgated under the Securities Exchange Act of
1934, to act as the Committee. In addition to the power to amend or terminate
the Plan pursuant to Section 8, the Committee shall have full power and
authority to: (i) interpret and administer the Plan and any instrument or
agreement entered into under the Plan; (ii) establish such rules and
regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (iii) make any other determination and
take any other action that the Committee deems necessary or desirable for
administration of the Plan. Decisions of the Committee shall be final,
conclusive and binding upon all persons, including the Company, any
participant and any other employee of the Company. A majority of the members
of the Committee may determine its actions and fix the time and place of its
meetings.
The Plan shall be administered so as to ensure all participants have the
same rights and privileges as are provided by section 423(b)(5) of the Code.
12. Maximum Number of Shares. The maximum number of Common Shares which may
be purchased under the Plan is 300,000 subject, however, to adjustment as
hereinafter set forth. Common Shares sold hereunder may be treasury shares,
authorized and unissued shares, or a combination thereof. If the Company
shall, at any time
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after the effective date of the Plan, change its issued Common Shares into an
increased number of shares, with or without par value, through a stock
dividend or a split-up of shares, or into a decreased number of shares, with
or without par value, through a combination of shares, then, effective with
the record date for such change, the maximum number of Common Shares which
thereafter may be purchased under the Plan and the maximum number of shares
which thereafter may be purchased during any Purchase Period shall be the
maximum number of shares which, immediately prior to such record date,
remained available for purchase under the Plan and Purchase Period
proportionately increased, in case of such stock dividend or split-up, or
proportionately decreased in case of such combination of shares.
13. Miscellaneous. (a) Except as otherwise expressly provided herein, any
Authorization, election, notice or document under the Plan from an Eligible
Employee or participant shall be delivered to his employer corporation or its
designated agent and, subject to any limitations specified in the Plan, shall
be effective when so delivered.
(b) The term "business day" shall mean any day other than Saturday, Sunday
or a legal holiday in Illinois.
(c) The term "Officer" shall mean any officer within the meaning of Rule
16a-1(f) under Section 16 of the Securities Exchange Act of 1934, as amended.
(d) The term "Subsidiary Companies" shall mean all corporations which are
subsidiary corporations (within the meaning of Section 424(f) of the Code) and
of which the Company is the common parent.
(e) The Plan, and the Company's obligation to sell and deliver Common Shares
hereunder, shall be subject to all applicable federal, state and foreign laws,
rules and regulations, and to such approval by any regulatory or governmental
agency as may, in the opinion of counsel for the Company, be required.
14. Change in Control. In order to maintain the participants' rights in the
event of any Change in Control of the Company, as hereinafter defined, upon
such Change in Control the then current Purchase Period shall thereupon end,
and all participants' Purchase Accounts shall be applied to purchase shares
pursuant to Section 5, and the Plan shall immediately thereafter terminate.
"Change in Control" shall have the meaning assigned to such term in the
Amended and Restated Metromail Corporation 1996 Stock Incentive Plan.
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<PAGE>
PROXY METROMAIL CORPORATION PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING TO BE HELD APRIL 24,
1997
The undersigned hereby appoints Barton L. Faber and Susan L. Henricks, and
each of them, the proxy or proxies of the undersigned with full power of
substitution to vote all shares of the common stock of Metromail Corporation, a
Delaware corporation (the "Company"), that the undersigned is entitled to vote
at the Annual Meeting of Stockholders of the Company to be held on April 24,
1997, or adjournments thereof, with all powers the undersigned would possess if
personally present, on the following as specified and, in their discretion, on
such other matters as may properly come before the meeting.
Proposal 1: Election of Directors.
Jonathan P. Ward
[_] FOR the Nominee listed above [_] WITHHOLD AUTHORITY to vote
for the Nominee listed above
Proposal 2: Approval of Amended and Restated Metromail Corporation 1996 Stock
Incentive Plan.
[_] FOR[_] AGAINST[_] ABSTAIN
Proposal 3: Approval of Metromail Corporation 1997 Employee Stock Purchase
Plan.
[_] FOR[_] AGAINST[_] ABSTAIN
(Please sign on reverse side.)
When properly executed, this proxy will be voted as directed. If no direction
is given, this proxy will be voted FOR the election of the nominee, FOR
Proposal 2 and FOR Proposal 3 and in the discretion of the proxies nominated
hereby on any other business as may properly come before the meeting.
Dated: ___________________________, 1997
Please sign exactly as name appears below
----------------------------------------
Signature
----------------------------------------
Signature, if held jointly
Please sign exactly as your name ap-
pears on this Proxy. If shares are reg-
istered in more than one name, the sig-
natures of all such holders are re-
quired. A corporation should sign in
its full corporate name by a duly au-
thorized officer, stating such offi-
cer's title and official capacity, giv-
ing the full title as such. A partner-
ship should sign in the partnership
name by an authorized person, stating
such person's title and relationship to
the partnership.
PLEASE COMPLETE, DATE, SIGN AND RETURN
THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
