SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) 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 Section 240.14a-11(c) or Section 240.14a-12
Cadmus
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[CADMUS LOGO]
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of Cadmus Communications Corporation. The meeting will be
held on November 12, 1998, at 11:00 a.m., eastern standard time in the
Auditorium of the Crestar Center, 919 East Main Street, Richmond,
Virginia.
The primary business of the meeting will be the election of
directors, approval of an amendment to the Company's 1990 Long Term
Incentive Stock Plan and the ratification of independent public
accountants, as more fully explained in the enclosed proxy statement.
During the meeting, we also will report to you on the condition and
performance of Cadmus and its subsidiaries, including developments
during the past fiscal year. You will have an opportunity to question
management on matters of interest to all shareholders.
We hope to see you on November 12, 1998. Whether you plan to attend
or not, please complete, sign, date and return the enclosed proxy card
as soon as possible in the postage-paid envelope provided. Your vote is
important. We appreciate your continued interest in and support of
Cadmus.
Cordially,
/s/ C. Stephenson Gillispie, Jr.
--------------------------------
C. Stephenson Gillispie, Jr.
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
October 2, 1998
CADMUS COMMUNICATIONS CORPORATION
6620 West Broad Street, Suite 240, Richmond, Virginia 23230
<PAGE>
[CADMUS LOGO]
------------------------------------------------------
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
------------------------------------------------------
TO BE HELD NOVEMBER 12, 1998
The 1998 Annual Meeting of Shareholders of Cadmus Communications
Corporation will be held on November 12, 1998, at 11:00 a.m., eastern standard
time in the Auditorium of the Crestar Center, 919 East Main Street, Richmond,
Virginia, for the following purposes:
1. To elect four Class III directors to serve until the 2001 Annual
Meeting of Shareholders.
2. To approve an amendment to the 1990 Long Term Incentive Stock Plan to
increase the number of shares issuable thereunder by an additional 350,000
shares.
3. To ratify the designation of Arthur Andersen LLP as independent public
accountants for the current fiscal year.
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on September 18,
1998, as the record date for determination of shareholders entitled to notice
of and to vote at the meeting and any adjournments thereof.
By Order of the Board of Directors
/s/ Bruce V. Thomas
-----------------------------
Bruce V. Thomas
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
October 2, 1998
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY. IF YOU ATTEND THE MEETING IN
PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
<PAGE>
CADMUS COMMUNICATIONS CORPORATION
6620 West Broad Street, Suite 240, Richmond, Virginia 23230
------------------------------------------
PROXY STATEMENT
------------------------------------------
1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 12, 1998
GENERAL
The enclosed proxy is solicited by the Board of Directors of Cadmus
Communications Corporation ("Cadmus" or "Company") for the 1998 Annual Meeting
of Shareholders ("Annual Meeting") of Cadmus to be held November 12, 1998, at
the time and place set forth in the accompanying Notice of Annual Meeting of
Shareholders and for the following purposes: (i) to elect four Class III
directors to serve until the 2001 Annual Meeting of Shareholders (see "Election
of Directors" pages 5-12); (ii) to approve an amendment to the 1990 Long Term
Incentive Stock Plan (see "Approval of Amendment to 1990 Long Term Incentive
Stock Plan" pages 22-24); (iii) to ratify the designation of Arthur Andersen
LLP as independent public accountants for the current fiscal year (see
"Ratification of the Selection of Independent Public Accountants" page 24); and
(iv) to transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
If a shareholder is a participant in the Cadmus Dividend Reinvestment
Plan, the enclosed proxy card represents the number of full shares in the
dividend reinvestment plan account, as well as shares registered in the
participant's name. A participant in the Cadmus Thrift Savings Plan with shares
of Cadmus common stock allocated to his or her account will receive a separate
proxy card representing the number of full shares allocated to his or her
account as of the record date for the Annual Meeting.
Cadmus will pay all costs for this proxy solicitation. Proxies are being
solicited by mail and may also be solicited personally, by telephone or
telegraph, by directors, officers, and employees of Cadmus. Cadmus may
reimburse banks, brokerage firms, and other custodians, nominees, and
fiduciaries for their reasonable expenses in sending proxy materials to the
beneficial owners of the stock. All shares of the common stock of Cadmus
("Common Stock") represented by properly executed and delivered proxies will be
voted according to their terms and conditions at the Annual Meeting or any
adjournments thereof. Shareholders may revoke proxies at any time prior to
their exercise by written notice to Cadmus, by submitting a proxy bearing a
later date, or by attending the Annual Meeting and requesting to vote in
person.
The approximate mailing date of this proxy statement and the accompanying
proxy is October 2, 1998.
VOTING RIGHTS
Only those shareholders of record at the close of business on September
18, 1998, are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. The number of shares of
1
<PAGE>
Common Stock outstanding and entitled to vote as of the record date was
7,832,751. A majority of the votes entitled to be cast, represented in person
or by proxy, will constitute a quorum for the transaction of business.
With regard to the election of directors, votes may be cast in favor or
withheld. If a quorum is present, the nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected directors; therefore, votes
withheld will have no effect. The approval of the amendment to the 1990
Incentive Stock Plan and ratification of Arthur Andersen LLP as independent
public accountants require the affirmative vote of a majority of the shares
cast on the matter. Thus, although abstentions and broker non-votes (shares
held by customers which may not be voted on certain matters because the broker
has not received specific instructions from the customer) are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, they are generally not counted for purposes of determining whether
such proposals have been approved and therefore have no effect.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 31, 1998 (except as noted
below), the number and percentage of shares of Common Stock held by persons
known by Cadmus to be the owners of more than 5% of the Company's Common Stock,
each of the Cadmus directors and nominees for director, the executive officers
named in the "Summary Compensation Table," and all directors and executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP COMMON STOCK ISSUED
OF BENEFICIAL OWNER OF COMMON STOCK(1) AND OUTSTANDING
- ------------------------------- ---------------------- --------------------
<S> <C> <C>
Loomis, Sayles & Company, LP
Boston, Massachusetts 469,800 5.9%
J. & W. Seligman & Co. Inc.
Boston, Massachusetts 456,355 5.8%
Brinson Partners, Inc.
Chicago, Illinois 415,200 5.2%
Dimensional Fund Advisors Inc.
Santa Monica, California 413,600 5.2%
Frank Daniels, III
Raleigh, North Carolina 26,000(2) *
C. Stephenson Gillispie, Jr.
Richmond, Virginia 236,038(3) 2.9%
G. Waddy Garrett
Richmond, Virginia 4,600(4) *
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP COMMON STOCK ISSUED
OF BENEFICIAL OWNER OF COMMON STOCK(1) AND OUTSTANDING
- --------------------------- ---------------------- --------------------
<S> <C> <C>
Price H. Gwynn, III
Charlotte, North Carolina 16,466(5) *
Steven R. Isaac
Richmond, Virginia 32,600(6) *
Jeanne M. Liedtka
Charlottesville, Virginia 3,000(7) *
John D. Munford, II
Virginia Beach, Virginia 50,145 *
John H. Phillips
Richmond, Virginia 92,849(8) 1.2%
John C. Purnell, Jr.
Richmond, Virginia 10,182(9) *
Jerry I. Reitman
Chicago, Illinois 1,500(10)
Russell M. Robinson, II
Charlotte, North Carolina 20,272 *
John W. Rosenblum
Charlottesville, Virginia 7,000 *
Wallace Stettinius
Richmond, Virginia 194,328(11) 2.4%
Bruce V. Thomas
Richmond, Virginia 62,799(12) *
Bruce A. Walker
Seattle, Washington 6,800 *
David G. Wilson, Jr.
Richmond, Virginia 136,270(13) 1.7%
All Directors and
Executive Officers as a
Group (18 persons) 957,036(14) 11.3%
</TABLE>
3
<PAGE>
- ----------
* Indicates that percent of class does not exceed one percent.
(1) Except as otherwise indicated and except to the extent that in certain
cases shares may be held in joint tenancy with a spouse, each nominee,
director, or executive officer has sole voting and investment power with
respect to the shares shown. Except as otherwise noted, beneficial
ownership for each non-employee director includes 5,000 shares as to which
each such director holds presently exercisable options under the 1992
Non-Employee Director Stock Compensation Plan. The beneficial ownership
shown for the four institutional shareholders is based on a listing of
institutional holders of the Company's Common Stock as of June 30, 1998
provided to the Company by NASDAQ OnlineTM. These institutions also have
made Schedule 13G filings reflecting their respective ownerships as of
December 31, 1997. Each of these filings certifies that the acquisition of
the shares reported thereon was in the ordinary course of business and not
in connection with or as a participant in any transaction having the
purpose or effect of changing or influencing the control of the Company.
(2) Mr. Daniels holds 3,000 of his shares in the form of presently exercisable
options.
(3) Includes: 204,200 shares as to which Mr. Gillispie holds presently
exercisable options, 986 shares held in his father's estate of which he is
executor; 10 shares held as custodian; and 581 shares held for his account
in the Cadmus account under the Cadmus Thrift Savings Plan.
(4) Includes: 1,000 shares held by Mr. Garrett's wife, as to which shares Mr.
Garrett disclaims beneficial ownership, and 1,000 shares held in the form
of presently exercisable options.
(5) Mr. Gwynn holds 4,000 of his shares in the form of presently exercisable
options.
(6) Includes: 500 shares held by Mr. Isaac's children and 350 shares held by
Mr. Isaac's wife, as to all of which shares Mr. Isaac disclaims beneficial
ownership; and 30,000 shares in the form of presently exercisable options.
(7) Ms. Liedtka holds all of her shares in the form of presently exercisable
options.
(8) Includes: 51,500 shares as to which Mr. Phillips holds presently
exercisable options and 11,517 shares held for his account under the Cadmus
Thrift Savings Plan.
(9) Includes 150 shares held by Mr. Purnell's wife, as to which shares Mr.
Purnell disclaims beneficial ownership.
(10) Mr. Reitman holds 1,000 of his shares in the form of presently exercisable
options.
(11) Includes: 156,106 shares held in an agency account by NationsBank of
Virginia, N.A., as to all of which shares Mr. Stettinius is the beneficial
owner; 2,222 shares, also held in an agency account by NationsBank of
Virginia, N.A., for Mr. Stettinius' wife, as to which shares Mr.
Stettinius disclaims beneficial ownership; and 36,000 shares as to which
Mr. Stettinius holds presently exercisable options.
(12) Includes: 58,800 shares as to which Mr. Thomas holds presently exercisable
options and 2,063 shares held for his account in the Cadmus account under
the Cadmus Thrift Savings Plan.
4
<PAGE>
(13) Includes: 79,900 shares as to which Mr. Wilson holds presently exercisable
options and 506 shares held for his account in the Cadmus account under
the Thrift Savings Plan.
(14) In addition to the executive officers named in the Summary Compensation
Table, the beneficial ownership shown for executive officers of Cadmus
reflects shares beneficially owned by David E. Bosher, Vice President and
Treasurer and Edward B. Fernstrom, Vice President, Information Technology.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes (I, II and III), with
one class being elected every year for a term of three years. Price H. Gwynn,
III, John C. Purnell, Jr., Russell M. Robinson, II, John W. Rosenblum and David
G. Wilson, Jr. currently serve as Class III directors. Messrs. Purnell,
Robinson, Rosenblum and Wilson will be nominated to serve as Class III
directors for terms of three years expiring at the 2001 annual meeting. Mr.
Gwynn will not stand for re-election at the Annual Meeting in accordance with
the Company's policy on retirement of directors. Joseph J. Ward, who had been
elected in February, 1998 by the Board of Directors to serve as a Class III
director until the Annual Meeting, resigned as director in order to assume the
position of Executive Vice President of the Company's Professional
Communications sector. David G. Wilson, Jr., currently Chairman of the
Company's Professional Communications sector, was elected by the Board of
Directors to serve as a Class III director until the Annual Meeting to fill the
vacancy created by the resignation of Mr. Ward. The persons named in the proxy
will vote for the election of the nominees named below unless authority is
withheld. If, for any reason, any of the persons named below should become
unavailable to serve, an event which management does not anticipate, proxies
will be voted for the remaining nominees and such other person or persons as
the Board of Directors of Cadmus may designate. In the alternative, the Board
may reduce the size of affected Class to the number of remaining nominees, if
any, for whom the proxies will be voted.
Certain information concerning the four nominees for election at the
Annual Meeting is set forth below, as well as certain information about the
Class I and Class II directors, who will continue in office after the Annual
Meeting until the 1999 and 2000 annual meeting of shareholders, respectively.
5
<PAGE>
NOMINEES FOR ELECTION AS
CLASS III DIRECTORS
(TO SERVE UNTIL 2001 ANNUAL MEETING)
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
DIRECTOR PAST FIVE YEARS AND DIRECTORSHIPS
NAME AND (AGE) SINCE(1) IN OTHER PUBLIC COMPANIES
- -------------- ---------- --------------------------------------------
<S> <C>
1979 Executive Director, Friends Association for
Children, Richmond, Virginia, a non-profit
[Photo] child welfare organization.
John C. Purnell, Jr. (57)
- -----------------------------------------------------------------------------------------------------------------
[Photo]
1984 Attorney-at-law, President, Director and
shareholder of Robinson, Bradshaw &
Hinson, P.A., Charlotte, North Carolina.
Director, Caraustar Industries, Inc. and
Duke Energy Corporation.
Russell M. Robinson, II (66)
- --------------------------------------------------------------------------------------------------------------
[Photo]
1988 Dean, The Jepson School of Leadership
Studies, University of Richmond,
Richmond, Virginia. Formerly, Tayloe
Murphy Professor and Dean, the Darden
Graduate School of Business Adminis-
tration, University of Virginia. Director,
Chesapeake Corporation, Comdial
Corporation, Cone Mills Corporation, and
T. Rowe Price Associates.
John W. Rosenblum (54)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
DIRECTOR PAST FIVE YEARS AND DIRECTORSHIPS
NAME AND (AGE) SINCE(1) IN OTHER PUBLIC COMPANIES
- --------------- ---------- --------------------------------------------
<S> <C>
1998 Chairman, Cadmus Professional Communi-
cations sector effective July, 1998.
Formerly, Executive Vice President,
Professional Communications sector from
[Photo] July, 1997 and President and Chief
Executive Officer, Cadmus Journal
Services from November, 1994. From
March, 1993 to November, 1994, Senior
Vice President and General Manager of
David G. Wilson, Jr. (57) the Company's Byrd Journal division.
- -------------------------------------------------------------------------------------------------------------------------------
CLASS I DIRECTORS
(SERVING UNTIL 1999 ANNUAL MEETING)
1995 Associate Professor at the Darden Graduate
School of Business Administration,
University of Virginia. Formerly,
[Photo] Associate Professor at Rutgers University
and Simmons College.
Jeanne M. Liedtka (43)
- -------------------------------------------------------------------------------------------------------------------------------
1965 Retired. Formerly, Vice Chairman, Executive
Vice President, Union Camp Corporation,
[Photo] Franklin, Virginia. Director, Universal
Corporation and Caraustar Industries, Inc.
John D. Munford, II (70)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
DIRECTOR PAST FIVE YEARS AND DIRECTORSHIPS
NAME AND (AGE) SINCE(1) IN OTHER PUBLIC COMPANIES
- -------------- ---------- --------------------------------------------
<S> <C>
1997 Vice-Chairman, International Data Response
Corporation and Chairman, Board of
Governors of Children's Miracle Network.
[Photo] Executive Vice President and Director,
Integrated Communications (retired) of
the Leo Burnett Company, a
Chicago-based international advertising
Jerry I. Reitman (60) agency.
- ---------------------------------------------------------------------------------------------------------------------------------
1967 Senior Executive Fellow at the School of
Business, Virginia Commonwealth
[Photo] University, Richmond, Virginia. Formerly,
Chairman of the Board, President and
Chief Executive Officer, Cadmus.
Director, Chesapeake Corporation.
Wallace Stettinius (65)
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS II DIRECTORS
(SERVING UNTIL 2000 ANNUAL MEETING)
1994 Chairman and Chief Executive Officer, Total
Sports, Inc., a Raleigh-based news media
publisher. Chairman, KOZ inc., a
[Photo] Raleigh-based provider of Web-based
data. Formerly, Publisher, Nando.net and
Vice President, Editor and Director of
Operations, The News and Observer
Publishing Company.
Frank Daniels, III (42)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
DIRECTOR PAST FIVE YEARS AND DIRECTORSHIPS
NAME AND (AGE) SINCE(1) IN OTHER PUBLIC COMPANIES
- -------------- ---------- ----------------------------------------
<S> <C>
1991 Chairman of the Board, President and Chief
Executive Officer, Cadmus. Formerly,
Chief Operating Officer, Cadmus, and
President and Chief Executive Officer,
The William Byrd Press, Incorporated.
[Photo] Director, First Union - VA/MD/DC
Advisory Board.
C. Stephenson Gillispie, Jr. (56)
- --------------------------------------------------------------------------------------------------------------------------------
1977 President and Chief Executive Officer, Valco
Graphics, Inc., a Seattle marketing firm
[Photo] providing printing, mailing and fulfillment
services.
Bruce A. Walker (64)
- --------------------------------------------------------------------------------------------------------------------------------
1997 Chairman and Chief Executive Officer of
Alliance Agronomics, Inc., a
Mechanicsville, Virginia fertilizer
production and distribution concern.
[Photo] Director, Ag-Chem Equipment Co., Inc.,
Reeds Jewelers, Inc., and County Bank of
Chesterfield, Inc.
G. Waddy Garrett (57)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All service by Cadmus directors prior to June 30, 1984, refers to service
as directors of Cadmus' subsidiaries, The William Byrd Press, Incorporated
or Washburn Graphics, Inc.
CADMUS BOARD AND COMMITTEE MEETINGS AND ATTENDANCE
The Board of Directors of Cadmus held six meetings during the fiscal year
ended June 30, 1998. All directors attended at least 75% of all meetings of the
Board and committees on which they served, except Ms. Liedtka who attended 58%
of such meetings because she was out of the country on sabbatical leave for a
portion of the fiscal year.
9
<PAGE>
The Board has five standing committees: the Executive Committee, the
Nominating Committee, the Audit Committee, the Executive Compensation and
Organization Committee and the Benefits and Investment Committee.
The Executive Committee has a wide range of powers, but its primary duty
is to act if necessary between scheduled Board meetings. For such purpose, the
Executive Committee possesses all the powers of the Board in management of the
business and affairs of Cadmus except as otherwise limited by Virginia law. The
Executive Committee held no meetings during the fiscal year ended June 30,
1998. Members of the Committee are Messrs. Daniels, Gillispie (Chairman),
Gwynn, Munford and Stettinius.
The Nominating Committee selects and recommends to the Board a slate of
nominees to be voted on for election as directors at each annual meeting, and
makes recommendations concerning committee membership, appointment of officers
and nominees to fill vacancies occurring on the Board. The Nominating Committee
met two times during the fiscal year ended June 30, 1998. Members of the
Committee are Messrs. Daniels, Reitman (Chairman), Rosenblum and Stettinius.
The function of the Audit Committee is to recommend the appointment of a
firm of independent public accountants to audit the Company's consolidated
financial statements, to review and approve the scope, purpose and type of
audit services to be performed internally and by the external auditors, to
review the activities and findings of all the external auditors and employees
conducting internal audits, to determine the effectiveness of the audit
function and to render regular reports to the Board on its activities and
findings. The Audit Committee met six times during the fiscal year ended June
30, 1998. Members of the Committee are Messrs. Garrett, Munford, Purnell,
Rosenblum (Chairman) and Stettinius.
The primary function of the Executive Compensation and Organization
Committee (the "ECOC") is to review and approve the design and administration
of salary, benefits and incentive plans for senior management. This Committee
also evaluates the Company's organizational structure and the development,
goals and performance of senior management. The ECOC met six times during the
fiscal year ended June 30, 1998. Members of the ECOC are Messrs. Garrett
(Chairman), Gwynn, Munford, Walker and Ms. Liedtka.
The primary function of the Benefits and Investment Committee is to review
the operation of employee benefit plans and programs and to evaluate the
performance of Plan administrators, trustees and investment managers. The
Benefits and Investment Committee met four times during the fiscal year ended
June 30, 1998. Members of the Committee are Messrs. Daniels, Gwynn, Purnell
(Chairman), Reitman and Walker.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the ECOC are Messrs. Garrett (Chairman), Gwynn, Munford,
Rosenblum, Walker and Ms. Liedtka. No member of the ECOC is or has been an
employee of Cadmus. Furthermore, none of Cadmus' executive officers has served
on the board of directors of any company of which an ECOC
10
<PAGE>
member is an employee except for John H. Phillips, Vice President, Procurement
and Operations Finance of Cadmus, who serves as a director of Valco Graphics,
Inc., a privately-held Seattle marketing firm providing printing, mailing and
fulfillment services, of which Bruce A. Walker, an ECOC member, is President.
Russell M. Robinson, II, a Class III director and nominee for re-election
as such, served as Chairman of the ECOC until August 12, 1997 and currently
serves as lead outside director of the Board of Directors. The firm of
Robinson, Bradshaw and Hinson, P.A., of which Mr. Robinson is President, a
Director and a shareholder, was retained to perform legal services for Cadmus
during fiscal year 1998. It is anticipated that the firm will continue to
provide legal services to Cadmus during fiscal year 1999.
DIRECTORS' COMPENSATION
CASH COMPENSATION. Each director of Cadmus who is not also an executive
officer of Cadmus receives: (a) an annual retainer of $10,000; (b) $1,000 for
attendance at each Board meeting; (c) $750 for attendance at each committee
meeting; and (d) $300 for each conference call Board meeting in which he
participates. The Chairmen of the Audit, the Nominating, the Executive
Compensation and Organization, and the Benefits and Investment Committees each
receive an additional $2,000 annually. Each director also is reimbursed for
usual and ordinary expenses of meeting attendance. A director who also is an
employee of Cadmus or its subsidiaries receives no additional compensation for
serving as a director.
In May, 1997, the Board created the position of lead outside director and
appointed Russell M. Robinson, II, to serve in this position. The general
duties of the lead outside director include serving as liaison between the
non-management members of the Board and the Chief Executive Officer and
assisting the Chairman of the Board in the performance of certain of his
duties. The lead outside director receives an additional annual retainer of
$15,000 for such services.
Cadmus has in effect a plan under which directors may elect to defer their
annual retainers and attendance fees generally until after the termination of
their service on the Board.
NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN. Under the 1997 Non-Employee
Director Stock Compensation Plan, a portion of the anticipated future increases
in the annual retainer is paid in stock options. Each Director who is not an
employee of Cadmus or its subsidiaries will receive an option grant covering
1,000 shares of Common Stock on November 15 of each year during the term of the
Plan, with the first grant to be made under the Plan on November 15, 1998. The
options granted under the Plan are not exercisable for six months from date of
grant except in the case of death or disability. Options that are not
exercisable at the time a director's services on the Board terminate for any
reason other than death, disability or retirement in accordance with Cadmus'
policy will be forfeited. The 1997 Plan continues the form of stock
compensation previously provided under the 1992 Plan which expired August 15,
1997.
11
<PAGE>
CERTAIN RELATIONSHIPS AND OTHER TRANSACTIONS WITH MANAGEMENT
See "Compensation Committee Interlocks and Insider Participation" for
information relating to Mr. Robinson's relationship to the Company.
From time to time, Cadmus and its subsidiaries may purchase products from
or utilize services of, other corporations of which a Cadmus director is a
director, officer or employee. Such transactions occur in the ordinary course
of business and are not deemed material.
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended June 30, 1998, 1997,
and 1996, all compensation paid or accrued by Cadmus and its subsidiaries to
the Company's Chief Executive Officer and its four other most highly
compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- -----------------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME (AGE) AND COMPENSA- OPTIONS/ COMPEN-
PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($)(2) TION ($)(3) SARS (#S) SATION ($)
------------------- ------ --------------- -------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
C. Stephenson Gillispie, Jr. (56) FY98 $332,000 $ 199,200 -- 45,000 $ 16,160(8)
Chairman, President and FY97 322,000 0 -- 20,000 19,347(9)
Chief Executive Officer FY96 310,000 0 $ 46,575(5) 20,000 29,185(10)
Steven R. Isaac (50) FY98 315,000 137,800 -- 20,000 14,611(11)
Executive Vice President FY97 305,000 50,000 -- 25,000 5,520(12)
FY96 -- -- -- -- --
David G. Wilson, Jr. (57) FY98 275,000 138,300 -- 25,000 13,414(13)
Executive Vice President FY97 248,000 50,000 -- 25,000 14,681(14)
FY96 -- -- -- --
Bruce V. Thomas (41) FY98 218,000 130,000 -- 19,000 6,237(15)
Senior Vice President and FY97 198,000 50,000(4) -- 15,000 4,899(16)
Chief Financial Officer FY96 165,000 0 21,344(6) 8,000 7,952(17)
John H. Phillips (54) FY98 182,500 52,000 -- 5,000 8,169(18)
Vice President, Procurement FY97 176,900 0 -- 10,000 9,003(19)
and Operations Finance FY96 172,000 0 25,777(7) 8,000 10,105(20)
</TABLE>
- ----------
(1) Reflects salary before pretax contributions under the Cadmus Thrift Savings
Plans. David G. Wilson, Jr., served as Executive Vice President of the
Company's Professional Communications sector during the fiscal year ended
June 30, 1998, and assumed his current position as Chairman of that sector
effective July 22, 1998.
12
<PAGE>
(2) Reflects short-term incentive awards, if any, accrued for each of the three
fiscal years ended June 30, 1998 under the Cadmus Executive Incentive Plan
described in the Report of the Compensation Committee on Executive
Compensation on pages 17-20.
(3) For the fiscal year ended June 30, 1998, perquisites did not exceed 10% of
salary and bonus for any of the named executive officers and thus no
amounts are reportable as "Other Annual Compensation."
(4) Reflects a short-term incentive award paid with respect to the fiscal year
ended June 30, 1997, but not included in the Summary Compensation Table in
1997 because it was not awarded until after release of the 1997 Proxy
Statement.
(5) Of the total amount reported as "Other Annual Compensation" for Mr.
Gillispie in fiscal year 1996, $34,875 was paid, pursuant to a change in
the Cadmus vacation policy, for previously accrued vacation not taken in
prior fiscal years and $11,700 was paid as an automobile allowance.
(6) Of the total amount reported as "Other Annual Compensation" for Mr. Thomas
in fiscal year 1996, $12,163 was paid, pursuant to a change in the Cadmus
vacation policy, for previously accrued vacation not taken in prior fiscal
years and $9,181 was paid as an automobile allowance.
(7) Of the total reported as "Other Annual Compensation" for Mr. Phillips in
1996, $19,350 was paid, pursuant to a change in the Cadmus vacation policy,
for previously accrued vacation not take in prior fiscal years and $6,427
was paid as an automobile allowance.
(8) Reflects $11,472 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1998 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(9) Reflects $16,452 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1997 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(10) Reflects $26,809 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1996 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(11) Reflects $11,409 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1998 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(12) Reflects $4,883 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1997 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(13) Reflects $10,553 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1998 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(14) Reflects $12,525 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1997 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(15) Reflects $5,628 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1998 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(16) Reflects $4,347 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1997 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
13
<PAGE>
(17) Reflects $7,635 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1996 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(18) Reflects $6,906 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1998 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(19) Reflects $7,782 contributed or matched by Cadmus or its subsidiaries for
fiscal year 1997 under the Cadmus Thrift Savings Plans and the remainder
paid by Cadmus for life insurance premiums.
(20) Reflects $8,600 contributed or matched by Cadmus or its subsidiaries for
the fiscal year 1996 under the Cadmus Thrift Savings Plans and the
remainder paid by Cadmus for life insurance premiums.
STOCK OPTIONS
The following table reflects grants of stock options made during the
fiscal year ended June 30, 1998 to each of the named executive officers.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
NUMBER OF PERCENTAGE OF RATES OF STOCK
SECURITIES TOTAL OPTIONS/ PRICE APPRECIATION
UNDERLYING SARS EXERCISE FOR OPTION
OPTIONS GRANTED OR BASE TERM (3)
GRANTED TO EMPLOYEES PRICE EXPIRATION ---------------------
NAME (#) IN FISCAL YEAR ($/SH) DATE 5% 10%
----- --------------- ---------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
C. Stephenson Gillispie, Jr. 15,000(1) 6 26.875 5/12/08 253,521 642,476
30,000(2) 12 26.875 5/12/08 507,043 1,284,952
Stephen R. Isaac 5,000(1) 2 26.875 5/12/08 84,507 214,158
15,000(2) 6 26.875 5/12/08 253,521 642,476
David G. Wilson, Jr. 5,000(1) 2 17.125 8/12/07 53,848 136,463
5,000(1) 2 26.875 5/12/08 84,507 214,158
15,000(2) 6 26.875 5/12/08 253,521 642,476
Bruce V. Thomas 5,000(1) 2 26.875 5/12/08 84,507 214,158
14,000(2) 6 26.875 5/12/08 236,620 599,644
John H. Phillips 5,000(2) 2 26.875 5/12/08 84,507 214,158
</TABLE>
- ----------
(1) Grants were made under the Company's 1990 Long Term Incentive Stock Plan,
and were immediately exercisable.
(2) Grants were made under the Company's 1990 Long Term Incentive Stock Plan
and become exercisable in increments of one-third of the total number of
shares subject to option each on December 31, 2000, 2001 and 2002, subject
to earlier vesting if certain performance criteria are met.
14
<PAGE>
(3) The dollar amounts under these columns are the result of calculations at
assumed annual rates of stock price appreciation set by the Securities and
Exchange Commission. The dollar amounts shown are not intended to forecast
possible future appreciation, if any, of the price of the Common Stock.
The following table reflects certain information regarding the exercise of
stock options during the fiscal year ended June 30, 1998, as well as
information with respect to unexercised options held at such date by each of
the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED "IN THE MONEY" OPTIONS AT
OPTIONS AT FISCAL YEAR END (#) FISCAL YEAR END ($)
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
-------------------------------- --------------------------
<S> <C> <C>
C. Stephenson Gillispie, Jr. 204,200/30,000 2,216,632/0
Stephen R. Isaac 30,000/15,000 250,313/0
David G. Wilson, Jr. 79,900/15,000 882,178/0
Bruce V. Thomas 58,800/14,000 573,736/0
John H. Phillips 51,500/33,800 803,281/220,840
</TABLE>
The Columns "Number of Shares Acquired Upon Exercise" and "Value Realized"
have been omitted because no options were exercised by the named executive
officers during the last fiscal year.
CHANGE-IN-CONTROL AGREEMENTS
Cadmus has entered into agreements with Messrs. Gillispie, Isaac, Wilson,
Thomas, Phillips, Bosher and Fernstrom and five other managers that provide for
severance payments and certain other benefits if their employment terminates
after "a change in control" (as defined therein) of Cadmus. Payments and
benefits will be paid under these agreements only if, within three years
following a change in control (or such shorter period from the date of any
change in control to normal retirement), the employee (i) is terminated
involuntarily without "cause" (as defined therein) and not as a result of
death, disability or normal retirement, or (ii) terminates his employment
voluntarily for "good reason" (as defined therein). "Change in control" is
defined generally to include (i) an acquisition of 20% or more of Cadmus'
voting stock, (ii) certain changes in the composition of the Cadmus Board of
Directors, (iii) shareholder approval of certain business combinations or asset
sales in which Cadmus' historic shareholders hold less than 60% of the
resulting or purchasing company or (iv) shareholder approval of the liquidation
or dissolution of Cadmus.
In the event of such termination following a change in control, the
employee will be entitled to receive a lump sum severance payment, certain
other payments and a continuation of employee welfare benefits. Severance
payments under these agreements are determined by a formula that takes into
15
<PAGE>
account base salary, annual bonus and years of employment. Under this formula,
Mr. Gillispie will be entitled to the maximum severance payment, which will be
an amount equal to three times the sum of his base salary and annual bonus for
the year in which termination occurs, or for the fiscal year ended June 30,
1998, whichever is higher. The total amount payable to Mr. Gillispie may not
exceed the maximum amount that may be paid without the imposition of a federal
excise tax on Mr. Gillispie, except that the amount payable will not be reduced
unless his net after-tax benefit would be greater than that without the
reduction.
RETIREMENT BENEFITS
PENSION PLAN. Substantially all employees of Cadmus and its participating
subsidiaries who are 21 years of age or older and who are credited with at
least one year of service with Cadmus or a participating subsidiary are covered
by the Cadmus Pension Plan (the "Pension Plan"). The Pension Plan is a
non-contributory defined benefit pension plan under which retirement benefits
are generally based on periods of active participation. For the period July 1,
1979 through June 30, 1985, a participant earned a retirement benefit expressed
as an annuity for life equal to 2% of his or her base compensation (exclusive
of non-guaranteed commissions, bonuses, overtime pay and similar payments) for
each year of service. For periods after June 30, 1985, a participant earns a
retirement benefit generally equal to 1.6% of his or her base compensation each
year (limited to the inflation adjusted compensation cap each year starting
July 1, 1989). Under a special rule, employees who were participants on June
30, 1985 generally accrued further benefits after June 30, 1985 and before
January 1, 1992 at no less than the amount of accrual for the fiscal year ended
June 30, 1985. This special rule ceased to apply effective for accruals after
December 31, 1991. Prior to July 1, 1979, several different benefit formulas
applied, and employees who were participants before July 1, 1979 will retain
their accrued past service benefit for service before July 1, 1979 based on the
benefit formulas then in effect.
Because retirement benefits under the Pension Plan are based on career
average compensation, a table showing annual retirement benefits based upon
final average compensation and years of service is inappropriate and has been
omitted. Based on the benefit formula in effect on and after July 1, 1985, and
on the assumption that the individuals named will continue to receive, until
normal retirement age, covered compensation in the same amounts paid for the
fiscal year ended June 30, 1998, the estimated annual benefits (which are not
subject to any deduction for Social Security or other offset amount) payable
for the named executive officers are $67,050 for Mr. Gillispie, $37,120 for Mr.
Isaac, $61,252 for Mr. Wilson, $73,928 for Mr. Thomas and $66,268 for Mr.
Phillips.
CADMUS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Cadmus maintains the Cadmus
Supplemental Executive Retirement Plan (the "SERP") to provide supplemental
retirement benefits for certain key employees of Cadmus and its participating
subsidiaries who are credited with at least five years of service and who are
selected by the Board of Directors of Cadmus for participation in the SERP. The
Board may waive all or any part of the five year service requirement. The SERP
is a non-qualified unfunded plan which covers 17 active key employees of Cadmus
and its participating subsidiaries. The retirement or death benefit payable
under the SERP is a 15-year term certain annuity equal to 30%
16
<PAGE>
of the participant's final average (highest three years out of last ten) base
compensation (exclusive of non-guaranteed commissions, bonuses, overtime pay or
similar payments) generally commencing at the participant's normal retirement
age (which is age 65 for employees last hired prior to age 60 or otherwise is
the fifth anniversary of commencement of participation). Benefits are not
subject to any reduction for Social Security or other offset amount.
The following table shows the estimated annual retirement benefits payable
to SERP participants in the following average final compensation and years of
service classifications assuming retirement at age 65. Average compensation
under the SERP includes only the amounts set forth under "Salary" in the
Summary Compensation Table on page 12.
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN TABLE
<TABLE>
<CAPTION>
HIGHEST 3-YEAR YEARS OF SERVICE
AVERAGE COMPENSATION -----------------------------------------------
- ---------------------- 5 10 15 20 AND OVER
<S> <C> <C> <C> <C>
100,000 $7,500 15,000 22,500 $ 30,000
125,000 9,125 18,750 28,125 37,500
150,000 11,250 22,500 33,750 45,000
175,000 13,125 26,250 39,375 52,500
200,000 15,000 30,000 45,000 60,000
225,000 16,875 33,750 50,625 67,500
250,000 18,750 37,500 56,250 75,000
300,000 22,500 45,000 67,500 90,000
350,000 26,250 52,500 78,750 105,000
400,000 30,000 60,000 90,000 120,000
450,000 33,750 67,500 101,250 135,000
500,000 37,500 75,000 112,500 150,000
</TABLE>
Credited years of service under the SERP as of the fiscal year ended June
30, 1998 are: Mr. Gillispie -- 21; Mr. Isaac -- 2; Mr. Wilson -- 35; Mr. Thomas
- -- 6; and Mr. Phillips -- 23.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Executive Compensation and Organization Committee (the "Committee"),
composed of five non-employee directors, has responsibility for all aspects of
the compensation program for Cadmus executive officers. Working in
collaboration with Cadmus senior management and outside consultants, the
Committee administers this executive compensation program to fulfill the
objectives outlined below.
17
<PAGE>
PRINCIPAL OBJECTIVES. As set forth in the Company's Executive Compensation
Policy and Philosophy Statement, the principal objectives of the executive
compensation program are: (i) to attract and retain a highly-qualified
management team; (ii) to motivate this team to achieve corporate objectives and
to control and justify the costs of executive incentives; (iii) to ensure that
executive compensation is integral to, and supportive of, other Cadmus
management benefits, systems and processes; and (iv) to link pay with
performance in a number of respects, most notably linking executive
compensation and shareholder value so that increases in executive compensation
are directly related to the creation of value for the Company's shareholders.
The primary components of the Company's executive compensation program are
base salaries, short-term incentive payments, long-term incentive awards,
historically in the form of stock options, and the Supplemental Executive
Retirement Plan.
The Committee considered the deductibility of executive compensation under
Section 162(m) of the Internal Revenue Code which was enacted in 1993. Under
this provision, beginning in 1994 a publicly held corporation would not be
permitted to deduct compensation in excess of one million dollars per year paid
to the chief executive officer or any one of the other named executive officers
except to the extent the compensation was paid under compensation plans meeting
certain tax code requirements. The Committee noted that the Company does not
currently face the loss of this deduction for compensation. The Committee
nevertheless determined that, in reviewing the design of and administering the
executive compensation program, the Committee will continue in the future to
preserve the Company's tax deductions for executive compensation unless this
goal conflicts with the primary objectives of the Company's compensation
program.
SALARIES. Salaries for Cadmus executive officers are established and
administered by means of salary grades and salary ranges. All Cadmus executive
officers are assigned a base salary grade which is reviewed annually. With
outside consultants, senior management prepares a schedule of salary ranges by
grade, which is reviewed annually. At the beginning of each fiscal year, the
Committee reviews management's recommendations concerning adjustments in grade
designation and base salaries for each executive officer. Based on this review,
the Committee makes such salary adjustments as it deems appropriate. Base
salaries are generally competitive with the market based on peer group
comparisons provided by outside consultants.
SHORT-TERM INCENTIVE PAYMENTS. The Company utilizes an Executive Incentive
Plan under which its executive officers may earn annual incentive payments
based on their business unit's performance as well as the overall financial
performance of Cadmus. A formula that focuses primarily upon "return on capital
employed" ("ROC") establishes at each Cadmus business unit "curves" that
generate a "pool" from which the short-term incentives are paid. As ROC
improves and operating profits increase, the pool grows. No pool is created,
and no incentives are earned, however, until cost of capital devoted to the
business is recovered and a minimum earnings threshold is achieved.
18
<PAGE>
At the beginning of each fiscal year, senior management presents for
consideration and approval by the Committee the recommended short-term
incentive curves for Cadmus and each Cadmus business unit. At the conclusion of
the fiscal year, senior management recommends to the Committee specific
short-term awards for each executive officer. Those recommendations are based,
among other factors, on that executive's individual performance, as well as the
performance and profitability of that executive's business unit. A portion of
each executive's incentive award also is determined by the financial
performance of Cadmus. The Committee then considers and approves, to the extent
it believes appropriate, the incentive pools generated by the incentive curves
and the incentive award recommendations of senior management. At budgeted
performance levels, the Executive Incentive Plan generally should have the
potential to generate awards in the range of 30-60% of base salary. The Plan
also contains a midyear payment feature equal to 25% of the anticipated bonus.
This feature is designed to motivate executives and managers to meet or exceed
interim financial goals. Certain members of senior management, including the
Company's executive officers, are excluded from this midyear payment feature.
LONG-TERM INCENTIVE AWARDS. The long-term incentive component of executive
compensation for Cadmus executive officers is provided under the 1984 Stock
Option Plan and the 1990 Long Term Incentive Stock Plan. The 1984 Plan, under
which no additional shares are available for grant, provides solely for the
award of stock options and tandem SARs. The 1990 Plan, an omnibus plan,
provides for awards of incentive and non-qualified stock options, SARs,
restricted stock grants, performance units or shares, as well as "other
stock-unit" awards. In practice, however, stock options have been the only form
of awards made under the 1990 Plan to date.
Certain options issued in 1998 are exercisable over a period of 3 years
with earlier vesting if the Company's performance exceeds specific standards
adopted by the Compensation Committee. Other options issued in 1998 are
immediately vested. Options issued prior to 1998 are exercisable over 5 years
with accelerated performance vesting criteria. The vesting schedule for certain
options issued prior to 1998 was accelerated during 1998. Options generally
have a ten-year term subject to early termination under certain circumstances
and typically have an option exercise price equal to the market value of the
Common Stock at the date of grant. Thus, the Common Stock must appreciate
before an executive officer receives any benefit from an option grant.
At the beginning of each year, determination is made as to the number of
shares that the Company can reasonably issue for that year (typically 2% of
outstanding shares per year). Contemporaneously senior management, working
periodically with outside consultants, makes recommendations concerning awards
to specific executives. These awards generally are recommended only for those
relatively few executives who are in a position and have the ability to
influence materially the financial performance of Cadmus. These recommendations
are acted upon by the Committee at its August meeting. Although the Committee
has no specific target equity ownership in mind for Cadmus executives, an
overall guideline is that the long-term incentive potential should equal
short-term incentive amounts and should be directed at creating a meaningful
equity position for top management. (See "Executive Compensation -- Stock
Options," page 14 for information concerning specific grants made in fiscal
1998.)
19
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Supplemental executive retirement
benefits are provided under the Cadmus Supplemental Executive Retirement Plan.
Under this plan, executives earn an additional retirement benefit equal to 30%
of the executive's final average base compensation generally commencing at the
participant's normal retirement age payable as a 15-year term certain annuity.
The Committee may waive all or part of the five year service requirement. See
"Retirement Benefits -- Cadmus Supplemental Executive Retirement Plan."
CHIEF EXECUTIVE OFFICER COMPENSATION. Compensation for the Company's
Chairman and Chief Executive Officer is established in accordance with the
principles and objectives outlined above. Based upon external information and
data, including a survey of chief executive officer compensation at other
public manufacturing companies deemed comparable to the Company and based
further on the financial performance of the Company during fiscal 1998, the
Committee approved a merit increase of 3.11% over last year's base salary and
set Mr. Gillispie's salary as Chief Executive Officer for fiscal 1998 at
$332,000.
In determining the short-term and long-term incentive portions of Mr.
Gillispie's compensation for fiscal year 1998, the Committee considered both
the operating performance and the strategic progress of the Company. From an
operating perspective, the following aspects of the Company's performance were
considered: the Company's net income for the year increased 49% over that of
the prior year with record sales, operating margins and net income, the Company
effected a dramatic improvement in the performance and profit of the Marketing
Communications sector and particularly in the Professional Communications
sector, the Company successfully executed the restructuring program it
undertook in the prior year; the Company augmented the management team in both
the Marketing Communications sector and the Professional Communications sector,
and the Company made substantial progress on critical information technology
and infrastructure initiatives. From a strategic perspective the following
aspects of the Company's performance were considered: the Company successfully
effected the relocation of the Packaging and Promotional business to a new
180,000 square foot facility in Charlotte which substantially enhanced its
manufacturing capacity and capability, the Company instituted a company wide
"branding" initiative to further the Company "Create, Produce and Distribute"
model, the Company completed the acquisition and integration of Germersheim
during the year which furthered its ability to execute fully-integrated
services in select, niche markets. Based on the foregoing, the Committee
approved a short-term incentive of $199,200 for Mr. Gillispie, an annual stock
option grant of 30,000 shares and a special stock option grant of 15,000 shares
for Mr. Gillispie for fiscal 1998.
EXECUTIVE COMPENSATION AND ORGANIZATION COMMITTEE
G. Waddy Garrett (Chairman)
Price H. Gwynn, III
Jeanne M. Liedtka
John D. Munford, II
Bruce A. Walker
20
<PAGE>
PERFORMANCE GRAPH
Securities and Exchange Commission regulations require the Company to
include in its proxy statement the following Performance Graph. The Graph is
intended to permit shareholders to more easily relate executive compensation to
company performance based on the market price of a company's stock. The Graph
shows the percentage change in the market price for the Common Stock from June
30, 1993 to June 30, 1998.
The Graph assumes $100 invested on June 30, 1993 in the Company, the S&P
500, the 1998 Peer Group and the 1997 Peer Group and shows the total return on
such an investment, assuming reinvestment of dividends, as of June 30, 1998.
The 1998 Peer Group, included for the first time this year, includes Banta
Corporation, World Color Press, Quebecor, Merrill Corporation, Bowne and
Company, Mail-Well, Wallace Computer Services, the Media General Advertising
Agencies Index and the Media General Marketing Services Index. The combined
cumulative total return of the two indices is weighted to reflect the
percentage of the Company's sales volume attributable to its advertising and
marketing businesses, with the cumulative total returns of the other companies
in the 1998 Peer Group weighted by their respective market capitalization.
The Company has determined that it would be appropriate to replace the
1997 Peer Group with the 1998 Peer Group for fiscal 1999 reporting. The Company
believes that the 1998 Peer Group includes a more representative group of
comparable companies than the 1997 Peer Group for three reasons: (1) the
restructuring of the Company into the Professional Communications and Marketing
Communications sectors, (2) the Company's exit from the publishing business and
(3) the recent acquisition of two of the companies that were included in the
1997 Peer Group. Comparison of the Company against the 1998 Peer Group should
therefore provide a more meaningful measure of the Company's overall
performance. The 1997 Peer Group, included this year for comparative purposes,
consists of Devon Group, Graphics Industries, Banta Corporation, Courier
Corporation, Donnelly Corporation, Bowne and Co., Merrill Corporation, and the
Media General Book and Magazine Publishing Index.
21
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG CADMUS, THE S&P 500 INDEX AND PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Cadmus 100 206 278 182 186 294
S&P 500 100 101 128 161 217 282
1998 Peer Group 100 106 117 154 182 224
1997 Peer Group 100 101 130 155 204 313
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of the reports of changes in beneficial ownership of
Common Stock and written representations furnished to Cadmus, Cadmus believes
that its officers and directors filed on a timely basis the reports required to
be filed under Section 16(a) of the Securities Exchange Act of 1934 during the
fiscal year ended June 30, 1998, except that (i) a Form 3 was filed late for
Mr. Ward and (ii) two Forms 4 reporting a total of three purchases were filed
late by Mr. Garrett.
PROPOSAL TO APPROVE AMENDMENT TO 1990 LONG TERM INCENTIVE STOCK PLAN
SUMMARY. Cadmus historically has used stock options as an important part
of its executive compensation plan. This practice has been based on the belief
that options (i) are an effective means of attracting and retaining key
employees, and (ii) align the interests of shareholders and management. Under
the Cadmus 1990 Long Term Incentive Stock Plan (the "1990 Plan"), as of June
30, 1998,
22
<PAGE>
Cadmus had only 62,000 shares of Common Stock available for issuance. The
proposed amendment to the 1990 Plan would make an additional 350,000 shares
available for issuance.
GENERAL. In 1990, the shareholders approved the 1990 Plan. The 1990 Plan
was intended to replace the 1984 Stock Option Plan (the "1984 Plan") under
which no further options would be granted, but which would continue to govern
outstanding options previously granted thereunder until their exercise,
expiration or forfeiture. The 1990 Plan as initially adopted and approved by
shareholders provided that 360,000 shares of the Common Stock could be issued
to key employees of Cadmus and its subsidiaries pursuant to stock options,
stock appreciation rights, performance shares, performance units, restricted
stock and other stock unit awards ("Awards").
The 1990 Plan is administered by the Executive Compensation and
Organization Committee (the "Committee"), none of the members of which are
eligible for Awards under such plan. The Committee selects executive officers
and other key personnel to whom Awards may be granted and determines the
particular terms of each Award. Approximately 27 persons (including those
persons named in the Summary Compensation Table) are eligible for Awards under
the 1990 Plan. The nature and extent of a recipient's participation, the
benefits or amounts to be received by each recipient and any consideration to
be received by the Company for granting or awarding such benefits are
determined by the Committee. Unless specified by the 1990 Plan, the prices,
expiration dates, consideration to be received by the Company, and other terms
of each Award are determined by the Committee and are set forth in a written
agreement between the Company and the recipient. Awards may not be assigned,
transferred, pledged or otherwise encumbered by a participant, other than by
will or the laws of descent and distribution. Awards may be exercised during
the recipient's lifetime only by the recipient or, in the case of disability,
by the recipient's legal representative. Historically, such Awards also have
not been exercisable until at least six months after the grant of the Award.
For additional information on the Plan, see "Report of the Compensation
Committee on Executive Compensation -- Long-Term Incentive Awards" on page 19.
1994 AMENDMENTS TO THE 1990 PLAN. In 1994 shareholders approved a number
of amendments to the 1990 Plan (the "1994 Amendments"). The 1994 Amendments
increased the number of shares of Common Stock available for issuance under the
1990 Plan to 740,000 shares, subject to future adjustment as provided in the
1990 Plan. The 1994 Amendments also effected several changes to the 1990 Plan
to eliminate certain provisions generally viewed as unfavorable to
shareholders. Specifically, the 1994 Amendments (i) reduced from one-half to
one-third the total number of shares issuable under the 1990 Plan in the form
of restricted stock awards, performance awards or other stock unit awards, (ii)
decreased the maximum discount from market value permissible in setting the
option exercise price for non-qualified options from 50% to 15% (as a result,
the option exercise price of a non-qualified option may be no less than 85% of
the fair market value of the Common Stock on the date of grant); (iii) provided
that no participant may be granted options covering more than 75,000 shares of
Common Stock in any one calendar year; (iv) eliminated the ability of the
Committee to grant so-called "reload options" and (v) eliminated the
Committee's discretion to lower the option exercise price of outstanding
options as part of any modification, extension or renewal of such options.
23
<PAGE>
In addition, the Company acted to make all option grants "performance
vesting." Under the terms of all grants made subsequent to 1994, options
granted pursuant to the 1990 Plan first become exercisable approximately two to
five years from the date of grant, depending upon the Common Stock's
"cumulative total return" relative to the Company's peer group, as reflected in
the performance graph included in the Company's proxy statements. The Company
expects that options granted in the future under the 1990 Plan will also have
performance-based vesting.
1996 AMENDMENT TO 1990 PLAN. In 1996, shareholders of the Company approved
a further amendment to the 1990 Plan to increase the number of shares of Common
Stock available for issuance under the 1990 Plan by an additional 360,000
shares resulting in a total of 1,100,000 shares available for Awards under the
Plan, subject to future adjustment as provided in the Plan.
INFORMATION ABOUT OUTSTANDING AWARDS. At June 30, 1998, only 62,000 shares
were available for future Awards under the 1990 Plan. As of the same date,
options covering 906,200 and 72,234 shares of Common Stock were outstanding
under the 1990 Plan and 1984 Plan, respectively.
Information with respect to options granted in the fiscal year ended June
30, 1998 to the named executive officers under the 1990 Plan is set forth in
the Summary Compensation Table on page 12 and the table entitled "Options
Granted in Last Fiscal Year" on page 14. During the fiscal year ended June 30,
1998, a total of 125,000 options were awarded under the 1990 Plan to all
executive officers as a group and 115,000 options were awarded under the 1990
Plan to employees other than executive officers. On September 18, 1998, the
closing price of the Common Stock as reported by the NASDAQ National Market was
$19.25.
PROPOSAL TO AMEND 1990 PLAN. During the past fiscal year, the Board of
Directors amended the Plan to remove the mandatory 6-month vesting provisions.
Effective August 12, 1998, the Board of Directors approved a proposed amendment
to the 1990 Plan that would increase the number of shares of Common Stock
available for issuance under the 1990 Plan by an additional 350,000 shares,
subject to future adjustment as provided in the 1990 Plan. The Board believes
this amendment is necessary in order to make shares available for further
Awards under the 1990 Plan so that the Company and its subsidiaries will
continue to be able to provide an effective means of attracting and retaining
key employees and aligning to the maximum extent possible the interests of
these employees and Cadmus shareholders.
RATIFICATION OF THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the Company's independent accountants for
the fiscal year ended June 30, 1998, and has been selected as independent
public accountants for Cadmus for the fiscal year ending June 30, 1999, subject
to ratification by the shareholders.
If not otherwise specified, proxies will be voted in favor of ratification
of the appointment. Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they so desire, and are expected to be available to respond to appropriate
questions.
24
<PAGE>
SHAREHOLDER PROPOSALS AND NOMINATIONS FOR THE 1999 ANNUAL MEETING
Under applicable law, the Board of Directors need not include an otherwise
appropriate shareholder proposal (including any shareholder nominations for
director candidates) in its proxy statement or form of proxy for the 1999
annual meeting of shareholders unless the proposal is received by the Secretary
of Cadmus at the Company's principal place of business on or before June 4,
1999.
In addition, the Company's Bylaws prescribe certain procedures which must
be followed, including certain advance notice requirements, in order for a
proposal to be properly before a shareholder meeting. Notice that a shareholder
intends to bring any matter before a meeting must be received by the Company
not less than 60 days before the anniversary date of the meeting notice given
by the Company for the previous year's annual meeting. Any shareholder desiring
a copy of the Cadmus Bylaws will be furnished one without charge upon written
request to the Secretary.
OTHER MATTERS
As of the date of this Proxy Statement, management of Cadmus has no
knowledge of any matters to be presented for consideration at the Annual
Meeting other than those referred to above. If any other matter properly comes
before the Annual Meeting, the persons named in the accompanying proxy intend
to vote such proxy, to the extent entitled, in accordance with their best
judgment.
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED JUNE 30, 1998 CAN BE
OBTAINED WITHOUT CHARGE BY WRITING TO THE CORPORATE SECRETARY AT P.O. BOX
27367, RICHMOND, VIRGINIA 23261.
By Order of the Board of Directors
/s/ Bruce V. Thomas
--------------------------
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
25
<PAGE>
[CADMUS LOGO]
CADMUS COMMUNICATIONS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C. Stephenson Gillispie, Jr. and Bruce V.
Thomas jointly and severally, proxies, with full power to act alone, and with
full power of substitution, to represent the undersigned and to vote, as
designated below and upon any and all other matters which may properly be
brought before such meeting, all shares of Common Stock which the undersigned
would be entitled to vote at the Annual Meeting of Shareholders of Cadmus
Communications Corporation to be held on November 12, 1998, or any adjournment
thereof.
1. Election of Class III Directors to serve until 2001 Annual Meeting of
Shareholders.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
(except as written on the line below) vote for all nominees
listed below
Nominees: John C. Purnell, Jr., Russell M. Robinson, II, John W. Rosenblum
and David G. Wilson, Jr.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE LISTED
ABOVE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. Approval of the amendment to the 1990 Long Term Incentive Stock Plan
authorizing the issuance of an additional 350,000 shares under the Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE)
<PAGE>
3. Ratification of the designation of Arthur Andersen LLP as independent
accountants for the Corporation and its subsidiaries for the current fiscal
year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon any other
business that may come before the meeting or any adjournment thereof.
UNLESS OTHERWISE SPECIFIED IN THE
SQUARES PROVIDED, THE UNDERSIGNED'S
VOTE WILL BE CAST FOR ITEMS 1, 2 AND
3. IF, AT OR BEFORE THE TIME OF THE
MEETING, ANY OF THE NOMINEES LISTED
ABOVE HAS BECOME UNAVAILABLE FOR ANY
REASON, THE PROXIES HAVE THE
DISCRETION TO VOTE FOR A SUBSTITUTE
NOMINEE OR NOMINEES. THIS PROXY MAY
BE REVOKED AT ANY TIME PRIOR TO ITS
EXERCISE.
-------------------------------------
Signature
-------------------------------------
Signature
Dated:_______________________, 1998
(IN SIGNING AS ATTORNEY,
ADMINISTRATOR, EXECUTOR, GUARDIAN OR
TRUSTEE, PLEASE ADD YOUR TITLE AS
SUCH.)
