<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
PAXAR CORPORATION
(Name of Registrant as Specified In Its Charter)
PAXAR CORPORATION
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(1)(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 0-11:1 (set forth the amount on which the filing fee is calculated
and state how it was determined):
__________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount Previously Paid: $ ____________________________________
2) Form, Schedule or Registration Statement No.:
____________________________________
3) Filing Party:
____________________________________
4) Date Filed:
____________________________________
<PAGE> 2
PAXAR CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 24, 1997
To the Shareholders of PAXAR Corporation:
Notice is hereby given that the Annual Meeting of Shareholders of PAXAR
Corporation, a New York corporation, will be held on April 24, 1997, at the
Intercontinental Hotel, 111 East 48th Street, New York, New York 10017, at 9:30
a.m., for the following purposes:
1. To elect six Directors of the Company to serve for the ensuing two
years and until their successors are duly elected and qualified;
2. To approve the adoption of the Company's 1997 Incentive Stock
Option Plan;
3. To ratify the appointment of Arthur Andersen LLP, as the Company's
independent public accountants for the year ending December 31, 1997; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.
Only Shareholders of record at the close of business on March 20, 1997, are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board of Directors,
JACK BECKER
Assistant Secretary
White Plains, New York
March 31, 1997
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY, AND RETURN IT TO THE COMPANY. THE PROXY
MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED, AND SHAREHOLDERS EXECUTING
PROXIES MAY ATTEND THE MEETING AND VOTE IN PERSON SHOULD THEY SO DESIRE.
<PAGE> 3
PAXAR CORPORATION
105 CORPORATE PARK DRIVE
WHITE PLAINS, NEW YORK 10604
------------------------
PROXY STATEMENT
------------------------
The Board of Directors of PAXAR Corporation (the "Company") presents this
Proxy Statement to all Shareholders and solicits their proxies for the Annual
Meeting of Shareholders to be held on April 24, 1997. All proxies duly executed
and received will be voted on all matters presented at the Annual Meeting in
accordance with the instructions given by such proxies. In the absence of
specific instructions, proxies so received will be voted for the named nominees
for election to the Company's Board of Directors, for the 1997 Incentive Stock
Option Plan and for the ratification of Arthur Andersen LLP, as the Company's
independent public accountants. The Board of Directors anticipates that all of
the nominees will be available for election and does not know of any other
matters that may be brought before the Annual Meeting. In the event that any
other matter should come before the Annual Meeting or that any nominee is not
available for election, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies not marked to the contrary with
respect to such matter in accordance with their best judgment. The proxy may be
revoked at any time before being voted. The Company will pay the entire expense
of soliciting these proxies, which solicitation will be by use of the mails.
This Proxy Statement is being mailed on or about March 26, 1997.
The total number of shares of Common Stock of the Company outstanding as of
March 20, 1997 was 28,360,533. The Common Stock is the only outstanding class of
securities of the Company entitled to vote. Each share has one vote. Only
Shareholders of record as of the close of business on March 20, 1997 will be
entitled to vote at the Annual Meeting or any adjournment or adjournments
thereof.
The affirmative vote by holders of a plurality of the shares of Common
Stock cast for Directors is required for the election of Directors. The
affirmative vote by the holders of a majority of the votes cast on each proposal
are required for the approval of the Company's 1997 Incentive Stock Option Plan
and for the ratification of the selection of Arthur Andersen, LLP as the
Company's independent public accountants. Shares represented by proxies which
are marked "abstain" with respect to the approval of the stock option plan and
ratification of the independent public accountants and proxies which are marked
to deny discretionary authority on all other matters will only be counted for
the purpose of determining the presence of a quorum on such questions. Votes
withheld in connection with the election of one or more nominees for Director
will not be counted as votes cast for such individuals. In addition, where
brokers are prohibited from exercising discretionary authority for beneficial
owners who have not provided voting instructions (commonly referred to as
"broker non-votes"), those shares will not be included in the vote totals.
A list of Shareholders entitled to vote at the Annual Meeting will be
available at the Company's office, 105 Corporate Park Drive, White Plains, New
York 10604, for a period of ten (10) days prior to the Annual Meeting for
examination by any Shareholder.
<PAGE> 4
ACTIONS TO BE TAKEN AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF SIX DIRECTORS
The Directors to be elected at the Annual Meeting will serve for a term of
two years and until their successors are duly elected and qualify. Proxies not
marked to the contrary will be voted "FOR" the election of the following six
persons, all of whom, with the exception of John W. Paxton, are incumbent
Directors who were previously elected by the Shareholders. If elected, the terms
of such Directors will expire in 1999:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
YEAR FIRST OWNED BENEFICIALLY AT
PRINCIPAL BECAME A MARCH 20, 1997 AND
NAME AND AGE OCCUPATION DIRECTOR PERCENTAGE OF CLASS(1)
- --------------------- --------------------------------------------- ---------- ------------------------
<S> <C> <C> <C>
Victor Hershaft...... President and Chief Operating Officer since 1989 1,060,817(2)(3.7%)
(54) September 1994; President since September
1992; Executive Vice President from February
1989 until September 1992. Member of the
Board of Directors of Monarch Marking
Systems, Inc.
Jack Becker.......... Practicing attorney in New York State since 1968 141,691(3)(4)(5)
(61) 1960 and a principal of Snow Becker Krauss
P.C., general counsel to the Company. Such
firm has been retained by the Company for
more than the past three years and will be
retained by the Company for the current
fiscal year.
Robert Laidlaw....... Chairman Emeritus of Coats & Clark since 1987 38,832(3)(4)
(69) March 1990; Chairman of the Board of Coats &
Clark from 1966 until March 1990; President
of Coats & Clark from 1964 to 1986; and a
Director of Milliken & Company.
David E. McKinney.... Self-employed; previously employed by 1992 36,112(3)(4)
(62) International Business Machines Corporation
(IBM) in various capacities from 1956 until
1992, including Senior Vice President, Member
of Corporate Management Board. Member of the
Board of Directors of General Re-Insurance;
Organization Resource Counselors;
International Executive Services Corps; New
York Philharmonic; and the Thomas J. Watson
Foundation.
Leo Benatar.......... Associate Consultant, A.T. Kearney, Inc.; 1996 15,783(4)(6)
(67) former Chairman of the Board of Engraph, Inc.
from 1995 to 1996; Chairman and Chief
Executive Officer of Engraph, Inc. from 1981
to 1995; Member of the Board of Directors of
Mohawk Industries, Inc.; Schuller Corp.;
Interstate Bakeries Corporation; and Aaron
Rents, Inc.
John W. Paxton....... Mr. Paxton has been President and Chief -- 626,147(7)(2.17%)
(60) Executive Officer and a director of Monarch
Marking Systems, Inc. since October 23, 1995.
From 1994 to 1995, Mr. Paxton was Executive
Vice President and Chief Operating Officer of
the Industrial Automation Systems Group of
Western Atlas Inc. From 1991 to 1994, Mr.
Paxton was a Vice President of Litton
Industries. From 1988 to 1991, Mr. Paxton was
Chairman, President and Chief Executive
Officer of Intermec Corporation.
</TABLE>
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The terms of the following five Directors do not expire until 1998 and,
accordingly, no vote is being taken on their re-election at this Annual Meeting.
All of the following Directors are incumbents who were previously elected by the
Shareholders.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
YEAR FIRST OWNED BENEFICIALLY AT
PRINCIPAL BECAME A MARCH 20, 1997 AND
NAME AND AGE OCCUPATION DIRECTOR PERCENTAGE OF CLASS(1)
- ------------------------- --------------------------------------- ---------- ------------------------
<S> <C> <C> <C>
Arthur Hershaft.......... Chairman of the Board of Directors 1961 4,179,833(8)(14.66%)
(59) since 1986, and Chief Executive Officer
of the Company for more than the past
five years. Member of the Board of
Directors of Monarch Marking Systems,
Inc.
Sidney Merians........... President of Capital Investment 1986 172,213(3)(4)(9)
(70) Associates since 1986; Chairman of the
Board of Directors, Chief Executive
Officer and President of Talon, Inc.
for more than five years prior to 1986;
a Director of Hygrade Furniture
Transport, Inc.; and Ivy Asset
Management (Advisory Committee).
Thomas R. Loemker........ Vice Chairman of the Board of Directors 1987 411,549(10)(1.45%)
(66) from September 1992 until September
1994; Chairman of the Board of
Directors of Monarch Marking Systems,
Inc. from 1995 to 1997; President and
Chief Operating Officer of the Company
from 1987 until March 31, 1991; and
President of Pitney Bowes Business
Systems from 1985 to 1987.
Robert T. Puopolo........ Managing Director, Investment Banking 1992 37,761(3)(4)(11)
(38) Department, Oppenheimer & Co., Inc.
since 1993. Associate Director,
Corporate Finance Department, Bear,
Stearns & Co. Inc. from 1987 until
1993. Member of the Board of Directors
of Research Environmental Industries,
Inc.
Walter W.Williams........ Self-employed; previously employed by 1993 24,415(3)(4)
(62) Rubbermaid Inc. in various capacities
from 1987 until 1991, including
Chairman and Chief Executive Officer.
Employed by General Electric Company
from 1956-1987 in various capacities.
Member of the Board of Directors of the
Stanley Works and Corrpro Companies,
Inc.
All Officers and 6,744,520(23.16%)
Directors as a Group
(consisting of 11
persons)...............
</TABLE>
- ---------------
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the date hereof upon the exercise of options. Each beneficial
owner's percentage ownership is determined by assuming that options that
are held by such person (but not those held by any other person) and which
are exercisable within 60 days from the date hereof have been exercised.
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(2) Includes 67,001 shares issuable upon the exercise of outstanding stock
options granted to Mr. Hershaft. In addition, includes 159,598 shares owned
of record by Mr. Hershaft's wife, as to which Mr. Hershaft disclaims
beneficial ownership; and 117,251 shares held by Mr. Hershaft as custodian
for his children, as to which shares Mr. Hershaft disclaims beneficial
ownership. Does not include options to purchase 11,718 shares which are not
currently exercisable.
(3) Includes 14,649 options to acquire a like number of shares of Common Stock
at an exercise price of $7.04 per share, 4,883 options to acquire a like
number of shares of Common Stock at an exercise price of $9.60 per share
and 4,883 options to acquire a like number of shares of Common Stock at an
exercise price of $12.80 per share.
(4) Represents less than 1% of the outstanding Common Stock of the Company.
(5) Includes 80,058 shares owned of record by Mr. Becker's wife, as to which
shares Mr. Becker disclaims beneficial ownership.
(6) Includes 6,250 options to acquire a like number of shares of Common Stock
at an exercise price of $9.50 per share and 4,883 options to acquire a like
number of shares of Common Stock at an exercise price of $12.80 per share.
(7) Includes 500,918 shares issuable upon the exercise of outstanding options.
(8) Includes 149,659 shares issuable upon the exercise of outstanding stock
options. Also includes 566,841 shares held by Arthur Hershaft in trust for
the benefit of his children, as to which shares Mr. Hershaft disclaims
beneficial ownership.
(9) Includes 5,401 shares owned of record by Mr. Merians' wife, as to which
shares Mr. Merians disclaims beneficial ownership.
(10) Includes 4,883 options to acquire a like number of shares of Common Stock
at an exercise price of $9.60 per share and 4,883 options to acquire a like
number of shares of Common Stock at an exercise price of $12.80 per share.
(11) Includes 1,906 shares owned of record by Mr. Puopolo's wife, as to which
shares Mr. Puopolo disclaims beneficial ownership.
PROPOSAL 2. APPROVAL BY SHAREHOLDERS OF THE COMPANY'S 1997 INCENTIVE STOCK
OPTION PLAN
The Board of Directors of the Company, subject to the approval of
Shareholders, adopted the Company's 1997 Incentive Stock Option Plan (the
"Plan"), which authorizes the grant of options to purchase an aggregate of
1,500,000 shares of Common Stock. No options have been granted under the Plan as
of March 24, 1997.
GENERAL
The Board of Directors has deemed it in the best interest of the Company to
establish the Plan so as to provide employees and other persons involved in the
continuing development and success of the Company and its subsidiaries an
opportunity to acquire a proprietary interest in the Company by means of grants
of options to purchase Common Stock. The Plan supplements the Company's 1990
Employee Stock Option Plan (the "Existing Plan"), which presently has 18,081
shares of the 1,997,660 shares authorized thereunder available for issuance. The
Existing Plan was previously approved by the Company's Shareholders. It is the
opinion of the Board of Directors that by providing the Company's employees and
other individuals contributing to the Company and its subsidiaries the
opportunity to acquire an equity investment in the Company, the Plan will
maintain and strengthen their desire to remain with the Company, stimulate their
efforts on the Company's behalf, and also attract other qualified personnel to
provide services on behalf of the Company.
The following statements summarize certain provisions of the Plan. All
statements are qualified in their entirety by reference to the text of the Plan,
copies of which are available for examination at the Securities and Exchange
Commission and at the principal office of the Company, 105 Corporate Park Drive,
White Plains, New York 10604.
The Plan allows the Company to grant incentive stock options ("ISOs"), as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), Non-Qualified Stock Options ("NQSOs") not intended to qualify under
Section 422(b) of the Code and Stock Appreciation Rights ("SARs"). ISO's,
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<PAGE> 7
NQSO's and SAR's may be collectively referred to as "Options." The vesting of
one or more Options granted thereunder may be based on the attainment of
specified performance goals of the participant or the performance of the
Company, one or more subsidiaries, parent and/or division of one or more of the
above. The Plan is intended to provide the employees, directors, independent
contractors and consultants of the Company with an added incentive to commence
or continue their services to the Company and to induce them to exert their
maximum efforts toward the Company's success. The Board of Directors has deemed
it in the best interest of the Company to establish the Plan so as to provide
employees and the other persons listed above the opportunity to acquire a
proprietary interest in the Company by means of grants of options to purchase
Common Stock. The plan is not subject to ERISA.
ELIGIBILITY FOR PARTICIPATION
Under the Plan, ISOs or ISOs in tandem with SARs, which are subject to the
requirements set forth in Temp. Reg. Section 14a.422A-1, A-39 (a)-(e), may be
granted, from time to time, to employees of the Company, including officers, but
excluding Directors who are not otherwise employees of the Company. ISOs, NQSOs
and SARs (collectively, "Options") may be granted from time to time, under the
Plan, to employees of the Company, officers, Directors, independent contractors,
consultants and other individuals who are not employees of, but are involved in
the continuing development and success of the Company (persons entitled to
receive ISOs, NQSOs, and/or SARs are hereinafter referred to as "Participants").
ISOs and ISOs in tandem with SARs may not be granted under the Plan to any
person for whom shares first become exercisable under the Plan or any other
stock option plan of the Company in any calendar year having an aggregate fair
market value (measured at the respective time of grant of such options) in
excess of $100,000. Any grant in excess of such amount shall be deemed a grant
of a NQSO. Furthermore, the maximum number of Options which can be granted to a
Participant in any calendar year is 300,000. To date, the Company has
approximately 117 employees (three of whom are also Directors), who are eligible
for grants of one or more types of Options under the Plan. The Company cannot
presently compute the number of non-employees who may be entitled to NQSOs.
ADMINISTRATION
The Plan is to be administered by the Board of Directors of the Company
and/or by a stock option or compensation committee (the administrator of the
Plan whether the Board of Directors itself or a committee thereof is hereinafter
referred to as the "Committee" unless the context otherwise requires) which
shall be comprised solely of at least two "outside directors" (as such term is
defined under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). The Committee will have the authority, in its discretion, to
determine the persons to whom options shall be granted, the character of such
options and the number of shares of Common Stock to be subject to each option.
The Board of Directors may administer the Plan, provided, however, that in the
event a Committee has been appointed, the Committee will administer the plan
with respect to employees included within the term "covered employee" under
Section 162(m) of the Code.
TERMS OF OPTIONS
The terms of Options granted under the Plan are to be determined by the
Board of Directors or the Committee. Each Option is to be evidenced by a stock
option agreement between the Company and the person to whom such option is
granted, and is subject to the following additional terms and conditions:
(a) Exercise of the Option: The Committee will determine the time
periods during which Options granted under the Plan may be exercised. An
Option must be granted within ten (10) years from the date the Plan was
adopted or the date the Plan is approved by the Shareholders of the
Company, whichever is earlier. Options will be exercisable in whole or in
part at any time during the period but will not have an expiration date
later than ten (10) years from the date of grant. Unless otherwise provided
in any option agreement issued under the Plan, any Option granted under the
Plan may be exercisable in whole or in part at any time during the exercise
period and except for performance based options, must become fully
exercisable within five years from the date of its grant, and not less than
20% of the Option shall become
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<PAGE> 8
exercisable on an aggregate basis by the end of any of the first five years
of the Option. The Committee may, in its sole discretion, accelerate any
such vesting period after the grant thereof. Notwithstanding the above,
ISOs or SARs granted in tandem with ISOs, granted to holders owning
directly or through attribution more than 10% of the Company's Common Stock
are subject to the additional restriction that the expiration date shall
not be later than five (5) years from the date of grant. An Option is
exercised by giving written notice of exercise to the Company specifying
the number of full shares of Common Stock to be purchased and tendering
payment of the purchase price to the Company in cash or certified check, or
if permitted by the instrument of grant, with respect to an ISO, or at the
discretion of the Committee with respect to NQSOs, by delivery of Common
Stock having a fair market value equal to the Option Price, by delivery of
an interest bearing promissory note having an original principal balance
equal to the Option Price and an interest rate not below the rate which
would result in imputed interest under the Code or by a combination of
cash, shares of Common Stock and promissory notes. Furthermore, in the case
of a NQSO, at the discretion of the Committee, the Participant may have the
Company withhold from the Common Stock to be issued upon exercise of the
Option that number of shares having a fair market value equal to the
exercise price and/or the withholding amount due.
(b) Option Price: The option price of an NQSO or an SAR granted in
tandem with an NQSO granted pursuant to the Plan is determined in the sole
discretion of the Committee but, in no event may the option price of an ISO
or SAR granted in tandem with an ISO be less than 85% of the fair market
value on the date of grant. Such fair market value of an ISO shall be
determined by the Committee and, if the Common Shares are listed on a
national securities exchange or traded on the over-the-counter market, the
fair market value shall be the closing price on such exchange, or the mean
of the reported bid and asked prices of the Common Shares on the
over-the-counter market as reported by NASDAQ, the NASD OTC Bulletin Board
or the National Quotation Bureau, Inc., as the case may be, on such date.
ISOs or SARs granted in tandem with ISOs, granted to holders owning
directly or through attribution, more than 10% of the Company's Common
Stock are subject to the additional restriction that the option price must
be at least 110% of the fair market value of the Company's Common Shares on
the date of grant.
(c) Termination of Employment or Consulting Agreement; Death: Except
as provided in the Plan, or otherwise extended by the Committee in its sole
discretion, subject to the last paragraph of this subpart (c), upon
termination of employment with the Company, or, in the case of a
consultant, his consulting agreement, for any reason, a holder of an Option
under the Plan may exercise such Option to the extent such Option was
exercisable as of the date of termination or at any time within three (3)
months after the date of such termination. However, unless otherwise
determined by the Committee in its sole discretion, any Options granted
under the Plan shall immediately terminate in the event the optionee is
terminated as a result of performing services for the Company in bad faith
or has been convicted of a felony committed against the Company.
Unless extended by the Committee, if the holder of an Option granted
under the Plan dies (i) while employed by the Company or a subsidiary or
parent corporation or (ii) within three (3) months after the termination of
such holder's employment, such option may be exercised at anytime
determined by the Committee, but in no event less than six months of death
by a legatee or legatees of such option under such individual's last will
or by such individual's estate, to the extent such option was exercisable
as of the date of death or date of termination of employment, whichever
date is earlier.
If the holder of an Option under the Plan becomes disabled within the
definition of Section 22(e)(3) of the Code while employed by the Company or
a subsidiary or parent corporation, such Option may be exercised at any
time within six months, less one day, after such holder's termination of
employment due to the disability.
An Option may not be exercised except to the extent that the holder
was entitled to exercise the option at the time of termination of
employment or death unless otherwise extended by the Committee in its sole
discretion, and in any event it may not be exercised after the original
expiration date of the option.
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(d) Nontransferability of Options; No Liens: ISOs and SARs granted in
tandem with ISOs shall be nontransferable and nonassignable except by will
or the laws of intestacy, and any ISO or SAR in tandem with an ISO is
exercisable during the lifetime of the Optionee only by the Optionee, or in
the event of his or her death, by a person who acquires the right to
exercise the Option by bequest or inheritance or by reason of the death of
the Optionee. The Board or its Committee has the right to grant options
other than ISO's or SAR's in tandem with ISO's which may or may not be
transferable or assignable.
The option agreement may contain such other terms, provisions and
conditions not inconsistent with the Plan as may be determined by the Committee.
TERMINATION; MODIFICATION AND AMENDMENT
The Plan (but not options previously granted under the Plan) shall
terminate ten years from the earlier of the date of its adoption by the Board of
Directors or the date the Plan is approved by the Shareholders of the Company.
No Option will be granted after termination of the Plan.
The Board of Directors of the Company may terminate the Plan at any time
prior to its expiration date, or from time to time make such modifications or
amendments of the Plan, as it deems advisable. However, the Board of Directors
may not, without the approval of a majority of the then outstanding shares of
the Company entitled to vote thereon, except under conditions described under
"Adjustments Upon Changes in Capitalization," increase the maximum number of
shares as to which options may be granted under the Plan, materially change the
standards of eligibility under the Plan, or adopt a new plan.
No termination, modification or amendment of the Plan may adversely affect
the terms of any outstanding Options without the consent of the holders of such
Options.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
In the event that the number of outstanding shares of Common Stock of the
Company is changed by reason of recapitalization, reclassification, stock split,
stock dividend, combination, exchange of shares, or the like, the Board of
Directors of the Company will make an appropriate adjustment in the aggregate
number of shares of Common Stock available under the Plan, in the number of
shares of Common Stock reserved for issuance upon the exercise of then
outstanding Options and in the exercise prices of such Options. Any adjustment
in the number of shares will apply proportionately only to the unexercised
portion of Options granted under the Plan. Fractions of shares resulting from
any such adjustment shall be revised to the next higher whole number of shares.
In the event of the proposed dissolution or liquidation of substantially
all of the assets of the Company, all outstanding Options will automatically
terminate, unless otherwise provided by the Board of Directors.
FEDERAL INCOME TAX CONSEQUENCES.
The following discussion is only a summary of the principal federal income
tax consequences of the Options granted under the Plan and is based on existing
federal law, which is subject to change, in some cases retroactively. This
discussion is also qualified by the particular circumstances of individual
optionees, which may substantially alter or modify the federal income tax
consequences herein discussed.
Generally, under present law, when an option qualifies as an ISO under
Section 422 of the Code (i) an employee will not realize taxable income either
upon the grant or the exercise of the option, (ii) the amount by which the fair
market value of the shares acquired by the exercise of the option at the time of
exercise exceeds the option price is included in alternative minimum taxable
income for purposes of determining the employee's alternative minimum tax, (iii)
any gain or loss (the difference between the net proceeds received upon the
disposition of the shares and the option price paid therefor) upon a qualifying
disposition of the shares acquired by the exercise of the option will be treated
as capital gain or loss if the stock qualifies as a capital asset in the hands
of the employee, and (iv) no deduction will be allowed to the Company for
federal income tax purposes in connection with the grant or exercise of an
incentive stock option or a qualifying
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<PAGE> 10
disposition of the shares. A disposition by an employee of shares acquired upon
exercise of an ISO will constitute a qualifying disposition if it occurs after
the holder's death or more than two years after the grant of the option and one
year after the issuance of the shares to the employee. If such shares are
disposed of by the employee before the expiration of those time limits, the
transfer would be a "disqualifying disposition" and the employee, in general,
will recognize ordinary income (and the Company will receive an equivalent
deduction) equal to the aggregate fair market value of the shares as of the date
of exercise less the option price. Ordinary income from a disqualifying
disposition will constitute compensation for which withholding may be required
under federal and state law. Currently under the Code, the maximum rate of tax
on ordinary income is greater than the rate of tax on long-term capital gains.
Many proposals have been made to reduce the marginal rate of tax on capital
gains. However, to date, no such proposals have been enacted into law.
Furthermore, in the future, the rate of tax on such gains may be increased. No
assurance can be given of when, if ever, new tax legislation will be enacted
into law, and the effective date of any such legislation.
In the case of a non-qualified stock option granted under the Plan, no
income generally is recognized by the optionee at the time of the grant of the
option assuming such non-qualified stock option does not have a readily
ascertainable fair market value. The optionee generally will recognize ordinary
income when the non-qualified stock option is exercised equal to the aggregate
fair market value of the shares acquired less the option price. Ordinary income
from non-qualified stock options will constitute compensation for which
withholding may be required under federal and state law, and the Company will
receive an equivalent deduction, subject to the limitations of Section 162(m) of
the Code which limits the amount a publicly held corporation may deduct with
respect to remuneration generally paid to an executive officer of the
Corporation to $1,000,000. Income recognized by such executive officer on the
exercise of a NQSO or SAR would be deemed remuneration. However, there are
certain requirements which, if met, will allow income from the exercise of a
NQSO or SAR to be excluded from remuneration for such purposes. Even though the
Company and the Plan satisfy such requirements, no assurance can be given that
they will be met in the future.
Shares acquired upon exercise of non-qualified stock options will have a
tax basis equal to their fair market value on the exercise date or other
relevant date on which ordinary income is recognized and the holding period for
the shares generally will begin on the date of the exercise or such other
relevant date. Upon subsequent disposition of the shares, the optionee will
recognize capital gain or loss if the stock is a capital asset in his hands.
Provided the shares are held by the optionee for more than one year prior to
disposition, such gain or loss will be long-term capital gain or loss. As set
forth above, the maximum rate of tax on ordinary income is currently greater
than the rate of tax on long-term capital gains. To the extent an optionee
recognizes a capital loss, such loss may currently generally offset capital
gains and $3,000 of ordinary income. Any excess capital loss is carried forward
indefinitely.
The grant of an SAR is generally not a taxable event for the optionee. Upon
the exercise of an SAR the optionee will recognize ordinary income in an amount
equal to the amount of cash and with respect to SARs granted in tandem with
NQSOs, the fair market value of any shares of Common Stock received upon such
exercise, and the Company will be entitled to a deduction equal to the same
amount. However, if the sale of any shares received would be subject to Section
16(b) of the Securities Exchange Act of 1934, ordinary income attributable to
such shares received will be recognized on the date such sale would not give
rise to a Section 16(b) action, valued at the fair market value at such later
time, unless the optionee has made a Section 83(b) election within 30 days after
the date of exercise to recognize ordinary income as of the date of exercise
based on the fair market value at the date of exercise.
The foregoing discussion is only a brief summary of the applicable Federal
income tax laws as in effect on this date and should not be relied upon as being
a complete statement. The federal tax laws are complex, and they are subject to
legislative changes and new or revised judicial or administrative
interpretations at any time. In addition to the federal income tax consequences
described herein, an optionee may also be subject to state and/or local income
tax consequences in the jurisdiction in which the grantee works and/or resides.
NEW PLAN BENEFITS.
No options to purchase shares of Common Stock have been granted or
allocated under the Plan.
8
<PAGE> 11
MANAGEMENT RECOMMENDS VOTING "FOR" THE 1997 INCENTIVE STOCK OPTION PLAN.
PROPOSAL 3. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been the independent public accountants of the
Company since November 1979. They have no financial interest, either direct or
indirect, in the Company. Selection of independent public accountants is made by
the Audit Committee of the Company's Board of Directors and is approved by the
entire Board of Directors, subject to Shareholder ratification. A representative
of Arthur Andersen LLP is expected to attend the Annual Meeting and to have an
opportunity to make a statement or respond to appropriate questions from
Shareholders.
MANAGEMENT RECOMMENDS VOTING "FOR" THE RATIFICATION OF THE APPOINTMENT OF
THE INDEPENDENT PUBLIC ACCOUNTANTS.
MEETINGS OF THE BOARD OF DIRECTORS AND
INFORMATION REGARDING COMMITTEES
The Board of Directors has three standing committees, an Audit Committee, a
Compensation Committee and an Information Systems Committee. The Board of
Directors does not have a Nominating Committee.
The Audit Committee is composed of Sidney Merians (Chairman), Leo Benatar,
Thomas Loemker, and Robert Puopolo. The duties of the Audit Committee include
recommending the engagement of independent auditors, reviewing and considering
actions of Management in matters relating to audit functions, reviewing with
independent auditors the scope and results of its audit engagement, reviewing
reports from various regulatory authorities, reviewing the system of internal
controls and procedures of the Company, and reviewing the effectiveness of
procedures intended to prevent violations of law and regulation. The Audit
Committee held two meetings in 1996.
The Compensation Committee is composed of David McKinney (Chairman), Robert
Laidlaw and Walter Williams. Among the duties of this Committee are to recommend
to the Board remuneration for officers of the Company, to determine the number
and issuance of options pursuant to the Company's 1990 Employee Stock Option
Plan and to recommend the establishment of and to monitor a compensation and
incentive program for all executives of the Company. The Compensation Committee
held one meeting in 1996.
The Information Systems Committee is composed of Walter Williams
(Chairman), David McKinney and Thomas Loemker. The Committee was formed in
January 1995 to monitor the development and implementation of advanced,
integrated electronic data systems throughout the Company and to ensure that
such systems support the Company's strategic objectives. The Information Systems
Committee held one meeting in 1996.
The Board of Directors held five meetings in 1996. All Directors attended
at least 75% of the total number of Board meetings and of the meetings of
Committees on which each Director served.
The Company has also adopted a policy that no member of the Board of
Directors who attains the age of seventy years shall stand for re-election to
the Board of Directors.
9
<PAGE> 12
PRINCIPAL SHAREHOLDERS
The following table sets forth as of March 20, 1997 information with
respect to those persons known to the Company to be beneficial owners of more
than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
- ----------------------------------------------------------------- ------------------ ----------
<S> <C> <C>
Arthur Hershaft.................................................. 4,179,833(1) 14.66%
105 Corporate Park Drive
White Plains, NY 10604
The Prudential Insurance Company of America...................... 1,825,278(2) 6.44%
Prudential Plaza
Newark, NJ 07102
Thomas W. Smith.................................................. 3,568,900(3) 12.58%
Thomas N. Tryforos
323 Railroad Avenue
Greenwich, CT 06830
</TABLE>
- ---------------
(1) See Footnote 7 to the section of this Proxy captioned "Election of
Directors" above for a description of Mr. Hershaft's stock ownership.
(2) Represents shares of Common Stock held for the benefit of The Prudential
Insurance Company of America's clients.
(3) Represents shares of Common Stock beneficially owned by Messrs. Smith and
Tryforos as investment managers for certain managed accounts consisting of
three private investment limited partnerships, of which each of Messrs.
Smith and Tryforos is a general partner, an employee profit sharing plan of
a corporation of which Mr. Smith is the sole stockholder, for which the both
Messrs. Smith and Tryforos are trustees, and a trust for the benefit of a
family member of Mr. Smith, for which Mr. Smith is a trustee.
10
<PAGE> 13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the aggregate compensation paid by the
Company to the Chief Executive Officer and the three other Executive Officers of
the Company during the last three fiscal years:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ---------- ---------
OTHER RESTRICTED LONG TERM
ANNUAL STOCK OPTIONS/ INCENTIVE
NAME AND PRINCIPAL COMPENSATION AWARD(S) SARs PLAN ALL OTHER
POSITION YEAR SALARY($) BONUS($) ($) ($) (#)(1) PAYOUTS COMPENSATION($)(2)
- ------------------ ----- -------- -------- ------------ ---------- -------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arthur Hershaft... 1996 $357,617 $502,918 -- -- 31,250 -- $250,000
Chief Executive
Officer 1995 $343,863 $515,795 -- -- 39,063 -- --
1994 $332,235 $383,731 -- -- -- -- --
Victor Hershaft... 1996 $310,826 $349,680 -- -- 15,625 -- --
President 1995 $298,872 $358,646 -- -- 19,531 -- --
1994 $288,765 $266,819 -- -- -- -- --
Thomas Loemker.... 1996 -- -- -- -- -- -- --
Vice Chairman 1995 -- -- -- -- -- -- --
of the Board 1994 $134,615 $100,000 -- -- -- -- --
Jack Plaxe(3)..... 1996 $177,606 $166,506 -- -- 15,000 -- --
Chief Financial 1995 $170,775 $170,775 -- -- 18,750 -- --
Officer 1994 $165,000 $127,050 -- -- 0 -- --
</TABLE>
- ---------------
(1) Represents incentive stock options granted under either the Company's 1990
Employee Stock Option Plan or 1982 Incentive Stock Option Plan, as adjusted
for stock splits effectuated in the form of stock dividends and stock
dividends declared and issued subsequent to the grant of such options.
(2) Includes a special bonus of $250,000 in recognition of extraordinary
services performed in 1996 including the agreement to purchase the balance
of the interest of Monarch Holdings, Inc. not owned by the Company, the
expansion of the business of the Company overseas, and the general increase
in the results of operations.
(3) In March 1997, Jack Plaxe resigned from all positions held with the Company
including Chief Financial Officer and Secretary.
INDIVIDUALIZED OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS/SAR's EXERCISE APPRECIATION FOR
OPTIONS/ GRANTED TO OR BASE OPTION
SAR's EMPLOYEES IN PRICE EXPIRATION --------------------
GRANTED(#) FISCAL YEAR ($/SH) DATE 5% 10%
---------- ------------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Arthur Hershaft............... 27,179 7.9% $10.89 1/23/01 $47,427 $137,363
4,071 1.2% $ 9.90 1/23/06 $25,346 $ 64,232
Victor Hershaft............... 15,625 4.5% $ 9.90 1/23/06 $97,281 $246,531
Jack Plaxe.................... 15,000 4.3% $ 9.90 1/23/06 $93,390 $236,670
Thomsas Loemker............... 0 0 0 0 0 0
</TABLE>
- ---------------
(1) Stock options granted under the Company's 1990 Employee Stock Option Plan
(the "Plan") are intended to qualify as incentive stock options
("ISOs")under Section 422 of the Internal Revenue Code of 1986, as amended.
Under the terms of the Plan, ISOs may be granted to officers and other key
employees of the Company for a maximum term of 10 years. The price per share
of an ISO may not be less than the fair market value of the Company's shares
on the date the ISO is granted. However, ISOs granted to persons owning more
than 10% of the Company's Common Stock may not have a term in excess of five
years and may not have an option price of less than 110% of the fair market
value per share of the Company's shares on the date the ISO is granted. The
maximum number of ISOs is limited to such number so that the aggregate fair
market value, determined as of the date the ISOs are granted, of
11
<PAGE> 14
the shares of Common Stock with respect to which ISOs are exercisable for the
first time during any calendar year shall not exceed $100,000. Any options
granted in excess of the $100,000 limitation would not qualify as ISOs under the
Internal Revenue Code.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARs AT OPTIONS/SARs AT
ACQUIRED FY-END(#) FY-END($)
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED UNEXERCISABLE UNEXERCISABLE(1)
- ---------------------------------- ----------- -------- ---------------- ------------------
<S> <C> <C> <C> <C>
Arthur Hershaft................... 15,259 $212,138 71,142/63,258 $655,072/$541,234
Victor Hershaft................... 13,352 $192,421 35,045/30,273 $354,076/$273,771
Jack Plaxe........................ 0 0 29,101/29,063 $318,242/$262,837
Thomas Loemker.................... 0 0 0/0 0/0
</TABLE>
- ---------------
(1) As adjusted for stock splits effectuated in the form of stock dividends, and
stock dividends declared and issued subsequent to the date of grant of such
options.
COMPENSATION OF DIRECTORS
The Company established a policy in 1993 to pay each of its Directors, who
are not employees of the Company, in their capacity as Directors, $12,000 per
annum and grant each such Director options to purchase 5,000 shares upon
becoming a Director and options to purchase an additional 2,500 shares per year,
(adjusted for stock dividends subsequent to establishing the policy). As a
result of stock dividends distributed since 1993, each Director was granted an
option to purchase 4,883 shares of Common Stock in 1996. In addition, each such
Director is entitled to be paid $1,000 for attendance at each meeting of the
Board of Directors and $600 for attendance at Committee meetings. Committee
chairmen are paid $1,000 per annum in such capacity.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENT
See "Certain Transactions" for a description of employment contracts
between the Company and Arthur Hershaft and Victor Hershaft, and certain
compensation that may be payable to Arthur Hershaft and Victor Hershaft upon a
change in control of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee was an officer or employee of the
Company or of any of its subsidiaries during the prior year or was formerly an
officer of the Company or of any of its subsidiaries. None of the Executive
Officers of the Company has served on the Board of Directors or Compensation
Committee during the last fiscal year of any other entity, any of whose officers
served either on the Board of Directors of the Company or on the Compensation
Committee of the Company.
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION POLICY
The policy and objectives of the Compensation Committee of the Board of
Directors with respect to executive compensation are to improve shareholder
value by enhancing corporate performance through attracting and retaining key
executive personnel. The philosophy of the Committee is to base executive
compensation on short and long term performance criteria, thereby providing the
motivation and incentive for outstanding performance by executive officers.
12
<PAGE> 15
The following statements summarize the policies that guide the Committee's
executive compensation decisions. The Company's executive compensation program
is designed to:
-- Create an inducement and motivation for executive officers to sustain
Company growth and increase market share.
-- Align the financial interests of the executive officers with those of
the Company's shareholders.
-- Reward above-average returns to shareholders.
-- Induce corporate loyalty in both the short and long term.
The Company's executive compensation program has three major components:
base salaries, annual incentive, and long-term incentives.
BASE SALARIES
The Company's executive officers receive base salaries as compensation for
their job performance, abilities, knowledge, and experience. With respect to
Arthur Hershaft, the Chief Executive Officer and Chairman of the Board of
Directors of the Company, the base salary is determined pursuant to the terms of
his employment contract with the Company. Apart from any contractual
commitments, the base salaries paid to the executive officers are intended to be
maintained at competitive levels. This reflects the Committee's desire to place
more emphasis on the incentive portion of executive compensation, and thereby
correlating compensation to performance. The Committee reviews base salaries
annually and determines increases based upon an executive officer's contribution
to corporate performance and competitive market conditions.
ANNUAL INCENTIVE COMPENSATION
The Committee has adopted an annual incentive compensation program based
upon corporate performance criteria to augment the base salaries received by
executive officers. Under the incentive compensation program, performance is
measured as a function of the Company's improvement in earnings per share from
year to year. Each year, the Committee establishes "target" bonus awards for
executive officers. For 1997, the target incentive bonus award will be paid if
the growth in earnings per share is 20%. No bonus will be paid unless the growth
in earnings per share is at least 5%. The maximum bonus award of 200% of target
will be paid if growth in earnings per share is 40% or more. The "target" bonus
award with respect to Arthur Hershaft is 75% of base salary if the growth in
earnings per share is 20% or more.
LONG-TERM INCENTIVES
The Company has also established a stock option plan, pursuant to which
stock options are awarded by the Committee periodically to executive officers.
Stock option plans are designed to encourage executives to acquire an equity
interest in the Company, thereby aligning their long-term financial interests
with those of the shareholders. In January, 1997, the Committee authorized a
grant to Arthur Hershaft of 30,000 non-qualified stock options to purchase a
like number of shares of the Company's Common Stock at an exercise price of
$16.625 (equal to the closing market price on the date of grant) and a grant to
Victor Hershaft of 12,306 qualified stock options and 7,694 non-qualified stock
options to purchase a like number of shares of the Company's Common Stock at an
exercise price of $16.625 (equal to the closing market price on the date of
grant) The Committee believes this grant to be consistent with its compensation
policies by encouraging performance which contributes to the overall
profitability of the Company and which increases the price of the Company's
Common Stock.
Submitted March 24, 1997 by the members of the Compensation Committee.
David McKinney, Chairman
Robert Laidlaw
Walter Williams
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph compares on a cumulative basis the yearly percentage
change, assuming dividend reinvestment, over the last five fiscal years in (a)
the total shareholder return on the Company's Common Stock with (b) the total
return on the Standard & Poor's 500 Composite Index ("S&P 500") and (c) the
total return on a selected peer group index (the "1996 Peer Group"). The S&P 500
has been selected as the required broad entity market index. The 1996 Peer Group
is an index weighted by the relative market capitalization of the following ten
companies which were selected for being in related industries to the Company's
(product identification, bar-code, apparel, textile, and printing), for having
revenues between $50 and $700 million in their most recently reported fiscal
years and for having 5 year compound annual revenue growth of at least 10%. The
ten are: W.H. Brady Co.; Cadmus Communications Corp.; Checkpoint Systems, Inc.;
Eltron International; Merrill Corporation; Sealright Co., Inc.; Sensormatic
Electronics Corp.; Shorewood Packaging Corporation; Symbol Technologies Inc.;
and Telxon Corp.
The following graph assumes that $100 had been invested in each of Paxar
Corporation, the S&P 500, and the 10-member 1996 Peer Group on December 31,
1991.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG PAXAR CORPORATION, S&P 500 INDEX & PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD 96 PEER GROUP
(FISCAL YEAR COVERED) PAXAR CORPORATION S&P 500 INDEX INDEX
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 275.61 107.64 94.43
1993 268.60 118.50 122.84
1994 221.98 120.06 147.69
1995 367.66 165.18 144.53
1996 598.31 203.11 146.42
</TABLE>
14
<PAGE> 17
The immediately preceding sections entitled "Executive Compensation" and
"Performance Graph" do not constitute soliciting material for purposes of Rule
14a-9 of the Securities and Exchange Commission (the "Commission"), and will not
be deemed to have been filed with the Commission for purposes of Section 18 of
the Securities Exchange Act of 1934, and are not to be incorporated by reference
into any other filing made by the Company with the Commission.
CERTAIN TRANSACTIONS
The Company leases a plant located in Sayre, Pennsylvania from certain
present and former principals of the Company and certain of their heirs at an
annual rental of $108,000. Management believes that the terms of this
transaction are no less favorable to the Company than the terms obtainable from
non-affiliated persons.
On December 16, 1986, Arthur Hershaft and the Company entered into an
employment agreement. The agreement provides for an initial term of five years
and is renewable, at the option of Mr. Hershaft, for an additional five years.
In 1991, Mr. Hershaft exercised his option to renew his agreement for an
additional five years. Thereafter, the contract is automatically renewed
annually unless either the Company or Mr. Hershaft elect to terminate it. Mr.
Hershaft's fixed compensation for the fiscal year ending December 31, 1997 will
be $370,135. Mr. Hershaft is a participant in the Company's incentive
compensation programs and is entitled to receive other fringe benefits available
to executives employed by the Company. The Company has also agreed to maintain a
$1,000,000 life insurance policy on Mr. Hershaft's life, which requirement Mr.
Hershaft has waived. In the event of a permanent disability, Mr. Hershaft will
be entitled to $150,000 per annum (inclusive of coverage provided by Social
Security) pursuant to the proceeds of the disability insurance policy maintained
by the Company on Mr. Hershaft's behalf, provided that the premiums for such
disability insurance do not exceed $15,000 per annum. Mr. Hershaft may resign as
an active employee and become a consultant to the Company following the
conclusion of the term of the employment agreement. In the event Mr. Hershaft
becomes a consultant, he will be entitled to receive annual compensation of
$150,000 for each year in which he acts as a consultant to the Company prior to
his 65th birthday and annual compensation of $250,000 for each year in which he
acts as a consultant to the Company following his 65th birthday. The aggregate
length of Mr. Hershaft's consulting term is to be 10 years. In the event there
is a change in control of the Company which Mr. Hershaft and a majority of the
Corporation's Board of Directors oppose, Mr. Hershaft will be entitled, upon
such change of control, to terminate his employment and receive 2.9 times his
fixed compensation as defined in the employment agreement. However, if Mr.
Hershaft opposes a change in control, but the majority of the Board of Directors
vote in favor of such change, then Mr. Hershaft may terminate his employment and
receive 2.5 times his fixed compensation. The employment agreement also contains
various restrictive covenants limiting Mr. Hershaft's ability to enter into
competition with the Company.
On February 13, 1989, Victor Hershaft and the Company entered into an
employment agreement. The agreement provides for an initial term of six years
and is renewable for an additional four years unless either party elects to
terminate the agreement. In 1995, Mr. Hershaft exercised his option to renew his
agreement for an additional four years. Thereafter, the contract is
automatically renewable annually unless either the Company or Mr. Hershaft
elects to terminate it. Mr. Hershaft receives annual increases in salary equal
to the greater of (i) the average of the percentage increase of fixed
compensation of the three most senior executive officers of the Company granted
during the year then ended and (ii) five (5%) percent of Mr. Hershaft's fixed
compensation. Mr. Hershaft's fixed compensation for the fiscal year ending
December 31, 1997 will be $321,706. Mr. Hershaft is also a participant in the
Company's incentive compensation program and is entitled to receive other fringe
benefits available to executives employed by the Company. The Company also
maintains a $200,000 life insurance policy on Mr. Hershaft's life, payable to
beneficiaries named by Mr. Hershaft. In the event of a permanent disability, Mr.
Hershaft will be entitled to $150,000 per annum (inclusive of coverage provided
by Social Security) pursuant to the proceeds of the disability insurance policy
maintained by the Company on Mr. Hershaft's behalf, provided that the premiums
for such disability insurance do not exceed $7,500 per annum. Mr. Hershaft may
resign as an active employee and become a manufacturer's representative for the
Company at the expiration of the initial term or any renewed term. In the event
there is a change in control of the Company which Mr. Victor Hershaft, Mr.
Arthur Hershaft and a
15
<PAGE> 18
majority of the Corporation's Board of Directors oppose, Mr. Victor Hershaft
will be entitled, upon such change of control, to terminate his employment and
receive 2.9 times his fixed compensation as defined in the employment agreement.
However, if Mr. Victor Hershaft and Mr. Arthur Hershaft oppose a change in
control, but the majority of the Board of Directors vote in favor of such
change, then Mr. Victor Hershaft upon such change in control may terminate his
employment and receive 2.5 times his fixed compensation. The employment
agreement also contains various restrictive covenants limiting Mr. Victor
Hershaft's ability to enter into competition with the Company.
The law firm of Snow Becker Krauss P.C., of which Jack Becker is a
principal, serves as general counsel to the Company.
The Company has procured Directors and Officers' liability insurance from
Royal Indemnity Company under a contract dated March 1, 1997 at an aggregate
annual premium of $121,000. The policies insure the Company and the Directors
and Officers of the Company in accordance with the indemnification provisions of
the New York Business Corporation Law.
In December 1989, Arthur Hershaft and the Company entered into an
agreement, as amended, providing for restrictions on the transfer by Mr.
Hershaft, or by his relatives or legal representatives, of the issued and
outstanding Common Stock of the Company held by Mr. Hershaft. The agreement
prohibits Mr. Hershaft from selling or otherwise encumbering or disposing of his
Common Stock unless he first offers the shares in writing for sale to the
Company at a price equal to the market value of the shares, or, if Mr. Hershaft
receives an offer from a third party to purchase all or a portion of his Common
Stock, at a price per share equal to the price offered by the third party. The
agreement permits Mr. Hershaft to gift up to 100,000 shares per annum and to
encumber and/or pledge up to an additional 75,000 per annum during the term of
the agreement. In addition, the agreement permits Mr. Hershaft to transfer
Common Stock to his wife, children, grandchildren or a charitable trust
maintained by him, provided that any such permitted transferee enters into an
agreement with the Company on the same terms as Mr. Hershaft's December 1989
agreement. The agreement also allows Mr. Hershaft the following rights: (i) to
sell Common Stock on the open market in quantities permissible under Rule 144
promulgated by the Securities and Exchange Commission; and (ii) to sell Common
Stock pursuant to a merger or other corporate reorganization approved by the
Company's Board of Directors, provided that the same transaction is offered to
at least the holders of a majority of the Company's then outstanding shares of
Common Stock.
In the event of the death of Mr. Hershaft, the December 1989 agreement, as
amended, also requires the Company to purchase and the executor or administrator
of Mr. Hershaft's estate to sell (i) all of the shares of Common Stock owned by
the estate, if the total market value of such shares shall be $5,000,000 or
less, or (ii) the number of shares of a market value of $5,000,000, if the total
valuation of all of the Common Stock owned by Mr. Hershaft's estate shall be
more than $5,000,000. Under the agreement, the Company agreed to procure life
insurance on the life of Mr. Hershaft in the aggregate amount of $5,000,000 to
provide funds necessary to purchase Common Stock, as required upon his death. If
less than all of the Common Stock held by Mr. Hershaft's estate is sold to the
Company upon his death, the Company shall have the right, once during each
twelve-month period after closing of the purchase of Common Stock for the
estate, to purchase additional Common Stock for the estate in amounts equal to
the lesser of up to 30,000 shares or such number of shares as shall have an
aggregate market value of $350,000. The beneficiaries of Mr. Hershaft's estate
will be bound by the terms of the agreement.
On January 24, 1996, the Company granted 15,625 incentive stock options
exercisable at $9.90 per share to Victor Hershaft, a Director and President of
the Company, and 15,000 to Jack Plaxe, then the Company's Vice President and
Chief Financial Officer. Twenty-five percent of such options became exercisable
on the first anniversary of the date such options were granted. Thereafter an
additional twenty-five percent becomes exercisable on each succeeding
anniversary. Once vested, the options remain exercisable until January 23, 2006.
On January 24, 1996, the Company granted 27,179 incentive stock options to
Arthur Hershaft, the Company's Chief Executive Officer. Such options are
exercisable at a price of $10.89 per share for a period of
16
<PAGE> 19
five years. In addition, on January 24, 1996, the Company granted 4,071 options
to Arthur Hershaft which are exercisable at price of $9.90 for a period of ten
years.
On April 24, 1996, the Company granted an aggregate of 39,064 options
(4,883 each) to the following of the Company's Directors: David McKinney, Robert
Laidlaw, Jack Becker, Leo Benatar, Sidney Merians, Walter Williams, Robert
Puopolo and Thomas Loemker. Such options are exercisable at $12.80 per share for
a period of ten years and were granted in connection with service on the
Company's Board of Directors. See "Executive Compensation -- Compensation of
Directors."
On January 25, 1996, the Company granted 6,250 options to Leo Benatar, a
Director of the Company. Such options are exercisable at $9.50 per share for a
period of ten years and were granted in connection with his election to the
Company's Board of Directors. See "Executive Compensation -- Compensation of
Directors."
On March 3, 1997, the Company completed the acquisition from Odyssey
Partners, L.P. ("Odyssey") of 495 shares (the "Shares") of common stock, par
value $.01 ("Holdings Common Stock") of Monarch Holdings, Inc., a Delaware
corporation ("Holdings"). The Company previously owned 495 shares of Holdings
Common Stock. Holdings owned all of the outstanding capital stock of Monarch
Marking Systems, Inc. ("Monarch"). Immediately following the closing of the
acquisition, the Company merged with Holdings, as a consequence of which Monarch
became a wholly-owned subsidiary of the Company. Thomas R. Loemker, a director,
and John W. Paxton, a candidate for director, each received 125,229 shares of
the Company's Common Stock in the merger in exchange for 10 shares (1%) of
Holdings Common Stock owned by each of them. In the merger, Mr. Paxton received
incentive stock options to purchase an aggregate of 500,918 shares of the
Company's Common Stock at $2.42 a share pursuant to the Company's 1990 Employee
Stock Option Plan in exchange for outstanding options to purchase Holdings
Common Stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Officers and Directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and persons who own more than ten-percent of the Company's
equity securities are required by regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
January 1, 1996 through December 31, 1996, all filing requirements applicable to
its officers, directors, and greater than ten-percent beneficial owners were
complied with.
17
<PAGE> 20
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
at the Company's next Annual Meeting must be received by the Company no later
than December 23, 1997 in order for them to be included in the proxy statement
and form of proxy relating to that meeting.
By Order of the Board of Directors
JACK BECKER
Assistant Secretary
Copies of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 as filed with the Securities and Exchange Commission,
including the financial statements, can be obtained without charge by
shareholders (including beneficial owners of the Company's Common Stock) upon
written request to Investor Relations: Attn: Ms. Annette Geraghty, PAXAR
Corporation, 105 Corporate Park Drive, White Plains, New York 10604 and can be
found on the SEC's website at www.sec.gov.
White Plains, New York
March 31, 1997
18
<PAGE> 21
EXHIBIT A
PAXAR CORPORATION
1997 INCENTIVE STOCK OPTION PLAN
1. PURPOSES.
The PAXAR CORPORATION 1997 INCENTIVE STOCK OPTION PLAN (the "Plan") is
intended to provide the employees, directors, independent contractors and
consultants of Paxar Corporation (the "Company") and/or any subsidiary or parent
thereof with an added incentive to commence and/or continue their services to
the Company and to induce them to exert their maximum efforts toward the
Company's success. By thus encouraging employees, directors, independent
contractors and consultants and promoting their continued association with the
Company, the Plan may be expected to benefit the Company and its shareholders.
The Plan allows the Company to grant Incentive Stock Options ("ISOs") (as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), Non-Qualified Stock Options ("NQSOs") not intended to qualify under
Section 422(b) of the Code and Stock Appreciation Rights ("SARs") (collectively
the "Options"). The vesting of one or more Options granted hereunder may be
based on the attainment of specified performance goals of the participant or the
performance of the Company, one or more subsidiaries, parent and/or division of
one or more of the above.
2. SHARES SUBJECT TO THE PLAN.
The total number of shares of Common Stock of the Company, $.10 par value
per share, that may be subject to Options granted under the Plan shall be one
and one-half million (1,500,000) in the aggregate, subject to adjustment as
provided in Paragraph 8 of the Plan; however, the grant of an ISO to an employee
together with a tandem SAR or any NQSO to an employee together with a tandem SAR
shall only require one share of Common Stock available subject to the Plan to
satisfy such joint Option. The Company shall at all times while the Plan is in
force reserve such number of shares of Common Stock as will be sufficient to
satisfy the requirement of outstanding Options granted under the Plan. In the
event any Option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, the unpurchased shares subject thereto shall
again be available for granting of Options under the Plan.
3. ELIGIBILITY.
ISO's or ISO's in tandem with SAR's (provided the SAR meets the
requirements set forth in Temp. Reg. Section 14a.422A-1, A-39 (a) through (e)
inclusive) may be granted from time to time under the Plan to one or more
employees of the Company or of a "subsidiary" or "parent" of the Company, as the
quoted terms are defined within Section 424 of the Code. An Officer is an
employee for the above purposes. However, a director of the Company who is not
otherwise an employee is not deemed an employee for such purposes. NQSOs and
SARs may be granted from time to time under the Plan to one or more employees of
the Company, Officers, members of the Board of Directors, independent
contractors, consultants and other individuals who are not employees of, but are
involved in the continuing development and success of the Company and/or of a
subsidiary of the Company, including persons who have previously been granted
Options under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board of Directors of the Company
as such Board of Directors may be composed from time to time and/or by a Stock
Option Committee or Compensation Committee (the "Committee") which shall be
comprised of solely of at least two Outside Directors (as such term is defined
in regulations promulgated from time to time with respect to Section
162(m)(4)(C)(i) of the Code) appointed by such Board of Directors of the
Company. As and to the extent authorized by the Board of Directors of the
Company, the Committee may exercise the power and authority vested in the Board
of Directors under the Plan. Within the limits of the express provisions of the
Plan, the Board of Directors or Committee shall have
<PAGE> 22
the authority, in its discretion, to determine the individuals to whom, and the
time or times at which, Options shall be granted, the character of such Options
(whether ISOs, NQSOs, and/or SARs in tandem with NQSOs, and/or SARs in tandem
with ISOs) and the number of shares of Common Stock to be subject to each
Option, the manner and form in which the optionee can tender payment upon the
exercise of his Option, and to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of Option agreements that may be entered into in connection with
Options (which need not be identical), subject to the limitation that agreements
granting ISOs must be consistent with the requirements for the ISOs being
qualified as "incentive stock options" as provided in Section 422 of the Code,
and to make all other determinations and take all other actions necessary or
advisable for the administration of the Plan. In making such determinations, the
Board of Directors and/or the Committee may take into account the nature of the
services rendered by such individuals, their present and potential contributions
to the Company's success, and such other factors as the Board of Directors
and/or the Committee, in its discretion, shall deem relevant. The Board of
Directors' and/or the Committee's determinations on the matters referred to in
this Paragraph shall be conclusive.
(b) Notwithstanding anything contained herein to the contrary, at anytime
during the period the Company's Common Stock is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934 (the "1934 Act), the Committee, if
one has been appointed to administer all or part of the Plan, shall have the
exclusive right to grant Options to Covered Employees as defined under Section
162(m)(3) of the Code (generally persons subject to Section 16 of the 1934 Act)
and set forth the terms and conditions thereof. With respect to persons subject
to Section 16 of the 1934 Act, transactions under the Plan are intended, to the
extent possible, comply with all applicable conditions of Rule 16b-3, as amended
from time to time, (and its successor provisions, if any) under the 1934 Act and
Section 162(m)(4)(C) of the Code of 1986, as amended. To the extent any
provision of the Plan or action by the Board of Directors or Committee fails to
so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Board of Directors and/or such Committee.
5. TERMS OF OPTIONS.
Within the limits of the express provisions of the Plan, the Board of
Directors or the Committee may grant either ISOs or NQSOs or SARs in tandem with
NQSOs or SARs in tandem with ISOs. An ISO or an NQSO enables the optionee to
purchase from the Company, at any time during a specified exercise period, a
specified number of shares of Common Stock at a specified price (the "Option
Price"). The optionee, if granted a SAR in tandem with a NQSO or ISO, may
receive from the Company, in lieu of exercising his option to purchase shares
pursuant to his NQSO or ISO, at one of the certain specified times during the
exercise period of the NQSO or ISO as set by the Board of Directors or the
Committee, the excess of the fair market value upon such exercise (as determined
in accordance with subparagraph (b) of this Paragraph 5) of one share of Common
Stock over the Option Price per share specified upon grant of the NQSO or
ISO/SAR multiplied by the number of shares of Common Stock covered by the SAR so
exercised. The character and terms of each Option granted under the Plan shall
be determined by the Board of Directors and/or the Committee consistent with the
provisions of the Plan, including the following:
(a) An Option granted under the Plan must be granted within 10 years from
the date the Plan is adopted, or the date the Plan is approved by the
shareholders of the Company, whichever is earlier.
(b) The Option Price of the shares of Common Stock subject to each ISO and
each SAR issued in tandem with an ISO shall not be less than the fair market
value of such shares of Common Stock at the time such ISO is granted. Such fair
market value shall be determined by the Board of Directors and, if the shares of
Common Stock are listed on a national securities exchange or traded on the
over-the-counter market, the fair market value shall be the closing price on
such exchange, or the mean of the closing bid and asked prices of the shares of
Common Stock on the over-the-counter market, as reported by the Nasdaq Stock
Market, the National Association of Securities Dealers OTC Bulletin Board or the
National Quotation Bureau, Inc., as the case may be, on the day on which the
Option is granted or, if there is no closing price or bid or asked price on that
day, the closing price or mean of the closing bid and asked prices on the most
recent day preceding the day on which the Option is granted for which such
prices are available. If an ISO or SAR in tandem with an
2
<PAGE> 23
ISO is granted to any individual who, immediately before the ISO is to be
granted, owns (directly or through attribution) more than 10% of the total
combined voting power of all classes of capital stock of the Company or a
subsidiary or parent of the Company, the Option Price of the shares of Common
Stock subject to such ISO shall not be less than 110% of the fair market value
per share of the shares of Common Stock at the time such ISO is granted.
(c) The Option Price of the shares of Common Stock subject to an NQSO or an
SAR in tandem with a NQSO granted pursuant to the Plan shall be determined by
the Board of Directors or the Committee, in its sole discretion, but in no event
less than 85% of the fair market value per share of the shares of Common Stock
at the time of grant.
(d) In no event shall any Option granted under the Plan have an expiration
date later than 10 years from the date of its grant, and all Options granted
under the Plan shall be subject to earlier termination as expressly provided in
Paragraph 6 hereof. If an ISO or an SAR in tandem with an ISO is granted to any
individual who, immediately before the ISO is granted, owns (directly or through
attribution) more than 10% of the total combined voting power of all classes of
capital stock of the Company or of a subsidiary or parent of the Company, such
ISO shall by its terms expire and shall not be exercisable after the expiration
of five (5) years from the date of its grant.
(e) An SAR may be exercised at any time during the exercise period of the
ISO or NQSO with which it is granted in tandem and prior to the exercise of such
ISO or NQSO. Notwithstanding the foregoing, the Board of Directors and/or the
Committee shall in their discretion determine from time to time the terms and
conditions of SAR's to be granted, which terms may vary from the afore-described
conditions, and which terms shall be set forth in a written stock option
agreement evidencing the SAR granted in tandem with the ISO or NQSO. The
exercise of an SAR granted in tandem with an ISO or NQSO shall be deemed to
cancel such number of shares subject to the unexercised Option as were subject
to the exercised SAR. The Board of Directors or the Committee has the discretion
to alter the terms of the SARS if necessary to comply with Federal or state
securities law. Amounts to be paid by the Company in connection with an SAR may,
in the Board of Director's or the Committee's discretion, be made in cash,
Common Stock or a combination thereof.
(f) An Option granted under the Plan shall become exercisable, in whole at
any time or in part from time to time, but in no event may an Option (i) be
exercised as to less than one hundred (100) shares of Common Stock at any one
time, or the remaining shares of Common Stock covered by the Option if less than
one hundred (100), and (ii) except with respect to performance based Options,
become fully exercisable more than five years from the date of its grant nor
shall less than 20% of the Option become exercisable in any of the first five
years of the Option, if not terminated as provided in Section 6 hereof. The
Board of Directors or the Committee, if applicable, shall, in the event it so
elects in its sole discretion, set one or more performance standards with
respect to one or more Options upon which vesting is conditioned (which
performance standards may vary among the Options).
(g) An Option granted under the Plan shall be exercised by the delivery by
the holder thereof to the Company at its principal office (to the attention of
the Secretary) of written notice of the number of full shares of Common Stock
with respect to which the Option is being exercised, accompanied by payment in
full, which payment at the option of the optionee shall be in the form of (i)
cash or certified or bank check payable to the order of the Company, of the
Option Price of such shares of Common Stock, or, (ii) if permitted by the
Committee or the Board of Directors, as determined by the Committee or the Board
of Directors in its sole discretion at the time of the grant of the Option with
respect to an ISO and at or prior to the time of exercise with respect to a
NQSO, by the delivery of shares of Common Stock having a fair market value equal
to the Option Price or the delivery of an interest-bearing promissory note
having an original principal balance equal to the Option Price and an interest
rate not below the rate which would result in imputed interest under the Code
(provided, in order to qualify as an ISO, more than one year shall have passed
since the date of grant and one year from the date of exercise), or (iii) at the
option of the Committee or the Board of Directors, determined by the Committee
or the Board of Directors in its sole discretion at the time of the grant of the
Option with respect to an ISO and at or prior to the time of exercise with
respect to a NQSO, by a combination of cash, promissory note and/or such shares
of Common Stock (subject to the
3
<PAGE> 24
restriction above) held by the employee that have a fair market value together
with such cash and principal amount of any promissory note that shall equal the
Option Price, and, in the case of a NQSO, at the discretion of the Committee or
Board of Directors by having the Company withhold from the shares of Common
Stock to be issued upon exercise of the Option that number of shares having a
fair market value equal to the exercise price and/or the tax withholding amount
due, or otherwise provide for withholding as set forth in Paragraph 9(c) hereof,
or in the event an employee is granted an ISO or NQSO in tandem with an SAR and
desires to exercise such SAR, such written notice shall so state such intention.
To the extent allowed by applicable Federal and state securities laws, the
Option Price may also be paid in full by a broker-dealer to whom the optionee
has submitted an exercise notice consisting of a fully endorsed Option, or
through any other medium of payment as the Board of Directors and/or the
Committee, in its discretion, shall authorize.
(h) The holder of an Option shall have none of the rights of a stockholder
with respect to the shares of Common Stock covered by such holder's Option until
such shares of Common Stock shall be issued to such holder upon the exercise of
the Option.
(i) All ISOs or SARs in tandem with ISOs granted under the Plan shall not
be transferable otherwise than by will or the laws of descent and distribution
and may be exercised during the lifetime of the holder thereof only by the
holder. The Board or the Committee, in its sole discretion, shall determine
whether an Option other than an ISO or SAR in tandem with an ISO shall be
transferable. No Option granted under the Plan shall be subject to execution,
attachment or other process.
(j) The aggregate fair market value, determined as of the time any ISO or
SAR in tandem with an ISO is granted and in the manner provided for by
Subparagraph (b) of this Paragraph 5, of the shares of Common Stock with respect
to which ISOs granted under the Plan are exercisable for the first time during
any calendar year and under incentive stock options qualifying as such in
accordance with Section 422 of the Code granted under any other incentive stock
option plan maintained by the Company or its parent or subsidiary corporations,
shall not exceed $100,000. Any grant of Options in excess of such amount shall
be deemed a grant of a NQSO.
(k) Notwithstanding anything contained herein to the contrary, an SAR which
was granted in tandem with an ISO shall (i) expire no later than the expiration
of the underlying ISO; (ii) be for no more than 100% of the spread at the time
the SAR is exercised; (iii) shall only be transferable when the underlying ISO
is transferable; (iv) only be exercised when the underlying ISO is eligible to
be exercised; and (v) only be exercisable when there is a positive spread.
(l) In no event shall an employee be granted Options for more than 300,000
shares of Common Stock during any calendar year period; provided, however, that
the limitation set forth in this Section 5(l) shall be subject to adjustment as
provided in Section 8 herein.
6. DEATH OR TERMINATION OF EMPLOYMENT/CONSULTING RELATIONSHIP.
(a) Except as provided herein, or otherwise determined by the Board of
Directors or the Committee in its sole discretion, upon termination of
employment with the Company voluntarily by the employee or termination of a
consulting relationship with the Company prior to the termination of the term
thereof, a holder of an Option under the Plan may exercise such Options to the
extent such Options were exercisable as of the date of termination at any time
within thirty (30) days after termination, subject to the provisions of
Subparagraph (d) of this Paragraph 6. Except as provided herein, or otherwise
determined by the Board of Directors or the Committee in its sole discretion, if
such employment or consulting relationship shall terminate for any reason other
than death, voluntary termination by the employee or for cause, then such
Options may be exercised at anytime within three (3) months after such
termination. Notwithstanding anything contained herein to the contrary, unless
otherwise determined by the Board of Directors or the Committee in its sole
discretion, any options granted hereunder to an Optionee and then outstanding
shall immediately terminate in the event the Optionee is terminated for cause,
and the other provisions of this Section 6 shall not be applicable thereto. For
purposes of this Section 6, termination for cause shall be deemed the decision
of the Company, in its sole discretion, that Optionee has not adequately
performed the services for which he/she/it was hired.
4
<PAGE> 25
(b) If the holder of an Option granted under the Plan dies (i) while
employed by the Company or a subsidiary or parent corporation or while providing
consulting services to the Company or a subsidiary or parent corporation or (ii)
within three (3) months after the termination of such holder's
employment/consulting, such Options may, subject to the provisions of
subparagraph (d) of this Paragraph 6, be exercised by a legatee or legatees of
such Option under such individual's last will or by such individual's personal
representatives or distributees at any time within such time as determined by
the Board of Directors or the Committee in its sole discretion, but in no event
less than six months after the individual's death, to the extent such Options
were exercisable as of the date of death or date of termination of employment,
whichever date is earlier.
(c) If the holder of an Option under the Plan becomes disabled within the
definition of section 22(e)(3) of the Code while employed by the Company or a
subsidiary or parent corporation, such Option may, subject to the provisions of
subparagraph (d) of this Paragraph 6, be exercised at any time within six months
less one day after such holder's termination of employment due to the
disability.
(d) Except as otherwise determined by the Board of Directors or the
Committee in its sole discretion, an Option may not be exercised pursuant to
this Paragraph 6 except to the extent that the holder was entitled to exercise
the Option at the time of termination of employment, consulting relationship or
death, and in any event may not be exercised after the original expiration date
of the Option. Notwithstanding anything contained herein which may be to the
contrary, such termination or death prior to vesting shall, unless otherwise
determined by the Board of Directors or Committee, in its sole discretion, be
deemed to occur at a time the holder was not entitled to exercise the Option.
(e) The Board of Directors or the Committee, in its sole discretion, may at
such time or times as it deems appropriate, if ever, accelerate all or part of
the vesting provisions with respect to one or more outstanding options. The
acceleration of one Option shall not infer that any Option is or to be
accelerated.
7. LEAVE OF ABSENCE.
For the purposes of the Plan, an individual who is on military or sick
leave or other bona fide leave of absence (such as temporary employment by the
Government) shall be considered as remaining in the employ of the Company or of
a subsidiary or parent corporation for ninety (90) days or such longer period as
such individual's right to reemployment is guaranteed either by statute or by
contract.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event that the outstanding shares of Common Stock are hereafter
changed by reason of recapitalization, reclassification, stock split-up,
combination or exchange of shares of Common Stock or the like, or by the
issuance of dividends payable in shares of Common Stock, an appropriate
adjustment shall be made by the Board of Directors, as determined by the Board
of Directors and/or the Committee, in the aggregate number of shares of Common
Stock available under the Plan, in the number of shares of Common Stock issuable
upon exercise of outstanding Options, and the Option Price per share. In the
event of any consolidation or merger of the Company with or into another
company, or the conveyance of all or substantially all of the assets of the
Company to another company for solely stock and/or securities, each then
outstanding Option shall upon exercise thereafter entitle the holder thereof to
such number of shares of Common Stock or other securities or property to which a
holder of shares of Common Stock of the Company would have been entitled to upon
such consolidation, merger or conveyance; and in any such case appropriate
adjustment, as determined by the Board of Directors of the Company (or successor
entity) shall be made as set forth above with respect to any future changes in
the capitalization of the Company or its successor entity. In the event of the
proposed dissolution or liquidation of the Company, or, except as provided in
(b) below, the sale of substantially all the assets of the Company for other
than stock and/or securities, all outstanding Options under the Plan will
automatically terminate, unless otherwise provided by the Board of Directors of
the Company or any authorized committee thereof.
(b) Any Option granted under the Plan, may, at the discretion of the Board
of Directors of the Company and said other corporation, be exchanged for options
to purchase shares of capital stock of another corporation
5
<PAGE> 26
which the Company, and/or a subsidiary thereof is merged into, consolidated
with, or all or a substantial portion of the property or stock of which is
acquired by said other corporation or separated or reorganized into. The terms,
provisions and benefits to the optionee of such substitute option(s) shall in
all respects be identical to the terms, provisions and benefits of optionee
under his Option(s) prior to said substitution. To the extent the above may be
inconsistent with Sections 424(a)(1) and (2) of the Code, the above shall be
deemed interpreted so as to comply therewith.
(c) Any adjustment in the number of shares of Common Stock shall apply
proportionately to only the unexercised portion of the Options granted
hereunder. If fractions of shares of Common Stock would result from any such
adjustment, the adjustment shall be revised to the next higher whole number of
shares of Common Stock.
9. FURTHER CONDITIONS OF EXERCISE.
(a) Unless the shares of Common Stock issuable upon the exercise of an
Option have been registered with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended, prior to the exercise of the Option,
an optionee must represent in writing to the Company that such shares of Common
Stock are being acquired for investment purposes only and not with a view
towards the further resale or distribution thereof, and must supply to the
Company such other documentation as may be required by the Company, unless in
the opinion of counsel to the Company such representation, agreement or
documentation is not necessary to comply with said Act.
(b) The Company shall not be obligated to deliver any shares of Common
Stock until they have been listed on each securities exchange on which the
shares of Common Stock may then be listed or until there has been qualification
under or compliance with such state or federal laws, rules or regulations as the
Company may deem applicable.
(c) The Board of Directors or Committee may make such provisions and take
such steps as it may deem necessary or appropriate for the withholding of any
taxes that the Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to withhold in
connection with the exercise of any Option, including, but not limited to, (i)
the withholding of payment of all or any portion of such Option and/or SAR until
the holder reimburses the Company for the amount the Company is required to
withhold with respect to such taxes, or (ii) the cancelling of any number of
shares of Common Stock issuable upon exercise of such Option and/or SAR in an
amount sufficient to reimburse the Company for the amount it is required to so
withhold, (iii) the selling of any property contingently credited by the Company
for the purpose of exercising such Option, in order to withhold or reimburse the
Company for the amount it is required to so withhold, or (iv) withholding the
amount due from such employee's wages if the employee is employed by the Company
or any subsidiary thereof.
10. TERMINATION, MODIFICATION AND AMENDMENT.
(a) The Plan (but not Options previously granted under the Plan) shall
terminate ten (10) years from the earliest of the date of its adoption by the
Board of Directors, or the date the Plan is approved by the shareholders of the
Company, or such date of termination, as hereinafter provided, and no Option
shall be granted after termination of the Plan.
(b) The Plan may from time to time be terminated, modified or amended by
the affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company entitled to vote thereon.
(c) The Board of Directors of the Company may at any time, prior to ten
(10) years from the earlier of the date of the adoption of the Plan by such
Board of Directors or the date the Plan is approved by the shareholders,
terminate the Plan or from time to time make such modifications or amendments of
the Plan as it may deem advisable; provided, however, that the Board of
Directors shall not, without approval by the affirmative vote of the holders of
a majority of the outstanding shares of capital stock of the Company entitled to
vote thereon, increase (except as provided by Paragraph 8) the maximum number of
shares of Common Stock as to which Options or shares may be granted under the
Plan, or materially change the standards of
6
<PAGE> 27
eligibility under the Plan. Any amendment to the Plan which, in the opinion of
counsel to the Company, will be deemed to result in the adoption of a new Plan,
will not be effective until approved by the affirmative vote of the holders of a
majority of the outstanding shares of capital stock of the Company entitled to
vote thereon.
(d) No termination, modification or amendment of the Plan may adversely
affect the rights under any outstanding Option without the consent of the
individual to whom such Option shall have been previously granted.
11. EFFECTIVE DATE OF THE PLAN.
The Plan shall become effective upon adoption by the Board of Directors of
the Company. The Plan shall be subject to approval by the affirmative vote of
the holders of a majority of the outstanding shares of capital stock of the
Company entitled to vote thereon within one year before or after adoption of the
Plan by the Board of Directors.
12. NOT A CONTRACT OF EMPLOYMENT.
Nothing contained in the Plan or in any option agreement executed pursuant
hereto shall be deemed to confer upon any individual to whom an Option is or may
be granted hereunder any right to remain in the employ of the Company or of a
subsidiary or parent of the Company or in any way limit the right of the
Company, or of any parent or subsidiary thereof, to terminate the employment of
any employee.
13. OTHER COMPENSATION PLANS.
The adoption of the Plan shall not affect any other stock option plan,
incentive plan or any other compensation plan in effect for the Company, nor
shall the Plan preclude the Company from establishing any other form of stock
option plan, incentive plan or any other compensation plan.
7
<PAGE> 28
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PAXAR CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
The undersigned, a holder of Common Stock of PAXAR Corporation, a New
York corporation (the "Company"), hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders and Proxy Statement, each dated March 31, 1997,
and hereby appoints ARTHUR HERSHAFT and JACK BECKER, and each of them, the
proxies of the undersigned, each with full power to appoint their substitutes,
and hereby authorizes them to attend, represent and vote for the undersigned,
all of the shares of the Company held of record by the undersigned on March 20,
1997 at the Annual Meeting of Shareholders of the Company, to be held on April
24, 1997 at 9:30 a.m., at the Intercontinental Hotel, 111 East 48th Street, New
York, New York 10017, and any adjournment or adjournments thereof, as follows:
(TO BE SIGNED ON REVERSE SIDE)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 29
1. ELECTION OF DIRECTORS, as provided in the Company's Proxy Statement:
FOR all nominees WITHHOLD
listed below AUTHORITY
To vote for all
nominees listed below
[ ] [ ]
(Instructions: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH OR OTHERWISE STRIKE OUT HIS NAME BELOW)
Nominees: Victor Hershaft
Jack Becker
Robert Laidlaw
David E. McKinney
Leo Benatar
John W. Paxton
2. To approve the Company's 1997 Incentive Stock Option Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To ratify the appointment of Arthur Andersen LLP, as the Company's
Independent auditors for the year ending December 31, 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The undersigned hereby revokes any other proxy to vote at such Annual Meeting,
and hereby ratifies and confirms all that said attorneys and proxies, and each
of them, may lawfully do by virtue hereof. With respect to matters not known at
the time of the solicitations hereof, said proxies are authorized to vote in
accordance with their best judgement.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED, OR, IF NO
CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS,
FOR THE ADOPTION OF PROPOSALS 2 and 3, AND AS SAID PROXIES SHALL DEEM ADVISABLE
ON SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING. EACH MATTER ABOVE WAS
PROPOSED BY THE BOARD OF DIRECTORS.
Please mark, sign, date and return the Proxy Card promptly
using the enclosed envelope.
Signature(s)
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Date , 1997
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The signature(s) hereon should correspond exactly with the name(s) of the
Stockholder(s) appearing on the Stock Certificate. If stock is jointly held,
all joint owners should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If signer
is a corporation, please sign the full corporate name and give title of
signing officer.
