<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
------------------------------------------
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 MAY 1, 1998
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 May 1, 1998, at the Rihga
Royal Hotel, 151 West 54th Street, New York, New York 10019, at 9:30 a.m., for
the following purposes:
1. To elect four 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 Deferred Compensation Plan
for Directors;
3. To approve the amendment to the Company's Certificate of
Incorporation to make a technical change of the Company's name from "PAXAR
Corporation" to "Paxar Corporation";
4. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the year ending December 31, 1998; and
5. 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 25, 1998, are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board of Directors,
DANIEL S. BISHOP,
Secretary
White Plains, New York
March 31, 1998
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
(914) 697-6800
------------------------
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 May 1, 1998. 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 Deferred Compensation
Plan for Directors, for the amendment to the restated certificate of
incorporation, as amended (the "Certificate of Incorporation") to change the
name of the Company, 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 31, 1998.
The total number of shares of Common Stock of the Company outstanding as of
March 25, 1998 was 48,505,222 shares. 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 25, 1998 will
be entitled to vote at the Annual Meeting or any adjournment or adjournments
thereof.
Directors will be elected by a plurality of the votes cast for Directors.
The affirmative vote by the holders of a majority of the votes cast on each
proposal is required for the approval of the Company's Deferred Compensation
Plan and for the ratification of the selection of Arthur Andersen, LLP as the
Company's independent public accountants. The affirmative vote by holders of a
majority of the issued and outstanding shares of the Company's Common Stock is
required for approval of the amendment to the Company's Certificate of
Incorporation to change the name of the Company to Paxar Corporation. Shares
represented by proxies which are marked "abstain" with respect to the approval
of the Deferred Compensation Plan, the amendment to the certificate of
incorporation 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 Annual Meeting for examination by any Shareholder.
<PAGE> 4
ACTIONS TO BE TAKEN AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF FOUR 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 four
persons, all of whom, with the exception of James C. McGroddy, are incumbent
Directors who were previously elected by the Shareholders. Mr. McGroddy was
appointed a Director by the Board in January 1998 to fill an existing vacancy.
If elected, the terms of such Directors will expire at the Annual Meeting of
Shareholders to be held in 2000. The following table sets forth information
concerning the nominees:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY DIRECTOR SINCE
---- --- ------------------------- --------------
<S> <C> <C> <C>
Arthur Hershaft...................... 60 Chairman of the Board, President and 1961
Chief Executive Officer
Thomas R. Loemker.................... 67 Director 1987
Walter W. Williams................... 63 Director 1993
James C. McGroddy.................... 61 Director 1998
</TABLE>
BIOGRAPHICAL INFORMATION ABOUT NOMINEES
Arthur Hershaft has been the Chairman of the Board of Directors and Chief
Executive Officer of the Company since 1986. Mr. Hershaft has been President of
the Company since January 1998.
Thomas R. Loemker was Vice Chairman of the Board of Directors of the
Company from September 1992 until September 1994. Mr. Loemker was also Chairman
of the Board of Directors of Monarch Marking Systems, Inc. from 1995 to 1997 and
President and Chief Operating Officer of Monarch Marking Systems, Inc. from 1987
until March 31, 1991.
Walter W. Williams has been a self-employed consultant since 1991. Mr.
Williams was previously employed by Rubbermaid Inc. in various capacities from
1987 until 1991, including Chairman and Chief Executive Officer. From 1956 to
1987 he was employed by General Electric Company in various capacities. Mr.
Williams is a member of the Board of Directors of the Stanley Works and Corrpro
Companies, Inc.
James C. McGroddy, Ph.D., has been a self-employed consultant since 1997.
Dr. McGroddy was employed by International Business Machines Corporation ("IBM")
in various capacities from 1965 through December 1996. From January 1996 through
December 1996, Dr. McGroddy served as Senior Vice President and Special Advisor
to the Chairman of IBM. From May 1989 to December 1995, Dr. McGroddy was Senior
Vice President of Research of IBM with responsibility for approximately 2,500
technical professionals in IBM's seven research laboratories around the world.
Dr. McGroddy is Chairman of the Board of Directors of Integrated Surgical
Systems, Inc.
The terms of the following six Directors do not expire until the Annual
Meeting of Shareholders to be held in 1999, 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>
NAME AGE POSITION WITH THE COMPANY DIRECTOR SINCE
---- --- ------------------------- --------------
<S> <C> <C> <C>
Victor Hershaft...................... 55 Executive Vice President of the Company, 1989
President of Apparel Identification
Operations and Director
John W. Paxton....................... 61 Executive Vice President of the Company, 1997
President of Printing Solutions
Operations and Director
Jack Becker.......................... 62 Director 1968
Leo Benatar.......................... 68 Director 1996
Robert Laidlaw....................... 69 Director 1987
David E. McKinney.................... 63 Director 1992
</TABLE>
2
<PAGE> 5
BIOGRAPHICAL INFORMATION ABOUT DIRECTORS
Victor Hershaft has been Executive Vice President and President of Apparel
Identification Operations of the Company since January 1998. Prior to that time
he served in various executive capacities with the Company since 1989.
John W. Paxton has been Executive Vice President and President of Printing
Solutions Operations of the Company since January 1998. Prior to that time, he
served as President and Chief Executive Officer and a Director of Monarch
Marking Systems, Inc., a wholly owned subsidiary of the Company from 1995
through 1997. 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.
Jack Becker is a practicing attorney in New York State and has been a
principal of Snow Becker Krauss P.C., outside counsel to the Company, since
1977. Such firm has been retained by the Company as its principal outside
counsel for more than the past three years and will be retained by the Company
in this capacity for the current fiscal year. Mr. Becker is a Director of AFP
Imaging Corporation.
Leo Benatar is an Associated Consultant with A.T. Kearney, Inc. Mr. Benatar
was Chairman of the Board of Engraph, Inc. from 1981 to 1996, and Chief
Executive Officer of Engraph, Inc. from 1981 to 1995. Mr. Benatar is a member of
the Boards of Directors of Mohawk Industries, Inc., Johns Manville Corp.,
Interstate Bakeries Corporation, and Aaron Rents, Inc.
Robert Laidlaw has been Chairman Emeritus of Coats & Clark since March
1990. Mr. Laidlaw was Chairman of the Board of Coats & Clark from 1966 until
March 1990 and President of Coats & Clark from 1964 to 1986. Mr. Laidlaw is a
Director of Milliken & Company.
David E. McKinney is the Director of the Thomas J. Watson Foundation. Mr.
McKinney was previously employed by IBM in various capacities from 1956 until
1992, including Senior Vice President and a Member of Corporate Management
Board. Mr. McKinney is a member of the Boards of Directors of General Re-
Insurance, Organization Resource Counselors, International Executive Services
Corps, and the New York Philharmonic. Mr. McKinney is also a Trustee of Brown
University.
In addition to Messrs. Arthur Hershaft, Victor Hershaft and John Paxton,
the following individuals are Executive Officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Jack R. Plaxe............................. 56 Senior Vice President and Chief Financial
Officer
Daniel S. Bishop.......................... 48 Vice President, Secretary and General
Counsel
</TABLE>
Jack R. Plaxe was Vice President and Chief Financial Officer of the Company
from August 1993 through March 1997, when he resigned. In December 1997, he
rejoined the Company and was appointed Senior Vice President and Chief Financial
Officer. Prior to Mr. Plaxe's service with the Company, Mr. Plaxe was employed
since 1985 in various capacities with AmBase Corporation, including Chief
Financial Officer and Executive Vice President.
Daniel S. Bishop has been Vice President, Secretary and General Counsel of
the Company since November 1997. Prior to that time, Mr. Bishop was General
Counsel, Secretary and Vice President of Strategic Development and Human
Resources of Monarch Marking Systems, Inc., since October 1995. From March 1993
to September 1995, Mr. Bishop was Vice President and Associate General Counsel
of Western Atlas, Inc. From 1977 to February 1993, Mr. Bishop served in various
capacities with Litton Industries, Inc. including Vice President and Group
Counsel of the Industrial Automation Systems Group.
3
<PAGE> 6
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 a Governance and Nominating Committee. The Board of
Directors also has an Information Systems Committee, which meets on an ad hoc
basis.
The Audit Committee is composed of Sidney Merians (Chairman), Thomas R.
Loemker and Leo Benatar. Mr. Merians is not standing for reelection to the Board
of Directors. He will be succeeded as Chairman of the Audit Committee by Thomas
R. Loemker, and James C. McGroddy is expected to be appointed to the Audit
Committee. 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 one meeting
in 1997.
The Compensation Committee is composed of David E. McKinney (Chairman),
Robert Laidlaw and Walter W. Williams. The duties of this Committee include
recommending to the Board remuneration for officers of the Company, determining
the number and issuance of options pursuant to the Company's 1990 Employee Stock
Option Plan and 1997 Incentive Stock Option Plan and recommending the
establishment of and monitoring a compensation and incentive program for all
executives of the Company. The Compensation Committee held three meetings in
1997.
The Governance and Nominating Committee is composed of Leo Benatar
(Chairman), Walter W. Williams and David E. McKinney. The duties of this
Committee include recommending nominees to serve on the Board of Directors to
fill vacancies, administering searches for executive officers and evaluating and
improving the organization of the Company. The Governance and Nominating
Committee held two meetings in 1997. Shareholders desiring to recommend director
candidates for consideration by the Governance and Nominating Committee may do
so by writing to the Secretary of the Company, giving the recommended
candidate's name, biographical data, and qualifications.
The Information Systems Committee is composed of Walter W. Williams
(Chairman), David E. McKinney and Thomas R. 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 1997. The functions of this Committee will move to
the Audit Committee for 1998.
The Board of Directors held five meetings in 1997. 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 a policy that no member of the Board of Directors who
attains the age of 70 years shall stand for re-election to the Board of
Directors. Accordingly, Sidney Merians, who has been a director since 1986, will
not stand for re-election and a vacancy currently exists on the Board of
Directors. If the Governance and Nominating Committee identifies an appropriate
candidate, the Board of Directors will consider appointing the candidate to the
Board to fill such vacancy.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 6, 1998 certain information,
with respect to the beneficial ownership of Common Stock by (i) each person
known by the Company to be the owner of more than 5% of the outstanding shares
of Common Stock, (ii) each Director, (iii) the Chief Executive Officer and each
of the other four most highly compensated officers of the Company and (iv) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT AND NATURE OUTSTANDING
NAME OF BENEFICIAL OWNERSHIP(1) SHARES OWNED(2)
---- -------------------------- ---------------
<S> <C> <C>
Arthur Hershaft...................................... 5,120,350(3) 10.58%
Victor Hershaft...................................... 1,277,121(4) 2.64%
Jack R. Plaxe........................................ 50,328(5) *
Daniel S. Bishop..................................... 103,434(6) *
John W. Paxton....................................... 528,667(7) 1.11%
Jack Becker.......................................... 183,218(8)(9) *
Leo Benatar.......................................... 24,584(10) *
Robert Laidlaw....................................... 54,644(8) *
Thomas R. Loemker.................................... 519,322(11) 1.11%
James C. McGroddy.................................... 7,000(12) *
David E. McKinney.................................... 54,369(8)(13) *
Walter W. Williams................................... 36,623(8) *
Thomas W. Smith...................................... 3,791,254(14) 7.8%
Thomas N. Tryforos
323 Railroad Avenue
Greenwich, CT 06830
All directors and executive officers as a group (12
persons)........................................... 7,935,914 16.40%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding Common Stock of the Company.
(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.
(2) Based on 48,407,997 shares issued and outstanding on March 6, 1998. 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.
(3) Includes 136,263 shares issuable upon the exercise of presently exercisable
stock options. Also includes 668,051 shares held by Mr. Hershaft in trust
for the benefit of his children, as to which shares Mr. Hershaft disclaims
beneficial ownership. Does not include options to purchase 81,738 shares of
Common Stock which are not currently exercisable.
(4) Includes 47,608 shares issuable upon the exercise of presently exercisable
stock options. In addition, includes 186,740 shares owned of record by Mr.
Hershaft's wife, as to which shares Mr. Hershaft disclaims beneficial
ownership; and 146,564 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 45,751 shares of Common Stock which
are not currently exercisable.
(5) Does not include options to purchase 105,031 shares of Common Stock which
are not currently exercisable.
(6) Includes 101,749 options to acquire a like number of shares of Common Stock
at an exercise price of $6.70 per share. Does not include options to
purchase 10,000 shares of Common Stock, which are not currently
exercisable.
(7) Includes 363,648 options to acquire a like number of shares of Common Stock
at an exercise price of $2.42 per share. Does not include options to
purchase 25,000 shares of Common Stock which are not currently exercisable.
5
<PAGE> 8
(8) Includes 18,311 options to acquire a like number of shares of Common Stock
at an exercise price of $5.63 per share, 6,104 options to acquire a like
number of shares of Common Stock at an exercise price of $7.68 per share,
6,104 options to acquire a like number of shares of Common Stock at an
exercise price of $10.24 per share and 6,104 options to acquire a like
number of shares of Common Stock at an exercise price of $15.60 per share.
(9) Includes 100,072 shares owned of record by Mr. Becker's wife, as to which
shares Mr. Becker disclaims beneficial ownership and 6,250 shares held by a
charitable foundation of which Mr. Becker is the President.
(10) Includes 7,813 options to acquire a like number of shares of Common Stock
at an exercise price of $7.60 per share, 6,104 options to acquire a like
number of shares of Common Stock at an exercise price of $10.24 per share
and 6,104 options to acquire a like number of shares of Common Stock at an
exercise price of $15.60 per share.
(11) Includes 6,104 options to acquire a like number of shares of Common Stock
at an exercise price of $7.68 per share, 6,104 options to acquire a like
number of shares of Common Stock at an exercise price of $10.24 per share,
6,104 options to acquire a like number of shares of Common Stock at an
exercise price of $15.60 per share and 27,470 shares held by Mr. Loemker's
wife.
(12) Includes 6,000 options to acquire a like number of shares of Common Stock
at an exercise price of $15.375 per share.
(13) Does not include 1,406 shares owned by Mr. McKinney's wife, as to which Mr.
McKinney disclaims beneficial ownership.
(14) Represents shares of Common Stock beneficially owned by Messrs. Smith and
Tryforos as investment managers for certain managed accounts consisting of
three private investment limited partnerships, of which each of Messrs.
Smith and Tryforos is a general partner, an employee profit sharing plan of
a corporation of which Mr. Smith is the sole shareholder, a trust for which
both Messrs. Smith and Tryforos are trustees, and a trust for the benefit
of a family member of Mr. Smith, for which Mr. Smith is a trustee, as
indicated on their report on Form 13D dated March 20, 1996, with respect to
shares of the Company's Common Stock and their report on Form 13D dated
October 28, 1996, with respect to International Imaging Materials, Inc.
("IIMAK") common stock and as adjusted to reflect subsequent stock
dividends of the Company, the Company's acquisition of IIMAK, and certain
sales and purchases of the Company's Common Stock since the date of these
reports. Messrs. Smith and Tryforos have shared voting and dispositive
power over all but 294,153 shares, over which Mr. Smith has sole voting and
dispositive power.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the aggregate compensation paid by the
Company to the Chief Executive Officer and the four other most highly
compensated Executive Officers of the Company for services rendered during the
last three fiscal years:
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- ------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1) COMPENSATION($)
- --------------------------- ---- --------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Arthur Hershaft...................... 1997 $370,135 $147,450 37,500 --
President and CEO 1996 $357,618 $502,918 39,063 $ 250,000(2)
1995 $343,863 $515,795 48,829 --
Victor Hershaft(3)................... 1997 $321,706 $102,550 25,000 --
Executive Vice President 1996 $310,827 $349,680 19,532 --
1995 $298,872 $358,646 24,414 --
John W. Paxton(4)(5)................. 1997 $297,214 $128,092 626,148 --
Executive Vice President
Daniel S. Bishop(5)(6)............... 1997 $156,876 $ 51,634 101,749 --
Vice President and General Counsel
</TABLE>
6
<PAGE> 9
- ---------------
(1) Represents stock options granted under either the Company's 1990 Employee
Stock Option Plan or the 1997 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) Represents a special bonus paid 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) Mr. Hershaft was appointed Executive Vice President of the Company and
President of Apparel Identification Operations in January 1998. In 1995,
1996 and 1997, he served as President and Chief Operating Officer of PAXAR
Corporation.
(4) Mr. Paxton was appointed Executive Vice President of the Company and
President of Printing Solution Operations in January 1998. Prior to that
time, Mr. Paxton served as President of Monarch Marking Systems, Inc. since
October 1995.
(5) Salary and bonus reflects compensation paid by the Company following the
Company's acquisition of Monarch Holdings, Inc. in March 1997.
(6) Mr. Bishop was appointed Vice President, General Counsel and Secretary of
the Company in November 1997. Prior to that time, Mr. Bishop was General
Counsel, Secretary and Vice President of Strategic Development and Human
Resources of Monarch Marking Systems, Inc., since October 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN OR BASE FOR OPTION TERM
OPTIONS FISCAL PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) YEAR(2) ($/SH) DATE 5% 10%
- ---- ------------- ------------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Arthur Hershaft....... 37,500(3) 7.6% $13.30 1/28/07 $ 313,500 $ 795,000
Victor Hershaft....... 25,000(3) 5.0% $13.30 1/28/07 $ 209,000 $ 530,000
John W. Paxton........ -0-(4) -- -- -- -- --
Jack Plaxe............ 18,750(5) 3.8% $13.30 1/28/07 -- --
105,031(6) 21.4% $15.69 12/7/07 $1,036,378 $2,626,386
Daniel S. Bishop...... -0-(7) -- -- -- -- --
</TABLE>
- ---------------
(1) Stock options granted under the Company's 1990 Employee Stock Option Plan
(the "1990 Plan") and 1997 Incentive Stock Option Plan (the "1997 Plan") are
intended to qualify as incentive stock options ("ISO's") under Section 422
of the Internal Revenue Code of 1986, as amended. Under the terms of the
1990 Plan and the 1997 Plan, ISO's 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, ISO's 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 ISO's is limited to such number so that the
aggregate fair market value, determined as of the date the ISO's are
granted, of the shares of Common Stock with respect to which ISO's 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 ISO's under the Internal Revenue Code.
(2) The Company granted a total of 490,869 options to employees in the fiscal
year ended December 31, 1997. This amount does not include (i) options to
purchase 1,244,468 shares of Common Stock granted in exchange for options to
purchase shares of the common stock of Monarch Holdings, Inc. ("Holdings")
in connection with the Company's acquisition of the 51% of Holdings that it
did not then own or (ii) options to purchase 1,862,055 shares of Common
Stock granted in exchange for options to purchase shares of the common stock
of IIMAK in connection with the merger of IIMAK with a subsidiary of the
Company.
7
<PAGE> 10
(3) Adjusted to reflect the 25% stock dividend paid by the Company on September
9, 1997.
(4) This amount does not include options to purchase 626,148 shares of Common
Stock granted to Mr. Paxton in exchange for options to purchase common stock
of Holdings. Mr. Paxton's options to purchase the Company's Common Stock are
exercisable at $1.94 per share until October 1, 2005. On March 3, 1997, the
date of grant, the market price of the Company's Common Stock was $15.20,
and accordingly, Mr. Paxton's options had an aggregate value of $8,302,723.
Their potential realizable value at 5% appreciation from the date of grant
is $12,848,557 and at 10% is $19,185,174.
(5) Represents options granted to Mr. Plaxe on January 29, 1997, as adjusted for
the 25% stock dividend paid by the Company on September 9, 1997. These
options expired in March 1997 when Mr. Plaxe resigned from the Company.
(6) Represents options granted to Mr. Plaxe on December 6, 1997 in connection
with Mr. Plaxe's reemployment with the Company. Of these options, 80,031
options equal the number of options that had expired upon Mr. Plaxe's
resignation in March 1997, and 25,000 options are new grants.
(7) This amount does not include options to purchase 101,749 shares of Common
Stock granted to Mr. Bishop in exchange for options to purchase common stock
of Holdings. Mr. Bishop's options to purchase the Company's Common Stock are
exercisable at $6.70 per share until March 20, 2006. On March 3, 1997, the
date of grant, the market price of the Company's Common Stock was $15.20,
and accordingly, Mr. Bishop's options had an aggregate value of $864,866.
Their potential realizable value at 5% appreciation from the date of grant
is $1,717,523 and at 10% is $2,964,966.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FY- IN-THE-MONEY OPTIONS/SARS
SHARES END(#)(1) AT FY-END($)(1)
ACQUIRED ON VALUE ------------------------------ ------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ----------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Arthur Hershaft...... 19,073 $ 173,408 126,886 59,539 $ 824,370 $441,925
Victor Hershaft...... 13,351 $ 129,382 38,923 54,440 $ 350,157 $280,533
John W. Paxton....... 262,500 $3,613,050 363,648 0 $4,680,877 0
Jack R. Plaxe........ 46,924 $ 481,136 0 105,031 $ 0 0
Daniel S. Bishop..... 0 0 101,749 0 $ 825,388 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. On December 31, 1997, the last reported sales price of the
Company's Common Stock on the New York Stock Exchange was $14.812.
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. The Company
amended the policy in 1997 to increase the Directors' annual fee from $12,000 to
$15,000, to increase the Directors' fee for attendance at Committee meetings
from $600 to $750, and to eliminate the initial stock option grant to new
Directors where the Director would also receive another grant of stock options
during his or her first year of service. Pursuant to the revised policy, the
grant of options to newly appointed Directors will be such that only one grant
is made during the first year of service, after which the newly appointed
Directors will receive the same grants on the same basis as all other Directors.
The revised policy continues to entitle each Director to be paid $1,000 for
attendance at each meeting of the Board of Directors and each Committee Chairman
to be paid $1,000 per annum in such capacity.
8
<PAGE> 11
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
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.
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, President and Chairman of the
Board of Directors of the Company, and Victor Hershaft, Executive Vice President
and President of the Apparel Identification Group, the base salary is determined
pursuant to the terms of their respective employment contracts 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, and in some cases a combination of return on assets, growth in
sales, cash flow and operating profit. Each year, the Committee establishes
"target" bonus awards for executive officers. For 1998, the target
9
<PAGE> 12
incentive bonus award will be paid to Arthur Hershaft, Jack Plaxe and Daniel
Bishop 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, the Company's Chief
Executive Officer, is 75% of base salary if the growth in earnings per share is
20% or more.
In respect to the other participants in the incentive compensation program,
including Victor Hershaft, John Paxton, James Wrigley, Ken Cassady and Richard
Marshall, incentive compensation would be allocated between earnings per share
of the Company and a combination of return on assets, growth in sales, cash flow
and operating profit, the percentage of which factors would depend upon the
circumstances of the operating unit that each participant is responsible for.
LONG-TERM INCENTIVES
The Company has also established two stock option plans, 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.
On December 8, 1997, the Company authorized a grant to Jack Plaxe of 6,374
incentive stock options and 98,657 non-qualified stock options to purchase a
like number of shares of the Company's Common Stock at an exercise price of
$15.688 (equal to the closing market price on the date of the grant).
In January 1998, the Committee authorized a grant to Arthur Hershaft, the
Company's Chief Executive Officer, of 5,913 incentive stock options to purchase
a like number of shares of the Company's Common Stock at an exercise price of
$16.91 (equal to 110% of the closing market price on the date of grant) and
39,087 non-qualified stock options to purchase a like number of shares of the
Company's Common Stock at an exercise price of $15.375 (equal to the closing
market price on the date of the grant), a grant to Victor Hershaft of 7,347
incentive stock options and 17,653 non-qualified stock options to purchase a
like number of shares of the Company's Common Stock at an exercise price of
$15.375 (equal to the closing market price on the date of the grant), a grant to
John W. Paxton of 25,000 incentive stock options to purchase a like number of
shares of the Company's Common Stock at an exercise price of $15.375 (equal to
the closing market price on the date of the grant) and a grant to Daniel S.
Bishop of 10,000 incentive stock options to purchase a like number of shares of
the Company's Common Stock at an exercise price of $15.375 (equal to the closing
market price on the date of the grant). The Committee believes these grants 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 27, 1998 by the members of the Compensation Committee.
David E. McKinney, Chairman
Robert Laidlaw
Walter W. Williams
10
<PAGE> 13
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"), (c) the total
return on the peer group index that was selected for 1996 (the "1996 Peer
Group") and (d) the total return on a selected peer group index for 1997 (the
"1997 Peer Group"). The S&P 500 has been selected as the required broad entity
market index. The graph compares the Company's Common Stock with two peer groups
because the Company's appropriate peer group changed for 1997 due to the
acquisitions of the 51% interest in Monarch that the Company did not own on
March 3, 1997, and of IIMAK on October 28, 1997. In order to better facilitate a
comparison of the performance of the Company's Common Stock, the 1996 Peer Group
is presented in addition to the appropriate peer group for 1997. The 1997 Peer
Group is an index weighted by the relative market capitalization of eight
companies which were selected for being in related industries to the Company's
(product identification, bar-code, apparel, textile, ribbon manufacturing and
printing), for having revenues between $100 million and $2.5 billion in their
most recently reported fiscal years and for having five-year compound annual
revenue growth of at least 10%. The eight are: Eltron International, Inc., Moore
Corp. Ltd, PSC Inc., Reynolds & Reynolds, Standard Register Co., Symbol
Technologies, Wallace Computer Services, Inc. and Zebra Technologies CP. The
1996 Peer Group is an index weighted by the relative market capitalization of
the following ten companies, which were selected last year for being in related
industries to the Company's prior to the Company's acquisitions of Monarch and
IIMAK (product identification, bar-code, apparel, textile and printing). 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, the 10-member 1996 Peer Group and the 8-member 1997
Peer Group on December 31, 1992.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG PAXAR CORPORATION,
S&P 500 INDEX, 1996 PEER GROUP AND 1997 PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD PAXAR 1997.00 PEER 1996.00 PEER
(FISCAL YEAR COVERED) CORPORATION S&P 500 INDEX GROUP GROUP
<S> <C> <C> <C> <C>
DEC. 1992 100.00 100.00 100.00 100.00
DEC. 1993 97.45 110.08 137.62 133.10
DEC. 1994 80.54 111.53 141.70 156.79
DEC. 1995 133.40 153.45 194.85 140.44
DEC. 1996 217.08 188.68 229.16 140.94
DEC. 1997 233.00 251.63 225.78 165.69
</TABLE>
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"), 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.
11
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED 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, 1998 will
be $400,000. 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, 1998 will be $332,000. 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 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
12
<PAGE> 15
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 the principal outside counsel to the Company.
The Company has procured Directors and Officers' liability insurance from
Federal Insurance Company under a contract dated March 1, 1998 at an aggregate
annual premium of $146,500. 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 make gifts of 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.
On January 29, 1997, the Company granted 30,000 non-qualified stock options
to Arthur Hershaft, the Company's Chief Executive Officer and a Director of the
Company. Such options are exercisable at a price of $16.625 per share for a
period of ten years.
On January 29, 1997, the Company granted 11,415 incentive stock options and
8,585 non-qualified stock options, all exercisable at $16.625 to Victor
Hershaft, Executive Vice President of the Company, and a Director of the
Company, and 15,000 incentive stock options at $16.625 to Jack Plaxe, the
Company's Chief Financial Officer and a Senior Vice President of the Company.
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 anniversary. Once vested, the options remain
exercisable until January 28, 2007.
On March 3, 1997, the Company completed the acquisition of 495 shares or
49% (the "Shares") of Common Stock, par value $.01 ("Holdings Common Stock") of
Monarch Holdings, Inc., a Delaware corporation ("Holdings"), from Odyssey
Partners, L.P. ("Odyssey"). The Company previously owned 495 or 49% of 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, Executive Vice President of the Company, President
of Printing Solutions Operations and a Director, each received 156,536 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
options to purchase an aggregate of 626,148 shares of the Company's Common Stock
at $1.94 a share pursuant to the Company's 1990 Employee Stock Option Plan in
exchange for outstanding options to purchase Holdings Common Stock. In
connection with the foregoing transaction, Daniel S. Bishop, Vice President,
Secretary and General Counsel of the Company, received options to purchase an
aggregate of 101,749 shares of the Company's Common Stock at $6.70 a share
pursuant to the Company's 1990 Employee Stock Option Plan in exchange for
outstanding options to purchase Holdings Common Stock.
13
<PAGE> 16
On January 21, 1998, the Company granted options as follows: (i) the
Company granted Arthur Hershaft 5,913 incentive stock options exercisable at
$16.91 and 44,087 non-qualified stock options exercisable at $15.375.
Twenty-five percent of such options become exercisable on the first anniversary
of the date such options were granted. Thereafter an additional twenty-five
percent becomes exercisable on each anniversary. Once vested, the options remain
exercisable until January 30, 2008 except for the incentive stock options, which
are exercisable only until January 20, 2003; (ii) the Company granted Victor
Hershaft 7,347 incentive stock options and 17,653 non-qualified stock options
exercisable at $15.375. Twenty-five percent of such options become exercisable
on the first anniversary of the date such options were granted. Thereafter an
additional twenty-five percent becomes exercisable on each anniversary. Once
vested, the options remain exercisable until January 20, 2008; (iii) the Company
granted John Paxton 25,000 incentive stock options exercisable at $15.375.
Twenty-five percent of such options become exercisable on the first anniversary
of the date such options were granted. Thereafter an additional twenty-five
percent becomes exercisable on each anniversary. Once vested, the options remain
exercisable until January 20, 2008; and (iv) the Company granted Daniel Bishop
10,000 incentive stock options exercisable at $15.375. Twenty-five percent of
such options become exercisable on the first anniversary of the date such
options were granted. Thereafter an additional twenty-five percent becomes
exercisable on each anniversary. Once vested, the options remain exercisable
until January 20, 2008.
On December 8, 1997, the Company granted Jack Plaxe 6,374 incentive stock
options and 98,657 non-qualified stock options exercisable at $15.6875.
Twenty-five percent of such options became exercisable on the first anniversary
of the date such options were granted. Therefore an additional twenty-five
percent becomes exercisable on each anniversary. Once vested, the options remain
exercisable until December 7, 2007. The Company also granted Mr. Plaxe 18,750
options on January 29, 1997 but these options expired in March 1997 when Mr.
Plaxe resigned from the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE SHAREHOLDERS VOTE "FOR" THE NOMINEES LISTED IN PROPOSAL 1.
PROPOSAL 2. APPROVAL BY SHAREHOLDERS OF THE COMPANY'S DEFERRED COMPENSATION
PLAN FOR DIRECTORS
The Board of Directors of the Company, subject to the approval of
Shareholders, adopted the Company's Deferred Compensation Plan for Directors
(the "Plan"), which provides Directors of the Company who are not employees of
the Company the opportunity to defer to a future date the receipt of their
annual retainer fees, committee chairman fees and fees for attendance at Board
and Committee meetings ("Compensation") and to have any deferred Compensation
credited to an account ("Account") based on Units determined by reference to the
price of the Company's Common Stock.
GENERAL
The Board of Directors has deemed it in the best interest of the Company to
establish the Plan so as to encourage the Company's outside Directors to defer
their compensation and to have any appreciation thereof based upon appreciation
in the value of the Company's Common Stock, thereby further aligning the
independent Directors' interests with those 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.
ELIGIBILITY FOR PARTICIPATION
Under the Plan, all Directors of the Company who are not employees of the
Company are eligible to participate. The Plan will be effective with respect to
any Compensation earned by a Director after approval by the Company's
Shareholders at the Annual Meeting of Shareholders to which this Proxy relates.
14
<PAGE> 17
ADMINISTRATION
The Plan is to be administered by the Non-Employee Directors (as defined in
Rule 16b-3 under the Securities Exchange Act of 1934, as amended) of the
Company's Compensation Committee. The sole duty of the Committee with respect to
the Plan shall be to approve or disapprove elections to defer Compensation under
the Plan and any amendments to such elections.
DEFERRAL OF COMPENSATION AND PAYMENT OF DEFERRED AMOUNTS
If a Director elects to defer his Compensation, a number of Units will be
credited to his account equal to the amount of such Compensation divided by the
closing price of the Company's Common Stock (the "Stock Price") on the business
day immediately preceding the election. If the Company pays cash dividends on
its Common Stock, additional Units will be credited to the Director's Account
equal to the aggregate amount of cash dividends deemed to be paid on the Units
in his Account divided by the Stock Price on the record date of the dividend.
Units will also increased or decreased consistent with any stock split or
dividend or any reverse stock split or other reorganization. Upon an election by
a Director to receive payment of his deferred Compensation, he will receive an
amount equal to the number of Units to be paid multiplied by the Stock Price on
the day immediately preceding the election.
TERMINATION; MODIFICATION AND AMENDMENT
The Board of Directors of the Company may terminate the Plan at any time,
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, materially change the standards of eligibility under the Plan or adopt
a new plan.
No termination, modification or amendment of the Plan may affect amounts
previously credited to Directors' Accounts.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" PROPOSAL 2
PROPOSAL 3. AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE
THE COMPANY'S NAME FROM "PAXAR CORPORATION" TO "PAXAR CORPORATION"
The Company's Board of Directors has unanimously adopted a technical
amendment to the Company's Certificate of Incorporation changing the name of the
Company from "PAXAR Corporation" to "Paxar Corporation." This amendment is
intended to conform the Company's legal name with the name by which the Company
is known worldwide.
If the proposed Amendment is approved, Article "1" of the Company's
Certificate of Incorporation will be amended to read in its entirety as follows:
1. The name of the Corporation is Paxar Corporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" PROPOSAL 3.
PROPOSAL 4. 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.
15
<PAGE> 18
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" PROPOSAL 4.
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 reports received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company is not aware of any failures to file
reports or report transactions in a timely manner during the Company's fiscal
year ended December 31, 1997, except that Arthur Hershaft filed one late report
concerning one transaction, Victor Hershaft filed two late reports concerning
two transactions, and David E. McKinney filed three late reports concerning
three transactions.
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 3, 1998 in order for them to be included in the proxy statement
and form of proxy relating to that meeting.
ANNUAL REPORT ON FORM 10-K
Copies of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 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.
By Order of the Board of Directors
Daniel S. Bishop, Secretary
White Plains, New York
March 31, 1998
16
<PAGE> 19
ANNEX A
PAXAR CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
1. PURPOSE AND ELIGIBILITY
PAXAR CORPORATION (the "Corporation") hereby establishes the Deferred
Compensation Plan for Directors (the "Plan"), the purpose of which is to provide
Directors of the Corporation who are not employees of the Corporation the
opportunity to defer to a future date the receipt of their annual retainer fees,
committee chairman fees and fees for attendance at Board and Committee meetings
("Compensation"). The options which the Directors of the Corporation are
entitled to receive as additional compensation for serving as Director may not
be deferred under the Plan. Nothing contained in this Plan shall be deemed to
constitute an employment contract or agreement between the Directors and the
Corporation.
2. ELECTION
Subject to the approval of the Committee as described in Section 7 below, a
Director may elect to defer receipt of all or a portion of Compensation not yet
earned, effective as of (a) the Effective Date, as defined in Section 6 hereof,
if the election is made prior to the Effective Date or (b) the first day of any
taxable year after such election if the election is made after the Effective
Date. Such election shall be in writing and shall specify the method of payment
of a Director's deferred amounts in accordance with Section 4 below, and shall
continue until amended or terminated by written notice delivered to the
Corporation and approved by the Committee. Notwithstanding the foregoing, a
Director may amend a prior election to change the method of payment and/or
extend the deferral period under Section 4 below of previously deferred
Compensation provided that written notice of such amendment is approved by the
Committee prior to the last day of the taxable year preceding the taxable year
in which payments are scheduled to commence under the terms of such Director's
then current election and, if earlier, six (6) months prior to the date benefit
payments are scheduled to commence under the terms of such Director's then
current election.
3. MAINTENANCE OF DEFERRED ACCOUNTS
(a) Compensation which is deferred shall be credited, in accordance with
each Director's election as described in Section 2 above, to his or her account
("Account") as of the date on which current payment otherwise would have been
made (the "Payment Date") based on Units. The number of Units credited from time
to time to each Account shall be:
With Respect to Deferred Compensation: The number obtained by
dividing the amount of Compensation otherwise payable on the Payment Date
by 100% of the closing price of the Corporation's common stock (the
"Stock") on the New York Stock Exchange (such closing price being the
"Stock Price") on the immediately preceding business day;
With Respect to Cash Dividends: The number obtained by multiplying
the number of Units in the Account by any cash dividends declared by the
Corporation on the Stock as of the Payment Date and dividing the product by
100% of the Stock Price on the related dividend record date; and
With Respect to Stock Dividends: The number obtained by multiplying
the number of Units in the Account by any stock dividend declared by the
Corporation on the Stock as of the Payment Date.
(b) The number of Units credited to each Account shall be appropriately
adjusted to take into account any changes in the number of outstanding shares of
Stock resulting from split-ups or combinations of shares or recapitalizations.
(c) The Plan is intended to constitute an "unfunded" plan for deferred
compensation. The establishment of or allocation to an Account shall not vest in
any participant any right, title or interest in or to any specific assets of the
Corporation nor shall the Corporation be required to purchase any Stock.
However, in the event the Corporation should purchase such Stock, the
Corporation shall not be required to exercise any option or
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right under such Stock, or if the Corporation wishes to exercise any option or
right under such Stock, the Corporation shall not be required to exercise such
option or right in any particular manner. With respect to the Corporation's
obligations under the Plan, the participant shall have no rights that are
greater than those of a general creditor of the Corporation.
4. PAYMENT OF DEFERRED AMOUNTS
(a) Except as provided in this Section 4 and Section 5(a) below, an Account
shall be paid to the Director in cash either:
(i) in a lump sum on a date specified by the Director on his election
form and in an amount equal to the value of the Units then credited to the
Director's Account, or
(ii) in quarterly or annual installments over such period and
commencing at such time as the Director shall have elected on his or her
election form, each installment being equal to the value of the Units then
credited to the Account divided by the number of installments remaining to
be paid.
For purposes of payments under this Section 4, the value of each Unit shall
be equal to the Stock Price on the business date which immediately precedes the
date as of which the payment is made.
(b) In the event of a Director's death or Disability (as defined below),
all amounts credited to his or her Account as of his or her date of death or
Disability shall be paid promptly in a lump sum, in an amount equal to the value
of the Units as of such date, to the Beneficiary designated on the Director's
election form or, if none, to his estate. "Disability" means the inability, due
to illness or injury, to engage in any gainful occupation for which the
individual is suited by education, training or experience, which condition
continues for at least six (6) consecutive months.
(c) If a Change in Control (as defined below) occurs and the participant
ceases to be a Director (other than by reason of death, Disability, retirement
or Termination for Cause) (as defined below) within two (2) years thereafter,
then upon the date of any such cessation, all amounts credited to the
participant's Account as of such date shall be paid promptly to the Director in
a lump sum, in an amount equal to the value of the Units as of such date. A
"Change in Control" shall occur if either (i) any person, including a "group" as
defined in Section 13(d)(3) of the Exchange Act, shall become the beneficial
owner of shares of the Corporation with respect to which 20% or more of the
total number of votes for the election of the Board of Directors of the
Corporation may be cast; or (ii) as a result of, or in connection with, any cash
tender offer, exchange offer, merger or other business combination, sale of
assets or contested election or combination of the foregoing, the persons who
were prior to the institution thereof directors of the Corporation shall cease
to constitute a majority of the Board of Directors of the Corporation; or (iii)
stockholders of the Corporation shall approve an agreement pursuant to which the
Corporation will cease to be an independent publicly owned corporation or
providing for a sale or other disposition of all or substantially all of the
assets of the Corporation. "Termination for Cause" means termination which is
effected by reason of fraud, deceit, or other gross misconduct by the Director
performed within the scope of his or her duties as a Director.
(d) Notwithstanding anything contained herein to the contrary, the
commencement of payment to a Director with respect to his Account shall not
start later than the time the Director obtains the age of seventy and one-half
(70 1/2) and end no later than such Director obtaining the age of seventy-five
(75).
5. LIMITATIONS ON PAYOUTS; NON-ASSIGNMENT
(a) In the case of payments of amounts credited to an Account under Section
4 above, the Units shall be deemed to be paid out in the order in which they
were acquired, so that any earlier-acquired Units then credited to such Account
shall be paid out before payment with respect to later-acquired Units. In
addition, the provisions of Sections 4(a), 4(b), 4(c) and 4(d) above
notwithstanding, if any payment is to be made under Section 4(a), 4(b), 4(c) or
4(d) above with respect to a Unit acquired (X) less than six (6) months before
the date of payment and (Y) at a time that the participant was subject to
reporting under Section 16(a) of the Exchange Act, such payment shall be delayed
until the first business day that is more than six (6) months after the date
such Unit was acquired under the Plan. This six (6) month holding
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requirement shall apply to acquisitions with respect to cash dividends and stock
dividends, as well as to acquisitions of Units upon deferral of fees. For
purposes of the Plan, Units will be deemed to be acquired at the date they are
credited to an Account.
(b) No right to receive payments under this Plan shall be transferable or
assignable by a Director except by such Director's last will and testament or in
accordance with the laws of descent and distribution of the state of such
Director's domicile at date of death. All amounts of Compensation deferred under
this Plan, all property and rights which may be purchased by the Corporation
with such amounts, and all income attributable to such amounts, property and
rights which may be purchased by the Corporation shall remain the sole property
and rights of the Corporation (without being restricted to the provision of
benefits under this Plan) subject only to the claims of the Corporation's
general creditors.
(c) Notwithstanding anything contained herein which may be to the contrary,
no modification of the time or manner of payment under the Plan shall be
authorized if and to the extent that such authorization or the making of such
modification would constitute "constructive receipt" on the part of a
participant of amounts credited to his or her Account under the then applicable
Federal income tax laws.
6. EFFECTIVE DATE AND TERMINATION
This Plan shall be effective with respect to any Compensation earned by a
Director after the Corporation's 1998 Annual Meeting of Shareholders, provided
the Plan is approved by the Corporation's shareholders at such meeting (the
"Effective Date"), and may be amended or terminated at any time by resolution of
the Board, but no amendment or termination shall affect amounts previously
credited to Directors' Accounts.
7. ADMINISTRATION
(a) The Non-Employee Directors (as such term is defined in Rule 16(b)-3 of
the Exchange Act) of the Corporation's Compensation Committee shall administer
the Plan. The sole duty of the Committee with respect to the Plan shall be to
approve or disapprove elections to defer Compensation under the Plan, and any
amendments to such elections. No election to defer Compensation, and no
amendment to any such election, shall be valid unless and until approved in
writing by any two (2) members of the Committee, provided, however, that no
member of the Committee may approve his or her own election, or any amendment to
his or her election.
(b) The Plan shall be construed in a manner consistent with the
requirements of Rule 16b-3 of the Exchange Act and, if any provision of the Plan
does not comply with the requirements of Rule 16b-3 of the Exchange Act as then
applicable to any transaction by such a participant, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of such Rule so that such participant shall avoid liability under
Section 16(b) of the Exchange Act.
8. APPLICABLE LAW.
This Plan shall be construed under the laws of the State of New York and
applicable Federal law.
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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, 1998, and hereby appoints ARTHUR HERSHAFT and DANIEL S. BISHOP, 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 25, 1998 at the Annual Meeting of Shareholders of the
Company, to be held on May 1, 1998 at 9:30 a.m., at the Rihga Royal Hotel, 151
West 54th Street, New York, New York 10019, and any adjournment or adjournments
thereof, as follows:
(TO BE SIGNED ON REVERSE SIDE)
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1. ELECTION OF DIRECTORS, as provided in the Company's Proxy Statement:
FOR all nominees listed below WITHHOLD
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: Arthur Hershaft
Thomas R. Loemker
Walter W. Williams
James C. McGroddy
2. To approve the Company's Deferred Compensation Plan for Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve a technical amendment to the Company's Certificate of
Incorporation changing its name from "PAXAR Corporation" to "Paxar
Corporation."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the appointment of Arthur Andersen LLP, as the Company's
independent auditors for the year ending December 31, 1998.
[ ] 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 judgment.
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, 3 and 4, 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)
Date: ,1998
The signature(s) hereon should correspond exactly with the name(s) of the
Shareholder(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.
