<PAGE>
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant To Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
/ / Preliminary information statement / / Confidential, for use of the
Commission only (as permitted
by Rule 14c-5(d)(2))
/ X / Definitive information statement
PUBCO CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
/ X / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and O-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
P U B C O C O R P O R A T I O N
3830 Kelley Avenue
Cleveland, Ohio 44114
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 9, 1999
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Pubco Corporation (the "Company") will be held at the
Ramada Inn, I-295 and Route 13 North, New Castle, Delaware 19720 on
September 9, 1999, at 11:00 A.M. Eastern Time to consider and act upon
the following:
1. Election of a Board of Directors to serve until the next
Annual Meeting of Stockholders or until their successors are duly
elected and qualified.
2. Proposal to approve an amendment to the 1998 Equity
Incentive Plan to increase the number of shares that may be the subject
of awards thereunder.
3. Such other matters as may properly come before the Meeting.
Stockholders of record of the Company's Common Stock and Class B
Stock at the close of business on August 2, 1999, the record date fixed
by the Board of Directors, are entitled to notice of and to vote at the
Meeting or at any adjournment thereof.
By Order of the Board of Directors
Stephen R. Kalette
Secretary
Cleveland, Ohio
August 4, 1999
SEE INFORMATION STATEMENT ENCLOSED
<PAGE>
P U B C O C O R P O R A T I O N
3830 Kelley Avenue
Cleveland, Ohio 44114
INFORMATION STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
September 9, 1999
August 4, 1999
Matters to be Considered at the Meeting
This Information Statement is furnished by Pubco Corporation, a Delaware
corporation (the "Company"), for the Annual Meeting of Stockholders to be held
September 9, 1999, and at all adjournments thereof (the "Meeting"), for the
purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The Company's Annual Report for the year ended December 31,
1998 is being mailed together with this Information Statement on or about
August 6, 1999. Stockholders of record as of the close of business on
August 2, 1999 (the "Record Date") are entitled to notice of and to vote at
the Meeting.
The only business which the Board of Directors intends to present or knows
that others will present at the Meeting is as set forth in the attached Notice
of Annual Meeting of Stockholders.
Voting
Holders of record at the close of business on the Record Date of the
Company's issued and outstanding Common Stock, par value $.01 per share
("Common Stock"), will be entitled to one vote for each share held and holders
of record at the close of business on the Record Date of the Company's Class B
Stock, par value $.01 per share ("Class B Stock"), will be entitled to 10
votes for each share held. As of July 27, 1999, the Company had 3,199,161
shares of Common Stock outstanding and 553,312 shares of Class B Stock
outstanding.
A stockholder who has indicated his intention to vote for the six nominees
for the Board of Directors named herein and for approval of the amendment to
the 1998 Equity Incentive Plan beneficially owns shares entitled to
approximately 82% of all possible votes in such election, thereby assuring
election of the six nominees and approval of the amendment to the 1998 Equity
Incentive Plan.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of July 27, 1999 (i) the number of
shares of the Company's stock owned, directly or indirectly, by each Director
of the Company and by all Directors, Director nominees and officers as a
group, and (ii) the number of shares of the Company's stock held by each
person who was known by the Company to beneficially own more than 5% of the
Company's stock:
<TABLE>
<CAPTION>
Common Stock Class B Stock Aggregate
Amount and Nature Amount and Nature Percent of
of Beneficial Percent of of Beneficial Percent of Voting
Name of Holder Ownership (1)(2) Class Ownership (1)(2) Class Power
<S> <C> <C> <C> <C> <C>
Glenn E. Corlett -- -- -- -- --
Harold L. Inlow -- -- -- --
Stephen R. Kalette 166 * 13,759 2.5 1.6
Robert H. Kanner (3) 2,066,894 64.6 514,044 92.9 82.5
William A. Dillingham 3,725 * -- -- --
Jack Howard (4) 5,000 * -- -- --
Leo L. Matthews (5) -- -- -- -- --
3830 Kelley Avenue
Cleveland, Ohio 44114
All Directors, nominees
and officers as a group 2,075,935 64.9 527,803 95.4 84.2
(9 persons) (3)
FMR Corp. (6)
82 Devonshire Street
Boston, MA 02109 319,500 9.9 -- -- 3.7
<FN>
* indicates less than 1%.
(1) Each owner has sole voting and investment power with respect to the
shares beneficially owned by him.
(2) Class B Stock is convertible into Common Stock on a share for share
basis. Therefore, ownership of Class B Stock may also be deemed to
be beneficial ownership of the same number of shares of Common Stock.
(3) Does not include 800 shares of Common Stock owned by Mr. Kanner as
custodian for his children, as to which shares he disclaims
beneficial ownership.
(4) Does not include 1,100 shares of Common Stock owned by Mr. Howard's
wife as custodian for his children, as to which shares he disclaims
beneficial ownership.
(5) Mr. Matthews owns approximately 3.6% of the Common Stock of the
Company's subsidiary, Allied Construction Products, Inc.
(6) Information concerning FMR Corp. is based upon disclosure contained
in a Schedule 13G mailed to the Company on February 1, 1999.
</TABLE>
<PAGE>
ELECTION OF DIRECTORS
Six Directors are to be elected for the ensuing year to hold office
until the next Annual Meeting of Stockholders and until their successors
are elected and shall qualify. Mr. Corlett, Mr. Dillingham, Mr. Inlow,
Mr. Kalette and Mr. Kanner are currently serving as Directors of the
Company having been elected to the Board of Directors at the 1998 Annual
Meeting of Stockholders. Mr. Howard has been nominated as a Director of
the Company. Election as a Director requires the favorable vote of the
majority of the votes of the Common Stock and Class B Stock (voting
together as a single class) voting at the election of Directors.
Information Concerning Nominees
Name, Age and Position Principal Occupation
with the Company During Last Five Years
Glenn E. Corlett Dean of the College of Business at Ohio University
55, Director since in Athens, Ohio since July 1, 1997. Between
1997, Member of the November, 1996 and June, 1997, Mr. Corlett was an
Audit Committee independendent business consultant in Cleveland,
Ohio. For more than five years prior to November,
1996, Mr. Corlett was the Executive Vice President
and Chief Operating Officer of N. W. Ayer,
Incorporated, a New York City-based advertising
agency he joined in 1990.
William A. Dillingham President of the Company's computer printer and
56, Director since labeling supplies businesses for more than 10 years.
1997, President of
the Company's computer
printer and labeling
supplies businesses.
Jack Howard Principal of Mutual Securities, Inc., an NASD
38, Director Nominee registered Broker/Dealer for more than the past
five years. Director of Gateway Industries, Inc.
and Roses Holdings, Inc.
Harold L. Inlow Independent business consultant since January 1,
65, Director since 1995. For more than 25 years prior to January 1,
1997, Member of the 1995, Mr. Inlow was the President of the Company's
Audit Committee Kline's Department Store subsidiary.
Stephen R. Kalette Director and executive officer of the Company since
49, Director since April, 1984.
1983, Vice President,
Administration, General
Counsel & Secretary
Robert H. Kanner Director and executive officer of the Company since
51, Director since December, 1983.
1983, Chairman,
President & CEO
<PAGE>
Board of Directors
The Board of Directors establishes broad corporate policies which are
carried out by the officers of the Company who are responsible for day-to-day
operations. In 1998, the Board held two meetings and took action by unanimous
written consent on two other occasions. No Director was absent during the
year from any of the meetings of the Board of Directors or of any of the
committees of the Board on which he served.
Committees of the Board of Directors
The Company has a standing Audit Committee. The Audit Committee consists
of Mr. Corlett and Mr. Inlow . The Audit Committee (i) reviews the internal
controls of the Company and its financial reporting; (ii) meets with the
Treasurer and such other officers as it, from time to time, deems necessary;
(iii) meets with the Company's independent public accountants and reviews the
scope and results of auditing procedures, the degree of such auditors'
independence, audit and non-audit fees charged by such accountants, and the
adequacy of the Company's internal accounting controls; and (iv) recommends to
the Board the appointment of the independent accountants.
Compensation of Directors
The Company pays its outside Directors an annual fee of $15,000, payable
monthly. The Company also reimburses its Directors for any expense reasonably
incurred while performing services for the Company. Directors who are
employees of the Company or otherwise receive compensation from the Company do
not receive any fee for acting as Directors of the Company.
Other Executive Officers
Leo L. Matthews, age 59, has been President of Allied since it was
acquired in March, 1993.
Maria Szubski, age 40, was named the Company's Chief Financial Officer on
June 30, 1999. She has been employed by the Company as an accountant for more
than the past five years.
Certain Transactions
The Company leases a general purpose 312,000 square foot building in
Cleveland, Ohio (the "Building") on a triple net basis. The premises are used
for executive and administrative facilities, computer printer supplies and
labeling supplies manufacturing and administrative operations, and Allied's
manufacturing and administrative operations. The Company subleases a portion
of the building to an unrelated party. The annual rental for the Building is
approximately $548,700. The Partnership that owns the Building is 80% owned
and controlled by Mr. Kanner. Mr. Dillingham, Mr. Kalette and five other
individuals have a minority interest in the Partnership.
<PAGE>
MANAGEMENT COMPENSATION
<TABLE>
Summary Compensation Table
The following table discloses compensation paid or accrued, during each of the Company's last three
fiscal years, to the Company's Chief Executive Officer and to its other executive officers.
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Name and Other Annual Restricted LTIP All Other
Principal Bonus Compensation Stock Options Payouts Compensation
Position Year Salary($) ($) ($) Awards ($) SARs(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. Kanner(3)
Chairman, CEO, 1998 $525,000 --- $74,710(4) --- --- --- $181,605(1,2,5)
President & 1997 525,000 --- 72,014 --- --- --- 184,691
CFO 1996 525,000 --- 64,917 --- --- --- 185,560
Stephen R. Kalette
VP-Admin., 1998 $330,000 --- $27,600(6) --- --- --- $ 35,757(1,2)
General Counsel 1997 330,000 --- 26,416 --- --- --- 35,799
& Secretary 1996 330,000 --- 25,022 --- --- --- 35,076
William A. Dillingham(7)
President of 1998 $450,000 --- $10,091(7) --- --- --- $ 31,000(2,8)
Buckeye Division 1997 450,000 --- 5,473 --- --- --- 31,000
1996 450,000 --- 7,284 --- --- --- 30,000
Leo L. Matthews(9)
President of 1998 $130,000 $ 70,000 $ 5,703(10) --- --- --- $ 11,000(11)
Allied 1997 130,000 90,900 5,163 --- --- --- 10,847
1996 120,000 85,055 5,459 --- --- --- 7,200
<FN>
(1) In 1988, the Company adopted a non-qualified plan to provide retirement benefits for executive
officers and other key employees. The plan provides benefits upon retirement, death or
disability of the participant and benefits are subject to a restrictive vesting schedule.
$58,505 in 1998, $58,291 in 1997 and $57,660 in 1996 of the amounts shown in the table for Mr.
Kanner and $34,757 in 1998, $34,799 in 1997 and $35,076 in 1996 of the amounts shown in the table
for Mr. Kalette are amounts contributed to such plan for the benefit of such executive officers
with respect to the years noted. Vesting of benefits under the plan is phased in over 20 years
and only a portion of the amount contributed for each year has fully vested.
(2) In 1997, the Company adopted a 401-K plan to provide retirement benefits for employees of Pubco
and the Company's printer supplies business, including officers. Participating employees make
voluntary contributions to the Plan, a portion of which the Company matches. Of the amounts
shown in the 1998 and 1997 tables for Mr. Kalette and Mr. Kanner, $1,000 was contributed by Pubco
to such plan. Of the amount shown in the 1998 and 1997 tables for Mr. Dillingham, $1,000 was
contributed by Buckeye to such plan. Vesting of benefits under the plan is phased in over six
years.
<PAGE>
(3) Mr. Kanner deferred his entire salary for each of the years reported under the terms
of deferred compensation plans established for his benefit. The amounts reported
for each year are the amounts deferred for that year. As compensation is earned by
Mr. Kanner, it is paid by the Company to deferred compensation trusts. These
amounts are being distributed to Mr. Kanner by the trusts in accordance with the
terms of the deferred compensation plans.
(4) Of the amount shown in the table, $70,258 in 1998, $67,620 in 1997 and $61,370 in
1996 represents the premiums on life insurance paid for by the Company on Mr.
Kanner's life, and for which the Company is not a beneficiary; and $4,452 in 1998,
$4,394 in 1997 and $3,547 in 1996 represents the cost of providing Mr. Kanner with
use of an automobile during the year.
(5) Of the amount reflected, $122,100 in 1998, $125,400 in 1997 and $127,900 in 1996
represents a payment by the Company toward the premium on split dollar life
insurance on Mr. Kanner's life and for which the Company is not the beneficiary.
The amounts will be repaid to the Company out of the death proceeds from such policy.
(6) Of the amount shown in the table, $23,085 in 1998, $22,210 in 1997 and $21,396 in
1996 represents the premiums on life insurance paid for by the Company on Mr.
Kalette's life, and for which the Company is not a beneficiary; and $4,057 in 1998,
$3,725 in 1997 and $3,154 in 1996 represents the cost of providing Mr. Kalette with
use of an automobile during the year
(7) All of the amounts shown as paid to or for Mr. Dillingham were paid by the Company's
printer supplies business. Of the amount shown in the table, $4,425 in 1998, $3,885
in 1997 and $3,535 in 1996 represents the premiums on life insurance paid for by the
Company's printer supplies business on Mr. Dillingham's life, and for which it is
not a beneficiary; and $5,666 in 1998, $1,588 in 1997 and $3,749 in 1996 represents
the cost of providing Mr. Dillingham with use of an automobile during the year.
(8) In 1988, the Company's printer supplies business adopted a non-qualified plan to
provide retirement benefits for executive officers and other key employees. The
plan provides benefits upon retirement, death or disability of the participant and
benefits are subject to arestrictive vesting schedule. Of the amount shown in the
table for Mr. Dillingham, $30,000 was contributed to such plan for the benefit of
such executive officer with respect to each of the years noted. Vesting of benefits
under the plan is phased in over 20 years and only a portion of the amount
contributed for each year has fully vested.
(9) All of the amounts shown as paid to or for Mr. Matthews were paid by the Company's
construction products business. Mr. Matthews has an employment agreement with such
business providing for a minimum $130,000 per year base salary; a share of Allied's
earnings in excess of its operating plan earnings, if any, and discretionary bonuses.
(10) Of the amount shown in the table, $1,710 in 1998, $1,710 in 1997 and $1,710 in 1996
represents the premiums on life insurance paid for by the construction products
business on Mr. Matthew's life, and for which it is not a beneficiary; and $3,993 in
1998, $3,453 in 1997 and $3,749 in 1996 represents the cost of providing Mr.
Matthews with use of an automobile during that year.
<PAGE>
(11) In 1993, the Company's construction products business adopted a 401-K plan (with a
profit sharing component) to provide retirement benefits for its employees,
including officers. Participating employees make voluntary contributions to the
Plan, a portion of which such business matches. All of the amount shown in the
table for Mr. Matthews was contributed by Allied to such plan. Vesting of benefits
under the plan is phased in over three years.
</TABLE>
Unless covered by an employment agreement with the Company, officers
serve for one year terms or until their respective successors are duly
elected and qualified.
1998 Equity Incentive Plan
In July, 1998, the Board of Directors adopted the Company's 1998
Equity Incentive Plan, subject to approval by the Company's stockholders
which was obtained at the Annual Meeting of Stockholders held on
September 14, 1998. The Plan provides for the grant of (i) incentive and
non-statutory stock options, (ii) stock bonuses, (iii) rights to purchase
restricted stock, and (iv) stock appreciation rights, to key employees,
officers and consultants of the Company and its affiliates. The maximum
number of shares of Common Stock issuable under the Plan as approved by
the stockholders is 200,000. No stock awards were issued under the Plan
during 1998. During 1999, the Board amended the Plan, subject to
stockholder approval within 12 months of the date of the amendment, to
increase the number of shares issuable under the Plan by 120,000 shares
to 320,000 shares. See, "Approval of the Amendment to 1998 Equity
Incentive Plan". Also in 1999, the Board issued non-statutory stock
options to purchase 240,000 shares at $9.00 per share, 40,000 of which
are subject to approval of the amendment by the stockholders. Mr.
Dillingham, Mr. Kalette and Ms. Szubski were issued options to purchase
100,000, 20,000 and 10,000 shares, respectively, under the Plan. Other
officers and non-officer employees of the Company were issued options to
purchase a total of 110,000 shares. None of such options are presently
exercisable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As Directors of the Company, Mr. Kanner and Mr. Kalette participate
in Board of Directors' deliberations and decisions concerning executive
officer compensation. Mr. Kanner and Mr. Kalette are executive officers
of the Company.
The Statement of the Board of Directors Regarding Executive
Compensation and the Stock Performance Charts which follow shall not be
deemed incorporated by reference by any general statement incorporating
by reference this Information Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934,
except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under
such Acts.
<PAGE>
STATEMENT OF THE BOARD OF DIRECTORS
REGARDING EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is not, as a
matter of course, directly determined by Company performance through
objective criteria; although Mr. Matthews' employment arrangement
includes participation in a bonus pool related to the performance of
Allied and Mr. Matthews' compensation may include discretionary bonuses.
Several years ago the Board set Mr. Kanner's and Mr. Kalette's
compensation at levels it determined were appropriate based upon the
nature of their respective responsibilities and their willingness to work
for the Company at such compensation levels. The Board did not formally
review Mr. Kanner's or Mr. Kalette's compensation for 1998 and their
compensation is expected to remain the same until further review by each
of them and the other Directors. Future adjustment to Mr. Kanner's and
Mr. Kalette's compensation, if any, would be based upon a change in their
respective levels of responsibilities and the size and scope of the
Company's operations.
Glenn E. Corlett
William A. Dillingham
Harold L. Inlow
Robert H. Kanner
Stephen R. Kalette
APPROVAL OF THE AMENDMENT TO 1998 EQUITY INCENTIVE PLAN
In July 1998, the Board of Directors adopted the Company's 1998
Equity Incentive Plan (the "Plan") subject to approval by the Company's
stockholders. The Plan was approved by the Company's Stockholders at the
September, 1998 Annual Meeting.
Stockholders are requested in this proposal to approve an amendment
to the Plan which will increase to 320,000 the number of shares that may
be the subject of awards. The Company believes that its ability to
provide employees with attractive equity-based incentives is critical in
allowing it to attract and retain qualified individuals. The Company
believes that the grant of stock options encourages employees to build
long-term stockholder value. The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and
entitled to vote at the meeting will be required to approve the amendment
to the Plan. Abstentions will be counted toward the tabulation of votes
cast on this proposal and will have the same effect as negative votes.
Mr. Kanner has announced his intention to vote for approval of the
<PAGE>
amendment to the Plan, thereby assuring stockholder approval. The Plan
was attached as Appendix A to the Company's Information Statement dated
August 17, 1998 to which reference is hereby made for the Plan's terms.
In 1999, the Board of Directors issued non-statutory stock options to
purchase 240,000 shares at $9.00 per share, 40,000 of which are subject
to approval of this amendment by the stockholders. Mr. Dillingham, Mr.
Kalette and Ms. Szubski were issued options to purchase 100,000, 20,000
and 10,000 shares, respectively, under the Plan. Other officers and
non-officer employees of the Company were issued options to purchase a
total of 110,000 shares. None of such options are presently exercisable.
Summary of Terms of the Plan
General
The Plan provides for the grant of (i) both incentive and
nonstatutory stock options, (ii) stock bonuses, (iii) rights to purchase
restricted stock, and (iv) stock appreciation rights (collectively,
"Stock Awards"). Incentive stock options granted under the Plan are
intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). Nonstatutory stock options granted under the Plan are intended
not to qualify as incentive stock options under the Code. See "Federal
Income Tax Information" for a general discussion of the tax treatment of
incentive and nonstatutory stock options.
Purpose
The Plan was adopted to (i) provide a means by which selected
officers and employees of and consultants to the Company and its
affiliates could be given an opportunity to benefit from increases in the
value of the stock of the Company, (ii) assist in retaining the services
of employees holding key positions as well as secure and retain the
services of persons capable of filling such positions and (iii) provide
incentives for such persons to exert maximum efforts for the success of
the Company.
Administration
The Plan is administered by the Board of Directors of the Company.
The Board has the power to construe and interpret the Plan and, subject
to the provisions of the Plan, to determine the persons to whom and the
dates on which Stock Awards will be granted; whether a Stock Award will
be an incentive stock option, a nonstatutory stock option, a stock bonus,
a right to purchase restricted stock, a stock appreciation right or a
combination of the foregoing; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person
shall be permitted to receive stock pursuant to a Stock Award; whether a
person shall be permitted to receive stock upon exercise of an
independent stock appreciation right; and the number of shares with
respect to which a Stock Award shall be granted to each such person. The
Board of Directors is authorized to delegate administration of the Plan
<PAGE>
to a committee composed of not fewer than two members of the Board. As
used herein with respect to the Plan, the "Board" refers to any such
committee as well as to the Board of Directors itself.
Eligibility
Incentive stock options may be granted under the Plan only to
Employees (including officers) of the Company and its affiliates. Other
Stock Awards may be granted under the Plan only to employees (including
officers) of and consultants to the Company and its affiliates.
No incentive stock option may be granted under the Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of the
Company or any affiliate of the Company, unless the option exercise price
is at least 110% of the fair market value of the stock subject to the
option on the date of grant, and the term of the option does not exceed
five years from the date of grant. For incentive stock options granted
under the Plan, the aggregate fair market value, determined at the time
of grant, of the shares of Common Stock with respect to which such
options are exercisable for the first time by an optionee during any
calendar year (under all such plans of the Company and its affiliates)
may not exceed $100,000.
Stock Subject to the Plan
The maximum number of shares of Common Stock issueable under the Plan
is currently 200,000, subject to adjustment for certain corporate
events. The amendment, if adopted, would increase that number to
320,000. If any Stock Award granted under the Plan expires or otherwise
terminates, in full or in part, without being exercised in full, the
Common Stock not acquired pursuant to such Stock Award again becomes
available for issuance under the Plan.
Terms of Options
The following is a description of the permissible terms of options
under the Plan. Individual option grants may be more or less restrictive
as to any or all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock
options under the Plan may not be less than the fair market value of the
Common Stock subject to the option on the date of the option grant, and
in some cases (see "Eligibility" above), may not be less than 110% of
such fair market value. The exercise price of nonstatutory options under
the Plan is determined by the Board. The closing price of the Company's
Common Stock as reported on the Nasdaq Small Cap Market on July 30, 1999
was $8.8125 per share.
In the event of a decline in the value of the Company's Common Stock,
the Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory,
with new lower priced options. To the extent required by Section 162(m),
<PAGE>
an option repriced under the Plan is deemed to be cancelled and a new
option granted.
The exercise price of options granted under the Plan must be paid
either: (i) in cash ; (ii) by delivery of other Common Stock of the
Company or (iii) pursuant to a deferred payment arrangement or in any
other form of legal consideration.
Option Exercise. Options granted under the Plan may become
exercisable ("vest") in cumulative increments as determined by the
Board. Unless the Board determines otherwise at the time of grant,
shares covered by options under the Plan vest at the rate of 25% of the
shares subject to the option on the first anniversary of the date of
grant and 25% of such shares at the end of each of the next three
anniversaries thereafter during the optionee's employment or provision of
services as a consultant. To the extent provided by the terms of an
option, and in the discretion of the Board, an optionee may satisfy any
federal, state or local tax withholding obligation relating to the
exercise of such option by a cash payment upon exercise, by authorizing
the Company to withhold a portion of the stock otherwise issuable to the
optionee, by delivering the already-owned stock of the Company or by a
combination of these means.
Term. The maximum term of options under the Plan is 10 years, except
that in certain cases (see "Eligibility") the maximum term is five
years. Options under the Plan terminate three months after termination
of the optionee's employment or relationship as a consultant of the
Company or any affiliate of the Company, unless (i) such termination is
due to such person's permanent and total disability (as defined in the
Code), in which case it may be exercised (to the extent the option was
exercisable at the time of disability) at any time within one year of
such termination (or expiration, if earlier); (ii) the optionee dies
while employed by or serving as a consultant of the Company or any
affiliate of the Company, or within a period specified by the option
after termination of such relationship, in which case the option may be
exercised (to the extent the option was exercisable at the time of the
optionee's death) within the period ending on the earlier of twelve (12)
months after the optionee's death or the expiration of the term of the
option by the person or persons to whom the rights to such option pass by
will or by the laws of descent and distribution; or (iii) the option by
its terms specifically provides otherwise. The option term may also be
extended in the event that exercise of the option within these periods is
prohibited for specified reasons.
Terms of Stock Bonuses and Purchases of Restricted Stock
The following is a description of the permissible terms of stock
bonuses and restricted stock purchase agreements under the Plan. The
terms and conditions of stock bonus or restricted stock purchase
agreements may change from time to time, and the terms and conditions of
separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement includes the substance of each of the
following provisions as appropriate:
<PAGE>
Purchase Price. The purchase price under each restricted stock
purchase agreement is such amount as the Board may determine and
designate in such agreement but in no event may the purchase price be
less than eighty-five percent (85%) of the stock's fair market value on
the date such award is made. Notwithstanding the foregoing, the Board
may determine that eligible participants in the Plan may be awarded stock
pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company for its benefit.
Vesting. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board.
Termination of Employment. In the event a participant's continuous
status as an employee terminates, the Company may repurchase or otherwise
re-acquire any or all of the shares of stock held by that person which
have not vested as of the date of termination under the terms of the
stock bonus or restricted stock purchase agreement between the Company
and such person.
Stock Appreciation Rights
The three types of Stock Appreciation Rights that are authorized for
issuance under the Plan are as follows:
Tandem Stock Appreciation Rights. Tandem stock appreciation rights
may be granted appurtenant to an option, and are generally subject to the
same terms and conditions applicable to the particular option grant to
which they pertain. Tandem stock appreciation rights require the holder
to elect between the exercise of the underlying option for shares of
stock and the surrender, in whole or in part, of such option for an
appreciation distribution. The appreciation distribution payable on the
exercised tandem right is in cash (or, if so provided, in an equivalent
number of shares of stock based on fair market value on the date of the
option surrender) in an amount up to the excess of (i) the fair market
value (on the date of the option surrender) of the number of shares of
stock covered by that portion of the surrendered option in which the
optionee is vested over (ii) the aggregate exercise price payable for
such vested shares.
Concurrent Stock Appreciation Rights. Concurrent stock appreciation
rights may be granted appurtenant to an option and may apply to all or
any portion of the shares of stock subject to the underlying option and
are generally subject to the same terms and conditions applicable to the
particular option grant to which they pertain. A concurrent right is
exercised automatically at the same time the underlying option is
exercised with respect to the particular shares of stock to which the
concurrent right pertains. The appreciation distribution payable on an
exercised concurrent right is in cash (or, if so provided, in an
equivalent number of shares of stock based on fair market value on the
date of the exercise of the concurrent right) in an amount equal to such
portion as shall be determined by the Board at the time of the grant of
the excess of (i) the aggregate fair market value (on the date of the
<PAGE>
exercise of the concurrent right) of the vested shares of stock purchased
under the underlying option which have concurrent rights appurtenant to
them over (ii) the aggregate exercise price paid for such shares.
Independent Stock Appreciation Rights. Independent stock
appreciation rights may be granted independently of any option and are
generally subject to the same terms and conditions applicable to
nonstatutory stock options. The appreciation distribution payable on an
exercised independent right may not be greater than an amount equal to
the excess of (i) the aggregate fair market value (on the date of the
exercise of the independent right) of a number of shares of Company stock
equal to the number of share equivalents in which the holder is vested
under such independent right, and with respect to which the holder is
exercising the independent right on such date, over (ii) the aggregate
fair market value (on the date of the grant of the independent right) of
such number of shares of Company stock. The appreciation distribution
payable on the exercised independent right is in cash or, if so provided,
in an equivalent number of shares of stock based on fair market value on
the date of the exercise of the independent right.
Adjustment Provisions
If there is any change in the stock subject to the Plan or subject to
any Stock Award granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property
other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or transaction
not involving the receipt of consideration by the Company), the Plan and
Stock Awards outstanding thereunder will be appropriately adjusted as to
the class and the maximum number of shares subject to such plan, the
maximum number of shares which may be granted to an employee during a
calendar year, and the class, number of shares and price per share of
stock subject to such outstanding Stock Awards.
Effect on Certain Corporate Events
The Plan provides that, in the event of a dissolution, liquidation,
sale of substantially all of the assets of the Company, a specified type
of merger or other corporate reorganization, to the extent permitted by
law, any surviving corporation will be required to either assume Stock
Awards outstanding under the Plan or substitute similar Stock Awards for
those outstanding under the Plan, or such outstanding Stock Awards will
continue in full force and effect. In the event that any surviving
corporation declines to assume or continue Stock Awards outstanding under
the Plan, or to substitute similar Stock Awards, then with respect to
Stock Awards held by persons then performing services as employees,
directors or consultants, the Stock Awards will become immediately vested
and will terminate if not exercised prior to such corporate event. The
acceleration of a Stock Award in the event of an acquisition or similar
corporate event may be viewed as an anti-takeover provision, which may
have the effect of discouraging a proposal to acquire or otherwise obtain
control of the Company.
<PAGE>
Duration, Amendment and Termination
The Board may suspend or terminate the Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the Plan will terminate on July 17, 2008.
The Board may also amend the Plan at any time or from time to time.
However, no amendment will be effective unless approved by the
stockholders of the Company within twelve months before or after its
adoption by the Board if the amendment would: (i) modify the
requirements as to eligibility for participation (to the extent such
modification requires stockholder approval in order for the Plan to
satisfy Section 422 or 162(m) of the Code, if applicable, or Rule 16b-3
("Rule 16b-3") of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); (ii) increase the number of shares reserved for issuance
upon exercise of options; or (iii) change any other provision of the Plan
in any other way if such modification requires stockholder approval in
order to comply with Rule 16b-3 or satisfy the requirements of Section
422 of the Code. The Board may submit any other amendment to the Plan
for stockholder approval, including, but not limited to, amendments
intended to satisfy the requirements of Section 162(m) of the Code
regarding the exclusion of performance-based compensation from the
limitation on the deductibility of compensation paid to certain employees.
Restrictions on Transfer
Under the Plan, an incentive stock option may not be transferred by
the optionee otherwise than by will or by the laws of descent and
distribution and during the lifetime of the optionee, may be exercised
only by the optionee. A nonstatutory stock option may not be transferred
except by will or by the laws of descent and distribution or pursuant to
a "qualified domestic relations order" or as otherwise approved by the
Board. In any case, the optionee may designate in writing a third party
who may exercise the option in the event of the optionee's death. In
addition, shares subject to repurchase by the Company under an early
exercise stock purchase agreement may be subject to restrictions on
transfer which the Board deems appropriate. No rights under a stock
bonus or restricted stock purchase agreement shall be transferable except
by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order satisfying the requirements of Rule
16b-3 and any administrative interpretations or pronouncements
thereunder, so long as stock awarded under such agreement remains subject
to the terms of the agreement.
Federal Income Tax Information
Incentive Stock Options. Incentive stock options under the Plan are
intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the
optionee or the Company by reason of the grant or exercise of an
incentive stock option. However, the exercise of an incentive stock
<PAGE>
option may increase the optionee's alternative minimum tax liability, if
any.
If an optionee holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is
granted and at least one year from the date on which the shares are
transferred to the optionee upon exercise of the option, any gain or loss
on a disposition of such stock will be long-term capital gain or loss.
Generally, if the optionee disposes of the stock before the expiration of
either of these holding periods (a "disqualifying disposition"), at the
time of disposition, the optionee will realize taxable ordinary income
equal to the lesser of (i) the excess of the stock's fair market value on
the date of exercise over the exercise price, or (ii) the optionee's
actual gain, if any, on the purchase and sale. The optionee's additional
gain, or any loss, upon the disqualifying disposition will be a capital
gain or loss, which will be long-term or short-term depending on whether
the stock was held for more than one year. Long-term capital gains
currently are generally subject to lower tax rates than ordinary income.
Slightly different rules may apply to optionees who acquire stock subject
to certain repurchase options.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled
(subject to the requirement of reasonableness, the provisions of Section
162(m) of the Code and the satisfaction of a tax reporting obligation) to
a corresponding business expense deduction in the tax year in which the
disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under
the Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by
reason of the grant of a nonstatutory stock option. Upon exercise of a
nonstatutory stock option, the optionee normally will recognize taxable
ordinary income equal to the excess of the stock's fair market value on
the date of exercise over the option exercise price. Generally, with
respect to employees, the Company is required to withhold from regular
wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, the
provisions of Section 162(m) of the Code and the satisfaction of a tax
reporting obligation, the Company will generally be entitled to a
business expense deduction equal to the taxable ordinary income realized
by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the
selling price and the sum of the amount paid for such stock plus any
amount recognized as ordinary income upon exercise of the option. Such
gain or loss will be long or short-term depending on whether the stock
was held for more than one year. Slightly different rules may apply to
optionees who acquire stock subject to certain repurchase options.
Restricted Stock and Stock Bonuses. Restricted stock and stock
bonuses granted under the Plan generally have the following federal
income tax consequences:
<PAGE>
Upon acquisition of stock under a restricted stock or stock bonus
award, the recipient normally will not recognize taxable ordinary income
equal to the excess of the stock's fair market value over the purchase
price, if any. To the extent the stock is subject to certain types of
vesting restrictions, the taxable event will be delayed until the vesting
restrictions lapse unless the recipient elects to be taxed on receipt of
the stock pursuant to Section 83(b) of the Code. Generally, with respect
to employees, the Company is required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income
recognized. Subject to the requirement of reasonableness, Section 162(m)
of the Code and the satisfaction of a tax reporting obligation, the
Company will generally be entitled to a business expense deduction equal
to the taxable ordinary income realized by the recipient. Upon
disposition of the stock, the recipient will recognize a capital gain or
loss equal to the difference between the selling price and the sum of the
amount paid for such stock, if any, plus any amount recognized as
ordinary income upon acquisition (or vesting) of the stock. Such gain or
loss will be long or short-term depending on whether the stock was held
for more than one year from the date ordinary income is measured.
Slightly different rules may apply to persons who acquire stock subject
to forfeiture.
Stock Appreciation Rights. No taxable income is realized upon the
receipt of a stock appreciation right, but upon exercise of the stock
appreciation right the fair market value of the shares (or cash in lieu
of shares) received must be treated as compensation taxable as ordinary
income to the recipient in the year of such exercise. Generally, with
respect to employees, the Company is required to withhold from the
payment made on exercise of the stock appreciation right or from regular
wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, Section
162(m) of the Code and the satisfaction of a reporting obligation, the
Company will be entitled to a business expense deduction equal to the
taxable ordinary income recognized by the recipient.
Potential Limitation on Company Deductions. As part of the Omnibus
Budget Reconcilation Act of 1993, the U.S. Congress amended the Code to
add Section 162(m) which denies a deduction to any publicly held
corporation for compensation paid to certain employees in a taxable year
to the extent that compensation exceeds $1 million for a covered
employee. It is possible that compensation attributable to awards under
the Plan, when combined with all other types of compensation received by
a covered employee from the Company, may cause this limitation to be
exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation.
In accordance with applicable Treasury regulations issued under Section
162(m) of the Code, compensation attributable to stock options and stock
appreciation rights will qualify as performance-based compensation,
provided that certain conditions are met.
<PAGE>
STOCK PERFORMANCE CHART
The following chart is a comparison of the Cumulative Total Return on the
Company's Common Stock over the five year period ending December 31, 1998, with
the Cumulative Total Return on the Center for Research in Security Prices
("CRSP") Index for Nasdaq Stock Market (US Companies) and a self-determined
peer group.
" Date " " Company" " Market" " Market" " Peer" "Peer "
" " " Index " " Index " " Count " " Index" "Count"
"12/31/92", 100.000, 100.000, 3929, 100.000, 7
"01/29/93", 112.195, 102.846, 3917, 102.494, 7
"02/26/93", 102.439, 99.010, 3948, 106.188, 7
"03/31/93", 107.317, 101.875, 3973, 104.966, 7
"04/30/93", 110.976, 97.528, 4008, 104.396, 7
"05/28/93", 104.878, 103.350, 4036, 106.959, 7
"06/30/93", 92.683, 103.826, 4072, 105.490, 7
"07/30/93", 87.805, 103.949, 4104, 108.416, 7
"08/31/93", 102.439, 109.321, 4139, 116.559, 7
"09/30/93", 121.951, 112.577, 4174, 116.772, 7
"10/29/93", 107.317, 115.107, 4221, 119.773, 7
"11/30/93", 102.439, 111.676, 4304, 117.836, 7
"12/31/93", 104.878, 114.790, 4376, 122.639, 7
"01/31/94", 109.756, 118.274, 4400, 121.756, 7
"02/28/94", 102.439, 117.170, 4439, 118.769, 7
"03/31/94", 112.195, 109.964, 4491, 112.854, 7
"04/29/94", 106.098, 108.537, 4520, 109.119, 7
"05/31/94", 104.878, 108.802, 4562, 110.545, 7
"06/30/94", 103.659, 104.822, 4576, 107.579, 7
"07/29/94", 97.561, 106.972, 4594, 111.414, 7
"08/31/94", 103.659, 113.792, 4612, 118.352, 7
"09/30/94", 112.195, 113.501, 4615, 110.076, 7
"10/31/94", 97.561, 115.732, 4637, 109.952, 7
"11/30/94", 104.878, 111.892, 4653, 102.890, 7
"12/30/94", 107.317, 112.206, 4658, 106.503, 7
"01/31/95", 92.683, 112.835, 4648, 107.848, 7
"02/28/95", 100.000, 118.802, 4650, 112.275, 7
"03/31/95", 107.317, 122.325, 4644, 117.178, 7
"04/28/95", 97.561, 126.177, 4655, 120.577, 7
"05/31/95", 97.561, 129.432, 4654, 126.692, 7
"06/30/95", 87.805, 139.922, 4671, 128.133, 7
"07/31/95", 107.317, 150.207, 4690, 138.356, 7
"08/31/95", 104.878, 153.252, 4713, 135.003, 7
"09/29/95", 107.317, 156.777, 4709, 135.542, 7
"10/31/95", 112.195, 155.878, 4747, 132.315, 7
"11/30/95", 117.073, 159.538, 4779, 137.695, 7
"12/29/95", 117.073, 158.688, 4819, 135.853, 7
"01/31/96", 125.610, 159.470, 4809, 142.716, 7
"02/29/96", 134.146, 165.539, 4839, 148.712, 7
"03/29/96", 129.268, 166.088, 4878, 148.561, 7
"04/30/96", 151.220, 179.868, 4923, 154.890, 7
"05/31/96", 158.537, 188.126, 4981, 160.113, 7
"06/28/96", 163.415, 179.646, 5034, 161.128, 7
"07/31/96", 148.781, 163.650, 5066, 155.691, 7
"08/30/96", 153.659, 172.819, 5090, 156.493, 7
"09/30/96", 153.659, 186.037, 5096, 169.990, 7
"10/31/96", 153.659, 183.983, 5138, 163.082, 7
"11/29/96", 158.537, 195.356, 5180, 178.908, 7
"12/31/96", 143.902, 195.180, 5176, 172.893, 7
<PAGE>
"01/31/97", 141.463, 209.053, 5161, 186.226, 7
"02/28/97", 151.220, 197.490, 5170, 194.706, 7
"03/31/97", 151.220, 184.596, 5168, 192.466, 7
"04/30/97", 162.195, 190.368, 5155, 194.310, 7
"05/30/97", 164.634, 211.941, 5148, 205.090, 7
"06/30/97", 160.976, 218.431, 5132, 213.927, 7
"07/31/97", 173.171, 241.488, 5127, 239.804, 7
"08/29/97", 215.854, 241.118, 5116, 223.789, 7
"09/30/97", 207.317, 255.384, 5106, 228.147, 7
"10/31/97", 210.976, 242.157, 5114, 211.895, 7
"11/28/97", 209.756, 243.370, 5130, 214.938, 7
"12/31/97", 202.439, 239.480, 5081, 219.585, 7
<PAGE>
INDEPENDENT AUDITORS
Ernst & Young LLP was the Company's independent auditor for the
fiscal year 1998. The Company has been advised by Ernst & Young that
neither the firm nor any of its associates has any relationship with the
Company or any affiliate of the Company other than the usual relationship
that exists between independent auditor and client. A representative of
that firm might be present at the Meeting, will have an opportunity to
make a statement if he desires to do so, and will be available to respond
to appropriate questions from stockholders.
By Order of the Board of Directors
Stephen R. Kalette
Secretary
FORM 10-K REPORT
IN ADDITION TO ITS ANNUAL REPORT TO STOCKHOLDERS, THE COMPANY FILES
AN ANNUAL REPORT WITH THE SECURITIES AND EXCHANGE COMMISSION ON FORM
10-K. STOCKHOLDERS MAY OBTAIN A COPY WITHOUT EXHIBITS WITHOUT CHARGE BY
WRITING TO THE COMPANY, ATTENTION: STEPHEN R. KALETTE, SECRETARY, PUBCO
CORPORATION, 3830 KELLEY AVENUE, CLEVELAND, OHIO 44114. COPIES OF
EXHIBITS MAY BE OBTAINED AT $0.25 PER PAGE TO COVER THE COMPANY'S COSTS
IN FURNISHING SUCH COPIES.
