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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Republic Group Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(4) Date Filed:
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Notes:
<PAGE>
REPUBLIC GROUP INCORPORATED
P. 0. BOX 1307
HUTCHINSON, KANSAS 67504-1307
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 22, 1998
The Annual Meeting of Stockholders of Republic Group Incorporated (the
"Company") will be held on the 22nd day of October, 1998, at 11:00 a.m., Central
Daylight Savings Time, in Gallery I of the Hotel Crescent Court, 400 Crescent
Court, Dallas, Texas for the following purposes:
(1) Electing eight directors to serve on the Board of Directors of the Company
until the next Annual Meeting of Stockholders and until their respective
successors are elected and qualified,
(2) Transacting such other business as may properly be brought before the
meeting or any adjournment thereof.
Information regarding the matters to be acted upon at the meeting is contained
in the Proxy Statement attached to this Notice.
Only stockholders of record at the close of business on the 28th day of
August, 1998, will be entitled to notice of or to vote at the meeting or any
adjournment thereof. A complete list of the stockholders entitled to vote at the
meeting will be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours at the Company's office
at 1320 Greenway Drive, Suite 920, Irving, Texas 75038 for a period of ten days
preceding the meeting.
By Order of the Board of Directors
Janey L. Rife
Vice President, Treasurer and Secretary
Hutchinson, Kansas
September 18, 1998
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REPUBLIC GROUP INCORPORATED
P. 0. BOX 1307
HUTCHINSON, KANSAS 67504-1307
SEPTEMBER 18, 1998
PROXY STATEMENT FOR ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON OCTOBER 22,1998
The accompanying proxy is solicited by the Board of Directors of Republic
Group Incorporated (the "Company") for use at the Annual Meeting of Stockholders
to be held in Gallery I of the Hotel Crescent Court Hotel, 400 Crescent Court,
Dallas, Texas on Thursday, October 22, 1998, at 11:00 a.m., Central Daylight
Savings Time (the "Annual Meeting") and at any adjournment thereof. These proxy
materials are being sent to the stockholders of the Company on or about
September 18, 1998. The Company will bear the cost of solicitation. Solicitation
may be made by personal interview, mail, telephone or telegram by directors,
officers and regular employees. The Company may also request banking
institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to
forward solicitation materials to the beneficial owners of common stock, par
value $1.00 per share ("Common Stock"), of the Company held of record by such
persons; the Company will reimburse the forwarding expenses.
All shares represented by a valid proxy will be voted. The person giving the
proxy has the right to revoke the same at any time before it has been exercised
by giving written notice to that effect to the Secretary of the Company. A
stockholder who attends the Annual Meeting in person may revoke his or her proxy
at that time and vote in person if desired.
ANNUAL REPORT
The Company's Annual Report to Stockholders, covering the fiscal year ended
June 30, 1998, including audited financial statements is enclosed herewith, but
neither the report nor the financial statements are incorporated in this proxy
statement or are deemed to be a part of the material for the solicitation of
proxies.
OUTSTANDING STOCK
At the close of business on the 28th day of August, 1998, the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to be voted 11,765,321 shares of
Common Stock.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to be voted is necessary to
constitute a quorum at the Annual Meeting. If a quorum is not present or
represented at the Annual Meeting, the stockholders entitled to vote thereat may
adjourn the Annual Meeting from time to time for a period not to exceed 30 days,
without notice, until a quorum is present or represented.
Pursuant to the bylaws of the Company, the number of directors of the Company
has been fixed at eight. Cumulative voting for directors is not permitted.
Consequently, the eight persons receiving the greatest number of votes at the
Annual Meeting will be elected as the directors of the Company.
Holders of Common Stock will be entitled to one vote for each share of such
stock owned of record at the close of business on August 28, 1998, with respect
to each matter submitted to a vote at the Annual Meeting. Abstentions and broker
non-votes are each included in the determination of the number of shares present
at the Annual Meeting for purposes of determining a quorum. Abstentions and
broker non-votes have no effect on the election of directors except to the
extent that they affect the total votes received by any particular candidate.
With respect to other matters requiring approval of a quorum, abstentions will
have the effect of negative votes, but broker non-votes will have no effect
because they are not treated as shares entitled to vote on such matters.
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SECURITY OWNERSHIP
The following table sets forth information with respect to the beneficial
ownership of equity securities of the Company as of August 28, 1998, by (i) each
person known to management to be the beneficial owner of more than 5% of any
class of the Company's voting securities, (ii) each director and each nominee
for election as a director of the Company, (iii) each named executive officer
for which compensation information is provided in this proxy statement, and (iv)
all directors and executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial of Beneficial Percent
Title of Class Owner (1) Ownership (2) of Class
-------------- -------------------- ----------------- ---------
<S> <C> <C> <C>
Common Stock Todd T. Brown 35,348 *
$1.00 par C. William Claypool 1,500 *
Value (3) Geary D. Cribbs 44,665 *
Stephen L. Gagnon 77,813 *
Susan C. Hall 25,404 *
Bert A. Nelson 20,732 *
Talbot Rain 7,755 *
Doyle R. Ramsey 29,953 *
Gerald L. Ray 303,840 (4) 2.56%
Robert F. Sexton 19,250 *
Phil Simpson (5) 2,269,600 (6) 19.09%
L. L. Wallace 25,594 (7) *
David B. Yarbrough 35,086 *
All Directors and Executive
Officers as a Group
(18 persons) 2,935,090 24.68%
</TABLE>
*The percentage of shares beneficially owned is less than 1% of issued and
outstanding shares of Common Stock.
(1) Mrs. Hall and Messrs. Brown, Cribbs and Ramsey are executive officers of
the Company; Mr. Gagnon was an executive officer of the Company until his
death June 19, 1998; Mr. Simpson is an executive officer and director of
the Company and beneficial owner of more than 5% of the Company's Common
Stock; and Messrs. Claypool, Nelson, Rain, Ray, Sexton, Wallace and
Yarbrough are directors of the Company.
(2) Includes shares with respect to which executive officers, directors, or
their estates have the right to acquire beneficial ownership pursuant to
the exercise of stock options exercisable at, or within 60 days after,
August 28, 1998, as follows: Brown - 9,750, Cribbs - 7,550, Gagnon -
59,300, Hall - 6,450, Nelson - 18,150, Rain - 6,600, Ramsey - 6,450,
Ray - 6,600, Sexton - 18,150, Simpson - 13,750, Wallace - 6,600,
Yarbrough - 6,600 and all Directors and Executive Officers as a Group -
193,034. Also includes shares in the accounts established under the
Company's Employee Stock Ownership Plan for persons who are salaried
employees of the Company, with respect to which each executive officer
named in the Summary Compensation Table has voting power, as follows:
Brown - 15,199, Cribbs - 20,485, Gagnon - 7,967, Hall - 11,058, Ramsey -
9,371, Simpson - 90,896, and all Executive Officers as a Group - 162,052.
Unless otherwise indicated, all other shares are owned directly and the
owner has sole voting and investment power.
(3) A Common Stock Purchase Right ("Purchase Right") is attached to each
outstanding share of the Common Stock entitling the holder to buy one share
of Common Stock for $40.91. A Purchase Right is not exercisable or
transferable apart from the Common Stock until ten days after a person
(other than certain exempt persons) acquires 15% or more of the Common
Stock or ten business days after the commencement or announcement of a
tender offer, which, if consummated, would result in ownership by a person
or group of 15% or more of the Common Stock. Exempt persons include Phil
Simpson, his wife, their descendants and their descendant's spouses, trusts
or estates for any of their benefit; and partnerships, corporations or
other entities 80%-owned by any of them.
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(4) Includes 209,510 shares owned by Gerald L. Ray & Associates, Inc. of which
Mr. Ray is the principal owner, 12,163 shares owned by Gerald L. Ray IRA
R/O, 20,900 shares owned by Gerald L. Ray IRA R/O Defined Benefit Plan, of
which Mr. Ray is trustee, and 54,667 shares in the Gerald L. Ray IRA, of
which Mr. Ray is trustee.
(5) Phil Simpson's address is P.0. Box 750, Dallas, Texas 75221.
(6) Shares beneficially owned by Mr. Simpson excludes 487,507 shares of Common
Stock held by Mr. Simpson's son and two daughters, who are not members of
Mr. Simpson's household. Mr Simpson disclaims beneficial ownership of such
shares. Shares beneficially owned by Mr. Simpson also excludes 209,806
shares owned by other relatives who are not members of Mr. Simpson's
household, as to which he disclaims beneficial ownership.
(7) Includes 7,196 shares owned by Mr. Wallace's spouse with respect to which
he shares voting and investment power.
ACTION TO BE TAKEN UNDER THE PROXY
All proxies duly signed, dated and returned will be voted as specified
therein, but unless otherwise specified, will be deemed to grant authority to
vote (i) "FOR" the election of the eight nominees for directors named in this
proxy statement, unless the giver withholds authority to vote for any one or
more or all of such persons, and (ii) in the transaction of such other business
as may properly come before the Annual Meeting or any adjournment thereof. As to
any other matter or business which may be brought before the Annual Meeting, a
vote may be cast pursuant to the accompanying proxy in accordance with the
judgment of the person or persons voting the same. Management does not know of
any such other matter or business. Should any nominee named herein for the
office of director become unable or be unwilling to accept nomination for or
election to such position, the persons acting under the proxy will vote for the
election in his stead of such other persons as management may recommend.
Management has no reason to believe that any of the nominees will be unable to
serve if elected to office.
ELECTION OF DIRECTORS
The eight persons named below are management's nominees for election as
directors of the Company to serve until the next Annual Meeting of Stockholders
and until their respective successors are elected and qualified. Each of the
nominees has served as a director of the Company since the date of his first
election or appointment to the Board of Directors of the Company.
<TABLE>
<CAPTION>
First
Principal Occupation During last 5 years and Directorships Became a
Name Age of Public Companies Director
- ------------------------ --- ---------------------------------------------------------------- --------
<S> <C> <C> <C>
C. William Claypool (a) 62 Retired since June 1997, prior thereto Corporate Vice President 1998
and General Manager-Paper Division of Sonoco Products
Company; Director of Sonoco Hong Wen, a subsidiary of
Sonoco Asia (paper product manufacturer)
Bert A. Nelson (a) 66 Personal Investments 1990
Talbot Rain (a) 78 Locke Purnell Rain Harrell (A Professional Corporation) 1967
(attorneys) (of Counsel) (b)
Gerald L. Ray (a) 65 President, Gerald L. Ray & Associates, Inc. (investment advisor) 1969
Robert F. Sexton (a) 64 President of Bakery Associates; Inc. (food industry supplier); 1990
Director of Ultrak, Inc.
Phil Simpson 63 Chairman of the Board, President and Chief Executive Officer 1961
of the Company
L. L. Wallace (a) 83 Retired since January 1980 and prior thereto Vice President 1980
of Packaging Corporation of America (paper product manufacturer)
David B. Yarbrough (a) 79 Retired since January 1987 and prior thereto President and 1973
major stockholder of Yarbrough Construction Co., Inc.
</TABLE>
4
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(a) Messrs. Ray (chairman), Nelson, and Rain are members of the Audit Committee
which held two meetings during the last fiscal year. The Audit Committee
meets with the independent accounting firm serving as auditors of the
Company to review financial reports, to discuss their procedures and
findings and to hear their recommendations with respect to financial
accounting matters.
Messrs. Yarbrough (chairman), Claypool, Sexton and Wallace are members of
the Compensation Committee, which held three meetings during the last
fiscal year. The Compensation Committee reviews the performance of officers
and employees and makes recommendations to the Board of Directors
concerning officers' salaries, bonuses for officers and employees, the
Company's Employee Stock Ownership Plan, 401(k) Plan, stock option, stock
appreciation right, restricted stock, and performance unit awards, proposed
benefit plans and other compensation related matters.
(b) The Company was represented by Locke Purnell Rain Harrell (A Professional
Corporation), from which Mr. Rain retired in 1989, with respect to various
legal matters during the fiscal year ended June 30, 1998.
The Board of Directors held eight meetings during the last fiscal year. Each
director attended at least 75% of the aggregate of (i) the total number of
meetings held by the Board and (ii) the total number of meetings held by all
committees of the Board on which he served, during the periods that he served.
The Board does not have a standing nominating committee or any standing
committee performing similar functions.
COMPENSATION OF DIRECTORS
DIRECTORS' FEES
The Company currently has a policy of paying directors who are not salaried
officers of the Company on the following basis: $2,000 per month for service on
the Board of Directors and $5,000 per year for service on each committee of the
Board on which such person served, plus expenses.
DIRECTOR STOCK OPTION PLAN
The Republic Group Incorporated Non-Employee Director Stock Option Plan was
adopted in 1989 and amended and restated in 1996 (the "Director Plan"). Each
non-employee member of the Board of Directors (Messrs. Rain, Ray, Wallace and
Yarbrough) at time of adoption, was granted an option to purchase 11,550 shares
of the Company's Common Stock at an option exercise price of $4.65 share, the
fair market value of the Company's Common Stock on the date the Director Plan
was adopted. Messrs. Nelson and Sexton were granted options to purchase 11,550
shares of the Common Stock at an option exercise price of $3.41 per share on the
date of their respective appointments to the Board. In each case, the exercise
price was the fair market value of the Company's Common Stock on such dates.
The one-time grant of options to each new director under the Director Plan do
not have a fixed term and are fully exercisable after the non-employee director
has completed three calendar years of service on the Board of Directors,
including service prior to adoption of the Director Plan. Each option will
automatically terminate 12 months after the director ceases to be a director by
reason of his death or permanent disability or six months after he ceases to be
a director for any other reason. The exercise price will be paid to the Company
in full at the time of exercise in cash or, in whole or in combination with
cash, in shares of Company Common Stock previously issued to the optionee.
The Director Plan, as amended in 1996, replaced the one-time grant provision
in the plan with an annual grant of options to purchase 2,200 shares of Common
Stock to each non-employee member of the Board of Directors at an option
exercise price equal to the fair market value of the Common Stock on the date of
such grant. The Director Plan provided for an initial grant of options to
purchase 2,200 shares of Common Stock on August 16, 1996, the effective date of
the amendment, which covered service during the year ending with the 1996 annual
meeting, and an additional grant on October 24, 1996 following the Annual
Meeting of stockholders, which covered the 1997 fiscal year. Thereafter, grants
will be made once annually to non-employee directors following the Company's
Annual Meeting. Options under the plan will become exercisable in full one year
following the date of grant, provided that the non-employee director serves as a
director throughout such one-year period.
5
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The Board of Directors believes that annual grants of long-term incentives
based on the value of the Company's Common Stock will assist the Company in
attracting and retaining qualified members of the Board of Directors. The Board
of Directors also believes that such equity-based incentives will promote the
long-term financial interests of the Company by motivating these members of the
Board to achieve long-range goals.
The Director Plan is administered by the Board of Directors as a whole and
contains customary provisions for the adjustment of shares covered by the
Director Plan and for the adjustment of option exercise prices in the event of
stock dividends and splits, mergers and other similar events.
DIRECTOR RETIREMENT COMPENSATION ARRANGEMENT
The Company has adopted an arrangement whereby non-employee directors of the
Company who have served on the Board of Directors for three or more years will
be paid a lump sum retirement payment 180 days after their service on the Board
of Directors terminates. The amount of the retirement payment will be the sum of
(i) the amount then being paid annually to non-employee directors for service
on the Board and on each committee on which the retiring director was serving at
the time of his termination, (ii) $500 for each year or part thereof between
1967 and 1985, inclusive, during which he was a director, (iii) $1,000 for each
year or part thereof between 1986 and 1993, inclusive, during which he was a
director and (iv) $1,500 for each year or part thereof beginning in 1994, during
which he was a director. The retirement payment is not payable if the director
is removed or is requested (by resolution of the Board of Directors) to resign
from the Board of Directors due to his serious neglect or misconduct in the
discharge of his duties and responsibilities as a director of the Company or his
commission of any criminal act or act of dishonesty (of which the Board of
Directors shall be the sole judge), if the director directly or indirectly
competes with the Company within one year after his service on the Board of
Directors terminates or if the director discloses non-public, confidential or
proprietary information about the Company.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation committee has responsibility for executive compensation
policies and practices. The committee approves all elements of compensation for
corporate officers and other key employees within a specified compensation
range, administers the Company's 1989 Long-Term Incentive Plan under which stock
options are granted to officers, other executives and selected key employees,
and administers the Target Bonus Plan, which provides an opportunity for
officers, other executives and selected key employees to be eligible for bonuses
based upon budgeted financial performance and stockholder value targets. The
committee regularly reports on its activities to the Board of Directors and
obtains ratification by the non-employee members of the board on all items of
compensation related to corporate officers. The committee is comprised of four
outside directors who are not officers or employees of the Company or its
subsidiaries and who are not eligible to participate in any of the plans or
programs that the committee administers.
The Company's compensation programs are designed to help attract and retain
qualified and motivated executive officers, who will provide the leadership
requited to achieve the Company's strategic goals. One of those goals is
sustaining long-term value growth for stockholders.
COMPENSATION PRACTICES
Executive officers of the Company are compensated primarily through base
salaries, annual bonuses and long-term, equity-based incentives. Compensation
derived from the last two categories is directly tied to corporate performance.
It is the Committee's philosophy that a significant percentage of total
executive compensation be provided through performance-based bonuses and long-
term incentives. It is the intention of the Committee that executive
compensation not exceed the annual deduction limitation imposed on compensation
to certain executive officers by Section 162(m) of the Internal Revenue Code.
Executive compensation by the Company historically has not approached the
$1,000,000 limitation.
Salaries for executive officers are reviewed by the Committee annually.
Increases are based on evaluations of the officers' past and projected
contributions to the Company and changes in competitive pay levels. It is the
Company's policy to target the median salary levels of comparable companies,
after taking into consideration the relative scope of responsibility and
experience of each executive officer. Typically, several sources of information
regarding prevailing salary levels in the paper and gypsum industries are
considered. Peer companies are selected on the basis of similarities in lines of
business and size. Some peer com-
6
<PAGE>
panies, because they are privately owned, are not included in the industry index
shown in the stock price performance graph that appears later in this proxy
statement.
COMPENSATION PROGRAMS
During the fiscal year ended June 30, 1998, the Board of Directors of the
Company approved a one-year extension of the Amended and Restated Target Bonus
Plan, which is subject to annual approval and extension by the Board. Under the
plan, executive officers and other key salaried employees may be eligible for
bonuses. Each individual participant's eligibility for a bonus is based upon
actual performance against a budgetary target approved by the Board. If actual
results are 100% of the budgetary target, the participant is entitled to a
standard bonus, which equals a standard bonus percentage preset for that
individual by the Board multiplied by his base salary. If actual results exceed
80% of the budgetary target, but are less than 100% of the budgetary target, the
participant is entitled to a fraction of his standard bonus. The numerator of
the fraction is the number of percentage points that the percentage of actual
performance to budgetary target exceeds 80%, and the denominator is 20. If
actual results exceed 100% of the budgetary target, the participant is entitled
to a bonus equal to his standard bonus multiplied by the percentage of actual
performance to budgetary target, up to a preset maximum formula bonus. The
Committee may recommend and the Board may approve discretionary increases to
bonuses and bonuses in excess of the maximum formula bonus amount, under the
plan.
For the fiscal year ended June 30, 1998, the budgetary target for participants
with corporate-wide responsibility was budgeted earnings per share for the
Company. The budgetary targets for other participants were budgeted divisional
or facility operating profits, depending on the scope of the participant's
responsibility. The standard bonus percentages during fiscal year 1998 ranged
from 20% to 50% for executive officers and from 10% to 20% for other key
employees. The maximum formula bonus for each participant was fixed at 130% of
his standard bonus. With respect to fiscal 1998, the committee and the Board
exercised their discretionary authority to increase the bonuses granted to
certain participants in the plan, including certain executive officers. In some
cases, bonuses were increased in excess of the maximum formula bonus amount.
Such increased bonuses were approved in certain situations where actual
performance exceeded 130% of the budgetary target or where other accomplishments
achieved by the affected participants justified such approval.
STOCK OPTIONS
Under the Company's 1989 Long-Term Incentive Plan, annual grants of stock
options are made to executive officers and other key salaried employees to
retain and motivate such persons to sustain and improve long-term stock market
performance. Stock options are granted at the prevailing market value and have
value to the holders only if the Company's stock price increases. Typically,
grants become exercisable in four equal annual increments. Although no specific
targets have been set, the Company encourages its executives to acquire, through
stock options granted over a period of several years, holdings in the Company
that are significant in relation to their base salaries. The number of options
granted to key salaried employees and to executives at a given level of
responsibility are the same, with executives at higher levels of responsibility
receiving larger grants. In fiscal 1998, the Chief Executive Officer and the
Executive Vice President each were granted options to purchase 11,000 shares,
the Vice Presidents each were granted options to purchase 6,000, the Treasurer
was granted an option to purchase 5,000 shares.
COMPENSATION FOR THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
With respect to the fiscal year ended June 30, 1998, Mr. Simpson, Chief
Executive Officer of the Company, was paid a base salary of $308,000 and a
formula bonus of $146,475, or 47.5 % of his base salary. The bonus paid to Mr.
Simpson reflects the relationship of actual earnings per share to the budgetary
target. Actual earnings per share for fiscal year 1998 ($1.51) were 98.6% of the
budgetary target approved by the Board of Directors for Mr. Simpson. Mr.
Simpson's base salary for the fiscal year included a 14% increase over the
previous fiscal year. Based on the information available to it, the Committee
also believed that Mr. Simpson's base salary was consistent with salaries being
paid to chief executive officers of comparable companies. During fiscal year
1998, Mr. Simpson was granted an option to purchase a total of 11,000 shares of
the Company's Common Stock: 10,541 Incentive Stock Option shares at $20.7625 per
share, which equals 110% of the closing market price on the date of grant, and
459 Non-Qualified Stock Option shares at $18.875, under the Company's 1989
Long-Term Incentive Plan.
COMPENSATION COMMITTEE
David B. Yarbrough, Chairman
C. William Claypool Robert F. Sexton L. L. Wallace
7
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee of the Company's Board of
Directors during the year ended June 30, 1998 (i) was an officer or employee of
the Company or any of its subsidiaries, (ii) was formerly an officer of the
Company or any of its subsidiaries or (iii) had any relationship requiring
disclosure by the Company under any paragraph of Item 404 of Securities and
Exchange Commission Regulation S-K. During the year ended June 30, 1998, there
existed no interlocking relationships involving the executive officers,
directors or Compensation Committee members of the Company and the executive
officers, directors or compensation committee members of any other entity.
SUMMARY COMPENSATION TABLE
The following table provides a summary of the compensation provided to the
named executive officers of the Company for the three fiscal years ended June
30, 1998.
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------------
Annual Compensation Awards Payouts
------------------------------------- ---------- ----------
Other
Annual Securities All Other
Name and Compen- Restricted Underlying Compen-
Principal Bonus sation Stock Options LTIP sation
Position Year Salary (1) (2) Award (3) Payouts (4)
- ------------------- ---- -------- -------- ----- ---------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phil Simpson 1998 $308,077 $146,475 $ - $ - 11,000 $ - $17,410
Chairman, 1997 $270,192 $198,000 $ - $ - 11,000 $ - $16,636
President and Chief 1996 $245,673 $175,000 $ - $ - 11,000 $ - $24,481
Executive Officer
Stephen L.Gagnon 1998 $167,404 $ 99,050 $ - $ - 11,000 $ - $19,785
Former Executive 1997 $152,115 $111,600 $ - $ - 11,000 $ - $18,106
Vice President (5) 1996 $137,404 $ 98,000 $ - $ - 11,000 $ - $21,701
Geary D. Cribbs 1998 $133,173 $ 76,850 $ - $ - 6,000 $ - $16,199
Sr. Vice President 1997 $115,192 $ 74,400 $ - $ - 5,500 $ - $17,369
Gypsum 1996 $ 94,135 $ 47,025 $ - $ - 4,400 $ - $18,284
Doyle R. Ramsey 1998 $113,308 $ 45,281 $ - $ - 6,000 $ - $14,803
Executive Vice 1997 $105,769 $ 52,272 $ - $ - 5,500 $ - $16,168
President and CFO 1996 $ 89,308 $ 41,500 $ - $ - 4,400 $ - $16,989
Susan G. Hall 1998 $103,173 $ 55,227 $ - $ - 6,000 $ - $15,320
Vice President 1997 $ 89,038 $ 59,550 $ - $ - 5,500 $ - $ 7,867
Gypsum Sales 1996 $ 85,648 $ 42,075 $ - $ - 4,400 $ - $ 7,206
Todd T. Brown 1998 $128,269 $ 20,000 $ - $ - 6,000 $ - $16,369
Vice President 1997 $118,846 $ 32,720 $ - $ - 5,500 $ - $16,746
Paperboard 1996 $113,308 $ 53,420 $ - $ - 4,400 $ - $18,973
Operations
</TABLE>
(1) Bonuses earned with respect to a fiscal year are shown for that year, even
if they were not paid until after the end of the fiscal year.
(2) In each case, perquisites and other personal benefits were less than 10% of
the total of annual salary and bonus reported.
(3) Represents stock covered by stock options granted to the named persons
pursuant to the Company's 1989 Long-Term Incentive Plan. No tandem or
freestanding stock appreciation rights were granted.
8
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(4) During 1998, the components of "All Other Compensation" were as follows:
(a) employer contributions to the Company's Employee Stock Ownership Plan,
Mr. Simpson - $6,710, Mr. Gagnon - $6,710, Mr. Cribbs - $6,710, Mr. Ramsey
- $6,710; Mrs. Hall - $6,710 and Mr. Brown - $6,710, (b) employer
contributions to the Company's 401(k) Plan, Mr. Simpson - $10,700, Mr.
Gagnon - $11,750, Mr. Cribbs - $9,489, Mr. Ramsey - $8,093, Mrs. Hall -
$8,610, and Mr. Brown - $9,659 and (c) that portion of employer payment of
premiums for term life insurance for the benefit of executive officers, Mr.
Gagnon - $1,315.
(5) Mr. Gagnon passed away on June 19, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides a summary of individual grants of stock options
under the Company's 1989 Long-Term Incentive Plan made during the year ended
June 30, 1998 to each 6f the named executive officers.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
---------------------------------------------------------------- ---------------------
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise or
Granted Employees in Base Price Expiration
Name (1) Fiscal Year ($/Sh) Date 5% (4) 10% (5)
- --------------------- --------- ------------ ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Phil Simpson 10,541(2) 9.80% $20.7625 10-23-02 $35,073 $101,572
459(3) $ 18.875 $ 2,394 $ 5,289
Stephen L. Gagnon (6) 11,000(2) 9.80% $ 18.875 10-23-02 $57,363 $126,757
Geary D. Cribbs 6,000(2) 5.35% $ 18.875 10-23-02 $31,289 $ 69,140
Doyle R. Ramsey 6,000(2) 5.35% $ 18.875 10-23-02 $31,289 $ 69,140
Susan G. Hall 6,000(2) 5.35% $ 18.875 10-23-02 $31,289 $ 69,140
Todd T. Brown 6,000(2) 5.35% $ 18.875 10-23-02 $31,289 $ 69,140
</TABLE>
(1) No tandem or freestanding stock appreciation rights were granted.
(2) Incentive stock options, which become cumulatively exercisable in equal
annual installments of 25% on the first, second, third and fourth
anniversaries of the grant date.
(3) Mr. Simpson was granted an option to purchase 11,000 shares: 10,541
Incentive Stock Option shares at $20.7625 per share, which equals 110% of
the closing market price on the date of grant, and 459 Non-Qualified stock
option shares at $18.875.
(4) Based on an assumed stock price of $26.455 per share on October 23, 2002,
with respect to Mr. Simpson, and $24.089 per share on October 23, 2002,
with respect to Messrs. Gagnon, Cribbs, Ramsey, Brown and Mrs. Hall.
October 23, 2002 is the expiration date for the options granted during
fiscal year 1998.
(5) Based on an assumed stock price of $33.438 per share on October 23, 2002,
with respect to Mr. Simpson, and $30.398 per share on October 23, 2002,
with respect to Messrs. Gagnon, Cribbs, Ramsey, Brown and Mrs. Hall.
October 23, 2002 is the expiration date for the options granted during
fiscal year 1998.
9
<PAGE>
(6) Mr. Gagnon passed away on June 19, 1998. Under the terms of the Company's
1989 Long-Term Incentive Plan, the options were cancelled on June 19, 1998
upon his death. If Mr. Gagnon's option grant were excluded from the table,
the option grant percentages with respect to Mr. Simpson would have been
10.42% and with respect for Messrs. Cribbs, Ramsey, Brown and Mrs. Hall
would have been 5.93%.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table provides a summary of exercises of stock options during
the fiscal year ended June 30, 1998 by each of the named executive officers and
the fiscal year-end value of unexercised stock options held by such persons.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
June 30, 1998 (1) at June 30, 1998
-------------------------- --------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Phil Simpson 8,250 $170,911 2,750 27,500 $ 15,876 $142,167
Stephen L. Gagnon(2) 10,000 $208,598 59,300 0 $726,667 $ 0
Geary D. Cribbs 2,200 $129,369 2,475 13,425 $ 19,038 $ 72,988
Doyle R. Ramsey 4,400 $120,171 1,375 13,425 $ 7,938 $ 72,988
Susan G. Hall 4,950 $121,529 1,375 13,425 $ 7,938 $ 72,988
Todd T. Brown 6,600 $135,420 4,675 13,425 $ 47,362 $ 72,988
</TABLE>
(1) No tandem or freestanding stock appreciation rights were outstanding at
June 30, 1998.
(2) Mr. Gagnon passed away on June 19, 1998. Under the terms of the Company's
1989 Long-Term Incentive Plan, the options unexercisable were cancelled on
June 19, 1998 upon his death, vested Incentive Stock Options are
exercisable within 12 months of his death and vested Non-Qualified Options
are exercisable within 36 months of his death by his estate.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
None of the executives named in the Summary Compensation Table has an
employment contract with the Company. The Company has established the Key
Employee Continuation Plan (the "Continuation Plan") to encourage the continued
retention and dedication of key employees. Each of the Company's executive
officers is a participant. The Continuation Plan provides for a severance
payment by the Company to a participant in the event of a change in control of
the Company followed by his termination within one year thereafter (other than
for cause, disability, death, retirement or voluntary resignation). The payment
will equal the employee's average annual cash compensation for the five years
(or portions thereof that he was employed by the Company) preceding the change
in control multiplied by 150% in the case of Mr. Simpson and Mr. Ramsey and 100%
in the case of each other executive.
The Company's 1989 Long-Term Incentive Plan provides for the vesting and
full exercisability of all stock options outstanding under the plan upon the
occurrence of a change of control.
10
<PAGE>
OTHER EXECUTIVE COMPENSATION MATTERS
During the year ended June 30, 1998, the Company made no performance unit
or other awards to the executives named in the Summary Compensation Table under
any plan or arrangement providing for compensation intended to serve as
incentive for performance to occur over a period longer than one fiscal year,
except the stock options described above, and no such other awards were
outstanding as of June 30, 1998,
The Company does not maintain a defined benefit or actuarial plan in which
its executive officers participate.
During the year ended June 30, 1998 the Company did not adjust or amend the
exercise price of stock options or stock appreciation rights previously awarded
to any of the executives named in the Summary Compensation Table.
PERFORMANCE GRAPH
The following line graph compares the five-year cumulative total
stockholder return, assuming reinvestment of dividends, on the Company's Common
Stock with the cumulative total return of (i) Standard & Poor's SmallCap 600
Stock Index and (ii) the Standard & Poor's Paper Products Index, for the period
from June 30, 1993 through June 30, 1998, assuming an investment of $100 in the
Company's Common Stock and each such index as of June 30, 1993.
INDEXED RETURNS
BASE YEARS ENDING
PERIOD
COMPANY/INDEX JUN93 JUN94 JUN95 JUN96 JUN97 JUN98
- -------------------------------------------------------------------------
REPUBLIC GROUP INC 100 121.56 136.39 198.71 315.80 335.66
S&P SMALLCAP 600 INDEX 100 101.87 122.61 154.50 188.01 224.60
PAPER & FOREST PRODUCTS-500 100 104.97 140.39 128.35 160.27 149.95
11
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANT
The Company has selected Arthur Andersen LLP to be its independent public
accountant for the fiscal year ending June 30, 1998. Representatives of Arthur
Andersen LLP are expected to be present at the Annual Meeting with the
opportunity to make a statement if they desire to do so, and such
representatives are expected to be available to respond to appropriate questions
raised at the Meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, 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
and the New York Stock Exchange. Executive Officers, Directors and greater than
ten percent stockholders are required by the SEC regulations to furnish the
Company with copies of all Section 16(a) Forms 3, 4, and 5 which they file.
Based solely on its review of the copies of such forms received by the
Company and written representations from certain reporting persons for the
fiscal year ended June 30, 1998, the Company believes that all filing
requirements applicable to its Executive Officers, Directors and greater than
ten percent beneficial owners were met.
STOCKHOLDERS' PROPOSALS
Any stockholder submitting a proposal to be acted upon at the next Annual
Meeting of Stockholders is required to make such submission to the executive
offices of the Company not less than 120 days in advance of the mailing date of
proxy material to stockholders. Based upon the mailing date of proxy material
for the 1998 Annual Meeting, any such proposal should be submitted to, and
received by the Company, prior to May 20, 1999.
SIGNATURES OF PROXIES IN CERTAIN CASES
If a stockholder is a corporation, the accompanying proxy should be signed
in its corporate name by an authorized officer, and his title should be
indicated. If stock is registered in the name of a decedent, the proxy should be
signed by an executor or an administrator. The executor or administrator should
attach to the proxy appropriate instruments showing his qualifications and
authority. Proxies signed by a person as agent, attorney, administrator,
executor, guardian or trustee should indicate his title following his signature.
By Order of the Board of Directors
Janey L. Rife
Vice President, Treasurer and Secretary
Hutchinson, Kansas
September 18, 1998
12
<PAGE>
REPUBLIC GROUP INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 22, 1998
VOTE BY INTERNET
Your Internet vote is quick, convenient and your vote is immediately submitted.
Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Visit our Internet voting site at http://www.umb.com/proxy and follow the
instructions on the screen.
Your Internet vote authorizes the named proxies to vote your shares to the same
extent as if you marked, signed, dated and returned the proxy card. Please note
that all votes cast by Internet must be submitted prior to 5:00 p.m. Central
Time, October 21,1998.
If you vote by Internet, please do not return your proxy by mail.
THANK YOU FOR YOUR VOTE.
Cut or tear along perforated edge
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, the proxy will be
voted FOR all nominees listed in Proposal 1 and FOR Proposal 2.
DATED ________________________________, 1998
PLEASE SIGN HERE ___________________________
____________________________________________
____________________________________________
Please sign exactly as your name appears. If
shares are held by joint tenants, both must
sign. If signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by an
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
<PAGE>
REPUBLIC GROUP INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS
October 22, 1998
VOTE BY INTERNET
Your Internet vote is quick, convenient and your vote is immediately submitted.
Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Visit our Internet voting site at http://www.umb.com/proxy and follow the
instructions on the screen.
Your Internet vote authorizes the named proxies to vote your shares to the same
extent as if you marked, signed, dated and returned the proxy card. Please note
that all votes cast by Internet must be submitted prior to 5:00 p.m. Central
Time, October 21,1998.
If you vote by Internet, please do not return your proxy by mail.
THANK YOU FOR YOUR VOTE.
Cut or tear along perforated edge
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Republic Group Incorporated to be held on October 22,
1998 and the Proxy Statement in connection therewith, and (2) constitutes and
appoints Talbot Rain, Phil Simpson, Gerald L. Ray and each of them (acting by
majority, or if only one be present, then by that one alone), his attorneys and
proxies, with full power of substitution and revocation to each, for and in the
name, place and stead of the undersigned, to vote, and act with respect to, all
of the shares of Common Stock, par value $1.00 per share, of Republic Group
Incorporated standing in the name of the undersigned or with respect to which
the undersigned is entitled to vote and act, at said meeting and at any
adjournment(s) thereof, and especially to vote as designated below.
1. ELECTION OF DIRECTORS FOR all nominees listed WITHHOLD AUTHORITY to
below (except as marked vote for all nominees
to the contrary below). [ ] below. [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
C.William Claypool, Bert A. Nelson, Talbot Rain, Gerald L. Ray,
Robert F. Sexton, Phil Simpson, L.L Wallace, David B. Yarbrough
2. In their discretion on any other matters as may properly come before the
meeting or any adjournment(s) thereof.
