<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 14a-11(c) or Rule 14a-12
Outlook Group Corp.
- --------------------------------------------------------------------------------
(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)(1) 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):
-----------------------------------------------------------------------
(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.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
ON OCTOBER 15, 1998
To the Shareholders of Outlook Group Corp.:
The annual meeting of shareholders of Outlook Group Corp. (the "Company")
will be held at the Valley Inn, 123 East Wisconsin Avenue, Neenah, Wisconsin on
Thursday, October 15, 1998 at 2:00 p.m. CDT, for the following purposes:
(1) To elect three directors for two-year terms expiring in the year
2000 and to elect two directors for three-year terms expiring in the
year 2001; and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on August 21, 1998 are
entitled to vote at this meeting or any adjournment of the meeting.
By Order of the Board of Directors
Annette S. Zoromski, Secretary
September 11, 1998
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, PLEASE MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING, WHETHER YOUR
HOLDINGS ARE LARGE OR SMALL. IF YOU DO ATTEND THE MEETING, OR FOR ANY OTHER
REASON DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS
VOTED.
<PAGE> 3
OUTLOOK GROUP CORP.
1180 AMERICAN DRIVE
NEENAH, WISCONSIN 54956
TELEPHONE (920) 722-2333
* * * * * * * * * * * * * *
GENERAL
The enclosed proxy is solicited by the Board of Directors of Outlook Group
Corp. (the "Company") for use at its annual meeting of shareholders on October
15, 1998. All properly executed proxies will be voted at the meeting in
accordance with their terms. A proxy may be revoked at any time before it is
voted, either by written notice filed with the Secretary of the Company or the
acting secretary of the meeting or by oral notice to the presiding officer. The
presence at the meeting of a shareholder who has filed a proxy shall not of
itself constitute a revocation.
Each shareholder of record at the close of business on August 21, 1998
will be entitled to one vote for each share registered in the shareholder's
name. At that date there were 4,667,132 outstanding shares of the Company's
Common Stock, $.01 par value (the "Common Stock"), the only class of stock of
which shares are outstanding. A majority of the votes entitled to be cast on a
matter, represented in person or by proxy, constitutes a quorum for action on
that matter. Abstentions and shares which are the subject of broker non-votes
will be counted for the purpose of determining whether a quorum exists at the
meeting. Shares represented at a meeting for any purpose are counted in the
quorum for all matters to be considered at the meeting. The voted proxies will
be tabulated by the persons appointed as inspectors of election.
Directors are elected by a plurality of the votes cast by the holders of
the Company's Common Stock entitled to vote in the election at a meeting at
which a quorum is present. "Plurality" means that the individuals who receive
the highest number of votes are elected as directors in a particular class, up
to the maximum number of directors in that class to be chosen at the meeting.
Any votes attempted to be cast "against" a candidate are not given legal effect
and are not counted as votes cast in an election of directors. Therefore, any
shares which are not voted (whether by withheld authority, broker non-vote or
otherwise) have no effect in the election of directors except to the extent that
the failure to vote for any individual results in another individual receiving a
larger number of votes.
The expense of printing and mailing proxy material, including forwarding
expense to beneficial owners of stock held in the name of another, will be borne
by the Company. No solicitation other than by mail is contemplated, except that
officers or employees of the Company may solicit the return of proxies from
certain shareholders by telephone.
If you are a participant in the Employee Stock Fund of the Company's
401(k) Savings Plan (the "Savings Plan"), the shares of Company Common Stock
held in your account will be voted as designated on the blue proxy card, which
will be provided separately, relating to shares held through the Savings Plan.
Savings Plan shares not voted by employees will be voted as directed by the
persons administering the Savings Plan, as provided in the Savings Plan.
This proxy material is being mailed to shareholders commencing on or about
September 14, 1998. The Annual Report to Shareholders of the Company covering
the fiscal year ended May 31, 1998, including financial statements, accompanies
this proxy statement.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Stock of the Company, as of August 21, 1998, by each
director, nominee for director and named executive officer, by all directors and
executive officers of the Company as a group, and by each person known to the
Company to beneficially own more than 5% of the Company's Common Stock. Except
as otherwise indicated in the footnotes to the table, such persons have sole
voting and investment power as to the shares reported as beneficially owned.
<TABLE>
<CAPTION>
NAME AND NATURE NUMBER OF PERCENT
OF BENEFICIAL OWNERSHIP (1) SHARES OF CLASS
--------------------------- ------ --------
<S> <C> <C>
Joseph J. Baksha....................... 68,500 1.5%
Harold J. Bergman...................... 4,000 *
Jeffry H. Collier(2)(3)................ 26,527 *
James L. Dillon........................ 62,499 1.3%
Richard C. Fischer..................... 12,000 *
Pat Richter............................ 3,150 *
Charles E. Thompson.................... 41,668 *
A. John Wiley, Jr.(2).................. 83,188 1.8%
All directors and executive officers
as a group (9 persons)(2)(3).......... 302,365 6.4%
David L. Erdmann(4).................... 326,049 7.0%
John F. Hofmann........................ 10,000 *
Dimensional Fund Advisors Inc.(5) 246,400 5.3%
Heartland Advisors, Inc.(6)............ 962,300 20.6%
The TCW Group, Inc. and Robert Day(7) 291,900 6.3%
</TABLE>
- -------------------
*Less than 1%.
(1) Includes the following shares issuable under stock options: Mr. Baksha -
30,000; Mr. Collier - 6,000; Messrs. Bergman, Dillon, Fischer, Richter,
Thompson and Wiley - 3,000 each; all directors and executive officers as a
group--54,000; Mr. Hofmann - 10,000.
(2) Voting and/or dispositive power is shared with respect to the indicated
number of shares: Mr. Collier--3,720 and Mr. Wiley--1,165; all directors
and executive officers as a group--4,885. See also footnote (3).
(3) As of August 21, 1998, 72,480 shares of Common Stock were held in the
Savings Plan. Employees have the right to designate the vote of shares of
Common Stock allocated to their accounts. Mr. Collier and two other
Company employees are trustees of the Savings Plan and share voting power
as to the shares not voted by participants. Savings Plan shares are not
included in the table, except those allocated to named participants'
accounts as of June 30, 1998 (the date of the last allocation) and 833
shares not yet allocated which are included with those beneficially owned
by all directors and executive officers as a group.
(4) According to information provided to the Company by Mr. Erdmann, he shares
voting and dispositive power as to 25,977 shares, and has sole powers as
to the remaining shares. The business address of Mr. Erdmann is c/o Lake
Country Foods, Inc., 132 South Concord Road, Oconomowoc, Wisconsin 53066.
(5) According to a report on Form 13G filed on February 10, 1998, Dimensional
Fund Advisors Inc. ("Dimensional") held sole voting and dispositive power
as to 161,800 shares of Common Stock, and sole dispositive power as to
247,400 shares of Common Stock at December 31, 1997. As of June 30, 1998,
Dimensional informed the Company that it beneficially held 246,400 shares
of Common Stock. Dimensional is an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"). The business
address of Dimensional is 1299 Ocean Avenue, Santa Monica, California
90401.
(6) According to a report on Schedule 13G/A dated August 6, 1998, Heartland
Advisors, Inc. ("Heartland") had sole voting and dispositive power as to
962,300 shares of Common Stock as of July 31, 1998. Heartland is an
investment adviser registered under the Advisers Act. The business address
of Heartland is 790 North Milwaukee Street, Milwaukee, Wisconsin 53202.
-2-
<PAGE> 5
(7) According to a report on Schedule 13G/A dated February 12, 1998, The TCW
Group, Inc. ("TCW"), a holding company, and Robert Day, an individual who
may be deemed to control TCW, had sole voting and dispositive power as to
291,900 shares of Common Stock as of December 31, 1997. The business
address of TCW is 865 South Figuroa Street, Los Angeles, California 90017;
the business address of Mr. Day is 200 Park Avenue, Suite 2200, New York,
New York 10166.
The above beneficial ownership information is based on information
furnished by the specified persons and is determined in accordance with Rule
13d-3, as required for purposes of this Proxy Statement. It is not necessarily
to be construed as an admission of beneficial ownership for other purposes.
ELECTION OF DIRECTORS
The Company's Articles and Bylaws provide for a Board of between seven and
eleven directors, and for classification of the Board of Directors into three
separate classes. The Board of Directors has set the number of directors at
seven. At each annual meeting of shareholders, the number of directors equal to
the number constituting the class whose term expires at such meeting is elected
to hold office until the third succeeding annual meeting or until their
successors have been elected.
The Company did not hold an annual meeting of shareholders in 1997
because, at the usual time for such meeting, the Company was in the process of
negotiating a potential sale of the Company and the meeting was deferred with
the expectation that the matters would be considered together. Discussions
relating to the sale of the Company later terminated. As a result, the
shareholders did not vote upon the class of directors whose terms were to expire
in 1997. The directors affected, Messrs. Collier, Richter and Wiley continue to
serve as directors through the present. Thus, one class of directors (three of
the seven directors) is nominated for election at the 1998 annual meeting to
serve for terms expiring at the 2000 annual meeting. The class of directors
whose terms expire at the 1998 annual meeting (two of the seven directors) are
also nominated for election at the 1998 annual meeting to serve for terms
expiring at the 2001 annual meeting. The Company is nominating these two classes
of directors for election to ensure that the Company maintains three separate
classes of directors. The remaining directors were elected by the shareholders
at the 1996 annual meeting for terms expiring in 1999, as shown in the following
table.
Charles E. Thompson, a director of the Company since its inception, has
chosen not to stand for reelection to the Board of Directors. The Company thanks
Mr. Thompson for his many years of service to the Company.
Proxies received by management will be voted FOR the election of the five
nominees named unless otherwise specified. If any such nominee is unable to
serve (which is not anticipated), proxies may be voted for another person
designated by the Board of Directors.
Principal Occupation and Director
Name and Age Business Experience Since
------------ --------------------- -----
NOMINEES (FOR TERMS EXPIRING IN 2000)
Jeffry H. Collier, 45 (1) Vice President and General Manager 1993
of the Graphics division of the
Company since 1996 and Executive Vice
President of the Company since 1994;
previously, Vice President
Pat Richter, 57(2)(3)(4) Director of Athletics, University of 1995
Wisconsin Madison
A. John Wiley, Jr., 56 (1) President of Elipticon Wood Products, 1978
Inc. (manufacturer) since 1995;
previously, salesperson for, and officer
of, the Company
-3-
<PAGE> 6
NOMINEES (FOR TERMS EXPIRING IN 2001)
James L. Dillon, 54(2)(3) Accountant practicing with the firm 1978
Dillion, Endries, Otto & Calmes LLC since
1995; previously with the firm DiRenzo,
Simonis & Miller, Certified Public
Accountants
Joseph J. Baksha, 46 President and Chief Operating Officer of --
the Company since 1996; Vice President and
President of Outlook Packaging in 1996;
previously Executive Vice President and COO
of Washburn International (manufacturer and
distributor) from 1994 to 1996; and Executive
Vice President and COO of Alusuisse Flexible
Packaging (flexible packaging) prior thereto.
CONTINUING DIRECTORS (TERMS EXPIRE IN 1999)
Harold J. Bergman,
62 (2)(3) President and Chief Executive Officer of 1994
Riverside Paper Corp. (specialty paper
manufacturer and converter)
Richard C. Fischer, 59(3) Chairman and interim Chief Executive 1995
Officer of the Company since December
1997; also an investment banker with the
firm Fischer & Associates LLC since 1995
and previously an with Robert W. Baird &
Co. Incorporated
- --------------------
(1) Member of the Nominating Committee, of which Mr. Thompson is chairman.
This committee, which held no meetings in fiscal 1998, reviews potential
candidates for, and makes recommendations to the Board of Directors
regarding, additional members of the Board of Directors. Persons wishing
to suggest names for consideration for nomination to the Board may forward
them to the Nominating Committee, in care of the Company.
(2) Member of the Compensation Committee, of which Mr. Richter is chairman.
This Committee, which held one meeting in fiscal 1998, reviews and makes
recommendations to the Board of Directors regarding overall compensation
policy and salaries, bonuses and benefits to officers and other key
employees and awards stock options under the Company's stock option plan.
(3) Member of the Audit Committee of which Mr. Dillon is chairman. This
Committee, which held one meeting during fiscal 1998, reviews the
functions and findings of the Company's independent public accountants and
makes recommendations to the Board of Directors with respect thereto.
(4) Mr. Richter is also a director of Anchor BanCorp Wisconsin Inc., a
publicly held savings bank holding company, and Northland Cranberries,
Inc., a publicly held grower and marketer of cranberries and related
products.
The Board of Directors held 14 meetings during fiscal 1998, including
three meetings by telephone. During fiscal 1998, each director of the Company
attended at least 75% of the total number of meetings of the Board and of all
committees of the Board on which such director served (during the period that he
served).
Directors' Fees. Directors who are not employees of the Company receive a
fee of $3,600 per year, $300 for each meeting of the Board of Directors attended
and $100 ($150 in the case of the committee chairman) for each Board committee
meeting attended. (Mr. Collier is currently an employee of the Company.)
-4-
<PAGE> 7
Fischer Arrangements. Mr. Fischer, although designated the interim Chief
Executive Officer of the Company, is not an employee of the Company. Rather, he
is compensated for his duties in that position as an independent contractor. The
Company's arrangements with Mr. Fischer provide that he will receive $125 per
hour for services as interim Chief Executive Officer, up to a maximum of 100
hours per month. Mr. Fischer is not entitled to receive employee benefits in
this position. This arrangement supersedes his prior arrangement as chairman of
the Special Committee of the Board, for which he was paid a retainer of $10,000
in fiscal 1997 and compensated $200 per hour for his services in assisting the
Company and evaluating strategic alternatives. Mr. Fischer received $22,000
during fiscal 1998 with respect to his services as chair of the Special
Committee.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
--------------------------
The following table sets forth information concerning the total
compensation in fiscal year 1998 and in the two prior fiscal years of (i) each
person who served as Chief Executive Officer and (ii) the only other executive
officers who received total annual salary and bonus in excess of $100,000 during
the last fiscal year for services in all capacities to the Company and its
subsidiaries.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
---------------------- ------------
AWARDS
------
NAME AND PRINCIPAL FISCAL OPTIONS/SARS ALL OTHER
POSITION YEAR SALARY($) BONUS($)(2) #(3) COMPENSATION($)(4)
- ------------------ ---- --------- ----------- ------ ------------------
<S> <C> <C> <C> <C> <C>
Richard C. Fischer, 1998 $ 43,375 -0- -0- -0-
Chairman and
interim CEO (5)
David L. Erdmann, 1998 $137,500 -0- -0- -0-
former Chairman 1997 200,670 -0- -0- $ 3,500
and CEO(6) 1996 244,875 -0- 10,000 4,050
Joseph J. Baksha, 1998 $166,346 $89,832 -0- $ 5,797
President and
COO(7) 1997 162,787 48,831 30,000 -0-
Jeffry H. Collier, 1998 $115,000 $5,687 -0- $ 2,998
Executive Vice
President 1997 111,165 -0- -0- 2,860
1996 115,938 -0- 6,000 2,970
John F. Hofmann, 1998 $111,058 $31,000 -0- $ 3,300
Executive Vice
President - 1997 90,865 -0- 10,000 -0-
Sales and Marketing
</TABLE>
- ------------------
(1) While the named individuals received perquisites or other personal
benefits in the years shown, in accordance with SEC regulations, the value
of these benefits are not shown since they did not exceed, in the
aggregate, the lesser of $50,000 or 10% of the individual's salary and
bonus in any year.
(2) Annual bonus amounts, if any, are earned and accrued during the fiscal
years indicated but paid in the following fiscal year.
(3) Represents number of shares for which options were granted under the
Company's 1990 Stock Option Plan (the "Option Plan"). No SARs have been
granted.
(4) Reflects the Company's contributions to the executive officer's account in
the Savings Plan.
(5) Mr. Fischer commenced his duties as Chairman and interim Chief Executive
Officer in December 1997. Represents only compensation since becoming
interim CEO. See "Election of Directors - Fischer Arrangements" for
further information on Mr. Fischer's compensation arrangements.
(6) Mr. Erdmann resigned as Chairman and CEO in December 1997. The 1997
amount excludes severance pay after that date. See "Certain
Transactions--Erdmann Employment and Registration Agreements."
(7) Mr. Baksha joined the Company in June 1996.
(8) Mr. Hofmann became a Company officer during fiscal 1997, and resigned in
August 1998.
-5-
<PAGE> 8
OPTIONS OUTSTANDING AT YEAR END
The following table sets forth information with respect to the executive
officers named in the Summary Compensation Table concerning the number and value
of options outstanding at May 31, 1998.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED IN THE
UNEXERCISED OPTIONS MONEY OPTIONS
SHARES AT FY END (1) AT FY END(1)(2)
ACQUIRED ON VALUE ------------ --------------
NAME EXERCISE REALIZED EXERCISABLE(#)(3) EXERCISABLE($)(3)
---- ---------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Richard C. Fischer -0- -0- 3,000 $3,600
David L. Erdmann 10,000 $15,010 -- --
Joseph J. Baksha -0- -0- 30,000 $11,250
Jeffry H. Collier -0- -0- 6,000 $5,000
John F. Hofmann -0- -0- 10,000 $15,000
</TABLE>
- ------------------
(1) No SARs have been granted.
(2) Based upon the $5.875 closing price of Company Common Stock on May 31, 1998.
(3) All such outstanding options were exercisable at May 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
No options or SARs were granted in fiscal 1998.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
On June 1, 1997, the Company entered into an employment agreement with
Joseph J. Baksha, President and Chief Operating Officer of the Company, for a
term of two years, renewable June 1, 1999. Under the terms of the employment
agreement, Mr. Baksha earns an annual salary of $175,000 and an incentive equal
to a percentage of operating income capped at 100% of Mr. Baksha's annual
salary. Prior to a change in control, Mr. Baksha's employment agreement may be
terminated by either party, at any time, with or without cause or reason, upon
30 days written notice. The employment agreement also imposes certain
non-competition and confidentiality obligations on Mr. Baksha. In the event the
employment agreement is terminated by the Company other than for cause (as
defined in the agreement), Mr. Baksha would be entitled to receive his annual
salary for the year following his termination plus any bonus earned through the
last day of active employment. If there is a change of control of the Company
and Mr. Baksha is terminated without cause, Mr. Baksha's employment status
changes (as specified in the agreement) or Mr. Baksha's employment agreement is
not renewed (as specified in the agreement), Mr. Baksha shall be entitled to
receive his annual salary for the two years following the happening of an event
as set forth above plus any bonus earned through the last day of active
employment. Mr. Baksha is subject to a covenant not to compete and
confidentiality provisions for the duration of this employment and for six
months following termination of his employment with the Company.
The Company has committed to grant Mr. Baksha an option to purchase an
additional 10,000 shares of Common Stock under the provisions of the Option
Plan. The price of the option will be determined in the future by the
Compensation Committee. In the event of a change in control of the Company so
that the stock option cannot be granted, Mr. Baksha will receive the value of
the stock option based on a price of $5.00 per share and the price received by
the Company's shareholders in the change of control.
The Company also agreed to make a loan available to Mr. Baksha up to
$100,000 to purchase Common Stock at such time as Mr. Baksha, as an officer of
the Company, would be able to purchase Common Stock on the NASDAQ Stock Market.
The term of the loan would be five years at the same rate of interest charged
the Company on a line-of-credit at the time of such loan. Such a loan was made
in July 1998, at an interest rate of 8% per annum.
-6-
<PAGE> 9
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The general compensation policies of the Company and its subsidiaries are
set by the Compensation Committee of the Board of Directors. During fiscal 1997
and 1998, this Committee was composed of three independent non-employee
directors. Compensation decisions with respect to the Company's President/Chief
Executive Officer are made primarily by the Compensation Committee; compensation
decisions as to all other officers of the Company, including its subsidiaries,
are recommended by the Chief Executive Officer and then approved by the
Committee. All compensation programs, such as the Savings Plan and the Option
Plan, are either originated or approved by the Committee.
It is the policy of the Company to fairly compensate individuals for their
contributions to the Company's business, being mindful of the ability of the
Company to fund such compensation plans or programs and the need to provide fair
value to the Company's shareholders. To be effective in attracting and retaining
competent individuals, compensation packages must balance short-term and
long-term considerations, as well as provide incentives to individuals based
upon the performance of the Company and be competitive with other companies. In
recent years, the objective of fairly compensating executive officers has been
evaluated in the context of the diversification of the Company and varying
financial results. In view of these changes, the Compensation Committee has
tended to review historical performance, rather than to set compensation on a
prospective basis.
The Compensation Committee reviews numerous factors in determining the
compensation of the Chief Executive Officer. In particular, the Committee
evaluates the growth and earnings performance of the Company, the added
complexity of the Company itself resulting from diversification and addition of
new services, and other more subjective factors relating to the Chief Executive
Officer's performance deemed relevant by the Committee. In addition, the Chief
Executive Officer's financial package was structured so that, as described
below, bonuses are substantially dependent upon Company performance. Additional
incentive in the form of stock options is available.
Mr. Erdmann's compensation as former CEO was determined by the
Compensation Committee, and paid in accordance with an employment agreement
dated June 1, 1997. Under that agreement, Mr. Erdmann was entitled to a base
salary of $250,000, and a bonus component. The agreement also provided for
compensation in the event of a termination after an acquisition of the Company.
See "Certain Transactions - Erdmann Employment and Resignation Agreements."
Upon Mr. Fischer's assumption of the position of interim Chief Executive
Officer, the Committee, as ratified by the Board of Directors, determined that
compensation of Mr. Fischer as an independent contractor would be appropriate to
reflect his interim status. It was determined that compensation based upon
number of hours actually worked would be appropriate to reflect the nature of
the role being played by Mr. Fischer. Mr. Fischer's hourly rate was determined
by reference to Mr. Erdmann's salary prior to his resignation. Mr. Fischer is
not entitled to receive bonus payments.
The Company has also established the Option Plan as an additional
incentive to its officers and key employees, including the Chief Executive
Officer. The Committee believes that such a plan provides participants with an
incentive, extending beyond the current fiscal year, to increase the overall
value of the Company, by providing them with a greater stake in the increasing
value of the Company's Common Stock on a longer-term basis. The Option Plan is
designed to complement the incentive provided by the annual cash bonus. The
Committee granted no options to executive officers in 1998 because of
restrictions resulting from the Company's negotiations as to a possible
acquisition of the Company.
The factors considered to determine compensation of the other executive
officers in 1998 were essentially the same as those considered with respect to
the Chief Executive Officer. Bonuses for other executive officers are dependent
upon the level of the Company's pre-tax earnings; the management incentive plan
for those other executive officers (the "Management Plan") provides for the
payment of annual incentives to key Company employees, including all executive
officers other than the Chief Executive Officer if the Company's unconsolidated
pre-tax earnings (after any funding for general employee incentive bonus plans
is subtracted) exceeds 5.5% of the Company's unconsolidated net sales. Targets
were not met in fiscal 1998. Individual awards to participants under the
Management Plan would be recommended by the Chief Executive Officer based upon
individual and team contributions, accomplishment of any pre-established goals
and such other factors as the Chief Executive Officer may consider appropriate.
The Committee believes that the Management Plan establishes objective criteria
for determining whether management bonuses are
-7-
<PAGE> 10
appropriate yet provides flexibility in allowing the Chief Executive Officer to
recommend particular designations of awards based upon the factors set forth in
the Management Plan.
The Committee believes it is highly unlikely that the compensation of any
executive officer will exceed $1 million in any fiscal year, and therefore has
not taken any action with respect to the provisions of Section 162 of the
Internal Revenue Code which limit the deductibility of compensation to certain
executives of over $1 million in any fiscal year. However, the Committee
believes that any compensation income pursuant to the Option Plan would not be
subject to that limitation under applicable "grandfathering" provisions.
Members of the Compensation Committee:
Pat Richter, Chairman James L. Dillon
Harold J. Bergman
PERFORMANCE GRAPH
The following graph compares the cumulative total return on Company Common
Stock with The Nasdaq Stock Market Index for U.S. Companies and an index of
"peer" commercial printing companies created by the Company. The "peer" index
reflects the performance, weighted by period beginning market capitalization, of
the common stocks of the following companies: Paxar Corporation; Sealright
Company, Inc.; Shorewood Packaging Corporation; and Uniflex, Inc. These
companies (and other companies which subsequently ceased being publicly traded
and have therefore been dropped from the index) were originally chosen because
they were identified in the 1993 Keeley Report, a third party report of
corporate development activities and strategies in the printing and packaging
industry, as publicly traded "commercial" printing companies and whose shares
currently trade on NASDAQ or a stock exchange. The Company chose this industry
group because it includes companies in the Company's most significant service
lines.
The values on the graph show the relative performance of an investment of
$100 made on May 31, 1993, in Company Common Stock and each of the indices. In
the case of the NASDAQ and "peer" indices, the values reflect reinvestment of
dividends.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Outlook NASDAQ
(Fiscal Year Covered) Group US Stocks Peer Group
<S> <C> <C> <C>
1993 100 100 100
1994 96 105 102
1995 73 125 100
1996 45 182 111
1997 37 205 137
1998 48 261 129
</TABLE>
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<PAGE> 11
CERTAIN TRANSACTIONS
It is the policy of the Company that all material transactions between the
Company, its officers, directors or principal shareholders, or affiliates of any
of them, shall be on terms no less favorable to the Company than those which
could have been obtained if the transaction had been with unaffiliated third
parties on an arm's length basis, and such transactions will be approved by a
majority of the members of the Audit Committee of the Board of Directors, or a
majority of the directors who are independent and not financially interested in
the transaction.
Outlook Foods
On May 5, 1998, the Company sold substantially all of the assets of its
Outlook Foods, Inc. subsidiary ("Foods") to Lake Country Foods, Inc. and Lake
Country Properties, LLC (together, the "Buyer"), entities otherwise unaffiliated
with the Company but of which David L. Erdmann, the former chairman of the board
and chief executive officer of the Company and a greater-than-5% shareholder of
the Company, is a co-owner. The approximate total sales price was $8.9 million,
of which $6.1 million was paid in cash at closing, $1.5 million is payable over
four years after closing, and $1.3 million was paid by assumption of certain
liabilities. All amounts are approximate and are subject to post-closing
adjustments based upon the actual amount of certain current assets and the
assumed liabilities at the effective time of closing. The acquisition agreement
also provides for a possible $300,000 (which may be increased to $350,000 under
certain circumstances) credit against amounts due from the Buyer to Foods for
qualifying capital enhancements to be made to the Oconomowoc, Wisconsin facility
which was conveyed in the transaction, and certain other possible adjustments.
The acquisition agreement also includes various other customary terms and
conditions. The transaction was effective as of May 1, 1998.
The Company's intention to sell the food processing business was
previously announced by the Company, and the Foods operations had been accounted
for as a discontinued operation since 1996. The Company had previously announced
the execution of a letter of intent with another party relating to the sale of
the Foods operations. In the course of discussions and negotiations with that
party after signing the letter of intent, the Company became aware of
opportunities which it believed could result in a more beneficial transaction.
With the other party's permission, the Company began to explore those options,
which ultimately led to the transaction with the Buyer, as described above.
The terms of the transactions were determined by arm's length negotiations
between the Company and the Buyer, which did not begin until after Mr. Erdmann
ceased serving as a director and executive officer of the Company. The Company's
lenders provided waivers under the Company's existing credit agreements to
permit the transaction.
The transaction was unanimously approved by the Company's Board of Directors.
Erdmann Employment and Resignation Agreements
Mr. Erdmann and the Company entered into a new employment agreement for a
term of three years on June 1, 1997 which replaced a previous employment
agreement. Under his new agreement, Mr. Erdmann earned a salary of $250,000 per
year, which was to be reviewed annually by the Compensation Committee. Mr.
Erdmann was also to be paid an incentive payment immediately following audit of
the Company's 1998 fiscal year annual financial and accounting reports provided
the results showed at least a 5% profit before taxes. The amount, if any, of the
incentive payment would have been discretionary and determined by the
Compensation Committee. Prior to a change in control, Mr. Erdmann's employment
agreement was terminable by either party, at any time, with or without cause or
reason, upon 30 days written notice. The employment agreement also imposed
certain non-competition and confidentiality obligations on Mr. Erdmann. In the
event the employment agreement was terminated by the Company other than for
cause (as defined in the agreement), Mr. Erdmann would be entitled to receive
his annual salary for the year following his termination plus any bonus earned
through the last day of active employment. If there was a change of control of
the Company and Mr. Erdmann was terminated without cause (as defined in the
agreement), Mr. Erdmann was entitled to receive his annual salary for the two
years following his termination plus any bonus earned through the last day of
active employment. Mr. Erdmann was subject to a covenant not to compete and
confidentiality provisions for the duration of his employment and for one year
following termination of his employment with the Company.
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<PAGE> 12
In connection with his resignation as an officer and director of the
Company in December 1997, Mr. Erdmann and the Company entered into a Resignation
and Release Agreement (the "Resignation Agreement"), which terminated and
superseded the employment agreement. Under the Resignation Agreement, Mr.
Erdmann will receive for one year severance payments equal to his salary,
together with insurance benefits. Mr. Erdmann was paid $120,795 under the
Resignation Agreement, in severance payments and insurance benefits, during
fiscal 1998. In the event of a change in control of the Company within that one
year period, the benefits would be extended for an additional one year. Mr.
Erdmann released any claim for other benefits. Mr. Erdmann was permitted to
pursue the acquisition of the Foods operations (as discussed above) and, among
other things, remains subject to various noncompetition provisions.
Willow Creek Press
In 1995, the Company sold certain assets of its Outlook Publishing
division to Willow Creek Press, LLC ("Willow Creek"), of which Charles E.
Thompson is a 50% owner, for an aggregate price of $1.1 million, paid $100,000
at closing and $1.0 million in periodic payments, with interest at 1/2% over the
prime rate, from October 1, 1996 through July 1, 1999. The arrangements were
negotiated between Willow Creek and the Company, with Mr. Thompson not actively
participating on behalf of either party. The Outlook Publishing transaction
resulted from the Company's determination that publishing did not fit within its
long term strategy.
In 1996, to facilitate Willow Creek obtaining a new third party line of
credit, the $1.0 million payment obligation was replaced by a new promissory
note, also in the principal amount of $1.0 million, which provided for monthly
interest at 1% over the prime rate, with quarterly payments (in varying amounts)
due from February 28, 1997 through May 31, 2000. In November 1996, the existing
promissory note was amended so that the interest rate on the promissory note was
changed to 1% over the prime rate at M&I Bank Fox Valley on the outstanding
balance of principal and interest during the period from May 30, 1996, until
October 31, 1996, and interest of 1.5% over such prime rate on the outstanding
balance of principal and interest during the period beginning November 1, 1996
until May 30, 2000. Interest payments continued to be due monthly but the
amortization schedule was revised. The largest amount of principal due during
fiscal 1998 was $875,000.
In May 1998, the Company and Willow Creek agreed to a pre-payment of the
remaining principal amount of the note ($805,000) in exchange for a $75,000
reduction in principal. The note was repaid in July 1998. The various
transactions were approved by the Company's Board of Directors, with Mr.
Thompson abstaining.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than 10% shareholders (collectively, "insiders") are required by SEC regulation
to furnish the Company with copies of all Section 16(a) forms they file.
All publicly held companies are required to disclose the names of any
persons who fail to make any such filing on a timely basis and the number of
delinquent filings and transactions, based solely on a review of the copies of
the Section 16(a) forms furnished to the Company, or written representations
that no such forms were required. On that basis, the Company believes that
during fiscal 1998 the Company's insiders have complied with all Section 16(a)
filing requirements applicable to them.
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<PAGE> 13
AUDITORS
During fiscal 1998, the Board of Directors, upon the recommendation of the
Audit Committee, appointed the firm of PricewaterhouseCoopers LLP (formerly
Coopers & Lybrand LLP) as independent public accountants to audit the books and
accounts of the Company for fiscal 1998. PricewaterhouseCoopers LLP has acted as
the Company's independent public accountants since fiscal 1993, and the Board of
Directors expects to appoint that firm to audit the books and accounts of the
Company for fiscal 1999. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the annual meeting to respond to appropriate questions
and to make a statement if they so desire.
SHAREHOLDER PROPOSALS
Shareholder proposals must be received by the Company no later than May
15, 1999 in order to be considered for inclusion in next year's annual meeting
proxy material.
Under a recent Securities and Exchange Commission rule relating to the
discretionary voting of proxies at shareholder meetings, if a proponent of a
matter for shareholder consideration (other than a shareholder proposal) notify
the Company at least 45 days prior to the month and day of mailing the prior
year's proxy statement, then management proxies are allowed to use their
discretionary voting authority if a proposal is raised at the annual meeting,
without any discussion of the matter in the proxy statement. Thus, such matters
must be received by the Company by July 31, 1999 in the case of the 1999 annual
meeting.
OTHER MATTERS
Although the Board of Directors is not aware of any other matters which
may come before the meeting, if any such matter should be presented, the persons
named in the accompanying proxy intend to vote such proxy in accordance with
their best judgment.
By Order of the Board of Directors
Annette S. Zoromski, Secretary
September 11, 1998
A COPY (WITHOUT EXHIBITS) OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED MAY 31, 1998,
WILL BE PROVIDED WITHOUT CHARGE TO EACH RECORD OR BENEFICIAL OWNER OF THE
COMPANY'S COMMON STOCK, AS OF THE RECORD DATE FOR THE ANNUAL MEETING, UPON THE
WRITTEN REQUEST OF SUCH PERSON DIRECTED TO: CHIEF FINANCIAL OFFICER, OUTLOOK
GROUP CORP., 1180 AMERICAN DRIVE, NEENAH, WISCONSIN 54956.
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<PAGE> 14
1998 ANNUAL MEETING OF SHAREHOLDERS OF OUTLOOK GROUP CORP.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard C. Fischer, Joseph J. Baksha
and Annette Zoromski, and each of them, proxies, each with full power of
substitution, to represent and to vote all shares of stock the undersigned is
entitled to vote at the Annual Meeting of Shareholders of Outlook Group Corp. to
be held at the Valley Inn, 123 East Wisconsin Avenue, Neenah, Wisconsin, on
Thursday, October 15, 1998, at 2:00 p.m. CDT, and at any adjournment thereof,
hereby revoking any and all proxies heretofore given.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
OUTLOOK GROUP CORP. 1998 ANNUAL MEETING
<TABLE>
<S><C>
1. ELECTION OF DIRECTORS
(for terms expiring in 2000) 1- Jeffry H. Collier 2 - Pat Richter 3 - A. John Wiley
(for terms expiring in 2001) 4 - James L. Dillon 5 - Joseph J. Baksha
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed to the left (except to vote for all nominees
as specified below). listed to the left.
(Instructions: To withhold authority to vote for any indicated nominee, [ ]
write the number of the nominee(s) in the box provided to the right.
2. In their discretion on such other matters as may properly come before
the meeting or any adjournment thereof;
all as set out in the Notice and Proxy Statement relating to the meeting,
receipt of which are hereby acknowledged.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR the persons named in Proposal 1.
Dated: , 1998 ------------------------------
----------------- Signature(s) in box
Check appropriate box. Please sign exactly as name appears hereon. If stock
Indicate changes below: is owned by more than one person, all owners
should sign. Persons signing as executors,
Address change? [ ] Name change? [ ] administrators, trustees or in similar capacities
should so indicate. If a corporation, please sign in
full corporate name by the president or other autho-
rized officer. If a partnership, please sign in partner-
ship name by authorized person.
[ ] Please check box if you plan to attend in
person.
</TABLE>
