<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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
NORTHSTAR COMPUTER FORMS, INC.
- --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(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>
NORTHSTAR COMPUTER FORMS, INC.
7130 Northland Circle North
Brooklyn Park, Minnesota 55428
NOTICE OF ANNUAL SHAREHOLDERS MEETING
TO BE HELD APRIL 8, 1999
TO: The Shareholders of Northstar Computer Forms, Inc.:
The annual meeting of the shareholders will be held at the Radisson
Plaza Hotel, 35 South 7th Street, Minneapolis, Minnesota 55402, on Thursday,
April 8, 1999, at 3:30 p.m. for the following purposes:
1. To elect a Board of six directors, each to hold office until
the next Annual Shareholders Meeting or until their successors
are elected;
2. To consider and act upon a proposal to amend the Company's
Outside Directors Stock Option Plan to permit the granting of
additional options to directors and to add an additional
100,000 shares of Common Stock for issuance thereunder;
3. To consider and act upon a proposal to ratify the selection of
PricewaterhouseCoopers LLP as independent accountants of the
Company for the fiscal year ended October 31, 1999; and
4. To take action on any other business that may properly come
before the meeting.
The Board of Directors has fixed the close of business on February 19, 1999
as the record date for the determination of shareholders entitled to vote at
the meeting and any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Roger T. Bredesen, Chairman
Minneapolis, Minnesota
March 4, 1999
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND IN
PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE
IN PERSON IF THEY SO DESIRE.
<PAGE>
NORTHSTAR COMPUTER FORMS, INC.
7130 NORTHLAND CIRCLE NORTH
BROOKLYN PARK, MINNESOTA 55428
--------------------------------------------------------------
PROXY STATEMENT
MARCH 4, 1999
GENERAL MATTERS
SOLICITATION OF PROXIES
This Proxy Statement, mailed on or about March 4, 1999, is furnished
to shareholders of Northstar Computer Forms, Inc. (the "Company") in
connection with the solicitation of proxies by the Board of Directors of the
Company to be voted at the Annual Meeting of Shareholders to be held on
Thursday, April 8, 1999, or any adjournment or adjournments thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. The cost of this solicitation will be borne by the Company. In
addition to solicitation by mail, officers, directors and employees of the
Company may solicit proxies by telephone, special communications or in
person. The Company may also request banks and brokers to solicit their
customers who have a beneficial interest in the Company's Common Stock
registered in the names of nominees and will reimburse such banks and brokers
for their reasonable out-of-pocket expenses.
VOTING, EXECUTION AND REVOCATION OF PROXIES
Only stockholders of record at the close of business on February 19,
1999, will be entitled to vote. As of that date, the Company had 2,728,586
shares of Common Stock outstanding and entitled to vote. Each shareholder is
entitled to one vote for each share registered in his or her name. Cumulative
voting is not permitted.
If a proxy is properly executed and returned on time in the form
enclosed, it will be voted at the meeting as specified. Where specification
has not been made, it will be voted FOR the election of the nominees for
Director, FOR the proposal to amend and increase the number of shares
issuable pursuant to the Company's Outside Directors Stock Option Plan, FOR
ratification of the appointment by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent accountants for the
fiscal year ending October 31, 1999, and will be deemed to grant
discretionary authority to vote upon any other matters properly coming before
the meeting. The presence in person or by proxy of the holders of a majority
of the shares of stock entitled to vote at the Annual Meeting of
Shareholders, or 1,364,293 shares, constitutes a quorum for the transaction
of business.
A list of those shareholders entitled to vote at the Annual Meeting
will be available for a period of 10 days prior to the Annual Meeting for
examination by any shareholder at the Company's principal executive offices,
7130 Northland Circle North, Brooklyn Park, Minnesota, and at the Annual
Meeting itself.
2
<PAGE>
Any proxy may be revoked at any time before it is voted by written
notice to the Secretary, by receipt of a proxy properly signed and dated
subsequent to an earlier proxy, or by revocation of a written proxy by
request at the Annual Meeting. If not so revoked, the shares represented by
such proxy will be voted.
SECURITY OWNERSHIP OF PRINCIPAL
HOLDERS AND MANAGEMENT
The following table sets forth as of January 1, 1999, the number of
shares of Common Stock beneficially owned by each person known to the Company
to be the beneficial owner of more than five percent (5%) of the outstanding
shares of the Company's capital stock, by each director and by all executive
officers and directors as a group. Except as otherwise indicated, the persons
listed possess all voting and investment power with respect to the shares
listed for them.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
<S> <C> <C>
Roger T. Bredesen 211,698 Shares (1) 7.5%
7130 Northland Circle North
Brooklyn Park, MN 55428
Roger T. Bredesen 214,800 Shares 7.6%
Income Trust A dated
June 29, 1990
E. Burke Hinds, Trustee
100 So. 5th Street, Suite 1100
Minneapolis, MN 55402
Roger T. Bredesen 214,800 Shares 7.6%
Income Trust B dated
June 29, 1990
Clarence J. Hynes, Trustee
1433 Utica Avenue So.
Minneapolis, MN 55416
E. Fay Bredesen Income Trust 223,105 Shares 7.9%
dated June 29, 1990
Wendall J. Davidson, Trustee
11931 54th Avenue So.
Minneapolis, MN 55442
3
<PAGE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
<S> <C> <C>
E. Fay Bredesen 1996 Annuity 168,997 Shares 6.0%
Trust U/A dated December 20, 1996
E. Fay Bredesen and E. Burke
Hinds, Trustees
100 So. Fifth Street, Suite 1100
Minneapolis, MN 55402
E. Burke Hinds 428,140 Shares (2) 15.2%
100 So. Fifth Street, Suite 1100
Minneapolis, MN 55402
John Mutschler 8,500 Shares (3) *
7130 Northland Circle North
Brooklyn Park, MN 55428
Kenneth E. Overstreet 102,214 Shares (4) 3.6%
7130 Northland Circle North
Brooklyn Park, MN 55428
J.S. Braun 13,999 Shares (5) *
8000 Townline Avenue So.
Minneapolis, MN 55439
Roy W. Terwilliger 6,000 Shares (6) *
P. O. Box 444005
Eden Prairie, MN 55344
Dr. Lester A. Wanninger 4,000 Shares (7) *
395 Hubert H. Humphrey Building
271 19th Avenue South
Minneapolis, MN 55455
All executive officers (4)
and directors as a group
(9 individuals) 404,284 Shares (1, 3-8) 14.4%
- ---------------------------------
</TABLE>
* Represents less than 1%
(1) Includes 44,343 shares held in an annuity trust, 8,156 shares in a
revocable trust and 14,199 shares held in the Company's Profit Sharing
Plan and Trust in a segregated directed account.
(2) Represents 214,800 shares beneficially owned by the Roger T. Bredesen
Income Trust A dated June 29, 1990, 168,997 shares beneficially owned
by the E. Fay Bredesen 1996 Annuity Trust U/A dated December 20, 1996
and 44,343 shares beneficially owned by the Roger T. Bredesen 1996
Annuity Trust U/A dated December 20, 1996, as to all of which trusts
Mr. Hinds serves as trustee.
(3) Includes 7,000 shares owned by Mr. Mutschler's spouse.
4
<PAGE>
(4) Includes 58,998 shares issuable upon exercise of currently exercisable
options and 3,216 shares held in the Company's Profit Sharing Plan and
Trust in a segregated directed account.
(5) Includes 10,000 shares issuable upon exercise of currently exercisable
options.
(6) Consists of 6,000 shares issuable under currently exercisable options.
(7) Consists of 4,000 shares issuable upon exercise of currently
exercisable options.
(8) Includes 19,800 shares issuable to three officers upon exercise of
currently exercisable options.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
The Board of Directors currently consists of six persons. Each
Director will be elected to serve until the Annual Meeting of Shareholders to
be held in 2000 or until a successor is elected and qualified. Vacancies and
newly-created directorships resulting from an increase of the number of
Directors may be filled by a majority of the Directors then in office and the
Directors so chosen will hold office until the next election.
The Board of Directors has nominated for election Roger T. Bredesen,
John G. Mutschler, J.S. Braun, Kenneth E. Overstreet, Roy W. Terwilliger and
Dr. Lester A. Wanninger. It is intended that proxies accompanying this Proxy
Statement will be voted at the 1999 Annual Meeting FOR the election to the
Board of all of these individuals. The Board of Directors believes that each
nominee will be able to serve, but should any nominee be unable to serve as a
Director, the persons named in the proxies have advised that they will vote
for the election of such substitute nominee as the Board of Directors may
propose.
The Board recommends a vote FOR the election of the nominees for
director.
The following information is furnished with respect to each nominee
as of January 31, 1999:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
NAME AND AGE EXPERIENCE FOR THE PAST 5 YEARS DIRECTOR SINCE
- ------------ ------------------------------- --------------
<S> <C> <C>
Roger T. Bredesen, 72 Chief Executive Officer and Chairman of 1964
the Board of Directors of the Company
since its incorporation in 1964. Until 1994,
Mr. Bredesen was also President of the
Company, a position he held since founding
the Company.
5
<PAGE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
NAME AND AGE EXPERIENCE FOR THE PAST 5 YEARS DIRECTOR SINCE
- ------------ ------------------------------- --------------
<S> <C> <C>
John G. Mutschler, 70 Director of the Company since 1972. Mr. 1972
Mutschler is an attorney in Minnesota, and
since 1958 has been the President of John G.
Mutschler & Associates, Inc., a firm which
designs and administers qualified pension
and profit-sharing plans for businesses in
Minnesota and adjacent states. He has also
been the President of JGM Agency, Inc., a
firm engaged in the management of real estate,
since 1980.
J.S. Braun, 66 Director of the Company since 1992. Mr. Braun 1992
is the Chairman of Braun Intertec Corporation,
an engineering and environmental consulting firm
that he founded in 1957, Board member of
Community Bank Group and Vice Chairman of
a joint venture firm in China, Yucai-Braun Intertec.
Kenneth E. Overstreet, 57 Director of the Company since 1993. Since
December 1994, Mr. Overstreet has been the 1993
President of the Company. From 1989 to 1994, he
was the Executive Vice President of the Company.
Roy W. Terwilliger, 61 Director of the Company since 1994. Since 1992, 1994
Mr. Terwilliger has been a Minnesota Senator in
District 42. Since 1989, Mr. Terwilliger has been
President of Community Bank Group, Inc. of Eden
Prairie, Minnesota.
Dr. Lester A. Wanninger, 61 Director of the Company since 1996. Since 1989, 1996
Dr. Wanninger has been a faculty member and
coordinator of extension classes in Information
and Decision Sciences at the Carlson School
of Management of the University of Minnesota.
Dr. Wanninger has a Ph.D. in chemical engineering.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
MEETINGS. During the fiscal year ended October 31, 1998, there were
seven meetings of the Board of Directors. All of the meetings were attended
by every director except for two by Mr. Braun.
BOARD COMMITTEES. The Board of Directors has established both an
Audit Committee and a Compensation Committee.
The Audit Committee acts as a liaison between the Company's outside
auditing firm and Company management and, in connection therewith, may (i)
recommend to the Board of Directors an annual selection
6
<PAGE>
or retention of the Company's outside auditing firm, (ii) communicate with
the Company's outside auditing firm concerning matters of accounting and
auditing policy which such firm may desire to discuss with other than Company
management, and (iii) review and recommend to Company management improvements
in the Company's accounting and auditing procedures. The members of the Audit
Committee in fiscal 1998 consisted of Mr. Mutschler and Dr. Wanninger. The
Audit Committee held one meeting during the 1998 fiscal year.
The Compensation Committee makes recommendations to the Board of
Directors respecting the sufficiency and adequacy of the Company's
compensation programs for management and other key employees, including (i)
salary and bonus programs, (ii) incentive and other stock option programs
(including the recommendation of persons who should receive options and the
exercise price and other terms therefor), and (iii) other perquisites. The
members of the Compensation Committee consist of Messrs. Braun, Mutschler and
Terwilliger. One meeting was held in the fiscal year ended October 31, 1998,
at which all members of the Compensation Committee were in attendance. The
Compensation Committee's Report on Executive Compensation is contained below
in this Proxy Statement.
REMUNERATION OF DIRECTORS. Directors receive annual directors' fees
of $3,000 plus $800 per meeting attended (except for the Chairmen of the
Compensation and Audit Committees, who are paid $1,000 per meeting attended).
In addition, directors of the Company receive options to purchase an
aggregate of 10,000 shares of the Company's Common Stock at a purchase price
equal to the closing price of the Common Stock on the date of grant.
The options are granted on the date a director is elected to the
Board and vest and become exercisable over a five year period at the rate of
twenty percent (20%) per year commencing one year from the date of grant. Mr.
Terwilliger and Dr. Wanninger were granted their options under the Company's
Outside Directors Stock Option Plan (the "Directors Plan") which provides
formula grants of stock options to outside (non-employee) directors ("Outside
Directors"). Options granted under the Directors Plan expire at the earlier
of (i) ten years from the date of grant, or (ii) one year after the Outside
Director ceases to be a member of the Board.
The Board of Directors is proposing that the Directors Plan be
expanded to permit the granting of additional options to the Outside
Directors as one of the proposals for the 1999 Annual Meeting.
EXECUTIVE COMPENSATION
The following table summarizes the cash and non-cash compensation
paid to or earned by the Company's Chief Executive Officer and its three
other executive officers during the past three fiscal years whose annual
salary and bonus exceeded $100,000 during the Company's fiscal year ended
October 31, 1998.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
NAME AND FISCAL ALL OTHER
PRINCIPAL YEAR ENDED ANNUAL COMPENSATION LONG-TERM COMPENSATION COMPENSATION
POSITION OCTOBER 31, ($)(1)
------------------------- ---------------------------
SALARY ($) BONUS ($) AWARDS OF OPTIONS (#)
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 200,000 25,000 -0- 86,987(2)
------------------ ------------ ------------ --------------------------- -----------------
Roger T. Bredesen,
Chairman of 1997 200,000 50,000 -0- 87,799(2)
the Board and Chief
Executive Officer
------------------ ------------ ------------ --------------------------- -----------------
1996 180,726 25,000 -0- 5,008
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
1998 180,000 38,924 -0- 28,429(3)
------------------ ------------ ------------ --------------------------- -----------------
Kenneth E.
Overstreet, 1997 160,000 64,382 -0- 20,573(3)
President and
Director
------------------ ------------ ------------ --------------------------- -----------------
1996 122,894 28,198 -0- 19,897
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
1998 90,000 17,060 -0- 13,853
------------------ ------------ ------------ --------------------------- -----------------
Mary Ann Morin, 1997 84,929 30,546 -0- 15,353
Treasurer and Chief
Financial Officer
------------------ ------------ ------------ --------------------------- -----------------
1996 67,597 11,621 6,000 15,064
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
1998 106,000 11,766 -0- 7,171
------------------ ------------ ------------ --------------------------- -----------------
Stanley Klarenbeek, 1997 76,657 27,652 20,000 4,664
Vice President, Sales
and Marketing
Internal Bank Forms
------------------ ------------ ------------ --------------------------- -----------------
1996 70,150 16,130 6,000 4,931
- ----------------------- ------------------ ------------ ------------ --------------------------- -----------------
- ----------------------- ------------------ ------------ ------------ --------------------------- -----------------
</TABLE>
(1) Other compensation includes contributions under the Company's Profit
Sharing Plan and Trust ($8,641, $8,641, $5,428 and $7,171 in 1998 to
each of Messrs./Ms. Bredesen, Overstreet, Morin and Klarenbeek,
respectively) and the value of deferred compensation benefits under the
Company's Deferred Compensation Plan ($8,938 and $8,425 in 1998 for Mr.
Overstreet and Ms. Morin, respectively).
(2) Also includes amounts paid as deferred compensation pursuant to an
annual deferred compensation benefit established pursuant to Mr.
Bredesen's employment agreement with the Company ($67,496 in 1998 and
$65,786 in 1997) and directors' fees.
(3) Also includes amounts paid as directors' fees.
8
<PAGE>
STOCK OPTIONS
The following table summarizes the value of the unexercised options
held by the executive officers named in the Summary Compensation Table as of
October 31, 1998:
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
NAME EXERCISE(1) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Roger T. Bredesen 10,000 $32,500 0/0 0/0
- --------------------------------------------------------------------------------------------------------------------
Kenneth Overstreet 40,000 162,520 58,998/11,002(3) $152,399/24,250
- --------------------------------------------------------------------------------------------------------------------
Mary Ann Morin N/A N/A 12,600/5,400(4) $30,213/6,507
- --------------------------------------------------------------------------------------------------------------------
Stanley Klarenbeek 2,250 $23,063 3,600/35,400(4) $4,338/6,507
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Price and number of shares adjusted for May 13, 1998 3 for 2 stock
split.
(2) Value of unexercised options is calculated by determining the
difference between the fair market value of the shares underlying the
options at October 31, 1998 and the exercise price of the options.
(3) Consists of options to purchase 10,000 shares for serving on the Board
of Directors, and 60,000 shares under the Company's 1994 Employees
Incentive Stock Option Plan (the "1994 Plan").
(4) Granted pursuant to the 1994 Plan.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Roger T.
Bredesen, its Chief Executive Officer, effective December 17, 1986, to serve
in such capacity until terminated by one of the parties upon 90 days notice.
Mr. Bredesen's annual base salary under the employment agreement is adjusted
annually by the Compensation Committee of the Board of Directors (in 1998,
Mr. Bredesen's base salary was $200,000). The employment agreement also
establishes a ten year deferred compensation arrangement under which Mr.
Bredesen began receiving payments in November 1996 and pursuant to which he
received $67,494.00 for 1998.
The Company entered into an employment agreement with Kenneth E.
Overstreet, its President, effective May 10, 1989, to serve originally as its
Executive Vice President until terminated by one of the parties. Mr.
Overstreet's annual base salary under the employment agreement is adjusted
annually by the Compensation Committee of the Board of Directors (in 1998,
Mr. Overstreet's base salary was $180,000). The employment agreement also
granted to Mr. Overstreet an option to purchase 40,000 shares of the
Company's Common Stock at a purchase price of $3.00 per share, which was
exercised during the Company's 1998 fiscal year. Mr. Overstreet has agreed
not to compete with the Company for a period of two years after the
termination of his employment.
The Company and/or GFS have also entered into employment agreements
with each of Mary Ann Morin and Stanley Klarenbeek, effective January 3,
1989, and May 1, 1990, respectively, to serve as officers of the Company and
GFS (as appropriate) until terminated by one of the parties. Each officer's
9
<PAGE>
annual base salary under their respective employment agreements is adjusted
annually by the Compensation Committee of the Board of Directors (in 1998,
Ms. Morin's and Mr. Klarenbeek's base salary was $90,000 and $106,000,
respectively). Under the employment agreements, each has agreed not to
compete with the Company and/or GFS, as appropriate, for a period of two
years after the termination of his or her employment.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW, PHILOSOPHY AND OBJECTIVES
The Compensation Committee of the Board of Directors, composed of
three non-employee directors, is responsible for determining and periodically
evaluating various levels and methods of compensating the Company's
employees, directors and officers. The Committee recommends, on an annual
basis, the compensation to be paid to the Chief Executive Officer and each of
the other executive officers of the Company. Such recommendations are then
discussed by the Board of Directors, which is ultimately responsible for
incentive compensation. The Committee also evaluates and oversees other, more
broadly based benefit programs of the Company. The objective of the
Compensation Committee is to establish a compensation program for executive
officers that will motivate and retain management, recognize and reward
individual performance, and align the financial interests of the executive
officers with the success of the Company.
EXECUTIVE OFFICER COMPENSATION
The Company's executive officer compensation, including that of the
Chief Executive Officer, consists of base salary, annual cash bonuses, long
term incentive compensation in the form of stock options and other long term
deferred compensation. Executive officers are also entitled to participate in
various benefits offered to all of the Company's employees such as profit
sharing plan contributions.
BASE SALARY. The Compensation Committee meets in December of each
year to recommend executive officer base salaries for the succeeding calendar
year. Base salary decisions are based on what the Committee believes is
reasonable in light of each executive's individual performance, the financial
results of the Company for the preceding fiscal year, compensation paid to
executive officers in prior years and compensation being paid to executive
officers of companies similar (in terms of size, type of business, etc.) to
the Company.
ANNUAL CASH BONUS. In addition to base compensation, the Committee
reviews an annual bonus pool pursuant to a formula (previously adopted by the
Board) based on return on shareholders equity. For 1998, the pool consisted
of 4.625% of the Company's fiscal year net income before taxes, profit
sharing, bonus and deferred compensation up to 15% return on shareholders
equity plus 8% of its net income above a 15% return on shareholder's equity.
After calculating this amount, which for fiscal 1998 was an aggregate of
$203,805, the Chief Executive Officer then divides this pool among the
executive officers and other employees over a specified seniority level
pursuant to a point system which allocates points among participants
according to their level of responsibility. The Chief Executive Officer adds
up the number of points assigned to all participants in the bonus pool and
divides that total into the amount of the bonus pool yielding a bonus amount
per point. For example, Kenneth E. Overstreet was allocated 2,881 points in
fiscal 1998 and the least senior employee in the pool was allocated 82
points. All employees participating in the bonus program were allocated a
total of 15,085 points, yielding a bonus amount per point of $13.51, which,
in Mr. Overstreet's case, translated to a bonus of $38,924. The
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<PAGE>
Committee has the discretion, which it has exercised in prior years, to
adjust the aggregate amount of the bonus pool upwards or downwards.
STOCK OPTION PLAN. The Company also grants stock options under the
shareholder-approved 1994 Employees' Incentive Stock Option Plan to executive
officers, key personnel and other employees as long term incentive
compensation. Currently, 248,575 shares of common stock are reserved for
issuance upon exercise of options granted under the 1994 Plan (out of a total
of 500,575 shares available under the 1994 Plan). Options are granted at
prices equal to the fair market value of the Company's Common Stock on the
date of grant. The Committee encourages the use of stock options as a
component of compensation because it believes that options most closely tie
executive officer compensation to the financial performance of the Company,
as evidenced by its stock price. In fiscal 1998, the Company awarded no
options to its executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION.
Roger Bredesen is the founder of the Company and has been its Chief
Executive Officer since its inception in 1962. Mr. Bredesen's base salary for
fiscal 1998 and 1997 was $200,000. Mr. Bredesen was granted a bonus of
$25,000 in fiscal 1998, which bonus was subjectively determined and
recommended by the Committee and not based on the annual bonus formula
specified above. Mr. Bredesen also received an aggregate of $67,496 in
deferred compensation pursuant to his employment agreement with the Company,
which provides for payments to be paid over 10 years at a rate which is
subject to adjustment annually based upon changes in the Consumer Price
Index. Mr. Bredesen began receiving these payments in November 1996.
The Compensation Committee will continue to evaluate the Company's
executive officer compensation program to ensure that it continues to be
reasonable, performance-based and consistent with the Company's overall
compensation objectives.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS:
John G. Mutschler, Chairman
J.S. Braun
Roy W. Terwilliger
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION AND COMPENSATION
DECISIONS
As noted above, the Company's Compensation Committee consists of
John G. Mutschler, Chairman, J.S. Braun and Roy W. Terwilliger. No executive
officer of the Company is a member of the Compensation Committee.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on
the Company's Common Stock for the last five fiscal years with the cumulative
total return of the Dow Jones Publishing Index (consisting of a group of 12
companies) (the "Industry Index") and the Nasdaq Stock Market (the "Nasdaq
Index").
11
<PAGE>
[GRAPH]
<TABLE>
<CAPTION>
10-93 10-94 10-95 10-96 10-97 10-98
<S> <C> <C> <C> <C> <C> <C>
Nasdaq $100 $100 $135 $160 $210 $235
NSCF $100 $109 $123 $133 $280 $170
Dow Jones
Publishing Index $100 $ 99 $117 $141 $187 $209
</TABLE>
Assumes $100 invested in close of trading on the last trading day preceding
the first day of the fifth preceding year in the Company's Common Stock, the
Industry Index, and the Nasdaq Index. The cumulative total return assumes the
reinvestment of dividends.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
To the knowledge of the Company, based solely upon review of Forms 3
and 4 and amendments thereto furnished to the Company during the fiscal year
ended October 31, 1998, pursuant to Rule 16(a)-3(e) of the Rules and
Regulations promulgated under the Securities Exchange Act of 1934, as
amended, and forms 5 and amendments thereto furnished to the Company with
respect to its fiscal year ended October 31, 1998, no one failed to file, on
a timely basis, such filings for the Company's 1998 fiscal year.
TRANSACTIONS WITH MANAGEMENT
Effective August 1997, the Company leased its Roseville, Minnesota
facility from two trusts controlled by Roger T. Bredesen and his spouse, E.
Fay Bredesen. The facility is rented at an annual rate of $191,000 (for the
first three Lease years and then escalates based on various price indices
thereafter) plus taxes, utilities, insurance, certain repair and maintenance
obligations and other operating costs for the property. The initial term of
the Lease is 10 years with the Company having the right to extend the term
for two additional periods of five years each.
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PROPOSAL TO AMEND THE COMPANY'S OUTSIDE DIRECTORS
STOCK OPTION PLAN TO PERMIT THE GRANTING OF
ADDITIONAL OPTIONS TO DIRECTORS AND TO ADD AN ADDITIONAL
100,000 SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER
The Board of Directors and the Compensation Committee have
determined that it is in the best interest of the Company and its
shareholders to amend the Company's Outside Directors Stock Option Plan (the
"Directors Plan") to permit the granting of additional options to directors
and to add an additional 100,000 shares of Common Stock for issuance pursuant
to the Directors Plan.
The original purpose of the Directors Plan was to create a mechanism
by which new directors would receive options equal to those previously
granted to existing directors without running afoul of the "disinterested
administration" rules of the securities laws, which enabled "Outside
Directors" (meaning directors who are not employees of the Company) to
receive options without being disqualified from being deemed "disinterested
directors" for purposes of serving on the Compensation Committee and
administering other benefit plans of the Company. These regulations were
changed in 1996 to permit directors to receive discretionary grants of
options under certain kinds of plans or arrangements as long as such grants
are approved under specified circumstances.
The Directors Plan currently provides for formula grants of options
to Outside Directors. The options granted under the Directors Plan are
non-statutory stock options, meaning options which do not qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Pursuant to the Directors Plan, each Outside
Director elected to the Board during or after 1993 receives an option to
purchase 10,000 shares of Common Stock at a purchase price equal to the
closing price of the Common Stock on the date of grant, as listed in the
newspaper. The only directors who have received grants under the Directors
Plan are Mr. Terwilliger and Dr. Wanninger.
The proposed amendments would create two different operative
sections for the Directors Plan; one continuing to provide for formula grants
of options for directors elected after 1993 and the other permitting
discretionary grants of options to all Outside Directors. The Directors Plan,
which was previously administered by the Chief Financial Officer (because it
was non-discretionary), will now be administered by the Compensation
Committee. Formula options granted under the Directors Plan vest and become
exercisable over a five year period at the rate of 20% per year commencing
one year from the date of grant, and expire at the earlier of (i) 10 years
from the date of grant, or (ii) one year after the Outside Director ceases to
be a member of the Board. Discretionary Options granted under the Directors
Plan will not necessarily be subject to any vesting or expiration, but will
likely follow the same such provisions as formula grants.
All Options granted under the Directors Plan are exercisable at the
fair market value of the Company's Common Stock on the date of grant and may
not be transferred except pursuant to a qualified domestic relations order
(as defined in the Internal Revenue Code of 1986, as amended) or the laws of
descent and distribution. The number of shares reserved for issuance under
the Directors Plan is being increased by an additional 100,000 shares to
accommodate current and possible future grants.
The Compensation Commitee has made a discretionary grant to each
Outside Director of options to purchase 10,000 shares (the "1999 Grants")
contingent on approval of the amendment to the Directors Plan. The 1999
Grants have the same terms as the formula grants (vest over a period of five
years and expire at the earlier of ten years from the date of grant or one
year after ceasing to serve as a director) and are
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exercisable at $8.00 per share. The Compensation Commitee also granted an
option to Kenneth E. Overstreet (who is not an Outside Director) to purchase
5,000 shares under the 1994 Plan.
The Board recommends a vote FOR the proposal to amend the Directors
Plan to permit the granting of additional options to directors and to
increase the number of shares of Common Stock issuable thereunder.
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit
Committee, has selected PricewaterhouseCoopers LLP as independent accountants
to examine the accounts of the Company for the fiscal year ending October 31,
1999, and to perform other accounting services. PricewaterhouseCoopers has
acted as independent accountants of the Company since 1984. Representatives
of PricewaterhouseCoopers are expected to be present at the 1999 Annual
Meeting.
The Board recommends a vote FOR ratification of the appointment of
PricewaterhouseCoopers.
SHAREHOLDER PROPOSALS
The rules of the Securities and Exchange Commission permit
shareholders of the Company, after notice to the Company, to present
proposals for shareholder action in the Company's proxy statement where such
proposals are consistent with applicable law, pertain to matters appropriate
for shareholder action and are not properly omitted by Company action in
accordance with the proxy rules published by the Securities and Exchange
Commission. The Northstar Computer Forms, Inc. 2000 Annual Meeting of
Shareholders is expected to be held on or about April 7, 2000, and proxy
materials in connection with that meeting are expected to be mailed on or
about March 1, 2000. Shareholder proposals prepared in accordance with the
proxy rules must be received by the Company on or before December 1, 1999.
OTHER PROPOSALS
The Board of Directors of the Company does not intend to present any
business at the meeting other than the matters specifically set forth in this
Proxy Statement and knows of no other business to come before the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Roger T. Bredesen, Chairman
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AMENDMENT NO. 1 TO
NORTHSTAR COMPUTER FORMS, INC.
OUTSIDE DIRECTORS STOCK OPTION PLAN
THIS AMENDMENT NO. 1 (the "Amendment") to the Northstar Computer
Forms, Inc. Outside Directors Stock Option Plan (the "Directors Plan"), is
effective the 5th day of February, 1999, and has been approved by
appropriate action of the Board of Directors (the "Board") of Northstar
Computer Forms, Inc., a Minnesota corporation (the "Company"). Capitalized
terms not otherwise defined herein shall have the meanings specified in the
Directors Plan.
WHEREAS, the Board has determined that it is in the best interests of
the Company to amend the Directors Plan pursuant to this Amendment to, among
other things, make certain adjustments to the number of shares specified
therein to accommodate the Company's three for two stock split effective May
13, 1998 (the "Stock Split"), permit the granting of additional options to
directors and to increase the number of shares of Common Stock for issuance
thereunder.
NOW, THEREFORE, The Directors Plan is hereby amended as follows:
1. SECTION 2.7- OPTION. Section 2.7 of the Directors Plan is
amended to read in its entirety as follows:
2.7 "OPTION" means a right to purchase Common Stock granted to
an Outside Director under this Plan that does not qualify as an incentive
stock option under Section 422 of the Code. Options may be either
Formula Options or Discretionary Options.
2. SECTION 2- ADDITIONAL DEFINITIONS. New Sections 2.12 and 2.13
are hereby added to the Directors Plan and read in their entirety as follows:
2.12 "DISCRETIONARY OPTION" means an Option granted pursuant to
Section 5A of the Plan, which is granted at the discretion of the
Administrator.
2.13 "FORMULA OPTION" means an Option granted pursuant to
Section 5 of the Plan, as amended.
3. SECTION 3- ADMINISTRATION OF THE PLAN. Section 3 of the
Directors Plan is amended to read in its entirety as follows:
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered
by the Company's Compensation Committee (the "Administrator"), who shall
be responsible for overseeing that the terms and conditions of the Plan
are complied with and that grants are made to Outside Directors at the
proper times and in the proper amounts as are required hereunder with
respect to Formula Options and properly implemented with respect to
Discretionary Options. The Administrator shall have the power and
authority to make grants of Discretionary Options to Outside Directors
from time to time pursuant to the terms of the Plan, including the power
to determine the number of shares to be covered by each
<PAGE>
such award granted hereunder and the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, any vesting schedule or restriction on
any Option and/or the shares of Common Stock relating thereto). The
Administrator shall have no discretion with respect to Formula Options.
The Administrator shall have the authority to adopt, alter and
repeal such administrative rules, guidelines and practices governing the
Plan as it shall, from time to time, deem advisable; to interpret the
terms and provisions of the Plan and any award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the
administration of the Plan. The Administrator may delegate its authority
to officers of the Company for the purpose of implementing any aspect of
the Plan.
4. SECTION 4- COMMON STOCK SUBJECT TO THE PLAN. Section 4.1 of
the Directors Plan is amended to increase the number of shares specified
therein from 50,000 (after giving effect to the Stock Split) to 150,000.
5. SECTION 5- FORMULA OPTIONS. The title of Section 5 of the
Directors Plan is hereby amended to read in its entirety as follows: "Section
5. Terms and Conditions of Formula Options." References to "Options"
throughout that Section of the Directors Plan shall hereinafter be deemed to
be Formula Options.
6. SECTION 5.1(b)- NUMBER OF FORMULA OPTIONS. The number of
Formula Options to be granted to newly elected Outside Directors pursuant to
Section 5.1(b) of the Directors Plan is hereby changed from 6,667 to 10,000,
in order to give effect to the Stock Split.
7. NEW SECTION 5A- TERMS AND CONDITIONS OF DISCRETIONARY OPTIONS.
A new Section 5A is hereby added to the Directors Plan and reads in its
entirety as follows:
5A. TERMS AND CONDITIONS OF DISCRETIONARY OPTIONS
5A.1 GRANT. Subject to the terms and conditions of the Plan,
the Administrator shall have the discretion and authority to grant
Discretionary Options to each Outside Director who is not, on the date
such Option would be granted, the beneficial owner (as defined in Rule
13d-3 under the Exchange Act) of more than 5% of the outstanding Common
Stock, on the terms and conditions set forth in this Section 5A. The
terms and conditions of the Discretionary Options shall be as specified
in a resolution approved by the Administrator or a stock option grant
agreement entered into between an authorized representative of the
Administrator and an Outside Director and may contain or vary any of the
provisions specified in this Section 5A (except for Section 5A.2).
5A.2 EXERCISE PRICE. The exercise price for all Discretionary
Options granted hereunder shall be equal to the Fair Market Value of the
Common Stock on the Grant Date.
5A.3 VESTING OF OPTIONS. Unless otherwise specified by the
Administrator, and subject to the provisions of Section 5A-4 hereof,
Discretionary Options granted hereunder
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shall vest over a five year period at the rate of 20% per year,
commencing one year from the Grant Date.
5A.4 DURATION. Unless otherwise specified by the
Administrator, each Discretionary Option granted to an Outside
Director pursuant to this Plan and all rights to purchase Common
Stock thereunder shall terminate on the earliest of:
(a) Ten years after the date such Option is granted; or
(b) The expiration of the period specified in Section 6,
whichever is applicable, after an Outside Director ceases to be a
member of the Board.
In no event shall a Discretionary Option be exercisable at any time
after its original expiration date.
5A.5 MANNER OF EXERCISE. Unless otherwise specified by the
Administrator, a Discretionary Option may be exercised by an Outside
Director in whole or in part from time to time, subject to the
conditions contained herein, by delivery, in person or through
certified or registered mail, of written notice of exercise to the
Company at its principal executive office (Attention: Chief
Financial Officer), and by paying in full the total Option exercise
price for the shares of Common Stock purchased. Such notice shall be
in a form satisfactory to the Administrator and shall specify the
particular Option (or portion thereof) that is being exercised and
the number of shares with respect to which the Option is being
exercised. The exercise of the Option shall be deemed effective upon
receipt of such notice and payment complying with the terms of the
Plan. As soon as practicable after the effective exercise of the
Option, the Outside Director shall be recorded on the stock transfer
books of the Company as the owner of the shares purchased, and the
Company shall deliver to the Outside Director one or more duly issued
stock certificates evidencing such ownership. If an Outside Director
exercises any Discretionary Option with respect to some, but not all,
of the shares of Common Stock subject to such Option, the right to
exercise such Option with respect to the remaining shares shall
continue until it expires or terminates in accordance with its terms.
A Discretionary Option shall only be exercisable with respect to
whole shares.
5A.6 PAYMENT OF EXERCISE PRICE. The total purchase price of
the shares to be purchased upon exercise of a Discretionary Option
may be paid entirely in cash (including check, bank draft or money
order) or in whole or in part, by transfer from the Outside Director
to the Company of Previously Acquired Shares. In the event the
Outside Director pays the purchase price of a Discretionary Option in
whole or in part with Previously Acquired Shares, the value of such
shares shall be equal to their Fair Market Value on the date of
exercise of the Option.
5A.7 RIGHTS AS A SHAREHOLDER. No Outside Directors shall
have any rights as a shareholder with respect to any shares of Common
Stock covered by a Discretionary Option until the Outside Director
shall have become the holder of record of such shares, and no
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<PAGE>
adjustments shall be made for dividends or other distributions or
other rights as to which there is a record date preceding the date
the Outside Director becomes the holder of record of such shares.
8. SECTION 6- TERMINATION OF SERVICE ON THE BOARD. The reference
in this Section to Section 5.4(a) is amended to refer to both Section 5.4(a)
and Section 5A.4(a).
9. REMAINDER OF DIRECTORS PLAN STILL IN EFFECT. Except as
specifically amended hereby, all other provisions of the Directors Plan shall
remain in full force and effect.
10. RESTATEMENT OF DIRECTORS PLAN. The Administrator shall have
the authority to restate the Directors Plan as amended hereby and submit the
same for filing with the Securities and Exchange Commission. The restated
Directors Plan shall be entitled the "Amended and Restated Outside Directors
Stock Option Plan."
11. EFFECTIVE DATE. This Amendment is effective as of the date
hereof, which is the date adopted by the Board, but no grant made hereunder
shall be effective until this Amendment is ratified by the Company's
shareholders.
12. GOVERNING LAW. This Amendment shall be construed in accordance
with and governed by the laws of the State of Minnesota.
IN WITNESS WHEREOF, this Amendment is adopted the day and year first
above written.
NORTHSTAR COMPUTER FORMS, INC.
By:
-------------------------------------
Its:
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NORTHSTAR COMPUTERS FORMS, INC.
ANNUAL MEETING OF SHAREHOLDERS
APRIL 8, 1999
PROXY
The undersigned shareholder of Northstar Computers Forms, Inc. (the
"Company") hereby constitutes and appoints either Roger T. Bredesen or
Kenneth E. Overstreet, or both of them, his or her proxy, with full power of
substitution, to attend the Annual Shareholders Meeting of the shareholders
of the Company to be held on April 8, 1999, at 3:30 p.m., Central Time, at
the Radisson Plaza Hotel, 35 South 7th Street, Minneapolis, Minnesota 55402,
or at any and all adjournments thereof, and there to act for and to vote all
stock of the undersigned, in the manner specified below, upon the following
matters:
1. Election of six directors to serve until the next Annual Shareholders
Meeting or until their successors are elected:
Roger T. Bredesen, John G. Mutschler, J.S. Braun, Kenneth E. Overstreet,
Roy W. Terwilliger and Lester A. Wanninger
<TABLE>
<S> <C>
/ / FOR all nominees listed above (except / / WITHHOLD AUTHORITY to vote for
as indicated to the contrary below) all nominees listed above
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual, write that
nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
2. Approval of the proposal to amend the Company's Outside Directors Stock
Option Plan to permit the granting of additional options to directors
and to add an additional 100,000 shares of Common Stock for issuance
thereunder.
/ / FOR / / AGAINST / / ABSTAIN
3. Selection of PricewaterhouseCoopers LLP as independent accountants for
the Company for the fiscal year ending October 31, 1999.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion on any other matter that may properly come before
the meeting or any adjournment or adjournments thereof.
PLEASE FILL IN, SIGN, AND DATE ON REVERSE SIDE AND MAIL IN THE ENCLOSED
ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF
DIRECTORS. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
SPECIFIED BY THE UNDERSIGNED SHAREHOLDER. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR APPROVAL OF PROPOSALS 1, 2 AND 3 AND GRANT
DISCRETIONARY AUTHORITY ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
MEETING.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE COMPANY'S NOTICE
OF ANNUAL SHAREHOLDERS MEETING TO BE HELD APRIL 8, 1999 AND PROXY STATEMENT.
Dated: , 1999
-------------------
--------------------------------------------
--------------------------------------------
IMPORTANT: Signature(s) should correspond
with the name appearing on the books of the
Company. When signing in a fiduciary or
representative capacity, give full title as
such. When more than one owner, each should
sign.
