<PAGE>
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 (S) 240.14a-11(c) or (S) 240.14a-12
Catalina Marketing Corporation
................................................................................
(Name of Registrant as Specified In Its Charter)
Catalina Marketing Corporation
................................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.........................................................................
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:
.........................................................................
[x] 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 No.:
.........................................................................
3) Filing Party:
.........................................................................
4) Date Filed:
.........................................................................
<PAGE>
[LOGO OF CATALINA MARKETING CORPORATION APPEARS HERE]
NOTICE OF ANNUAL MEETING
TO BE HELD ON
JULY 23, 1996
----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
CATALINA MARKETING CORPORATION, a Delaware corporation (herein called the
"Company"), will be held at the Hyatt Regency Westshore, 6200 Courtney
Campbell Causeway, Tampa, Florida 33607 on Tuesday, July 23, 1996 at 9:00 AM
(the "Annual Meeting") for the following purposes:
1. To elect four Class II Directors;
2. To approve an amendment to the Company's 1992 Director Stock Grant Plan
to provide for the grant of 1,000 shares of Common Stock to each director
upon election or reelection to the Board of Directors and an amendment to
the 1992 Director Stock Grant Plan permitting deferral of stock grants
under the terms of the Company's Deferred Compensation Plan;
3. To approve various amendments to the Company's Deferred Compensation Plan
to, among other things, (i) permit participants to defer up to 50% of
their bonus or commissions for investment in the Plan's Common Stock
account, (ii) permit the deferral by directors of director fees for
investment in the Plan's Common Stock account and (iii) permit the
deferral of stock granted to directors under the 1992 Director Stock
Grant Plan and the deposit of that stock into the Plan's Common Stock
account;
4. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock
to 50,000,000 from 30,000,000;
5. To ratify and approve the Company's independent public accountants for
fiscal 1997; and
6. To consider and act upon any other matters which may properly come before
the Annual Meeting and any adjournment thereof.
In accordance with the provisions of the Company's Bylaws, the Board of
Directors has fixed the close of business on June 3, 1996 as the record date
for the determination of the holders of Common Stock entitled to notice of and
to vote at the Annual Meeting.
A list of stockholders entitled to vote at the Annual Meeting will be open
for examination by any stockholder for any purpose germane to the meeting
during ordinary business hours for a period of 10 days prior to the Annual
Meeting at the offices of the Company, 11300 9th Street North, St. Petersburg,
Florida 33716, and will also be available for examination at the Annual
Meeting until its adjournment.
YOUR ATTENTION IS DIRECTED TO THE ACCOMPANYING PROXY STATEMENT. WE INVITE
ALL STOCKHOLDERS TO ATTEND THE ANNUAL MEETING. TO ENSURE THAT YOUR SHARES WILL
BE VOTED AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE IN PERSON, EVEN THOUGH YOU HAVE SENT IN YOUR
PROXY.
By Order of the Board of Directors,
/s/ George W. Off
------------------------------------
George W. Off
President and Chief Executive
Officer
St. Petersburg, Florida
June 21, 1996
IMPORTANT: Whether or not you plan to attend the meeting,
you are requested to complete and promptly return the
enclosed proxy in the envelope provided.
<PAGE>
PROXY STATEMENT
CATALINA MARKETING CORPORATION
11300 9TH STREET NORTH
ST. PETERSBURG, FLORIDA 33716
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JULY 23, 1996
----------------
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
of CATALINA MARKETING CORPORATION, a Delaware corporation (the "Company"), for
use at the Company's 1996 Annual Meeting of Stockholders to be held on
Tuesday, July 23, 1996 at 9:00 AM at the Hyatt Regency Westshore, 6200
Courtney Campbell Causeway, Tampa, Florida, and at any and all adjournments
thereof (the "Annual Meeting"), for the purposes set forth in the accompanying
Notice of Annual Meeting. Any stockholder has the power to revoke his or her
proxy at any time before it is voted. A proxy may be revoked by delivering
written notice of revocation to the Company at its principal office, 11300 9th
Street North, St. Petersburg, Florida 33716, Attention: Corporate Secretary,
by a subsequent proxy executed by the person executing the prior proxy and
presented at the meeting, or by attendance at the Annual Meeting and voting in
person by the person executing the proxy. In addition to solicitation by mail,
officers, directors and regular employees of the Company, who will receive no
additional compensation for their services, may solicit proxies by mail,
telegraph or personal calls. The Company may, but does not currently plan to,
engage a proxy solicitation firm in connection with the solicitation of
proxies. The expense of any such engagement is not expected to exceed $10,000.
All costs of solicitation will be borne by the Company. The Company has
requested brokers and nominees who hold stock in their name to furnish this
proxy material to their customers and the Company will reimburse such brokers
and nominees for their related out-of-pocket expenses. This Proxy Statement of
the Company will be mailed on or about June 21, 1996 to each stockholder of
record as of the close of business on June 3, 1996.
VOTING AT THE MEETING
The Company had 9,784,227 shares of Common Stock, par value $.01 per share
(the "Common Stock"), outstanding as of June 3, 1996. Holders of record of
shares of the Common Stock at the close of business on June 3, 1996 will be
entitled to notice of and to vote at the Annual Meeting and will be entitled
to one vote for each such share so held of record.
NOMINATION AND ELECTION OF DIRECTORS
(PROPOSAL 1)
The persons named in the enclosed proxy will vote FOR the four nominees
named below under "Nominees for Directors" as the four Class II Directors,
unless instructed otherwise in the proxy. The persons receiving the greatest
number of votes, up to the number of directors to be elected, shall be the
persons elected as Class II Directors.
Shares represented by proxies which are marked "withhold authority" will
have the same effect as a vote against the nominees. Each Class II Director is
to hold office until the 1999 Annual Meeting of Stockholders and until his or
her respective successor is duly qualified and elected.
The names and certain information concerning the persons to be nominated to
become directors by the Board of Directors at the Annual Meeting are set forth
below. YOUR BOARD OF DIRECTORS
<PAGE>
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF EACH OF THE NOMINEES
NAMED BELOW UNDER "NOMINEES FOR DIRECTORS". It is intended that shares
represented by the proxies will be voted FOR the election to the Board of
Directors of the persons named below unless authority to vote for nominees has
been withheld in the proxy. Although each of the persons nominated has
consented to serve as a director if elected and your Board of Directors has no
reason to believe that any of the nominees will be unable to serve as a
director, if any nominee withdraws or otherwise becomes unavailable to serve,
the persons named as proxies will vote for any substitute nominee designated
by the Board of Directors. The following information regarding the Company's
directors (including the nominees) and executive officers is relevant to your
consideration of the slate proposed by your Board of Directors.
DIRECTORS AND EXECUTIVE OFFICERS
The current directors, executive officers of the Company and nominees for
director are as follows:
<TABLE>
<S> <C> <C>
Tommy D. Greer.............. 64 Chairman of the Board
George W. Off............... 49 Chief Executive Officer, President and Director
Karl J. Maggard............. 52 Executive Vice President, Marketing
Executive Vice President, Sales and President,
Daniel D. Granger........... 47 Catalina Marketing Services Division
Executive Vice President, Retail and Corporate
Joseph A. Lillis, III....... 49 Development
Senior Vice President and Chief
Philip B. Livingston........ 39 Financial Officer
Frank H. Barker............. 65 Director
Frederick W. Beinecke....... 53 Director
Patrick W. Collins.......... 67 Director
Stephen I. D'Agostino....... 62 Director
Thomas G. Mendell........... 49 Director
Helene Monat................ 49 Director
Thomas W. Smith............. 68 Director
Michael B. Wilson........... 59 Director
</TABLE>
The Board of Directors is divided into three classes, with each class
holding office for staggered three year terms. The terms of Class I Directors
Frank H. Barker, Patrick W. Collins and George W. Off expire in 1998, the
terms of Class II Directors Frederick W. Beinecke, Tommy D. Greer, Helene
Monat and Thomas W. Smith expire in 1996 and the terms of Class III Directors
Stephen I. D'Agostino, Thomas G. Mendell and Michael B. Wilson expire in 1997.
All executive officers of the Company are chosen by the Board of Directors and
serve at the Board's discretion. No family relationships exist between any of
the officers or directors of the Company.
ATTENDANCE AT MEETINGS AND BOARD COMMITTEES
During the fiscal year ended March 31, 1996, the Board of Directors held a
total of five meetings. All members of the Board of Directors attended more
than 75% of the meetings of the Board and of the committees of which he or she
was a member.
The standing committees of the Board of Directors are the Compensation
Committee, the Director Grant Plan Committee, the Audit Committee and the
Nominating Committee.
The Compensation Committee, which met on five occasions in fiscal 1996, is
responsible for: (i) reviewing and recommending to the Board of Directors an
integrated compensation and incentive program for all levels of management;
(ii) reviewing, approving and recommending to the Board of Directors other
employee compensation plans; and, (iii) reviewing and approving compensation
plans for members of the Board of Directors. In addition, the Compensation
Committee is responsible for: (a) granting options to purchase Company
2
<PAGE>
stock pursuant to the Company's 1989 Stock Option Plan; (b) determining the
number of shares subject to options granted and the exercise price per share;
and (c) administering such plan pursuant to its terms. Also, the Compensation
Committee has full and exclusive discretionary authority to (1) construe,
interpret and apply the terms of the Company's Employee Payroll Deduction
Stock Purchase Plan; (2) determine eligibility and adjudicate all disputed
claims under such Plan; and (3) administer such Plan in accordance with its
terms. The Committee currently consists of Frederick W. Beinecke as Chairman,
Patrick W. Collins, Thomas G. Mendell and Michael B. Wilson.
The Director Grant Plan Committee, which met on two occasions in fiscal
1996, is responsible for administering the 1992 Director Grant Plan pursuant
to its terms. The Committee currently consists of Tommy D. Greer as Chairman
and George W. Off.
The Audit Committee, which met on two occasions in fiscal 1996, is
responsible for: (i) reviewing the Company's financial results and the scope
and results of audits; (ii) evaluating the Company's system of internal
controls and meeting with independent auditors and appropriate Company
financial and auditing personnel concerning the Company's system of internal
controls; (iii) recommending to the Board of Directors the appointment of the
independent auditors; and (iv) evaluating the Company's financial reporting
activities and the accounting standards and principles followed. The Committee
currently consists of Stephen I. D'Agostino as Chairman, Frank H. Barker and
Thomas W. Smith.
The Nominating Committee, which met on one occasion in fiscal 1996, is
responsible for recommending qualified candidates for election as directors of
the Company, including the slate of directors which the Board of Directors
proposes for election by stockholders at each annual meeting, and for making
recommendations to the Board of Directors concerning the structure and
membership of the committees of the Board of Directors. In carrying out its
functions in regard to Board membership, the Committee will consider nominees
recommended by stockholders upon written submission of pertinent data to the
attention of the Corporate Secretary. Such data should include complete
information as to the identity of the proposed nominee, including name,
address, present and prior business and/or professional affiliations,
education and experience, particular field or fields of expertise, and the
reasons why, in the opinion of the recommending stockholder, the proposed
nominee is qualified and suited to be a director of the Company as well as
what particular contribution to the success of the Company such person could
be expected to make. The Committee currently consists of Stephen I. D'Agostino
as Chairman, Frederick W. Beinecke, Tommy D. Greer and George W. Off.
NOMINEES FOR DIRECTORS
The following four persons will be placed in nomination for election to the
Board of Directors as Class II Directors. The shares represented by the proxy
cards returned will be voted FOR the election of these nominees unless
otherwise stated in the proxy.
Frederick W. Beinecke was elected as a director of the Company in January
1993, and also served as a director of the Company from 1985 until January
1990. He has been the President of Antaeus Enterprises, Inc. (a venture
capital and marketable securities investment company) since 1982. Mr. Beinecke
is also a director of several private companies.
Tommy D. Greer was the Company's Chief Executive Officer from January 1992
until July 1994, after serving as its President and Chief Operating Officer
from January 1989 to January 1992. Mr. Greer has been a director of the
Company since April 1989 and currently serves as Chairman. Before joining the
Company, Mr. Greer had been retired. Prior to retirement Mr. Greer spent 25
years at Texize Chemicals Company, a household products manufacturer, where he
was responsible for conceptualizing and marketing many popular cleaning
products, including Fantastik Spray Cleaner, Spray & Wash, K2R and Glass Plus.
Mr. Greer was President of Texize from 1969 to 1975.
Helene Monat was elected as a director of the Company in October 1992. From
July 1992 until April 1996, Ms. Monat served as the Company's Executive Vice
President, Sales. From February 1995 until April 1996, she served as President
of Catalina Marketing Services, a business unit of the Company. She was Senior
Vice President, Sales from April 1990 until July 1992 and Vice President,
Sales East prior to that time.
3
<PAGE>
Thomas W. Smith was elected as a director of the Company in July 1994. Mr.
Smith founded and has been President of Prescott Investors, Inc., an
investment advisory firm, since 1973. Mr. Smith is on the board of directors
of MacDermid, Inc., a distributor of specialty chemicals.
OTHER DIRECTORS AND EXECUTIVE OFFICERS
Frank H. Barker, who was elected as a director of the Company in January
1996, was, until his retirement in January 1996, Corporate Vice President
responsible for public relations and government affairs and Company Group
Chairman responsible for the ophthalmic business and the health
promotion/disease prevention business of Johnson & Johnson. Prior to his
retirement, Mr. Barker had been employed by Johnson & Johnson for more than
twenty five years.
Patrick W. Collins, who was elected as a director of the Company in July
1995, was, until his retirement in March 1994, the Vice Chairman and Chief
Operating Officer of Ralphs Grocery Company, and a director of Ralphs from
1988 until March 1994. Prior to his most recent position, Mr. Collins was
Ralphs' President from February 1976 until March 1994. Mr. Collins is also a
director of First Stratford Capital Group, Inc.
Stephen I. D'Agostino was elected as a director of the Company in February
1988. Mr. D'Agostino is a consumer marketing consultant and was Chairman of
Lord Capital Corporation, an investment bank, from January 1989 to December
1991, Chairman of Texas State Optical Corp., an optical stores franchiser,
from August 1990 to December 1991. Mr. D'Agostino is a director of Super Value
Stores, Inc., a grocery wholesaler, as well as Kyser Industrial Corp., a
manufacturer of certain equipment for trucks and refrigerators for
supermarkets and food service organizations.
Daniel D. Granger became Executive Vice President, Sales of the Company and
President of Catalina Marketing Services, a business unit of the Company, in
January 1996. Prior to such time, Mr. Granger had been employed with the
Company for eight years, most recently serving as Chief Executive Officer and
President of Catalina Electronic Clearing Services, a business unit of the
Company.
Joseph A. Lillis, III joined the Company as Executive Vice President, Retail
and Corporate Development in January 1996. From January 1994 to January 1996,
Mr. Lillis served as Senior Vice President and General Manager of Hanes
Licensed Products for Sara Lee Corporation. Prior to joining Sara Lee, Mr.
Lillis served as Senior Vice President and Group Vice President of Advo, Inc.,
a direct mail services provider.
Philip B. Livingston joined the Company as Senior Vice President and Chief
Financial Officer in October 1995. From 1993 to 1995 he was Vice President and
Chief Financial Officer of Celestial Seasonings, Inc., a manufacturer of
specialty tea. From 1989 to 1993 he was Vice President and Chief Financial
Officer of Kenetech Corporation, an independent energy company. From 1985 to
1989 he held various financial management positions for Genentech, Inc., a
manufacturer of pharmaceutical products. Mr. Livingston is a certified public
accountant.
Karl J. Maggard has been the Company's Executive Vice President, Marketing
since June 1994. Prior to June 1994, Mr. Maggard spent 10 years with Tropicana
Products, Inc. as Senior Vice President of Sales and Chairman of the Strategic
Planning Committee.
Thomas G. Mendell was elected as a director of the Company in January 1990.
Mr. Mendell is a partner of The Beacon Group, a merchant banking firm. Prior
to joining The Beacon Group in 1994, Mr. Mendell was a partner of Goldman,
Sachs & Co., which he joined in 1974.
George W. Off, one of the Company's founders, became the President and Chief
Executive Officer in July 1994. Prior to that, Mr. Off was President and Chief
Operating Officer since October 1992, after serving as its Executive Vice
President from April 1990 to October 1992. Mr. Off was re-elected as a
director of the Company in October 1992 after serving in that capacity from
1983 until January 1990.
Michael B. Wilson was elected as a director of the Company in January 1993.
He was Vice President, Sales and Marketing, Consumer and Commercial Paper
Products, for Georgia-Pacific Corporation until his retirement in September
1992. Mr. Wilson also serves on the board of Worldtex, Inc., a covered yarn
manufacturer.
4
<PAGE>
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 1996, certain information
regarding the ownership of Common Stock of each person known by the Company to
be the beneficial owner of more than five percent of the outstanding shares of
the Company's Common Stock, each of its directors and executive officers, and
all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
OFFICERS, DIRECTORS AND -----------------------
5 PERCENT STOCKHOLDERS NUMBER PERCENT
----------------------- ------------ ----------
<S> <C> <C>
T. Rowe Price Associates (2)....................... 925,000 9.5%
100 E. Pratt Street
Baltimore, MD 21202
The Prudential Insurance Company of America (3).... 860,500 8.8%
Prudential Plaza
Newark, NJ 07102
Jennison Associates Capital Corp................... 857,000 8.8%
466 Lexington Avenue
New York, NY 10017
Thomas W. Smith (4)................................ 529,312 5.4%
323 Railroad Avenue
Greenwich, CT 06830
Antaeus Enterprises, Inc. (5)...................... 533,397 5.5%
420 Lexington Avenue, Suite 3020
New York, NY 10170
Frank H. Barker.................................... 834 *
Frederick W. Beinecke (5).......................... 582,640 6.0%
Patrick W. Collins................................. 1,221 *
Stephen I. D'Agostino (6).......................... 36,980 *
Daniel D. Granger.................................. 39,512 *
Tommy D. Greer (7)................................. 84,067 *
Joseph A. Lillis, III.............................. 0 *
Philip B. Livingston............................... 0 *
Karl J. Maggard.................................... 15,106 *
Thomas G. Mendell.................................. 5,780 *
Helene Monat (8)................................... 75,686 *
George W. Off...................................... 147,456 1.5%
Michael B. Wilson.................................. 2,599 *
All directors and executive officers as a group (14 1,521,193 15.3%
persons)..........................................
</TABLE>
- --------
* Amount represents less than 1% of the Company's Common Stock.
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and includes generally voting power or
investment power with respect to securities. Shares of Common Stock
subject to options currently exercisable or exercisable within 60 days are
deemed outstanding for computing the percentage ownership of the person
holding the options but are not deemed outstanding for computing the
percentage ownership of any other person. Such shares are included for
Messrs. Granger--20,500, Greer--36,250, Maggard--15,000 and Off--77,750
and Ms. Monat--44,700, all of which options are exercisable within 60 days
of March 31, 1996.
(2) These securities are owned by various individual and institutional
investors for which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment adviser with power to direct investments and/or
shared power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), Price Associates is deemed to be a beneficial owner of
such securities; however, Price Associates expressly disclaims that it is,
in fact, the beneficial owner of such securities.
5
<PAGE>
(3) The Prudential Insurance Company of America ("Prudential") has direct or
indirect voting and/or investment discretion with respect to these
securities which are held for the benefit of clients by Prudential's
separate accounts, internally managed accounts, registered investment
companies, subsidiaries and/or other affiliates. For purposes of the
reporting requirements of the Exchange Act, Prudential is deemed to be a
beneficial owner of such securities; however, Prudential expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(4) Shares listed for Mr. Thomas W. Smith, a director of the Company, include
50,442 shares owned directly by Mr. Smith, 221,000 shares held by Idoya
Partners, a limited partnership of which Mr. Smith is general partner,
209,500 shares held by Prescott Associates, a limited partnership of which
Mr. Smith is general partner, 12,200 shares held by Prescott International
Partners, a limited partnership of which Mr. Smith is general partner,
2,000 held by Mr. Smith's wife, 7,600 shares held in accounts for Mr.
Smith's children over which he has trading authority, 15,000 shares held
by Prescott Investors profit sharing account of which Mr. Smith is
trustee, and 11,570 shares held by trusts in which Mr. Smith is the
trustee.
(5) Frederick W. Beinecke, a director of the Company, is the President and a
director of Antaeus Enterprises, Inc. ("Antaeus"). The shares listed for
Mr. Beinecke include 21,743 shares owned directly by him, 27,500 shares
held by a trust for his benefit, and 533,397 shares held by Antaeus.
Antaeus and Mr. Beinecke may be deemed to be part of a group, together
with a trust, that beneficially owns 582,640 shares constituting
approximately 6% of the Company's outstanding shares. Antaeus, Mr.
Beinecke, and such trust disclaim membership in such a group. Except for
the shares owned directly by each of them, Antaeus and Mr. Beinecke
disclaim beneficial ownership of all such shares.
(6) Shares listed for Mr. D'Agostino include 950 shares held in an IRA account
by his wife. Mr. D'Agostino disclaims beneficial ownership of such shares.
(7) Shares listed for Mr. Greer include 4,285 shares held by his wife, as to
which Mr. Greer disclaims beneficial ownership.
(8) Shares listed for Ms. Monat include 189 shares held in a trust account for
the benefit of her minor child. Ms. Monat disclaims beneficial ownership
of such shares.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive officers,
directors and 10% stockholders to file reports regarding initial ownership and
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Executive officers, directors and 10% stockholders are
required by Securities Exchange Commission regulations to furnish the Company
with copies of all Section 16(a) forms they file. The Company's information
regarding compliance with Section 16(a) is based solely on a review of the
copies of such reports furnished to the Company by the Company's executive
officers, directors and 10% stockholders. The Company is not aware of any
noncompliance with the requirements of Section 16(a) to file reports during
the Company's last fiscal year, other than as reported below. The following
persons filed forms late during the 1996 fiscal year: Frank H. Barker (one
occasion), Frederick W. Beinecke (one occasion), Daniel D. Granger (two
occasions), Helene Monat (one occasion), George W. Off (one occasion) and
Joseph A. Lillis, III (one occasion). Further, the following recipients of
stock grants under the 1992 Director Grant Plan failed to file reports
disclosing the full amount of such grants due to a misunderstanding of the
application of reporting requirements to grants that vest over a period of
time: Patrick W. Collins, Frank H. Barker, Stephen I. D'Agostino, Michael B.
Wilson and Thomas G. Mendell.
6
<PAGE>
AMENDMENTS TO 1992 DIRECTOR STOCK GRANT PLAN
(PROPOSAL 2)
The Board has approved amendments to the Company's 1992 Director Stock Grant
Plan (the "Director Grant Plan"), effective July 25, 1995, subject to the
approval of the Company's stockholders. The affirmative vote of a majority of
the outstanding shares present or represented and entitled to vote at the
Annual Meeting will be required to approve this proposal. The persons named in
the enclosed proxy will vote shares represented by proxies returned to the
Company FOR the proposal unless instructed otherwise in the proxy. Shares
represented by proxies which are marked "abstain" will have the same effect as
a vote against this proposal. YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE AMENDMENTS TO THE DIRECTOR
GRANT PLAN.
AMENDMENTS REQUIRING STOCKHOLDER APPROVAL
Amendment to Calculation of Shares Granted Upon Election or Reelection.
Section 6(b) of the Director Grant Plan provides for a grant of shares of
Common Stock to each outside director as of the day that such director takes
office following the election or reelection of such director by the
stockholders or by the Board of Directors, as provided in the Company's
Bylaws. Previously, assuming a three-year term upon the election of an
eligible director, each grant included the number of shares obtained by
dividing $30,000 by the Fair Market Value (as defined in the Director Grant
Plan) of the shares on the effective date of the grant. This formula was
reduced pro rata for any term to which an eligible director was elected, which
term was expected to be less than three years.
In order to simplify the operation of the Director Grant Plan and to
increase the number of shares awarded to the outside directors upon their
election or reelection, the Board of Directors believed that it was in the
best interest of the Company to amend Section 6(b) to provide that upon each
election or reelection of a director such director will receive an aggregate
of 1,000 shares of Common Stock (or, if the Stock Split Dividend described in
Proposal 4 is effected, 2,000 shares) in lieu of the number derived from the
formula described above. This amendment eliminated the necessity of
determining the fair market value of the Company's Common Stock in calculating
the number of shares each director receives. Subject to approval by the
stockholders, Section 6(b) has been revised to read in its entirety as
follows:
Award of Grants. A Grant shall be awarded to each Director as of the day
that such Director takes office following the election or reelection of
such Director by the stockholders or by the Board, as permitted in the
Corporation's Bylaws, in partial consideration for the fulfillment by
such Director of such Director's duties as a director of the
Corporation. Subject to the availability of Shares as specified in
Section 5 of the Plan, each Grant awarded on or after July 25, 1995
shall include an aggregate of one thousand (1,000) Shares (subject to
adjustments in accordance with the provisions of Section 8 hereof) as of
the effective date of the Grant, as determined by the Administrator;
provided, however, that if the term (the "Term of Directorship") for
which the Director has been elected is not a full three-year term, the
number of Shares subject to a Grant shall be the number of Shares
calculated as set forth above, multiplied by a fraction, the numerator
of which is the number of full months during which the Grantee shall
serve as director following the award of the Grant and until the next
annual meeting of stockholders (the "Annual Meeting of Stockholders") at
which the class of directors to which the Grantee belongs is to be
elected (assuming for purposes of this calculation that the Annual
Meeting Date (as hereinafter defined) is July 31 of such fiscal year),
and the denominator of which is thirty-six (36), rounded up to the
nearest whole number of Shares.
Deferral of Grant. The Board has also proposed that the Director Grant Plan
be amended, effective as of the date of the Annual Meeting, to provide that
directors may defer the receipt of stock granted pursuant to Section 6(b) and
deposit the value of such stock as stock units into an account created under
the Company's Deferred Compensation Plan. Once deposited under the terms of
the Deferred Compensation Plan, neither the value of such deposit nor such
stock may be withdrawn until the director's retirement, termination or death
in
7
<PAGE>
accordance with the terms of the Deferred Compensation Plan. If receipt of
such stock is deferred, the director will thereby be able to defer taxable
income on the value of such stock until it is distributed pursuant to the
terms of the Deferred Compensation Plan. To effect this Amendment, a new
Section 6(i) would be added to the Director Grant Plan and would read in its
entirety as follows:
Deferral of Grant. Prior to his or her election or reelection to the
Board of Directors, each Director may elect to defer, in accordance with
the terms of the Corporation's Deferred Compensation Plan, all or a
portion of the Grant he or she shall receive if elected or reelected,
pursuant to Section 6(b). In such case, no shares will be issued to the
Director and a credit will be made to the Common Stock unit account
maintained for such Director under the Deferred Compensation Plan in a
number of units equal to the number of shares deferred on the date of
Grant.
REASONS FOR AMENDMENTS
The proposed amendment to change the formula for grant awards was adopted by
the Board of Directors for two reasons. First, the Board desired to simplify
the operation of the Director Grant Plan. Secondly, when the Director Grant
Plan was adopted (October 27, 1992), the fair market value of the Common Stock
on the New York Stock Exchange was $33.50 per share. As of July 24, 1995, the
day before the amendment was adopted by the Board, the closing price of the
Common Stock on the New York Stock Exchange was $55.50 per share and the
closing price of the Common Stock on June 3, 1996 was $78.00 per share. With
this increase in the value of the Common Stock, the number of shares subject
to grants has decreased due to the formula described above. This decrease was
viewed as an unacceptable consequence of the increase in stock price.
Therefore, to increase the benefits to directors and to counteract the effect
of the increase in stock value, the Board of Directors proposed an amendment
to the Plan to change the method in which grants are calculated, as set forth
herein. By guaranteeing outside directors a meaningful number of shares of
Common Stock of the Company upon election or reelection, the Plan provides a
valuable incentive to directors to continue in service to the Company.
The proposed amendment regarding the deferral of grants was adopted by the
Board of Directors to further increase the value of director compensation
without materially increasing the cost to the Company. By deferring grants,
directors will be able to defer taxable income on the value of a grant.
Further, by creating an incentive for directors to hold their stock for the
long term, in the form of units under the Deferred Compensation Plan, the
amendment further aligns directors' interests with the interests of the
stockholders of the Company.
SUMMARY OF THE DIRECTOR GRANT PLAN
The Director Grant Plan is intended to provide incentive to outside
directors of the Company, to encourage proprietary interest in the Company by
the Company's directors, and to attract new outside directors with outstanding
qualifications. The availability of stock grants is an important feature of
the Company's ability to attract and retain qualified directors.
Eligibility. The "Grantees" who are awarded grants under the Director Grant
Plan are the outside (non-employee) directors, duly elected to the board by
the Company's stockholders or otherwise in accordance with the Company's
Bylaws, and all outside (non-employee) directors appointed to fill a vacancy
or a newly created directorship position on the Board. The Company currently
has eight outside (non-employee) directors who are eligible to participate in
the Director Grant Plan.
Administration. The Director Grant Plan is administered, in the discretion
of the Board from time to time, by the Board or by a committee appointed by
the Board (the "Director Grant Plan Committee"). The Director Grant Plan
Committee must consist of not less than two members of the Board. The Board or
such Director Grant Plan Committee administering the Director Grant Plan (the
"Director Grant Plan Administrator") has the authority to (i) construe and
interpret the Director Grant Plan; (ii) define the terms used in the Director
Grant Plan; (iii) prescribe, amend and rescind rules and regulations relating
to the administration of the Director Grant Plan; and (iv) make all other
determinations necessary or advisable for the administration of the Director
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<PAGE>
Grant Plan. The Director Grant Plan Committee has been appointed by the board
to administer the Director Grant Plan. The members of the Director Grant Plan
Committee are Tommy D. Greer as Chairman and George W. Off.
Shares Available For Grants Under the Plan. The stock subject to grants
awarded under the Director Grant Plan are shares of authorized but unissued or
reacquired shares of Common Stock. The aggregate number of shares which were
initially available for grants under the Director Grant Plan was 50,000, and
there are currently 43,707 shares available for future grants under the
Director Grant Plan. The aggregate number of shares covered by the Director
Grant Plan and the number of shares covered by each grant will be
proportionately adjusted as a result of any stock split, stock dividend,
combination of shares or any other similar change (including the Stock Split
Dividend described in Proposal 4). Shares subject to any outstanding grants
which are forfeited for any reason are returned to the Company in accordance
with the Director Grant Plan and the shares so forfeited may again be subject
to grants.
Participants; Award of Grants. The Grantees consist exclusively of outside
(non-employee) directors of the Company. However, no director is eligible to
receive a grant if and to the extent that such director is prohibited from
personally accepting or benefitting from a grant due to such director's
affiliation with a business organization. Such directors will, instead,
receive $10,000 per year in cash, in quarterly installments, for each year
during the term of their directorships. All outside directors are currently
eligible to receive stock benefits under the Director Grant Plan. Grants are
evidenced by written stock grant agreements in such form as the Director Grant
Plan Administrator shall from time to time determine.
A grant is awarded to each Grantee as of the day that such Grantee takes
office following the election or reelection of such Grantee by the
stockholders or by the Board, as provided in the Company's Bylaws, in partial
consideration for the fulfillment by such Grantee of such Grantee's duties as
a director of the Company. Prior to the amendment to the Director Grant Plan
being proposed for approval by the stockholders, assuming a three-year term
upon the election of an eligible director, each grant included the number of
shares obtained by dividing $30,000 by the Fair Market Value (as defined in
the Director Grant Plan) of the shares on the effective date of the grant.
This formula was reduced pro rata for any term to which an eligible director
was elected, which term was expected to be less than three years. For example,
if a Grantee's term was expected to be eighteen months, the Fair Market Value
of the Shares to be awarded was $15,000. Pursuant to the amendment, this
formula has been changed such that each director will receive, upon election
or reelection for any three-year term, a grant of 1,000 shares (or 2,000
shares as adjusted for the Stock Split Dividend). The number of shares granted
will be reduced pro rata for any term of less than three years in length.
Although not required to do so, the Company has registered the award of shares
pursuant to the Director Grant Plan under the Securities Act of 1933, as
amended.
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<PAGE>
Grants Awarded Since Inception of the Director Grant Plan. Following final
approval of the Director Grant Plan by the Board on January 26, 1993, grants
have been awarded to Grantees who currently serve as directors pursuant to the
terms of the Director Grant Plan as follows:
GRANTS UNDER THE DIRECTOR GRANT PLAN
<TABLE>
<CAPTION>
AGGREGATE FAIR NUMBER OF MONTHS
DATE CLASS OF MARKET VALUE ON EXPECTED IN TERM NUMBER OF
DIRECTOR OF GRANT DIRECTOR(1) DATE OF GRANT FOLLOWING GRANT SHARES IN GRANT
-------- -------- ----------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Frederick W. Beinecke... 1/26/93 II $ 5,031 6 125
Stephen I. D'Agostino... 1/26/93(2) III 23,345 18 580
Michael B. Wilson....... 1/26/93 III 15,013 18 373
Frederick W. Beinecke... 7/27/93 II 30,000 36 780
Thomas G. Mendell....... 4/01/94(3) III 3,333 4 73
Stephen I. D'Agostino... 7/26/94 III 30,000 36 663
Thomas G. Mendell....... 7/26/94 III 30,000 36 663
Michael B. Wilson....... 7/26/94 III 30,000 36 663
Thomas W. Smith......... 7/26/94 II 20,000 24 442
Patrick W. Collins...... 7/26/94 I 10,000 12 221
Patrick W. Collins...... 7/25/95 I 55,380 36 1,000(4)
Frank H. Barker......... 1/23/96 I 54,353 30 834(5)
</TABLE>
- --------
(1) The terms of Class I Directors expire at the time of the 1998 Annual
Meeting of Stockholders, the terms of the Class II Directors expire at the
time of the 1996 Annual Meeting of Stockholders and the terms of the Class
III Directors expire at the time of the 1997 Annual Meeting of
Stockholders.
(2) This grant was deemed granted upon ratification of certain changes to the
Director Grant Plan on January 26, 1993 but was awarded in a manner to
provide a benefit based on the Fair Market Value ($34.50 per share) on the
date of adoption (October 27, 1992) of the Director Grant Plan. Based on
such Fair Market Value, the benefit to Mr. D'Agostino was approximately
$20,000.
(3) Prior to April 1994, Mr. Mendell was not eligible to receive grants under
the Director Grant Plan due to his affiliation with a business
organization which prohibited his receiving benefits under the Director
Grant Plan. However, prior to the end of the Company's 1994 fiscal year,
Mr. Mendell terminated his relationship with such business organization
and thus became eligible to receive grants under the Director Grant Plan.
Accordingly, on April 1, 1994, Mr. Mendell received a grant of 73 shares
to cover the four month period until the 1994 Annual Stockholders Meeting.
(4) As noted, the amendment being presented for approval by stockholders was
effective July 25, 1995, the date of the 1995 Annual Stockholder Meeting.
Therefore, subject to stockholder approval, Mr. Collins, who was elected
as a director at such meeting, received a grant of 1,000 shares.
(5) For the same reasons disclosed with respect to Mr. Collins in footnote 4
above, Mr. Barker received a grant of 834 shares on January 23, 1996, the
date of his election to the Board of Directors, which represents a grant
of 1,000 shares reduced to reflect the fact that he was expected to serve
a term of 30 months following the date of grant.
If the nominees for election as directors being considered at the Annual
Meeting are elected by the stockholders and the proposed amendments to the
Director Grant Plan are approved, then Mr. Beinecke, Ms. Monat and Mr. Smith
will each receive grants of 1,000 shares. The fair market value of the Shares
on June 3, 1996 was $78.00 per share. If this is the fair market value on the
date of the Annual Meeting, then each grant will have an aggregate value of
$78,000.
Vesting. Shares included in grants are subject to the vesting provisions
set forth in the Director Grant Plan. Shares which have vested according to
the formula described herein are considered "Vested Shares" and
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<PAGE>
shares which have not so vested are considered "Non-Vested Shares." The shares
included in each grant vest on each successive Annual Meeting date (the
"Annual Meeting Date") following the effective date of the grant. The number
of shares subject to a grant which become Vested Shares as of each Annual
Meeting Date is calculated by multiplying the number of shares included in the
grant by a fraction, the numerator of which is equal to the number of months
which have elapsed since the later of (i) the election or reelection of such
Grantee (i.e., the effective date of the grant) or (ii) the last Annual
Meeting Date, and the denominator of which is the number of full months during
which the Grantee serves as director following the award of the grant and
until the next Annual Meeting Date at which the class of directors to which
the Grantee belongs is to be elected (assuming for purposes of this
calculation that the Annual Meeting Date is July 31 of such fiscal year).
A Grantee may not assign, sell, pledge, hypothecate or otherwise transfer
any grant or any Non-Vested Shares. If a Grantee ceases to be a director for
any reason or no reason, including upon death or disability, removal (with or
without cause) or resignation, the grant will be automatically terminated
immediately upon the effective date of such cessation and all shares included
in the grant which are Non-Vested Shares as of the effective date of such
cessation, will be forfeited automatically and will, effective immediately
upon such cessation, be returned to the status of authorized shares to be
issued pursuant to grants under the Director Grant Plan.
A Grantee will have all rights as a stockholder with respect to all shares
included in the grant, regardless of whether the shares awarded are Vested
Shares or Non-Vested Shares, including, without limitation, the right to vote
any such shares and the right to receive dividends.
Change of Control. Upon the occurrence of a change of control of the
Company (i.e., a sale of all or substantially all of the Company's assets, a
merger of the Company with another entity where the Company is not the
surviving corporation or the consolidation of the Company with another
Company) (a "Forfeiture Event"), the Director Grant Plan will terminate.
Unless such Forfeiture Event occurs within thirty days following the date of
an Annual Meeting of Stockholders, any shares of Common Stock which would have
become Vested Shares at the next succeeding Annual Meeting of Stockholders
shall become vested and all other Non-Vested Shares will be forfeited. If a
Forfeiture Event occurs within such thirty-day period, all Non-Vested Shares
will be forfeited.
Amendment and Termination. Grants may be awarded pursuant to the Director
Grant Plan until the expiration of the Director Grant Plan on October 27,
2002.
The Board may, from time to time, with respect to any shares at the time not
subject to grants, suspend or discontinue the Director Grant Plan or revise or
amend it in any respect whatsoever, provided that the Board may not revise or
amend the Director Grant Plan more than once every six months (other than to
conform with changes in certain laws), and provided further that no amendment
or revision may adversely affect, without the affected Grantee's written
consent, the rights of any Grantee to whom shares have been issued pursuant to
the Director Grant Plan. In addition, without the approval of the Company's
stockholders, no such revision or amendment may:
1.Materially increase the benefits accruing to Grantees under the Director
Grant Plan;
2.Increase the number of Shares which may be issued under the Director
Grant Plan; or
3. Change the designation in the Director Grant Plan with respect to the
classes of persons eligible to receive Grants.
Federal Income Tax Consequences. The following discussion is intended only
as a general summary of the federal income tax consequences to Grantees and
the Company with respect to the Director Grant Plan. The discussion is based
on current laws which are subject to change at any time or which may be
interpreted differently. The discussion does not address tax consequences
under the laws of any state, local or foreign jurisdiction, nor does it
address federal and state estate, inheritance and gift taxes, and the tax
treatment of each Grantee will depend in part upon such Grantee's particular
tax situation.
11
<PAGE>
In general, a Grantee will not recognize income upon receipt of shares
pursuant to a grant. However, upon vesting of a Grantee's shares, a Grantee
will recognize compensation income (and receive basis in such shares) in an
amount equal to the fair market value of the Vested Shares determined on the
vesting date, and the Company will be entitled to a compensation deduction
equal to such amount. Alternatively, no later than 30 days after a grant of
shares, a Grantee may make an election under Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Code"). In such case, the Grantee will
recognize compensation income in the taxable year of the grant (and receive a
basis) equal to the fair market value of such shares determined on the date of
grant, and the Company will be entitled to a compensation deduction equal to
such amount. In general, under either alternative, a Grantee will recognize
capital gain or loss upon the subsequent disposition of the shares.
Unless a Grantee makes an election under Section 83(b) of the Code, as
described above, amounts paid to a Grantee as dividends with respect to such
shares prior to the date that a Grantee's shares vest under the Director Grant
Plan will be treated for federal income tax purposes as compensation income
(taxable at ordinary income rates) for which the Company will be entitled to a
compensation deduction with respect to such amounts. However, upon the vesting
of a Grantee's shares (or a Grantee's making of a timely Code Section 83(b)
election), amounts paid to a Grantee as dividends will be treated as dividends
for federal income tax purposes for which the Company will not be entitled to
a deduction with respect to such amounts.
Assuming approval of the proposed amendments, if a Grantee elects under the
Company's Deferred Compensation Plan to defer the receipt of shares pursuant
to a grant, the Grantee will not be taxed at the time of such election or upon
vesting of the grant. Rather, upon the receipt of shares from the Deferred
Compensation Plan upon death, disability or retirement, tax will be due on the
then value of the shares distributed. The taxable value of such shares will be
treated as ordinary compensation income to the Grantee and the Company will be
entitled to a corresponding compensation deduction.
AMENDMENTS TO DEFERRED COMPENSATION PLAN
(PROPOSAL 3)
The Board has approved an amendment and restatement of the Company's
Deferred Compensation Plan (the "Deferred Compensation Plan"), effective as of
July 1, 1996, certain of which amendments are subject to the approval of the
Company's stockholders. The affirmative vote of a majority of the outstanding
shares present or represented and entitled to vote at the Annual Meeting will
be required to approve this proposal. The persons named in the enclosed proxy
will vote shares represented by proxies returned to the Company FOR the
proposal unless instructed otherwise in the proxy. Shares represented by
proxies which are marked "abstain" will have the same effect as a vote against
this proposal. YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE PROPOSAL TO APPROVE THE AMENDMENTS TO THE DEFERRED COMPENSATION PLAN.
AMENDMENTS REQUIRING STOCKHOLDER APPROVAL
Deferral by Participants of Bonus or Commissions. The Deferred Compensation
Plan currently permits eligible employees to defer up to 100% of their regular
salary, bonus, commission, or any special compensation received during any
Deferred Compensation Plan year. Such deferred compensation is deposited in a
Deferred Compensation Account maintained by the Plan Administrator, as defined
below, in the name of the participant. Such deferred compensation bears
interest quarterly at a rate determined by the Plan Administrator in its sole
discretion, which rate is determined by reference to the average rate earned
by the Company's 401(k) plan, but in no event may exceed the prime rate as
reported by the Wall Street Journal plus one percent (1%).
Subject to stockholder approval, the Board of Directors has amended the
deferral provisions of the Deferred Compensation Plan to permit eligible
participants to elect that a portion of their deferred compensation equal to
up to fifty percent (50%) of each participant's annual bonus or commissions be
deposited into a Common Stock
12
<PAGE>
Account maintained under the Deferred Compensation Plan on such participant's
behalf. Deposits into the Common Stock Account during any one year pursuant to
this amendment are subject to a maximum amount of $100,000 per participant.
Amounts deferred are credited to the participant's Common Stock Account in a
number of hypothetical stock units equal to the dollar amount of the deferral
divided by the fair market value of the Common Stock (defined as the closing
price on the New York Stock Exchange of the Common Stock on the date in
question) on the five business days preceding the payment date for the bonus
or commission deferred. As noted, amounts deferred by eligible participants
are credited to units denominated in shares of Common Stock, but no shares of
Common Stock will be issued until the participants receive the related
payments in accordance with the Deferred Compensation Plan. Upon retirement,
termination of employment, or death, a participant or his or her beneficiary
will receive shares of Common Stock equal to the number of units in his or her
Common Stock Account. Such Common Stock would be distributed in the same
manner as other distributions under the Deferred Compensation Plan, either in
a lump sum or installments payable over ten years.
Deferral of Directors Fees. In addition to the amounts currently deferrable
pursuant to the Deferred Compensation Plan by employees of the Company, the
Board of Directors has amended the Deferred Compensation Plan, subject to
stockholder approval, to permit independent directors of the Company to
participate. Directors may defer up to one hundred percent (100%) of the cash
meeting fees paid to them for service to the Company. Any such director fees
deferred may be invested in the Common Stock Account maintained on behalf of
each director as described above. No directors fees deferred and invested in
Common Stock units will be subject to matching by the Company.
Deferral of Stock Grants Made Under The Director Grant Plan. Upon election
and reelection, each independent director receives a grant of stock in
accordance with the terms of Director Grant Plan, as more fully described
under Proposal 2. Subject to stockholder approval, the Board of Directors has
amended the Deferred Compensation Plan to permit stock grants to be deferred
and converted into stock units credited to the Common Stock Account maintained
by the Plan Administrator on behalf of each director. For each share of Common
Stock otherwise to be included in a grant under the Director Grant Plan, the
director's Common Stock Account under the Deferred Compensation Plan will be
credited with one stock unit. In order to defer a stock grant, each eligible
director must elect deferral prior to the annual stockholders meeting at which
his or her election or reelection to the Board of Directors of the Company
will be considered. Amounts deferred and placed in the director's Common Stock
Account are subject to the vesting schedule set forth in the Director Grant
Plan as more fully described under Proposal 2. By deferral of stock grants,
directors may postpone taxation with respect to the value of such stock grant
which would otherwise be taxable to him or her upon vesting.
Revocability of Elections. Subject to certain unforeseeable financial
emergency revocations permitted by the Deferred Compensation Plan, the
elections described above relating to the deferral of bonus or commissions
shall be irrevocable after the beginning of the Deferred Compensation Plan
year. In the case of director fees, the deferral election shall be irrevocable
upon the commencement of the meeting with respect to which such election is
made. Deferrals with respect to stock grants cannot be modified or amended
once the applicable stockholder meeting has commenced. Any such deferral
election will continue until revoked or modified in writing, which revocation
or modification shall only apply to compensation payable to the participant
after the end of the Deferred Compensation Plan year or for subsequent Board
of Directors or annual stockholder meetings. In addition to the above, with
respect to executive officers and directors subject to Section 16 of the
Exchange Act, and to the extent required by such section, executive officers
or directors making an election to deposit bonus, compensation, or directors
fees into Common Stock Accounts (but not stock grants) must make an
irrevocable election at least six months in advance of the effective date of
the transaction.
Adjustments to Common Stock Accounts. Upon the payment of dividends on the
Company's Common Stock, each participant's Common Stock Account will be
increased by the addition of units reflecting the value of such dividend.
Appropriate adjustments will also be made to reflect any stock split, stock
dividend, combination of shares or any other similar change relating to the
Common Stock.
13
<PAGE>
REASONS FOR AMENDMENTS
The Board of Directors has adopted the amendments to the Deferred
Compensation Plan described herein to enhance the effectiveness of the
Deferred Compensation Plan in attracting and retaining individuals of
outstanding abilities and specialized skills. The Board of Directors believes
that by permitting employees to invest certain of their deferred compensation
in units of Common Stock of the Company which will then be held for the
remainder of their employment with the Company, the Deferred Compensation Plan
will serve to provide additional incentives to such employees as stockholders
of the Company. By amending the Deferred Compensation Plan to permit directors
to defer compensation, the Board of Directors believes that they will provide
additional valuable benefits to such directors by allowing them to save for
their own retirement by deferring a portion of their income. Further, by
providing executive officers and directors with means of deferring taxation on
a portion of their income, the Company will enhance the value of such income
to such employees and directors without material additional expense to the
Company. As a result, the Company believes that the Deferred Compensation Plan
as amended will enable the Company to better attract and retain individuals
with outstanding abilities and specialized skills. In addition, it is deemed
to be in the best interest of the Company and its stockholders to align the
interests of the Company's directors and officers, whenever possible, with the
interests of the Company's stockholders.
SUMMARY OF THE DEFERRED COMPENSATION PLAN
In addition to the amendments being proposed to the stockholders for
approval at the Annual Meeting, the Deferred Compensation Plan has also been
amended by approval of the Board of Directors, effective as of July 1, 1996,
in several ways which are not subject to stockholder approval. The following
is a description of the Deferred Compensation Plan, as so amended.
General. The Company has maintained a deferred compensation plan for all
employees with a title of Vice President or a more senior title since January
1992. The original deferred compensation plan was amended and restated by the
Company and has been in effect, as amended, since January 1995. As currently
in effect, the Deferred Compensation Plan permits the deferral of all or any
part of a participant's regular salary, bonus, commission or special
compensation during the Deferred Compensation Plan year. Such deferred amounts
are invested in a Deferred Compensation Account, bearing interest as described
above, maintained by the Deferred Compensation Plan Administrator in the name
of each participant. Effective July 1, 1996, deferred amounts may be invested
at the direction of the employee in a variety of investment funds
substantially similar to the funds available under the Company's 401(k) plan.
The Plan Administrator will be under no obligation to follow the participant's
directions.
Under the Deferred Compensation Plan, Messrs. Off, Greer, Maggard and
Granger and Ms. Monat deferred aggregate compensation of $114,505, $19,383,
$15,986, $9,052 and $217,863, respectively, during fiscal year 1996, and
$152,983, $0, $14,950, $25,310 and $209,274, respectively, during fiscal year
1995.
Plan Administrator; Eligible Participants. The Deferred Compensation Plan is
currently administered by the Company (the "Plan Administrator"). The Company
currently intends to appoint the committee that administers the 401(k) plan as
Plan Administrator, effective July 1, 1996. The Plan Administrator has
complete control and discretion to manage the operation and administration of
the Deferred Compensation Plan, including without limitation, the power to (i)
determine all questions relating to the eligibility of employees to
participate or continue to participate in the Deferred Compensation Plan; (ii)
maintain all records and books of account necessary for the administration of
the Deferred Compensation Plan; (iii) interpret the provisions of the Deferred
Compensation Plan and make and publish such interpretive or procedural rules
as are not inconsistent with the Deferred Compensation Plan; (iv) compute,
certify and arrange for the payment of benefits to which any participant or
beneficiary is entitled; (v) process claims for benefits under the Deferred
Compensation Plan; (vi) engage agents and professionals to assist in carrying
out its duties; and (vii) develop and maintain such instruments as may be
deemed necessary from time to time by the Plan Administrator to facilitate
payment of benefits under the Deferred Compensation Plan. The Deferred
Compensation Plan provides that the Plan
14
<PAGE>
Administrator, in its sole discretion, shall determine those employees of the
Company or certain related entities eligible to participate in the Deferred
Compensation Plan. In accordance with current guidelines developed by the Plan
Administrator, all employees of the Company with the title of Vice President
or any more senior title are eligible to participate in the Deferred
Compensation Plan. If the proposed amendments are approved, eligible
participants will be expanded to include independent directors of the Company.
Deferral of Option Profit Upon Exercise of Non-Qualified Stock
Options. Effective July 1, 1996, participants in the Company's 1989 Stock
Option Plan (the "Option Plan") may defer the Option Profit, as defined below,
otherwise payable to the participant in shares of Common Stock upon the stock
for stock exercise, described below, of non-qualified stock options under the
Option Plan by filing an election form with the Plan Administrator at least
one year prior to the date on which the non-qualified stock option vests. With
respect to non-qualified stock options that are vested as of July 1, 1996 or
will become vested before July 1, 1997, participants may elect on or before
August 30, 1996 to defer the Option Profit received upon exercise thereof. Any
such Option Profit deferred will be credited to the deferring participant's
Common Stock Account and will be represented by stock units in a number
determined by dividing the Option Profit by the fair market value of the
Common Stock on the date of exercise of the non-qualified stock option. A
conforming amendment has been made to the Option Plan to permit the deferral
of the Option Profit.
For purposes of the Deferred Compensation Plan, the "Option Profit" is
defined as the amount (not less than zero) by which the fair market value of
the shares of Common Stock subject to a non-qualified stock option on the date
of the participant's exercise of such option exceeds the aggregate exercise
price of such option. A stock for stock exercise eligible for Option Profit
deferral is effected under the Deferred Compensation Plan by the optionee
paying the exercise price of an option by delivering to the Company shares of
Common Stock owned by the optionee for at least six months prior to exercise,
in good form for transfer, having a fair market value as of the date of
exercise equal to the aggregate exercise price of the subject option.
Following the deferral transaction, the previously owned shares continue to be
owned by the participant outside of the Deferred Compensation Plan.
Company Contributions. The Company credits each participant, excluding
directors, with a matching contribution based upon his compensation deferral
as follows: the first two percent (2%) of salary deferred pursuant to the
Deferred Compensation Plan is matched at a rate of one hundred percent (100%)
and the next two percent (2%) of salary deferred is matched at the rate of
twenty-five percent (25%). Any additional compensation deferred under the
Deferred Compensation Plan does not entitle the participant to a matching
contribution. All matching contributions are deposited in a Matching
Contribution Account maintained for each participant and are invested in the
same manner as Deferred Compensation Accounts. Further, as of each Deferred
Compensation Plan year, the Company may, in its sole discretion, credit
participants with a discretionary contribution in an amount to be determined
by the Company.
Vesting. A participant's vested interest in matching contributions is equal
to a percentage based on such participant's numbers of years of service.
Effective July 1, 1996, vesting will occur ratably in annual installments of
twenty percent (20%) per year to one hundred percent (100%) after five years
of service. Prior to such date, matching contributions vested fully after two
years of service.
Loans. Participants may borrow up to the lesser of 50% of their account
balance under the Deferred Compensation Plan (excluding the value of their
Common Stock Account) or $100,000. A maximum of two loans per participant not
exceeding in the aggregate the above limits may be outstanding at any one
time. Any such loans will be secured by the remaining balance of the
participant's account.
Distributions under Deferred Compensation Plan. Subject to certain
unforeseen emergency provisions, no amounts deferred may be distributed until
the participant's termination of employment with the Company or any related
employer or death. Distributions shall be made either in a series of annual
installments (not to exceed ten) or a lump sum, as selected by the participant
pursuant to an advance election. If a participant dies before receiving all
benefits of the Deferred Compensation Plan, all unpaid amounts shall be paid
to the beneficiary or
15
<PAGE>
beneficiaries designated by the participant to receive such benefits. If a
participant's employment is terminated for reasons other than retirement on or
after the participant's normal retirement date, as defined by the Deferred
Compensation Plan, the participant's disability or death, such participant
shall receive the balance of his Deferred Compensation Account and the vested
portion of his Matching Contribution Account and any discretionary
contributions made by the Company on his behalf. Upon attaining normal
retirement age or termination for disability or death, the participant shall
be one hundred percent (100%) vested in all matching and discretionary
contributions made under the Deferred Compensation Plan.
Change in Control. If a participant's employment is terminated other than
for Cause (as defined in the Deferred Compensation Plan) during the two years
following a Change in Control of the Company (also as defined in the Deferred
Compensation Plan), the participant's accounts under the Deferred Compensation
Plan will become fully vested. Upon the occurrence of a Change in Control of
the Company, no amendments may be made to the Deferred Compensation Plan which
would be adverse to the participants. Should a Change in Control occur, the
Deferred Compensation Plan's administration and claims procedure will be
handled by an independent third party instead of the Company or its duly
appointed administrative committee. Immediately prior to a Change in Control
units held in Common Stock Accounts will be converted into actual shares of
Common Stock and contributed to the trust, described below. In addition to the
above, the right to amend the Deferred Compensation Plan following a Change in
Control of the Company will be given to the participants acting by majority
vote rather than the Company.
Section 16 and Amendments. The Deferred Compensation Plan following the
adoption of the proposed amendments is intended to comply with Rule 16b-3
("Rule 16b-3") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), so that purchases of shares of the Deferred Compensation Plan
will be exempt from the short-swing prohibitions set forth in Section 16(b) of
the Exchange Act. Subject to certain limitations, the Company's Board of
Directors may amend the Deferred Compensation Plan from time to time. Under
Rule 16b-3, as presently in effect, stockholder approval is required for any
amendment to the Deferred Compensation Plan which would increase materially
the number of shares issuable to executive officers or directors under the
Deferred Compensation Plan, increase materially the Company stock benefits
which may be provided under the Deferred Compensation Plan to executive
officers or directors or modify materially the eligibility requirements for
participation in Company stock funds by executive officers and directors in
the Deferred Compensation Plan. In addition, no amendment may significantly
reduce the value of a participant's vested accounts.
Rabbi Trust. It is intended that the Deferred Compensation Plan be deemed
unfunded for federal tax purposes and for purposes of Title I of the Employee
Retirement Income Security Act of 1974 ("ERISA"). All accounts established
under the Deferred Compensation Plan have been maintained merely as
bookkeeping accounts and amounts credited to the participants' accounts have
been the general assets of the Company subject to the claims of the Company's
general creditors until such amounts are distributed to the participants.
Effective July 1, 1996, the Company has amended the Plan to establish a trust
fund to hold the assets of the Deferred Compensation Plan for the benefit of
participants. Following establishment of such trust, the Company intends to
make contributions to the trust equal to the amounts of deferred compensation
(along with all matching contributions), including amounts equal to all
compensation deferred, all matching amounts and earnings on accounts to date
under the Deferred Compensation Plan. Although such amounts will be deposited
into the trust, the Deferred Compensation Plan will continue to be unfunded
for tax and ERISA purposes because the assets of the trust will remain subject
to the claims of the Company's general creditors in the event of insolvency.
Notwithstanding the above, prior to a Change in Control, participants' Common
Stock Accounts will not be held in the trust. Such accounts will merely be
bookkeeping accounts on the records of the Company. Immediately prior to a
Change in Control, units in Common Stock Accounts will be converted into
actual shares of Common Stock and contributed to the trust. Further, in the
event of a Change in Control of the Company, assets will be deposited in the
trust equal to the liabilities under the Deferred Compensation Plan if not
already so deposited and its administration will be handled by an independent
third party instead of the Company. To fully fund the trust as of June 3,
1996, the Company would be required to deposit assets with a value of
approximately
16
<PAGE>
$3,660,000 into the trust. Such deposit will be made from the general cash
reserves of the Company and will not have a material adverse effect on the
financial position of the Company.
Federal Income Tax Considerations. The Deferred Compensation Plan is
intended to be administered as a non-qualified deferred compensation plan for
a select group of management or highly compensated employees. It is also
intended that amounts deferred and earnings accrued under the Deferred
Compensation Plan are not recognized as income for federal tax purposes until
such contributions or earnings are actually distributed or withdrawn from the
Deferred Compensation Plan. The Company is not entitled to a compensation
expense deduction for amounts deferred under the Deferred Compensation Plan
and will be required to pay income tax on all earnings on amounts held in the
Deferred Compensation Plan which accrue under the Deferred Compensation Plan
while such amounts remain in the Deferred Compensation Plan. Upon distribution
or withdrawal of any such amounts, the respective participant will be subject
to income tax on such amounts and the Company will receive a compensation
expense deduction in the amount of the withdrawal or distribution.
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(PROPOSAL 4)
The Board of Directors has approved an amendment to Article Fourth of the
Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation"), subject to the approval of the Company's stockholders, to
increase the number of authorized shares of Common Stock of the Company to
50,000,000 from 30,000,000. The affirmative vote of a majority of the
outstanding shares entitled to vote thereon at the Annual Meeting will be
required to approve this proposal. The persons name in the enclosed proxy will
vote the shares represented by proxies returned to the Company FOR the
proposal unless instructed otherwise in the proxy. Shares represented by
proxies which are marked "abstain" will have the same effect as a vote against
this proposal. YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE PROPOSAL TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
The following resolution relating to an amendment to the Certificate of
Incorporation will be introduced at the Annual Meeting for the purpose
described below:
RESOLVED, the existing paragraph A of Article Fourth of the Certificate of
Incorporation is amended in the following respects:
Paragraph A is amended to read in its entirety as follows:
A. The Corporation is authorized to issue two classes of shares designated
"Common Stock" and "Preferred Stock," respectively. The number of shares of
Common Stock authorized to be issued is 50,000,000, par value $.01 per
share, and the number of shares of Preferred Stock authorized to be issued
is 5,000,000, par value $.01 per share.
Currently, the Company has 30,000,000 shares of Common Stock authorized. As
of June 3, 1996, there were outstanding 9,784,227 shares of Common Stock of
the Company. In addition, on the same date, (i) 1,578,900 shares of Common
Stock were reserved and available for issuance upon the exercise of options
granted or which may be granted under the Company's 1989 Stock Option Plan,
(ii) 43,707 shares of Common Stock were reserved and available for issuance
upon grants of shares pursuant to the Director Grant Plan, (iii) 133,342
shares of Common Stock were reserved and available for issuance pursuant to
the Company's Employee Payroll Deduction Stock Purchase Plan and (iv) 10,000
shares of Common Stock were reserved pursuant to various other obligations of
the Company. Therefore, as of such date, the Company had only 18,449,824
shares of authorized Common Stock remaining for future issuance which were not
standing reserved for a specific purpose.
Effective June 5, 1996, the Board of Directors approved a two-for-one split
of the Common Stock, to be effected in the form of a stock dividend (the
"Stock Split Dividend"). The Stock Split Dividend will be paid on
17
<PAGE>
July 15, 1996 to holders of record of the Common Stock on June 24, 1996. Upon
payment of the Stock Split Dividend, each holder of record of Common Stock on
June 24, 1996 will receive one additional share of Common Stock for each share
of Common Stock held on such date. Following the Stock Split Dividend, the
number of shares subject to outstanding stock options, the number of shares
reserved for issuance under the Company's 1989 Stock Option Plan, the number
of shares issuable to directors under the Director Grant Plan, the number of
shares reserved for issuance under the Employee Payroll Deduction Stock
Purchase Plan and the number of shares reserved for issuance for other
purposes will be proportionately increased to reflect the Stock Split
Dividend. In addition, the exercise price of outstanding stock options will be
proportionately reduced, in accordance with the terms of the 1989 Stock Option
Plan. Also, the number of shares subject to grants pursuant to the Director
Grant Plan will be doubled such that, for example, assuming adoption of the
amendment to such plan described in Proposal 2, upon election or reelection of
an outside director for a three-year term, the director will receive a grant
of 2,000 (instead of 1,000) shares under the Director Grant Plan. As a result,
following the Stock Split Dividend the Company will have only 6,899,648 shares
of authorized Common Stock remaining for future issuance which will not be
standing reserved for a specific purpose.
The Board of Directors of the Company believes that it is in the best
interest of the Company and its stockholders that there be a greater number of
authorized and unissued shares available to give the Company the flexibility
it needs to conduct its business and accommodate future growth. The proposed
increase in authorized shares of Common Stock is desirable to enhance the
Company's flexibility in structuring its future capitalization, to meet
financing needs for expansion and growth and for other corporate purposes
which the Board may deem desirable. The Board of Directors believes that if
the Stock Split Dividend is effected without an increase in authorized Common
Stock, the remaining available unissued shares would not provide sufficient
flexibility for corporate action in the future.
The purpose of the proposed increase in the number of shares of authorized
Common Stock is to ensure that additional shares of Common Stock will be
available, if needed, for issuance in connection with any future transactions
approved by the Board of Directors, including, among others, future stock
splits, stock dividends, acquisitions, financings and other corporate
purposes. The Board of Directors believes that the availability of the
additional shares of Common Stock for such purposes without delay or the
necessity for a special stockholders meeting (except as may be required by
applicable law or regulatory authorities or by the policies, rules and
regulations of the New York Stock Exchange or any other stock exchange on
which the Company's securities may then be listed) will be beneficial to the
Company by providing it with the flexibility required to consider and promptly
respond to future business opportunities and needs as they arise. If the
proposed amendment is approved by the stockholders, no future authorization
for the issuance of newly authorized Common Stock will be solicited prior to
such issuance (except as may be required by applicable law or regulatory
authorities or by the policies, rules or regulations of the New York Stock
Exchange or any other stock exchange on which the Company's securities may
then be listed).
Other than as described above with respect to shares reserved for issuance
for specific purposes and with respect to the Stock Split Dividend, the
Company has no current plans to issue additional shares of Common Stock.
It is possible that shares of Common Stock may be issued at a time and under
circumstances which may increase or decrease earnings per share and increase
or decrease the book value per share of shares presently held. Further,
although the proposed increase in authorized shares of Common Stock is not
proposed for the purpose of any anti-takeover effect, the issuance of
additional shares of Common Stock authorized pursuant thereto may have an
anti-takeover effect and may delay or prevent a tender offer or takeover
attempt that a stockholder may consider in its best interest, including those
attempts that might result in a premium over the market price of shares held
by such stockholder. The proposed amendment will enable the Board of Directors
to issue shares of Common stock to third parties which could render more
difficult or discourage an attempt to obtain control of the Company by means
of a merger, tender offer, proxy contest or otherwise.
18
<PAGE>
In addition to the above matters, the proposed amendment is intended to
clarify a clerical matter relating to the Company's Certificate of
Incorporation as currently in effect. Specifically, the Certificate of
Incorporation has not formally been amended to eliminate the reference in that
document to shares of Series A Preferred Stock and Series D Preferred Stock,
both of which series were outstanding prior to the Company's initial public
offering which closed in March 1992. In connection with such initial public
offering, all such shares of Series A Preferred Stock and Series D Preferred
Stock outstanding (being 936,475 shares in the aggregate) were converted into
Common Stock and no shares of either such series have been, or are
contemplated to be, reissued.
The Company has taken the position that these shares are not, in fact,
available for reissuance, but the Delaware Secretary of State continues to
record such shares as authorized. Therefore, the Board of Directors of the
Company has authorized the filing of an amendment to the Certificate of
Incorporation to eliminate any reference to either of such series. The
proposed amendment to the Certificate of Incorporation would make clear that
the only shares of Preferred Stock which are authorized are the 5,000,000
shares of "undesignated" Preferred Stock which the Company has reported as
authorized, with none outstanding, since the completion of its initial public
offering. The Board of Directors of the Company is authorized pursuant to the
Certificate of Incorporation to provide for the issuance of such Preferred
Stock in series, to establish the number of shares to be included in each such
series and the designations, preferences and relative, participating,
optional, conversion and other special rights, and qualifications, limitations
or restrictions, of such shares without further action of the stockholders of
the Company. Such authority of the Board of Directors includes, but is not
limited to, fixing the number of shares constituting any series or the
distinct designation thereof, the rate and nature (whether participating or
cumulative) of any dividends payable on shares of Preferred Stock, the voting
rights of such shares, the conversion or redemption features of any such
shares, and the rights of such shares in the event of liquidation, dissolution
or winding up of the Company. The Company has no current plans to issue any
shares of Preferred Stock.
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL 5)
The Board of Directors has selected Arthur Andersen LLP to audit the
financial statements of the Company for the year ended March 31, 1997. Arthur
Andersen LLP has audited the Company's financial statements since 1985. The
persons named in the enclosed proxy will vote shares represented by proxies
returned to the Company FOR the proposal unless instructed otherwise in the
proxy.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO RATIFY AND APPROVE THE SELECTION OF THE ACCOUNTING FIRM ARTHUR
ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 1997.
A representative of Arthur Andersen LLP will be present at the Annual
Meeting to respond to any questions and to make a statement on behalf of his
firm, if he so desires.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware
of any matters other than those set forth herein and in the Notice of Annual
Meeting that will come before the meeting. Should any other matters arise
requiring the vote of stockholders, it is intended that proxies will be voted
in respect thereto in accordance with the best judgment of the person or
persons voting the proxies.
19
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is composed of Messrs.
Beinecke as Chairman, Collins, Mendell and Wilson, all of whom are independent
directors. The Committee is responsible to the Board and indirectly to
stockholders for assuring that:
1. The Company's human resource policies are effective in attracting,
retaining and developing outstanding executive talent;
2. The Company has succession plans for senior management positions;
3. The Company's total compensation program supports the Company's business
goals and strategies, reinforces desired corporate behaviors, and
properly recognizes performance; and
4. The Company's compensation levels are internally equitable and
externally competitive.
The Committee sets compensation policies designed to maintain a strong
relationship between performance and rewards, to align the interests of the
executive officers with those of the stockholders and to actively encourage
ownership of the Company's Common Stock. The Committee's actions with regard
to executive officers who are members of the Board are subject to Board
approval.
EXECUTIVE COMPENSATION POLICY
The Company's compensation program is designed to attract, motivate, reward
and retain the management talent required to achieve aggressive corporate
growth and profitability objectives, and thereby increase stockholder value.
It is the Company's policy to provide conservatively competitive base salaries
to attract and retain highly capable managers, attractive annual incentive
bonuses to encourage and reward achievement of the Company's annual growth and
profitability goals, and significant equity opportunities to align the
interests of management with those of stockholders.
Because of the unique position the Company occupies within its market
sector, there are few peer companies with which the Company can compare its
management compensation. Consequently, the Compensation Committee does not
rely on competitive surveys to set management compensation levels. However,
the Compensation Committee does review the executive compensation levels in
other publicly held growth companies in related and other industries, and
obtains advice from independent consultants as to the Company's pay practices
and levels.
The tax deductibility of a senior executive's compensation is limited to $1
million a year unless such compensation is "performance based" or meets other
exemptions under the Code. It is the Company's policy to structure and
administer its compensation program for executives to maximize the tax
deductibility of executive compensation for the benefit of its stockholders
whenever appropriate.
EXECUTIVE COMPENSATION PROGRAM
The principal elements of the executive compensation program are base
salary, annual incentive bonuses and stock options. Key management personnel
receive each element of compensation in various combinations, with the portion
of total compensation provided by annual incentive bonuses and stock options
increasing at higher management levels.
BASE SALARIES
The Compensation Committee reviews the salaries paid to the Company's
executive officers and considers increases based on several factors, including
competitive compensation data, individual performance, internal
20
<PAGE>
relationships and the performance and prospects of the Company. Base salaries
for executive officers were increased effective May 1, 1996 by an average of
5%.
ANNUAL INCENTIVE BONUSES
Annual incentive bonuses are awarded to the Company's senior management
under the annual management incentive plan. Bonuses are set as a maximum
percentage of salary by management level and are earned based on individual
and Company performance in relation to financial and non-financial objectives
set by the Compensation Committee. Bonus maximums range from 20% of salary up
to 80% of salary. The objectives for senior management are recommended by the
Chief Executive Officer and approved by the Compensation Committee. Cash
payments under the annual management incentive plan ranged from 13% to 58% of
individual employee's salary for fiscal 1996.
Bonuses for fiscal year 1996 were less than bonuses paid for fiscal year
1995. The Compensation Committee set very aggressive goals for the management
of the Company for fiscal year 1996, which goals were substantially, although
not fully, achieved. Examples of the Company's strong performance include an
18.5% increase in revenues and a 29.2% increase in earnings per share for
fiscal 1996 as compared to fiscal 1995. In light of such positive results, the
Compensation Committee deemed it appropriate to award substantial bonuses to
the Company's senior management, although not as large as those awarded the
year before.
STOCK OPTIONS
Annual stock option grants are recommended by the Chief Executive Officer
and are reviewed and approved by the Compensation Committee. Grants are based
on several factors, including an evaluation of individual performance, tenure
with the Company and management level. Special grants are considered to
attract experienced managers to join the Company. The Compensation Committee
believes that employee stock options are highly important to retain key
employees and in aligning employee interests with the stockholders' interests.
COMMITTEE DECISIONS AFFECTING CHIEF EXECUTIVE OFFICER'S COMPENSATION FOR
FISCAL 1997
Mr. Off's base salary was increased by the Compensation Committee to
$262,500 effective on May 1, 1996, a 5% increase over the prior year. Mr.
Off's salary level was determined based on his performance and contribution to
the Company's performance as evaluated by the Compensation Committee.
The CEO's bonus for fiscal 1996 was determined by the Compensation Committee
based on specific financial and non-financial performance goals. Mr. Off's
incentive bonus of $145,000 for fiscal 1996, 58% of his salary, was based upon
the Compensation Committee's evaluation of his performance and contribution to
the Company's achievements in fiscal 1996, in which increases in revenues, net
income and earnings per share were 18.5%, 27.8% and 29.2%, respectively, over
the prior year. In relation to this performance, Mr. Off's annual compensation
for fiscal 1996 (salary paid and bonus earned) was 2.6% higher than his annual
compensation for the prior year.
In addition, the Compensation Committee granted 25,000 stock options to Mr.
Off for fiscal 1996.
RESPECTFULLY SUBMITTED,
Frederick W. Beinecke Patrick W. Collins Thomas G. Mendell Michael B. Wilson
21
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(A)($) BONUS($) OPTIONS GRANTED COMPENSATION(B)
- --------------------------- ------ ------------ -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
George W. Off 1996 248,630 145,000 25,000 50,676
President, Chief Execu-
tive 1995 229,100 154,421 20,000 22,172
Officer and Director 1994 200,676 108,792 -- 74,905
Tommy D. Greer 1996 250,016 120,000 -- 20,394
Chairman of the Board 1995 248,150 145,609 72,500 6,000
1994 224,521 144,488 -- 63,747
Helene Monat (c) 1996 222,385 102,873 18,800 74,143
Executive Vice Presi-
dent, 1995 197,560 128,128 20,000 7,600
Sales, and Director 1994 173,669 100,000 -- 1,132
Karl Maggard 1996 204,005 60,000 -- 10,385
Executive Vice Presi-
dent, 1995 163,500 93,600 75,000 3,563
Marketing
Daniel D. Granger (c) 1996 195,100 115,000 -- 45,225
Executive Vice Presi-
dent, 1995 185,329 84,873 -- 23,748
Sales, and President,
Catalina 1994 150,568 68,640 -- 44,490
Marketing Services Divi-
sion
</TABLE>
- --------
(a) Salary includes all before-tax contributions by the employee to the
Company's Deferred Compensation Plan.
(b) Other compensation includes Company matching contributions and all
earnings (vested and non-vested) contributed by the Company under the
Company's Deferred Compensation Plan and reimbursement for moving expenses
associated with the corporate headquarters relocation to St. Petersburg,
Florida.
(c) Effective April 19, 1996, Helene Monat tendered her resignation as an
Executive Vice President and employee of the Company. Ms. Monat will
continue as a consultant to the Company, and has consented to her
nomination for reelection for director at the Annual Meeting. Daniel D.
Granger became an Executive Vice President of the Company effective
January 23, 1996 in anticipation of Ms. Monat's resignation.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION
OPTION FOR OPTION TERM($)(B)
OPTIONS GRANTED TO EXERCISE EXPIRATION ----------------------
GRANTED(A) EMPLOYEES PRICE($) DATE 5% 10%
---------- ---------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
George W. Off (CEO)..... 25,000 6.6% 46.25 5/1/00 70,271 169,287
Tommy D. Greer.......... -- -- -- -- -- --
Helene Monat............ 18,800 5.0% 46.25 5/1/00 52,844 127,303
Karl J. Maggard......... -- -- -- -- -- --
Daniel D. Granger....... -- -- -- -- -- --
</TABLE>
- --------
(a) Options granted generally become exercisable at the rate of 25% per year,
commencing one year after the date of grant, except for options associated
with a new hire which generally become exercisable at the rate of 20% per
year, and are subject to early termination in certain instances relating
to termination of employment.
(b) Potential Realizable Values is based on the assumption that the market
price of the stock appreciates at the stated rate, compounded annually,
from the date of grant to the expiration of the option. These values are
22
<PAGE>
calculated based on requirements promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
appreciation.
OPTION EXERCISES AND YEAR END VALUE TABLE
<TABLE>
<CAPTION>
AT FISCAL YEAR END
---------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS IN-THE-MONTH OPIONS($)(A)
ACQUIRED VALUE ------------------------- -------------------------
ON EXERCISE RELIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George W. Off (CEO)..... 7,500 412,500 66,500 58,750 3,248,654 2,200,139
Tommy D. Greer.......... -- -- 18,125 54,375 626,444 1,879,335
Helene Monat............ 30,622 1,473,609 35,000 43,800(b) 1,438,436 1,526,634(b)
Karl Maggard............ -- -- 15,000 60,000 469,687 1,878,750
Daniel D. Granger....... 9,425 448,866 20,500 6,250 914,280 263,671
</TABLE>
- --------
(a) The closing price of the Company's Common Stock was $78.13 per share on
March 29, 1996, the last business day of the fiscal year.
(b) Effective with her resignation as an employee of the Company, Ms. Monat
forfeited options relating to 34,100 of such shares, which were not then
exercisable.
COMMON STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's cumulative total return to
stockholders since its Initial Public Offering on March 26, 1992 with that of
the New York Stock Exchange Index and a peer group consisting of those public
companies traded on an exchange and listed under the Standard Industry
Classification (S.I.C.) Code 731--Advertising.
23
<PAGE>
[GRAPH APPEARS HERE]
COMPARISON(1) OF CUMULATIVE TOTAL RETURN AMONG
CATALINA MARKETING CORPORATION,
NYSE MARKET INDEX AND PEER GROUP INDEX(2).
[TABLE TO BE SUPPLIED BY COMPANY]
Assumes $100 invested on March 26, 1992, in Catalina Marketing Corporation,
the New York Stock Exchange and the peer group defined. Historical results are
not necessarily indicative of future performance.
- --------
(1) Based on the Company's Initial Public Offering price of $20.00. However,
it should be noted that the closing price of the Company's Common Stock on
the first day of trading on the New York Stock Exchange, March 27, 1992,
was $28.00.
(2) The peer group index is made up of the following securities: Ackerly
Communication, Inc., Advanced Promotion Technologies, Inc., All American
Communications, Inc., 4 Kids Entertainment, Greenstone Roberts
Advertising, Inc., Heritage Media Corporation, Grey Advertising, Inc.,
Interpublic Group of Companies, Inc., Omnicom Group, Saatchi & Saatchi
Plc., Site-Based Media, Inc., and WPP Group Plc.
NON-EMPLOYEE DIRECTOR COMPENSATION
In addition to grants made pursuant to the Company's 1992 Director Stock
Grant Plan, non-employee directors receive $1,500 per day for each one day
meeting attended in person, including committee meetings. The Chairman of each
committee receives $3,000 annually. Also, non-employee directors receive a fee
of $300 for each telephonic Board or committee meeting of less than one hour,
or a fee of $1,500 for such telephonic meetings which are in excess of one
hour. All expenses in connection with attendance at such meetings are paid by
the Company.
24
<PAGE>
FUTURE STOCKHOLDER PROPOSALS
The Company must receive at its principal office appearing on the front page
of this Proxy Statement before February 21, 1997, any proposal which a
stockholder wishes to submit to the 1997 Annual Meeting of Stockholders, if
the proposal is to be considered by the Board of Directors for inclusion in
the proxy materials for that annual meeting.
Please return your proxy as soon as possible. Unless a quorum consisting of
a majority of the outstanding shares entitled to vote is represented at the
meeting, no business can be transacted. Therefore, please be sure to date and
sign your proxy exactly as your name appears on your stock certificate and
return it in the enclosed prepaid return envelope. Please act promptly to
ensure that you will be represented at this important meeting.
THE COMPANY WILL PROVIDE WITHOUT CHARGE, ON THE WRITTEN REQUEST OF ANY
BENEFICIAL OWNER OF SHARES ENTITLED TO VOTE AT THE ANNUAL MEETING OF
STOCKHOLDERS, A COPY WITHOUT EXHIBITS OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR
ENDED MARCH 31, 1996. REQUESTS SHOULD BE MAILED TO THE SECRETARY, CATALINA
MARKETING CORPORATION, 11300 9TH STREET NORTH, ST. PETERSBURG, FLORIDA 33716.
THE ANNUAL REPORT ON FORM 10-K IS NOT SOLICITING MATERIAL AND IS NOT
INCORPORATED IN THIS DOCUMENT BY REFERENCE.
By Order of the Board of Directors
/s/ George W. Off
-----------------------------------
George W. Off
President and Chief Executive
Officer
June 21, 1996
25
<PAGE>
CATALINA MARKETING CORPORATION
ANNUAL MEETING OF STOCKHOLDERS--JULY 23, 1996
THIS PROXY SOLICITATED ON BEHALF OF THE BOARD OF DIRECTORS
P R O X Y
The undersigned, having received the Notice of Annual Meeting of Stockholders
and the Proxy Statement furnished therewith, hereby appoints George W. Off and
Barry A. Brooks as Proxies, each with the power to appoint his/her substitute,
and hereby authorizes each of them to represent and to vote, as designated be-
low, all the shares of Common Stock of Catalina Marketing Corporation (the
"Company") held of record by the undersigned on June 3, 1996, at the Annual
Meeting of Stockholders to be held at the Hyatt Regency Westshore, 6200
Courtney Campbell Causeway, Tampa, Florida 33607 on Tuesday, July 23, 1996 and
at any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES LISTED BELOW AND FOR EACH OTHER PROPOSAL
LISTED BELOW.
<PAGE>
PROXY CATALINA MARKETING CORPORATION
ANNUAL MEETING OF STOCKHOLDERS--JULY 23, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Annual Meeting of
Stockholders and the Proxy Statement furnished therewith hereby appoints
George W. Off and Barry A. Brooks as Proxies, each with the power to
appoint his/her substitute, and hereby authorizes each of them to represent
and to vote, as designated below, all the shares of Common Stock of
Catalina Marketing Corporation (the "Company") held of record by the
undersigned on June 3, 1996, at the Annual Meeting of Stockholders to be
held at the Hyatt Regency Westshore, 6200 Courtney Campbell Causeway,
Tampa, Florida 33607 on Tuesday, July 23, 1996 and at any adjournment or
postponement thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF CLASS II [_] FOR ALL nominees listed [_] WITHHOLD AUTHORITY
DIRECTORS below (except as indicated to to vote for all
the contrary below) nominees listed
below
</TABLE>
Frederick W. Beinecke, Tommy D. Greer, Helene Monat and Thomas W. Smith
INSTRUCTION: To withhold authority to vote for an individual nominee, write
the nominee's name in the space provided:
LOGO
2. PROPOSAL TO AMEND the Company's 1992 Director Stock Grant Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL TO AMEND the Company's Deferred Compensation Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
4. PROPOSAL TO AMEND the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock to 50,000,000
from 30,000,000.
[_] FOR [_] AGAINST [_] ABSTAIN
5. PROPOSAL TO RATIFY and approve the selection of Arthur Andersen LLP as
the Company's independent public accountants.
[_] FOR [_] AGAINST [_] ABSTAIN
6. At their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED ABOVE, AND FOR EACH
OTHER PROPOSAL LISTED ABOVE.
All other proxies heretofore given by the undersigned to vote shares of
stock of Catalina Marketing Corporation, which the undersigned would be
entitled to vote if personally present at the Annual Meeting or any
adjournment or postponement thereof, is hereby expressly revoked.
Dated: _____________________________
------------------------------------
(Print Name)
------------------------------------
(Signature)
Please mark, sign, date and return
the proxy card promptly using the
enclosed envelope. Joint owners
should each sign. Attorneys, execu-
tors, administrators, trustees,
guardians or corporation officers
should give full title.
<PAGE>
- --------------------------------------------------------------------------------
Please mark [X]
your votes as
indicated
in this example
1. Election of Class II Directors Frederick W. Beinecke, Tommy D. Greer, Helene
Monat and Thomas W. Smith
2. Proposal to amend the Company's 1992 Director Stock Grant Plan.
3. Proposal to amend the Company's Deferred Compensation Plan.
4. Proposal to amend the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock to 50,000,000 from
30,000,000.
5. Proposal to ratify and approve the selection of Arthur Andersen LLP as the
Company's independent public accountants.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ]
</TABLE>
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, WRITE THE
NOMINEE'S NAME IN THE SPACE PROVIDED:
6. At their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
Signature(s) ___________________________ Date _______________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
