<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
/X/ Filed by the Registrant
/ / Filed by a Party other than the Registrant
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HA-LO INDUSTRIES, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2).
/ / $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:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
HA-LO INDUSTRIES, INC.
5980 WEST TOUHY AVENUE
NILES, ILLINOIS 60714
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 10, 1996
Notice is hereby given that the Annual Meeting of Shareholders of HA-LO
Industries, Inc., an Illinois corporation (the "Company"), will be held at the
Company's principal executive office, 5980 West Touhy Avenue, Niles, Illinois
60714 on Monday, June 10, 1996 at 10:00 a.m., local time, for the following
purposes:
(1) To elect seven directors to serve until the next Annual Meeting of
Shareholders or until their successors are duly elected and qualified;
(2) To consider and vote upon certain amendments to the HA-LO Industries,
Inc. Stock Plan;
(3) To ratify the reappointment of the firm of Arthur Andersen LLP as the
Company's independent auditors for 1996; and
(4) To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on April 26, 1996 are
entitled to notice of and to vote at the meeting and at any postponements or
adjournments thereof. A complete list of the shareholders entitled to vote at
the meeting will be subject to inspection by any shareholder at the Company's
principal executive office, during usual business hours, for a period of ten
days prior to the meeting.
By Order of the Board of Directors,
BARBARA G. BERMAN
SECRETARY
Niles, Illinois
May 13, 1996
------------------------
THE BOARD OF DIRECTORS EXTENDS A CORDIAL INVITATION TO ALL SHAREHOLDERS TO
ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN AS PROMPTLY AS POSSIBLE THE ENCLOSED PROXY IN
THE ACCOMPANYING REPLY ENVELOPE. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE
THEIR PROXIES AND VOTE IN PERSON.
<PAGE>
HA-LO INDUSTRIES, INC.
5980 WEST TOUHY AVENUE
NILES, ILLINOIS 60714
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 10, 1996
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of HA-LO
Industries, Inc., an Illinois corporation (the "Company"), for use at the Annual
Meeting of Shareholders of the Company to be held on the date, at the time and
place and for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders and at any postponements or adjournments thereof. The
Company's principal executive office is located at 5980 West Touhy Avenue,
Niles, Illinois 60714 and its telephone number is (847) 647-2300. Shareholders
of record at the close of business on April 26, 1996 are entitled to notice of
and to vote at the meeting. This Proxy Statement and the accompanying proxy are
first being mailed to shareholders on or about May 13, 1996.
THE MEETING
VOTING AT THE MEETING
On April 26, 1996, there were issued and outstanding 6,986,146 shares of
common stock, no par value (the "Common Stock"). Each share of Common Stock
issued and outstanding on the record date entitles the holder thereof to one
vote on all matters submitted to a vote of shareholders at the meeting.
On May 2, 1996, the Board of Directors approved a 3-for-2 split of the
Company's outstanding shares, which split will be payable on June 3, 1996 to
shareholders of record on May 17, 1996. None of the information contained herein
reflects the 3-for-2 stock split.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock will constitute a quorum. The affirmative
vote of the holders of a majority of the shares represented at the meeting,
whether present in person or represented by proxy, will be necessary for the
election of directors, to approve the proposed amendments to the HA-LO
Industries, Inc. Stock Plan (the "Stock Plan") and for the ratification of the
reappointment of the firm of Arthur Andersen LLP as the Company's independent
auditors for 1996. Abstentions and broker non-votes will have the effect of a
vote against a nominee or a proposal.
PROXIES AND PROXY SOLICITATION
All shares of Common Stock represented by properly executed proxies will be
voted at the meeting in accordance with the directions marked on the proxies,
unless such proxies previously have been revoked. If no directions are indicated
on such proxies, they will be voted for the election of each nominee named below
under "Election of Directors," for the proposed amendments to the Stock Plan and
for the ratification of the reappointment of Arthur Andersen LLP as the
Company's independent auditors for 1996. If any other matters are properly
presented at the meeting for action, which is not presently anticipated, the
named proxies will vote in accordance with their best judgment. Each proxy
<PAGE>
executed and returned by a shareholder may be revoked at any time before it is
voted by timely submission of written notice of revocation or by submission of a
duly executed proxy bearing a later date (in either case directed to the
Secretary of the Company) or, if a shareholder is present at the meeting, he or
she may elect to revoke his or her proxy and vote his or her shares in person.
In addition to solicitation by mail, certain directors, officers and other
employees of the Company, not specially employed for this purpose, may solicit
proxies, without additional remuneration therefor, by personal interview, mail,
telephone or telecopy. The Company will request brokers and other fiduciaries to
forward proxy soliciting material to the beneficial owners of shares of Common
Stock that are held of record by such brokers and fiduciaries and will reimburse
such persons for their reasonable out-of-pocket expenses.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning each person,
other than members of management, who is known by the Company to beneficially
own more than 5% of the total number of outstanding shares of Common Stock. Such
information is based solely on Schedules 13G and 13D filed by each such person
with the Securities and Exchange Commission (the "Commission"), and unless
otherwise indicated, (i) is as of February 14, 1996 and (ii) each person has
sole voting and investment power with respect to all the shares shown as
beneficially owned by that person.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY APPROXIMATE
NAME AND ADDRESS OWNED PERCENT OF CLASS
- - -------------------------------------------------------------------- ----------------- -------------------
<S> <C> <C>
Montgomery Ward & Co., Incorporated ................................ 432,302(1) 6.0%
Montgomery Ward Plaza, Chicago, Illinois 60671
A I M Management Group Inc. ........................................ 363,200(2) 5.2%
11 Greenway Plaza, Suite 1919, Houston, Texas 77046
</TABLE>
- - ------------------------
(1) Information is as of December 27, 1995 and is reported on behalf of
Montgomery Ward & Co., Incorporated, its sole stockholder, Montgomery Ward
Holding Corp, and Bernard F. Brennan, the Chairman of the Board and Chief
Executive Officer of each of Montgomery Ward & Co., Incorporated and
Montgomery Ward Holding Corp. Includes 172,972 shares which Montgomery Ward
& Co., Incorporated, has the right to acquire pursuant to vested warrants.
(2) As reported by A I M Management Group Inc., a parent holding company, on
behalf of itself and its wholly-owned investment advisor subsidiaries, A I M
Advisors, Inc. and A I M Capital Management, Inc.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 26, 1996, certain information
concerning the beneficial ownership of Common Stock by (i) all directors and
nominees, (ii) each of the executive officers named in the Summary Compensation
Table on page 10 hereof and (iii) all directors and executive officers as
2
<PAGE>
a group. Unless otherwise indicated, each person has sole investment and voting
power (or shares such powers with his or her spouse) with respect to the shares
shown as beneficially owned by that person.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY APPROXIMATE
OWNED ON PERCENT OF
NAME APRIL 26, 1996(1) CLASS
- - ------------------------------------------------------------------ ------------------ ---------------
<S> <C> <C>
Lou Weisbach...................................................... 1,436,045(2) 20.5%
Richard A. Magid.................................................. 67,500(3) *
Barbara G. Berman................................................. 6,804(4) *
David C. Robbins.................................................. 117,366(5) 1.7%
Thomas Herskovits................................................. 77,366(6) 1.1%
Jordon R. Katz.................................................... 17,916(7) *
Marshall J. Katz.................................................. 180,230(8) 2.5%
Neil A. Ramo...................................................... 51,363(9) *
All Directors and Executive Officers as a Group (11 persons)...... 1,968,552(10) 27.0%
</TABLE>
- - ------------------------
* Less than 1%.
(1) Assumes approval of the amendments to the Company's Stock Plan described
elsewhere herein. See "Amendments to the Company's Stock Plan."
(2) Includes 500 shares owned by Mr. Weisbach's minor son and 8,619 shares
subject to immediately exercisable options held by Mr. Weisbach.
(3) Includes 65,500 shares subject to immediately exercisable options held by
Mr. Magid.
(4) Includes 1,000 shares owned by Ms. Berman's husband and 3,604 shares subject
to immediately exercisable options held by Ms. Berman.
(5) Includes 106,165 shares granted to Mr. Robbins as restricted stock pursuant
to a Bonus Shares Agreement between Mr. Robbins and the Company, of which
4,209 shares were no longer subject to restrictions on transfer as of March
31, 1996, 10,701 shares subject to immediately exercisable options held by
Mr. Robbins, and an aggregate of 500 shares owned in trust for the benefit
of Mr. Robbins' two minor children.
(6) Includes 4,000 shares owned by Mr. Herskovits' minor son and 8,666 shares
subject to immediately exercisable options held by Mr. Herskovits.
(7) Includes 1,000 shares owned by Mr. Katz's minor son and 1,666 shares subject
to immediately exercisable options held by Mr. Katz.
(8) All shares subject to immediately exercisable options held by Mr. Katz.
(9) Includes 15,353 shares subject to immediately exercisable options held by
Mr. Ramo and 200 shares subject to immediately exercisable options held by
Mr. Ramo's wife.
(10) Includes 8,662 shares subject to immediately exercisable options in
addition to the shares included in Notes 1-9 above.
3
<PAGE>
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires each of the Company's executive officers and directors
and persons who beneficially own more than 10% of the Common Stock to file
initial reports of beneficial ownership and reports of changes in beneficial
ownership of the Company's equity securities. Based solely on a review of the
copies of such reports furnished to the Company, the Company believes that
during the fiscal year ended December 31, 1995, all of its officers, directors
and 10% beneficial owners timely filed all required reports, except for Messrs.
Herskovits, Jordon Katz and Magid, each of whom reported one transaction late on
a Form 5.
ELECTION OF DIRECTORS
Seven directors are to be elected to the Board of Directors. Each director
elected at the meeting will hold office until the next Annual Meeting of
Shareholders of the Company or until his respective successor is duly elected
and qualified.
The Board of Directors has nominated, and it is the intention of the persons
named as proxies to vote for the election of, the nominees named below, each of
whom has previously been elected by the Company's shareholders, and has
consented to serve as a director if elected. In the event that any of the
nominees should be unable to serve as a director, it is intended that the
proxies will be voted for the election of such substitute nominees, if any, as
shall be designated by the Board of Directors. Management has no reason to
believe that any nominee will be unable to serve. Each of the nominees listed
below has served as a director of the Company since 1992, except for Mr.
Weisbach who has served as a director since 1988 and Mr. Robbins who has served
as a director since 1995.
As described below, the Company has entered into an agreement pursuant to
which it has granted to Montgomery Ward & Co., Incorporated ("Montgomery Ward")
the right to designate one person to serve on the Company's Board of Directors
for the duration of the Purchasing Agreement (as hereinafter defined). See
"Certain Transactions" below. Until April 15, 1996, when he resigned from the
Board of Directors, Mr. Dominic Mangone was the director designated by
Montgomery Ward. At such time as Montgomery Ward identifies another person to be
nominated to the Board of Directors, the number of directors will be increased
accordingly and such person will serve on the Board of Directors until the 1997
Annual Meeting of Shareholders or until his or her successor is duly elected and
qualified.
4
<PAGE>
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS
The following information is furnished with respect to each nominee:
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS(1) AGE
- - -------------------------------------------------------------------------------------------------- ---
<S> <C>
Lou Weisbach...................................................................................... 47
Chairman of the Board, President and Chief Executive Officer of the Company since its inception.
Richard A. Magid.................................................................................. 37
Chief Financial Officer of the Company since July 1992, and Treasurer of the Company since
August 1992. Vice President -- Finance of the Company from August 1992 through March 1996. From
1981 until joining the Company in 1992, he was employed by the accounting firm of Arthur
Andersen LLP, most recently as an audit and financial consulting manager.
David C. Robbins.................................................................................. 43
Executive Vice President of the Company since November 1992. Since 1977 he has been a sales
representative for the Company.
Thomas Herskovits................................................................................. 49
Private investor since January 1996. President and Chief Executive Officer of Specialty Foods
Corp. from November 1, 1993 to January 1996. From April 1993 through October 1993, he was an
independent financial consultant. From 1989 through March 1993, he was President of the KGF
Frozen Products Group, an operating unit of Kraft General Foods. From 1984 to 1989, he was
President of the Kraft Dairy Group of Kraft General Foods.
Jordon R. Katz.................................................................................... 44
President of JR Katz Assoc., Inc., an insurance and employee benefits planning company, since
1976.
Marshall J. Katz.................................................................................. 47
Independent financial consultant to the Company since 1992. From 1988 through 1991, he was the
owner and President of Northbrook Management Co., a money management firm trading in futures
and options.
Neil A. Ramo...................................................................................... 53
President of NEMAR, Inc., an independent marketing company that sells Company products, since
July 1993. From August 1991 through June 1993, he was President of RMI, Inc., d/b/a Creative
Promotions International, a predecessor marketing company to NEMAR, Inc. From 1984 to 1989, he
was President of Carson Pirie Scott Department Stores. After retiring from Carson Pirie Scott
Department Stores, he pursued personal interests until he founded RMI, Inc.
</TABLE>
- - ------------------------
(1) Only directorships of issuers with a class of securities registered pursuant
to Section 12 of the Exchange Act, or subject to the requirements of Section
15(d) of the Exchange Act, and directorships of issuers registered as
investment companies under the Investment Company Act of 1940, as amended,
are required to be listed in the above table.
5
<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has designated an Audit Committee and a Compensation
Committee. The Board of Directors has not designated a Nominating Committee;
rather, the Board of Directors as a whole performs the functions that would
otherwise be delegated to such committee.
Current members of the Audit Committee are Thomas Herskovits, Jordon R. Katz
and Richard A. Magid. The functions of the Audit Committee include assessing the
scope of the Company's engagement of its independent public accountants,
reviewing their reports and recommending to the Board of Directors the
engagement and discharge of independent auditors. The Audit Committee
recommended the engagement of Arthur Andersen LLP as the Company's auditors for
1996. The Audit Committee also meets with the financial staff of the Company to
review accounting procedures and internal audit controls.
Current members of the Compensation Committee are Thomas Herskovits and
Jordon R. Katz. The functions of the Compensation Committee include setting
executive officer salaries, determining annual bonuses and administering the
Company's incentive compensation plans, including the HA-LO Industries, Inc.
Stock Plan (the "Stock Plan"). See "Report of the Compensation Committee on
Executive Compensation," below.
During 1995, the Board of Directors held four meetings and took action by
written consent seven times, the Audit Committee held three meetings and the
Compensation Committee took action by written consent eight times. Each director
attended or participated in at least 75% of the aggregate number of meetings
held by the Board of Directors and the committees, if any, on which he served
during 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Thomas Herskovits and
Jordon R. Katz. None of the members of the Compensation Committee is either a
current or former officer or employee of the Company. Marc Simon, who served as
a member of the Compensation Committee until he resigned from the Board of
Directors on May 1, 1996, was, until June 1995, a partner in the law firm of
Neal, Gerber & Eisenberg, which performed legal services on behalf of the
Company during 1995. Fees paid to such firm in 1995 aggregated approximately
$304,000, which amount was not material in relation to such firm's revenues or
those of the Company. Such firm has rendered and is expected to continue to
render legal services to the Company during 1996.
COMPENSATION OF DIRECTORS
Until February 26, 1996, each non-employee director was entitled to receive
compensation under the Company's Stock Plan in the form of a non-statutory
option ("NSO") to purchase 3,500 shares of Common Stock at an exercise price per
share equal to the Fair Market Value (as defined in the Stock Plan) of the
Common Stock on the date of the first regularly scheduled Board of Directors
meeting during each calendar year. On February 26, 1996, the Compensation
Committee approved an increase in the number of shares subject to options
automatically granted to non-employee directors each year to 5,000. Accordingly,
on such date, each non-employee director received an NSO to purchase 5,000
shares of Common Stock at an exercise price per share of $24.25, which was the
Fair Market Value of the Common Stock on that date. The NSO vests in twelve
equal monthly installments. In addition, all
6
<PAGE>
employee and non-employee directors of the Company are eligible to participate
in the Company's Stock Plan pursuant to which each of them may be awarded stock
options, stock appreciation rights, restricted stock and/or phantom stock.
CERTAIN TRANSACTIONS
In January 1995, the Company entered into a five-year Exclusive Premium
Purchasing Agreement (the "Purchasing Agreement") with Montgomery Ward, whereby
the Company became the exclusive provider of premium advertising products to
Montgomery Ward. The Purchasing Agreement was initially scheduled to expire in
December 1999, subject to earlier termination at the election of either the
Company or Montgomery Ward during the first three months of 1997. In December
1995, the term of the Purchasing Agreement was extended for five additional
years (i.e., through December 2004), subject to earlier termination (i) at the
election of the Company in the event that Montgomery Ward fails to purchase
specified minimum amounts of Company products annually under the Purchasing
Agreement and (ii) at the election of Montgomery Ward on December 31 of any
year, commencing in 1998, upon no less than six-months notice.
In connection with the Purchasing Agreement, Merchant Partners, Limited
Partnership ("Merchant"), a fund in which Montgomery Ward is the principal
investor, acquired an aggregate of 299,850 shares of the Company's Common Stock
(the "Merchant Shares") from the Company and Mr. Weisbach. Pursuant to a Stock
Purchase Agreement between Merchant and Mr. Weisbach (the "Weisbach Stock
Purchase Agreement"), Merchant purchased 149,925 of the Merchant Shares from Mr.
Weisbach and obtained certain co-sale rights in the event Mr. Weisbach disposes
of more than 10% of the shares of Common Stock held by him during any
twelve-month period. Under a separate Stock Purchase Agreement between Merchant
and the Company (the "Company Stock Purchase Agreement"), Merchant acquired an
additional 149,925 of the Merchant Shares from the Company. The purchase price
of the Merchant Shares ($6.67 per share) was based upon the average market price
of the Common Stock during the three trading days immediately preceding the
January 11, 1995 purchase date (the "Purchase Date").
In connection with the Company Stock Purchase Agreement, Merchant also
acquired a warrant (the "First Warrant") to acquire up to an additional 400,000
shares of Common Stock at a price of $6.67 per share. The First Warrant became
vested with respect to 66,667 shares on the Purchase Date and, subject to the
continued effectiveness of the Purchasing Agreement and Montgomery Ward's
purchasing specified minimum amounts of Company products annually under the
Purchasing Agreement, was initially scheduled to vest with respect to the
remaining 333,333 shares in substantially equal amounts during each of the next
five years. In connection with the five-year extension of the Purchasing
Agreement, (i) the vesting date for the last 66,666 shares of Common Stock was
accelerated from January 11, 2000 to the date of such extension (i.e., December
27, 1995) and (ii) Merchant acquired a second warrant (the "Second Warrant") to
acquire up to an additional 199,998 shares of Common Stock at a price of $25.00
per share. Subject to the continued effectiveness of the Purchasing Agreement
and Montgomery Ward's purchasing specified minimum amounts of Company products
annually under the Purchasing Agreement, the Second Warrant will vest ratably
during each year of the six-year period ending January 11, 2005.
Under a Registration Rights Agreement (the "Registration Rights Agreement")
entered into between the Company and Merchant in connection with the foregoing
transactions, Merchant was
7
<PAGE>
granted the right, subject to certain restrictions and exceptions, to cause the
Company to file a registration statement under the Securities Act of 1933, as
amended, at the Company's expense, with respect to all shares of Common Stock
owned by Merchant, including the Merchant Shares and any shares of Common Stock
acquired by Merchant under the First Warrant and the Second Warrant. Merchant
was also granted, subject to certain restrictions and exceptions, "piggy back"
registration rights.
Also pursuant to the Company Stock Purchase Agreement, Merchant was granted
the right to designate one person to be nominated to serve on the Board of
Directors of the Company for the duration of the Purchasing Agreement. As with
the vesting of the First Warrant and the Second Warrant, this right is
conditioned upon Montgomery Ward's purchasing specified minimum amounts of
Company products annually under the Purchasing Agreement. Under the terms of the
Company Stock Purchase Agreement, Merchant's designated nominee must be Mr.
Mangone or another person acceptable to the Company. Mr. Mangone is a 50%
shareholder, director and executive officer of Merchant Development Corp., the
sole general partner of Merchant Advisors, Limited Partnership ("Advisors"), the
sole general partner of Merchant. In addition, Mr. Mangone is a limited partner
of Advisors and serves as a consultant to Montgomery Ward.
On December 29, 1995, Merchant distributed the Merchant Shares, the First
Warrant and the Second Warrant to Merchant's partners (including Montgomery
Ward) pro rata in accordance with their respective partnership interests. In
connection therewith, the rights and obligations of Merchant under the Weisbach
Stock Purchase Agreement, the Company Stock Purchase Agreement and the
Registration Rights Agreement were transferred to Merchant's partners, except
for Merchant's right to designate a nominee which was transferred to Montgomery
Ward. Until April 15, 1996, when he resigned from the Board of Directors, Mr.
Mangone was the director designated by each of Merchant and Montgomery Ward. See
"Election of Directors."
In February 1995, the Company entered into a Bonus Shares Agreement (the
"Bonus Shares Agreement") with Mr. Robbins in recognition of his efforts in
fostering the customer relationship with Montgomery Ward (which culminated in
the Purchasing Agreement) and in consideration of his assistance to the Company
in maintaining a continued positive customer relationship with Montgomery Ward
and maximizing its sales and profits under the Purchasing Agreement. In
addition, Mr. Robbins has covenanted not to compete with the Company during the
term of the Purchasing Agreement. Pursuant to the Bonus Shares Agreement, Mr.
Robbins received 160,000 shares of Common Stock (the "Bonus Shares") as
restricted stock under the Stock Plan, which Bonus Shares are in lieu of
commissions to which he would otherwise be entitled for sales of Company
products to Montgomery Ward. Commencing in 1995, these Bonus Shares became
eligible to vest (i.e., cease to be subject to transfer restrictions) in
accordance with a formula based, in part, upon the gross profit earned by the
Company on sales of its products to Montgomery Ward under the Purchasing
Agreement. In addition, any unvested Bonus Shares are subject to immediate
vesting upon the death or permanent disability of Mr. Robbins or in the event
that Mr. Robbins' sales representative status with the Company is terminated or
adversely affected following a change in control of the Company that results in
the termination of Mr. Weisbach as the Company's Chief Executive Officer. Prior
to vesting, the Bonus Shares are held by the Company. Under the Bonus Shares
Agreement, Mr. Robbins may instruct the Company as to the voting of all Bonus
Shares, whether or not such Bonus Shares have vested; however, Mr. Robbins has
the right to receive dividends and distributions with respect to
8
<PAGE>
vested Bonus Shares only. As of the date hereof, Mr. Robbins has become vested
in an aggregate of 58,044 of the Bonus Shares, 35,000 of which he has sold and
18,835 of which were transferred to and subsequently cancelled by the Company to
satisfy the attendant withholding tax liability.
In 1992, Mr. Robbins guaranteed $170,000 of an obligation to the Company
(the "Guaranty") owed by a former independent sales representative who is a
former member of Mr. Robbins' family (the "Obligor"). During 1995, the largest
amount of the obligation outstanding was $76,000 (exclusive of interest accruing
at 8% annually), and $38,000 was outstanding as of December 31, 1995. Pursuant
to an agreement between the Company and Mr. Robbins, the Company agreed to
release Mr. Robbins ratably over the three-year period which ends October 1997,
from his obligations under the Guaranty in exchange for his agreement not to
solicit customers or prospective customers of the Company during such period.
During 1995, Company paid Mr. Weisbach $91,000 in advance commissions
against his future sales of Company products. The Company does not charge Mr.
Weisbach interest on advance commissions. During 1995, the largest outstanding
amount of advance commissions (including advance commissions from prior years)
paid to Mr. Weisbach was $146,771, none of which remained outstanding as of
December 31, 1995. See "Report of the Compensation Committee on Executive
Compensation -- Compensation of the Company's Chief Executive Officer."
Marshall J. Katz renders consulting services to the Company with respect to
potential acquisitions by the Company and engagement of sales representatives
for Company products pursuant to a three-year agreement entered into with the
Company in March 1994 (the "Consulting Agreement"). As compensation for his
services with respect to acquisitions, Mr. Katz receives a fee calculated in
accordance with a formula set forth in the Consulting Agreement, which is
strictly contingent upon the successful completion of an acquisition and is
payable partly in cash and partly in the form of options under the Stock Plan to
acquire shares of Common Stock. For services rendered under the Consulting
Agreement in 1995, Mr. Katz earned approximately $876,768 in cash compensation
and received options to acquire an aggregate of 24,751 shares of the Company's
Common Stock. All options granted to Mr. Katz under the Consulting Agreement in
1995 are fully vested and exercisable at a price per share equal to the Fair
Market Value (as defined in the Stock Plan) of the Common Stock on the date of
grant, which ranged from $5.563 to $19.375 per share. For further information
concerning options to purchase shares of Common Stock granted to executive
officers, see "Summary Compensation Table."
9
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain summary information with respect to
all compensation earned by or paid to each of the Company's Chief Executive
Officer and its three other most highly compensated executive officers who were
serving as executive officers on December 31, 1995, and whose total salary plus
bonus for 1995 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------
AWARDS
--------------------------
ANNUAL COMPENSATION SECURITIES
------------------------- RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) STOCK ($)(2) OPTIONS (#) COMPENSATION (3)
- - ------------------------------------------ --------- ----------- ------------ ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Lou Weisbach ............................. 1995 $ 250,000 $ 160,493 -- 1,500 $ 100
Chairman of the Board, President and 1994 250,000 148,245 -- 1,500 100
Chief Executive Officer 1993 250,000 154,021 -- 6,369 --
Richard A. Magid ......................... 1995 144,233 -- -- 87,500 2,749
Chief Financial Officer and Treasurer 1994 121,136 7,500 -- 5,000 2,749
1993 115,000 -- -- 15,500 2,649
David C. Robbins ......................... 1995 170,000 607,500 $ 1,200,000 5,500 --
Executive Vice President(4) 1994 153,077 401,923 -- 4,200 675
1993 150,000 297,295 -- 3,751 877
Barbara G. Berman ........................ 1995 105,155 86,218 -- 300 2,100
Vice President and Secretary 1994 82,059 26,807 -- 2,300 2,100
1993 81,075 33,446 -- 2,154 2,000
</TABLE>
- - ------------------------
(1) Except for Mr. Magid, the amounts shown in this column consist of
commissions earned for sales of Company products. Amounts shown for Mr.
Weisbach reflect earned commissions only and do not include $91,000,
$101,765 and $104,979 paid to him during 1995, 1994 and 1993, respectively,
in advance commissions for future sales of Company products. See "Certain
Transactions", and "Report of the Compensation Committee on Executive
Compensation -- Compensation of the Company's Chief Executive Officer."
(2) Vests over 10 years, or at an accelerated rate based on Montgomery Ward's
purchases from the Company. At December 31, 1995, the 160,000 shares of
Restricted Stock awarded had a value of $4,920,000, based on the December
29, 1995 closing price of $30.75 for the Common Stock. See "Certain
Transactions."
(3) Amounts shown for 1995 consist of: $100 contributed by the Company on behalf
of each of Messrs. Weisbach and Magid and Ms. Berman to a 401(k) plan it
maintains; $2,000 of matching contributions made by the Company under one of
its non-qualified benefit plans on behalf of each of Mr. Magid and Ms.
Berman; and $649 of term life insurance policy premiums paid by the Company
for Mr. Magid.
10
<PAGE>
(4) Salary paid to Mr. Robbins each year was in lieu of an equal dollar amount
of commissions earned by him for sales of Company products.
The following table sets forth information with respect to options to
purchase shares of the Company's Common Stock that were granted during 1995 to
each of the executive officers named in the Summary Compensation Table above. No
stock appreciation rights ("SARs") were granted to any of the persons listed on
the table below during 1995.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS/SARS ANNUAL RATES OF STOCK
NUMBER OF GRANTED TO PRICE APPRECIATION FOR
SECURITIES EMPLOYEES IN EXERCISE OR OPTION TERM (1)
UNDERLYING OPTIONS/ FISCAL YEAR BASE PRICE EXPIRATION --------------------------
NAME SARS GRANTED (#)(2) (3) ($/SH) DATE 5%($) 10%($)
- - ---------------------------------- ------------------- ------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lou Weisbach...................... 1,500 * $ 6.50 01/01/05 $ 6,132 $ 15,539
Richard A. Magid.................. 37,500 22.3% 9.81 03/15/05 231,425 586,477
50,000 30.6% 15.75 11/06/05 371,441 1,255,072
David C. Robbins.................. 5,500 * 6.50 01/01/05 22,483 56,976
Barbara G. Berman................. 300 * 6.50 01/01/05 1,226 3,108
</TABLE>
- - ------------------------
* Less than 1%
(1) The amounts shown in these columns are the result of calculations at assumed
annual rates required by the Securities and Exchange Commission and are not
intended to forecast possible future appreciation, if any, of the price of
the Company's Common Stock. The Company did not use an alternative formula
for a grant date valuation, as the Company is not aware of any formula that
will determine with reasonable accuracy a present value based on future
unknown or volatile factors.
(2) All options were granted at an exercise price equal to the Fair Market Value
of the Company's Common Stock on the date of grant and generally vest over a
two-year period in increments of 50% each on the first and second
anniversary of the date of grant. Upon exercise, the option price may be
paid either in cash or in shares of Common Stock that have an aggregate Fair
Market Value equal to the option price. Additionally, the Company has the
right, and with respect to certain persons, the obligation, to withhold any
required taxes either in cash or shares of Common Stock.
(3) Percentage calculations in this column are based solely on the number of
options granted to employees of the Company and do not take into account
options granted to non-employee independent sales representatives for sales
of Company products.
11
<PAGE>
The following table sets forth information with respect to the unexercised
options held by each of the executive officers named in the Summary Compensation
Table above, as of December 31, 1995. None of such persons exercised any options
during 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS AT FY-END
OPTIONS/SARS AT FY-END (#) ($)(1)
-------------------------- ----------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ------------------------------------ -------------------------- ----------------------------
<S> <C> <C>
Lou Weisbach........................ 8,619/750 $ 217,535/$18,188
Richard A. Magid.................... 65,500/52,500 1,328,400/959,988
David C. Robbins.................... 10,701/2,750 265,764/66,688
Barbara G. Berman................... 3,454/1,300 86,840/31,900
</TABLE>
- - ------------------------
(1) On December 29, 1995, the closing price per share of the Company's Common
Stock was $30.75.
EMPLOYMENT AGREEMENTS
Mr. Weisbach serves as the President and Chief Executive Officer of the
Company pursuant to a five-year employment agreement that commenced on January
1, 1992. After the expiration of the initial five year term, the agreement is
automatically extended annually on each anniversary of the commencement date,
unless terminated in accordance with its terms. Under the agreement, during 1995
Mr. Weisbach received an annual base salary of $250,000 and was entitled to
receive up to a maximum of $250,000 per annum of commissions for his sales of
Company products in accordance with the Company's standard sales commission
policy. Effective January 1, 1996, Mr. Weisbach's total annual compensation was
set at $500,000. In addition, Mr. Weisbach is eligible to participate in any
stock plan, employee benefit plan or other arrangement generally available to
executive officers of the Company. See "Report of the Compensation Committee on
Executive Compensation -- Compensation of the Company's Chief Executive
Officer."
Pursuant to a three-year employment agreement entered into between Mr. Magid
and the Company as of March 15, 1995, Mr. Magid serves as the Chief Financial
Officer and Treasurer of the Company. After the expiration of the initial
three-year term, the agreement is automatically extended on each anniversary of
the commencement date for successive one-year periods, unless terminated in
accordance with its terms. Under the agreement, Mr. Magid receives an annual
base salary of $150,000 for the first year of the agreement, which amount shall
be increased to $175,000 and $200,000 for the second and third years of the
agreement, respectively. Mr. Magid's base salary is subject to further increase
from time to time by the Compensation Committee. Mr. Magid is also eligible to
receive an annual bonus of up to $25,000 (at such time and in such form as
determined by the Compensation Committee), based on the Company's profit and
other financial objectives as may be established by the Compensation Committee.
In addition, Mr. Magid is eligible to participate in any stock plan, employee
benefit plan or other arrangement generally available to executive officers of
the Company.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE EXCHANGE
ACT, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN
WHOLE OR IN PART, THE REPORT PRESENTED BELOW AND THE PERFORMANCE GRAPH FOLLOWING
SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
12
<PAGE>
REPORT OF THE COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee is currently comprised of Messrs. Herskovits and
Jordon R. Katz, neither of whom currently is or has been in the past an officer
or employee of the Company. The Compensation Committee is responsible for
setting executive officer salaries, determining annual bonuses and administering
the Company's incentive compensation plans, including the Company's Stock Plan.
POLICY AND OBJECTIVES
The Compensation Committee believes that executive compensation should
attract, retain and motivate the highly qualified individuals required for the
success of the Company and should also be commensurate with performance.
Inasmuch as the Company has only four executive officers, the Compensation
Committee also strives to ensure that each executive officer's compensation is
fair in relation to his or her experience and overall responsibility at the
Company. In general, the Compensation Committee considers both corporate and
individual performance in determining executive compensation. Corporate
performance is evaluated by reviewing the extent to which strategic and business
plan goals are met. Individual performance is evaluated by reviewing
organization and management development against set objectives. In making these
evaluations, the Compensation Committee relies upon input from the Chief
Executive Officer and/or the Chief Financial Officer regarding the financial
performance of the Company and the performance of specific employees.
Compensation for executive officers of the Company is divided into cash and
stock-based components as follows:
CASH-BASED COMPENSATION
The Company's cash-based compensation consists of salary, bonus and payments
pursuant to a non-qualified benefit plan maintained by the Company (the
"Incentive Plan"). Annual base salary for each of the Company's executive
officers is paid either pursuant to an employment agreement between the officer
and the Company (see "Executive Compensation -- Employment Agreements", above),
or upon the approval of the Compensation Committee, which annually reviews the
base salary payable to each executive officer. The Compensation Committee's
determination of annual salary is based upon its review of the officer's past
performance, the responsibilities associated with the officer's position and any
changes with respect thereto, and the recommendation of the Chief Executive
Officer and/or the Chief Financial Officer. While the Compensation Committee
acknowledges the subjective nature of these determinations, it believes that the
base salary paid to each of the Company's executive officers fairly reflects
that officer's prior performance, position and overall contribution to the
Company's success. Furthermore, it is the belief of the Compensation Committee
that this procedure is appropriate in light of the size of the Company and the
small number of executive officers.
In addition to an annual base salary, executive officers are eligible to
receive commissions on sales of Company products in amounts determined pursuant
to specified formulas. Bonuses may also be awarded to executive officers
pursuant to the Company's Incentive Plan.
Under the Incentive Plan, which was established by the Company in 1990,
eligible employees may elect to defer a certain amount of compensation for
payment at a later date. Currently, the Incentive
13
<PAGE>
Plan allows a participating employee to defer up to 25% of his or her annual
compensation (but not less than $1,350) for a minimum of at least five years.
Compensation that is deferred under the Incentive Plan is eligible for an
"Employer Match" equal to 50% of the deferred amount (up to a maximum of $2,000
per year), which vests on an installment basis according to a formula set forth
in the Incentive Plan. The Incentive Plan provides for the payment of the
deferred benefit, which includes the deferred compensation, the matched amounts
and interest, to the employee on an installment basis after the employee attains
at least 60 years of age. Under certain circumstances, including the death,
disability or financial hardship of the participating employee, the Incentive
Plan provides for the payment of deferred benefits prior to the employee
attaining 60 years of age.
STOCK-BASED COMPENSATION
The Compensation Committee is also responsible for administering the
Company's Stock Plan. Option grants pursuant to the Stock Plan are intended to
encourage performance that will result in appreciation of the market value of
the Company's Common Stock. Stock options are generally awarded from time to
time by the Compensation Committee based upon recommendations from the Chief
Executive Officer. In making its determinations of option awards, the
Compensation Committee considers the performance of the proposed optionee, the
Company's financial performance during the relevant period and the number of
options previously granted to the optionee.
Throughout 1995, the Compensation Committee, acting upon a recommendation by
the Chief Executive Officer, awarded options under the Stock Plan to employees
and independent sales representatives of the Company. In doing so, the
Compensation Committee sought to reward these individuals for their efforts on
behalf of the Company and to offer them the opportunity to acquire an initial,
or augment their existing, proprietary interest in the Company.
Accordingly, the Compensation Committee elected throughout 1995 to grant to
each qualifying employee and independent sales representative of the Company an
option to purchase a certain number of shares of the Company's Common Stock
based on commissions earned on sales of Company products during 1995.
COMPENSATION OF THE COMPANY'S CHIEF EXECUTIVE OFFICER
Lou Weisbach serves as the Chief Executive Officer of the Company pursuant
to an employment agreement with the Company. See "Executive Compensation --
Employment Agreements", above. During fiscal 1995, Mr. Weisbach earned his base
salary and $160,000 in commissions for his sales of Company's products. In
addition, during 1995, the Company advanced Mr. Weisbach $91,000 against
commissions to be earned for future sales of Company products. The compensation
paid to Mr. Weisbach during 1995 was not based upon, and had no specific
relation to, the performance of the Company's Common Stock during 1995.
THE COMPENSATION COMMITTEE
Thomas Herskovits
Jordon R. Katz
14
<PAGE>
PERFORMANCE GRAPH
NOTE: THE STOCK PRICE PERFORMANCE SHOWN ON THE GRAPH BELOW IS NOT
NECESSARILY INDICATIVE OF FUTURE PRICE PERFORMANCE.
COMPARISON OF $100 INVESTED IN THE COMPANY'S COMMON STOCK,
NASDAQ COMPOSITE INDEX AND THE COMPANY'S PEER GROUP (1)
SINCE OCTOBER 28, 1992 (2)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
10/28/92 12/31/93 12/31/94 12/31/95
<S> <C> <C> <C> <C>
HA-LO Industries, Inc. 98.1 81.5 96.3 455.6
Nasdaq Stock Market (US Companies) 112.7 129.3 126.4 178.8
NASDAQ Stocks 101.2 88.9 75.3 118.6
Miscellaneous Mondurable Goods
</TABLE>
- - ------------------------
(1) The above graph compares the performance of the Company's Common Stock with
that of a broad equity market index, the NASDAQ Composite Index, and a
published line-of-business index, NASDAQ stocks with SIC code 519
(miscellaneous nondurable goods). The Company's line of business is within
this SIC code and, accordingly, the Company has chosen NASDAQ companies
within this SIC code to comprise its peer group.
(2) The measurement period for the above graph commences on October 28, 1992,
the date upon which the Company's Common Stock began trading publicly.
15
<PAGE>
AMENDMENTS TO THE COMPANY'S STOCK PLAN
GENERAL; REASONS FOR PROPOSED AMENDMENTS
In 1992, the Company adopted the Stock Plan to reward key employees,
officers and directors and to provide them with additional performance
incentives. As originally adopted, the Stock Plan authorized the Company to
issue up to 474,603 shares of Common Stock to eligible individuals through
awards of (i) incentive stock options ("ISOs") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) NSOs
(individually and/or collectively with ISOs, "Options"), (iii) SARs, (iv) Common
Stock subject to transfer restrictions ("Restricted Stock") and (v) phantom
stock awards ("Phantom Stock") and provided for automatic annual grants of
Options covering 3,500 shares of Common Stock to each non-employee director. The
Company's Board of Directors and shareholders subsequently approved amendments
to the Stock Plan which increased the number of shares of Common Stock covered
by the Stock Plan to a total of 1,474,603. Effective February 26, 1996, and May
1, 1996, respectively, the Board of Directors adopted, subject to approval by
the Company's shareholders, amendments to the Stock Plan to (i) increase by
1,500 the number of shares subject to options granted annually to each
non-employee director of the Company and (ii) increase the number of shares of
Common Stock of the Company covered by the Stock Plan by an additional 600,000
shares, which would result in a total of 2,074,603 shares of Common Stock
covered by the Stock Plan.
Based upon the number of shares of Common Stock that have been awarded
pursuant to Options or as Restricted Stock under the Stock Plan to date and the
number of options exercised to date (see "Shares Subject to Stock Plan", below),
the Board of Directors believes that increasing the number of shares of Common
Stock subject to the Stock Plan is necessary to permit the Company to continue
to make awards under the Stock Plan and to provide incentives to employees,
directors, officers and sale representatives. Similarly, the Company believes
that increasing the number of Options granted annually and automatically to
non-employee directors will continue to incentivize such persons and to align
their interests with those of the Company's shareholders. At this time, the
Board of Directors is not considering any other amendment or modification to the
Stock Plan, whether or not such amendment or modification would require
shareholder approval.
Following is a brief description of the material features of the Stock Plan:
PURPOSE
The purpose of the Stock Plan is to foster the interests of the Company and
its shareholders by enabling employees, directors, officers and sales
representatives to acquire a proprietary interest in the Company. In this
respect, the Stock Plan is designed to provide additional incentives for such
persons to promote the success of the Company's business and enhance the market
price of the Common Stock.
ADMINISTRATION
The Stock Plan is administered by the Compensation Committee of the Board of
Directors, which selects the persons who will receive Options, SARs, Restricted
Stock or Phantom Stock under the Stock Plan. The Compensation Committee is
authorized to make grants under the Stock Plan, to determine the terms and
conditions thereof and to otherwise administer and interpret the Stock Plan. The
Compensation Committee is currently comprised of two persons who have not
received any awards or other allocations of equity securities under the Stock
Plan other than an annual formula
16
<PAGE>
grant of NSOs pursuant to the Stock Plan for their service as directors of the
Company. See "Election of Directors -- Compensation of Directors", above and "--
Director Stock Options," below. The Board of Directors appoints the members of
the Compensation Committee, fills vacancies on the Compensation Committee and
has the power to replace members of the Compensation Committee with other
eligible persons at any time.
ELIGIBILITY
Employees, directors, officers and sales representatives of the Company are
eligible to participate in the Stock Plan and to receive Options, SARs,
Restricted Stock and Phantom Stock thereunder. Approximately 370 individuals
currently participate in the Stock Plan (collectively, the "Participants").
SHARES SUBJECT TO STOCK PLAN
The terms of the Stock Plan currently provide that an aggregate of 1,474,603
authorized but unissued shares of Common Stock or treasury shares may be issued
under the Stock Plan under Options or as Restricted Stock. If the proposed
amendments to the Stock Plan are approved by the Company's shareholders, an
additional 600,000 shares of Common Stock or treasury shares would be covered by
the Stock Plan, resulting in a total of 2,074,603 available for issuance under
the Stock Plan. As of April 26, 1996, Options covering an aggregate of 1,157,422
shares of Common Stock have been granted (including increased automatic grants
to non-employee directors, see "Director Stock Options," below), an aggregate of
284,243 shares of Restricted Stock have been issued, Options covering an
aggregate of 18,519 shares of Common Stock have been cancelled and, together
with the 32,938 shares remaining available under the Stock Plan, are available
for issuance.
EXERCISE PRICE OF OPTIONS
The exercise price per share ("Option Price") of an Option granted under the
Stock Plan is set by the Compensation Committee, subject to the following
restrictions: (i) the Option Price of an ISO may not be less than 100% of the
Fair Market Value of the Common Stock on the date of grant, and (ii) the Option
Price of an NSO may not be less than 85% of the Fair Market Value of the Common
Stock on the date of grant. In general, all Options granted under the Stock Plan
to date have been granted at an Option Price equal to the Fair Market Value per
share of Common Stock on the date of grant. On April 26, 1996, the Fair Market
Value of the Common Stock was $31.38 per share.
TERMS OF OPTIONS
Options granted under the Stock Plan generally expire upon the earlier to
occur of (i) ten years from the date the Option is awarded ("Option Date"), (ii)
three months after the Participant's employment, directorship or other
relationship with the Company is terminated for any reason other than death,
(iii) six months after the Participant's death or (iv) the date on which the
Option is forfeited under Section 12 of the Stock Plan (e.g., 100% forfeiture if
the Participant's relationship with the Company is terminated for Cause (as
defined in the Stock Plan)). To date, the Compensation Committee has granted
only NSOs and Restricted Stock under the Stock Plan.
EXERCISE OF OPTIONS
The Options granted to date to Participants under the Stock Plan have
generally provided either for immediate vesting or for vesting in two equal
installments on the first and second anniversaries of the Option Date.
17
<PAGE>
Pursuant to an amendment to the Stock Plan adopted by the Compensation
Committee on February 26, 1996, which did not require shareholder approval, the
Stock Plan now provides that, upon the exercise of an Option, the optionee may
make payment either in cash, by certified check, by delivery of irrevocable
instructions to a broker to deliver the sale or loan proceeds necessary to pay
for the Common Stock received upon exercise or with shares of Common Stock
having an aggregate Fair Market Value on the date of delivery equal to the
Option Price. No Common Stock may be delivered upon the exercise of an Option
until the optionee has made full payment to the Company.
DIRECTOR STOCK OPTIONS
In an effort to attract, retain and compensate directors who are not
otherwise employed by the Company, the Stock Plan provided for the automatic
grant of an NSO to purchase 3,500 shares of Company's Common Stock to each
non-employee director on the date of the first regularly scheduled Board of
Directors meeting held in a calendar year at an exercise price equal to the Fair
Market Value of the Common Stock on such date. Subject to shareholder approval
of the proposed amendments, the number of shares subject to Options granted
annually to each non-employee director was increased to 5,000 effective February
26, 1996. Each NSO granted to a non-employee director vests in twelve equal
monthly installments. In all other respects, the terms of these non-employee
director NSOs are governed by the terms that apply generally to NSOs granted
under the Stock Plan.
STOCK APPRECIATION RIGHTS
Under the terms of the Stock Plan, the Compensation Committee may, in its
discretion, grant either tandem SARs or naked SARs to eligible Participants.
Tandem SARs are granted in tandem with Options and allow the recipient to
exercise the underlying Option without having to expend cash to pay the Option
Price. Under the Stock Plan, tandem SARs may be exercised only if the Fair
Market Value of a share of Common Stock on the date of surrender exceeds either
the Option Price of the related ISO or, if related to an NSO, the Fair Market
Value of the Common Stock on the Option Date, and then shall be exercisable only
to the extent that the related ISO or NSO is exercisable. A Participant who
elects to exercise a tandem SAR may surrender the exercisable portion of a
related Option in exchange for a number of shares of Common Stock determined by
a formula set forth in the Stock Plan. A naked SAR is similar to a tandem SAR,
but it is not granted in connection with an underlying Option and its terms are
governed by the Participant's SAR agreement.
PHANTOM STOCK
Under the Stock Plan, the Compensation Committee may, in its discretion
award Phantom Stock to eligible Participants. Subject to certain terms and
limitations, an award of Phantom Stock entitles the Participant to surrender all
or part of the vested portion of such stock and to receive from the Company the
Fair Market Value on the date of surrender of the Common Stock to which the
Phantom Stock relates or, at the Compensation Committee's election, shares of
Common Stock.
NON-ASSIGNABILITY OF OPTIONS, SARS AND PHANTOM STOCK
Options, SARs and Phantom Stock granted under the Stock Plan are not
transferable other than by will, the applicable laws of descent and distribution
or pursuant to a qualified domestic relations order. During the lifetime of a
Participant, Options may be exercised only by such Participant or his or her
guardian.
18
<PAGE>
RESTRICTED STOCK
In addition to Options, SARs and Phantom Stock, the Compensation Committee
may, in its discretion, make awards of Restricted Stock to eligible Participants
under the Stock Plan. A Participant may not sell or transfer shares of
Restricted Stock awarded under the Stock Plan and the shares are subject to
forfeiture in the event of the termination of the Participant's employment with
the Company, membership on the Board of Directors or sales representative
relationship. Notwithstanding the transfer restrictions, the holder of
Restricted Stock has the right to vote his or her shares of Restricted Stock and
to receive dividends in the same amount as dividends paid on non-restricted
shares of Common Stock.
ADJUSTMENT TO REFLECT CHANGE IN CAPITAL STRUCTURE
If there is any change in the corporate structure or shares of the Company,
the Board of Directors has the authority to make any adjustments necessary to
prevent accretion or to protect against dilution in the number and kind of
shares authorized by the Stock Plan or in the number and kind of shares covered
by Awards thereunder.
NEW PLAN BENEFITS
Except for the increased annual automatic grants made to non-employee
directors described above under "Director Stock Options," grants under the Stock
Plan are made at the discretion of the Compensation Committee. Accordingly,
future grants under the Stock Plan cannot be determined at this time. During
fiscal 1995, the persons named in the Summary Compensation Table as a group, all
current executive officers as a group, all current non-employee directors as a
group, and all employees, including all current officers who are not executive
officers, as a group, would have received 254,800, 266,800, 20,000, and 323,611,
shares, respectively, either as Options or Restricted Stock under the Stock Plan
as proposed to be amended.
RIGHTS AS A STOCKHOLDER
No person shall have any rights or privileges of a stockholder of the
Company as to shares subject to an option granted pursuant to the Stock Plan
until such option is exercised in accordance with the terms of the Stock Plan. A
Participant who has been granted SARs or Phantom Stock has no rights whatsoever
as a shareholder with respect to such SARs or Phantom Stock.
NO RIGHT TO EMPLOYMENT
Participation in the Stock Plan or any agreement entered into pursuant
thereto does not confer upon any Participant any right to continue in the
employment of the Company or its subsidiaries.
AMENDMENT AND DISCONTINUANCE
The Board of Directors may, at any time and from time to time, amend,
modify, suspend or terminate the Stock Plan without shareholder approval, but
may not, without the approval by the holders of a majority of the shares of
Common Stock that are represented, in person or by proxy, at a meeting of the
Company's shareholders (i) change the aggregate number of shares of Common Stock
reserved for issuance pursuant to the Stock Plan, except for such adjustments as
are permitted under the Stock Plan, (ii) change the class of eligible
individuals who may receive Awards under the Plan, (iii) adopt any amendment
affecting the Option Price at which Options may be granted, or (iv) materially
increase benefits accruing to Participants under the Stock Plan.
19
<PAGE>
TERMINATION
The Board of Directors may terminate the Stock Plan at any time with respect
to any shares of Common Stock that are not then subject to Options or Restricted
Stock. Termination of the Stock Plan will not affect Participants' rights and
obligations with respect to Options, Restricted Stock, SARs or Phantom Stock
granted before such termination.
MISCELLANEOUS
The Stock Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974.
TAX CONSEQUENCES
Following is a brief summary of the principal federal income tax
consequences of the grant and exercise of an option under the Stock Plan and the
subsequent disposition of shares of Common Stock acquired upon such exercise. In
addition, this section briefly summarizes the tax consequences of SARs,
Restricted Stock and Phantom Stock to the Participant and Company. This summary
is not intended to be exhaustive and does not describe all federal, state or
local tax laws.
The grant of an option will not result in any immediate tax consequence to
the Company or the optionee. ISOs granted under the Stock Plan are not taxable
upon exercise, but rather are taxable only upon the disposition of the shares of
Common Stock received ("Option Stock"). With respect to ISOs, however, the
spread between the Fair Market Value of the Option Stock on the date of exercise
and the Option Price may be subject to possible application of alternative
minimum tax. Generally, the Company is not entitled to deduct as compensation
amounts includible in a Participant's income as the result of an ISO. By
comparison, NSOs granted under the Stock Plan are taxable when exercised an the
difference between the Fair Market Value of the Option Stock on the date of
exercise and the Option Price. Such amount will not be an item of tax preference
to a Participant. The Company is generally entitled to a deduction as
compensation equal to the amount includible in a Participant's income upon the
exercise of an NSO.
Upon the disposition of Option Stock, a Participant may realize short-term
or long-term capital gain or loss, assuming such shares of Option Stock
constitute capital assets in a Participant's hands and depending upon the
holding period of such shares of Option Stock, equal to the difference between
the selling price and the tax basis of the shares of Option Stock sold. The tax
basis for this purpose will equal the sum of the exercise price and the amount
of ordinary income realized by the option holder as a result of such exercise.
Restricted Stock taxable as income to the Participant when it is no longer
subject to a substantial risk of forfeiture. Generally, the Company is allowed a
deduction as compensation when the Restricted Stock is includible in the
Participant's income. Upon the exercise of an SAR, a Participant is taxable on
an amount equal to the cash and/or value of shares of Common Stock received
pursuant to such exercise and generally the Company is entitled to a
corresponding deduction. The tax treatment of Phantom Stock is substantially
similar to that of SARs.
With respect to certain Participants, the Company is required under the
Stock Plan to withhold any required tax in shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENTS TO THE STOCK
PLAN.
20
<PAGE>
AUDITORS
It is proposed that the shareholders approve the reappointment of the firm
of Arthur Andersen LLP as the Company's independent auditors for 1996. The
decision to retain Arthur Andersen LLP as the Company's independent auditors for
1996 was approved by the Audit Committee of the Board of Directors and the Board
of Directors of the Company. A representative of Arthur Andersen LLP is expected
to attend the meeting where he or she will have the opportunity to make a
statement if he or she so desires and will be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
REAPPOINTMENT OF SUCH FIRM.
1997 ANNUAL MEETING OF SHAREHOLDERS
The 1997 Annual Meeting of Shareholders is presently scheduled to be held on
June 2, 1997. Any proposals of shareholders intended to be personally presented
at such meeting must be received by the Secretary of the Company for inclusion
in the Company's Proxy Statement and form of proxy no later than January 14,
1997.
21
<PAGE>
HA-LO INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Lou Weisbach and Richard A. Magid, and each of them, are hereby constituted and
appointed the lawful attorneys and proxies of the undersigned, with full power
of substitution, to vote and act as proxy with respect to all shares of common
stock, no par value, of HA-LO INDUSTRIES, INC. standing in the name of the
undersigned on the Company's books at the close of business on April 26, 1996
at the Annual Meeting of Shareholders to be held at 5980 West Touhy Avenue,
Niles, Illinois 60714, at 10:00 a.m., local time, on Monday, June 10, 1996, or
at any postponement(s) or adjournment(s) thereof, as follows:
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY /X/
<TABLE>
<S> <C> <C> <C>
FOR ALL
FOR WITHHELD EXCEPT
1. ELECTION OF DIRECTORS / / / / / /
Nominees: Lou Weisbach, Richard A. Magid, Thomas
Herskovits, Jordon R. Katz, Marshall J. Katz,
David C. Robbins and Neil A. Ramo
______________________________________________________________
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED ABOVE
FOR AGAINST ABSTAIN
2. APPROVAL OF THE PROPOSED AMENDMENTS TO THE COMPANY'S STOCK PLAN. / / / / / /
The powers hereby granted may be exercised by any of said attorneys or proxies
or their substitutes present and acting at the above-described Annual Meeting of
Shareholders or any postponement(s) or adjournment(s) thereof, or, if only one
be present and acting, then by that one. The undersigned hereby revokes any and
all proxies heretofore given by the undersigned to vote at said meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES
LISTED IN ITEM 1 AND FOR THE PROPOSALS IN ITEMS 2 AND 3.
FOR AGAINST ABSTAIN
3. RATIFICATION OF THE REAPPOINTMENT OF ARTHUR ANDERSEN LLP AS / / / / / /
THE COMPANY'S AUDITORS FOR 1996.
4. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or at any
postponement(s) or adjournment(s) thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / /
___________________________________________
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
Dated
___________________________________________________________________________, 1996
_________________________________________________________________________________
Signature
_________________________________________________________________________________
Signature
(Please sign proxy as name appears on corporate records. Joint owners should
each sign personally. Trustees and others signing in a representative capacity
should indicate the capacity in which they sign.)
</TABLE>
