<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
NORWOOD PROMOTIONAL PRODUCTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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> 2
NORWOOD PROMOTIONAL PRODUCTS, INC.
THE RENAISSANCE PLAZA
70 N.E. LOOP 410, SUITE 295
SAN ANTONIO, TEXAS 78216
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 21, 1997
To the Shareholders of NORWOOD PROMOTIONAL PRODUCTS,INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Norwood Promotional Products, Inc. (the "Company") will be held on Tuesday,
January 21, 1997, at 10:00 a.m., Central Time, in the San Jacinto Room at The
Four Seasons Hotel, 98 San Jacinto Blvd., Austin, Texas, for the following
purposes:
(1) To elect seven Directors;
(2) To approve an amendment to the Norwood Promotional Products,
Inc. Incentive Stock Compensation Plan to increase the number
of shares of Common Stock available for issuance under the
Plan from 190,000 shares to 410,000 shares;
(3) To ratify the selection of Ernst & Young LLP as independent
public accountants of the Company for the fiscal year 1997;
and
(4) To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors recommends election of the nominees for
Directors named in the accompanying Proxy Statement, the approval of the
amendment to the Incentive Stock Compensation Plan and the ratification of the
selection of Ernst & Young LLP.
Only shareholders of record as of the close of business on December 2,
1996 are entitled to notice of and to vote at the meeting. A list of
shareholders entitled to vote at the Annual Meeting will be available for
examination at the offices of the Company for ten days prior to the Annual
Meeting.
You are cordially invited to attend the Annual Meeting. WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO MARK,
SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD PROMPTLY SO THAT YOUR SHARES OF
STOCK MAY BE REPRESENTED AND VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER
THAT THE PRESENCE OF A QUORUM MAY BE ASSURED AT THE ANNUAL MEETING. Proxies
should be mailed promptly, and in any event, to reach the transfer agent not
later than January 16, 1997. If you attend the Annual Meeting, you may revoke
your proxy and vote in person.
By Order of the Board of Directors
/s/ J. MAX WAITS
J. Max Waits
Secretary
San Antonio, Texas
December 20, 1996
<PAGE> 3
NORWOOD PROMOTIONAL PRODUCTS, INC.
THE RENAISSANCE PLAZA
70 N.E. LOOP 410, SUITE 295
SAN ANTONIO, TEXAS 78216
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 21, 1997
---------------------
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of
Directors of Norwood Promotional Products, Inc., a Texas corporation (the
"Company"), to be voted at the Annual Meeting of Shareholders of the Company
(the "Annual Meeting"). The Annual Meeting will be held at the time and place
and for the purposes set forth in the accompanying Notice of the Annual
Meeting. ALL DULY EXECUTED PROXIES WILL BE VOTED AT THE ANNUAL MEETING IN
ACCORDANCE WITH THE DIRECTIONS GIVEN THEREON; IF NO DIRECTION IS INDICATED,
SUCH SHARES WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR
SET FORTH IN THIS PROXY STATEMENT AND FOR PROPOSALS 2 AND 3 SET FORTH IN THE
NOTICE.
Management does not intend to present any business at the
Annual Meeting for a vote other than the matters set forth in the Notice and
has no information that others will do so. IF OTHER MATTERS REQUIRING A VOTE
OF THE SHAREHOLDERS PROPERLY COME BEFORE THE ANNUAL MEETING, THE PERSONS NAMED
IN THE ENCLOSED PROXY CARD WILL VOTE THE SHARES REPRESENTED BY THE PROXIES HELD
BY THEM IN THEIR SOLE DISCRETION ON SUCH MATTERS.
The entire cost of the solicitation of proxies will be borne by the
Company. Solicitations will be made primarily by mail, except that, if
necessary to obtain reasonable representation of shareholders at the meeting,
proxies will also be solicited by telephone or telecopy by regular employees of
the Company, who will not receive any additional compensation. The Company may
reimburse brokerage firms and other custodians, nominees or fiduciaries for
their expenses in forwarding proxy material to beneficial owners of Common
Stock.
This Proxy Statement and the form of proxy are first being mailed to
the shareholders of the Company on or about December 20, 1996. The Company's
Annual Report to Shareholders is enclosed but does not form any part of the
materials for solicitation of proxies.
<PAGE> 4
ANY SHAREHOLDER OF THE COMPANY GIVING A PROXY MAY REVOKE THE PROXY BY
VOTING IN PERSON AT THE ANNUAL MEETING OR BY DELIVERING A DULY EXECUTED PROXY
BEARING A LATER DATE OR WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF THE
COMPANY AT THE ADDRESS GIVEN ABOVE PRIOR TO THE ANNUAL MEETING.
QUORUM AND VOTING
Only shareholders of record as of the close of business on December 2,
1996 (the "Record Date") are entitled to notice of and to vote at the meeting.
As of the Record Date, the Company had 5,616,375 outstanding shares of Common
Stock. The Common Stock is the only class of stock of the Company outstanding
and entitled to vote at the Annual Meeting. Each share of Common Stock
entitles the holder thereof to one vote on all matters to be voted upon by
shareholders at the Annual Meeting. Cumulative voting is not permitted in the
election of Directors. The presence, in person or by proxy, of the holders of
a majority of the issued and outstanding Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum to transact business. If a
quorum is not present or represented at the Annual Meeting, the shareholders
entitled to vote and present in person or by proxy may adjourn the Annual
Meeting from time to time without notice or other announcement until a quorum
is present or represented. Directors shall be elected by a plurality of the
votes cast by the holders of shares of Common Stock entitled to vote in the
election of Directors at the Annual Meeting, provided a quorum is present or
represented at the Annual Meeting or any adjournment thereof. A plurality
means that the nominees with the largest number of votes are elected as
Directors up to the maximum number of Directors to be chosen at the Annual
Meeting. Abstentions and broker non-votes will be counted for purposes of
determining a quorum but shall not be counted as voting for purposes of
determining whether a nominee or proposal has received the necessary number of
votes for election or approval.
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Stock as of the Record Date by (i) each Director of the
Company; (ii) each named executive officer (as defined in "Compensation of
Executive Officers"); (iii) all current executive officers and Directors of the
Company as a group; and (iv) each other person known to the Company to own
beneficially more than five percent of the Common Stock as of the Record Date.
2
<PAGE> 5
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (A)
-------------------------------
NUMBER OF
NAME OF BENEFICIAL OWNER SHARES PERCENTAGE
------------------------ --------- ----------
DIRECTORS AND EXECUTIVE OFFICERS:
<S> <C> <C>
Frank P. Krasovec (b) 636,917 11.33%
Robert P. Whitesell (c) 109,023 1.94%
J. Max Waits (d) 10,800 *
John K. Finnell (e) 194,201 3.45%
Robert L. Seibert (f) 14,587 *
John H. Wilson III (g) 34,651 *
John H. Josephson (h) 24,728 *
Harold Holland (i) 13,000 *
Roy D. Terracina 4,500 *
All directors and executive officers as a group
(9 persons) 1,042,407 18.32%
5% SHAREHOLDERS:
- ----------------
Delaware Management Company (j)(k) 300,600 5.35%
Montgomery Asset Management LP (j)(l) 368,600 6.56%
T. Rowe Price Associates, Inc. (j)(m) 300,000 5.34%
Trust Company of the West Group, Inc. (j)(n) 282,400 5.03%
Thomson Horstmann & Bryant, Inc. (j)(o) 375,100 6.68%
</TABLE>
- ---------------------------------
*Less than 1%
(a) Except as otherwise indicated, the persons named in the table have
sole voting and investment power with respect to the shares of Common
Stock shown as beneficially owned by them.
(b) Mr. Krasovec's business address is 106 East Sixth Street, Suite 530,
Austin, Texas 78701. Includes 2,000 shares of Common Stock issuable
upon exercise of an option granted to Mr. Krasovec by the Company
under the Company's 1989 Stock Option Plan (the "1989 Plan"), which is
exercisable within 60 days of the date of this Proxy Statement.
(c) Includes 2,000 shares of Common Stock issuable upon exercise of an
option granted to Mr. Whitesell by the Company under the 1989 Plan,
which is exercisable within 60 days of the date of this Proxy
Statement.
(d) Includes 5,562 shares of Common Stock issuable upon exercise of an
option granted to Mr. Waits by the Company under the 1989 Plan, which
is exercisable within 60 days of the date of this Proxy Statement.
(e) Includes 1,200 shares of Common Stock issuable upon exercise of an
option granted to Mr. Finnell by the Company under the 1989 Plan,
which is exercisable within 60 days of the date of this Proxy
Statement.
3
<PAGE> 6
(f) Includes 6,000 shares of Common Stock issuable upon exercise of
warrants granted to Mr. Seibert by the Company, which are currently
exercisable.
(g) Includes 22,728 shares of Common Stock issuable upon exercise of
warrants granted to Mr. Wilson by the Company, which are currently
exercisable.
(h) Includes 22,728 shares of Common Stock issuable upon exercise of
warrants granted to Mr. Josephson by the Company, which are
immediately exercisable. Excludes 150,000 shares of Common Stock
issuable upon exercise of warrants held by Allen & Company
Incorporated ("Allen"). Mr. Josephson, a director of Allen, disclaims
beneficial ownership of these shares.
(i) Includes 12,000 shares of Common Stock issuable upon exercise of
warrants granted to Mr. Holland by the Company, which are currently
exercisable.
(j) Information regarding beneficial ownership has been obtained from
reports on SEC Schedule 13G or from the Nasdaq Stock Market. This
information has not been verified by the Company.
(k) The business address of Delaware Asset Management Company is One
Commerce Square, Philadelphia, Pennsylvania 19103.
(l) The business address of Montgomery Asset Management is 101 California
Street, San Francisco, California 94111.
(m) The business address of T. Rowe Price Associates, Inc. is 100 East
Pratt Street, Baltimore, Maryland 21202.
(n) The business address of Trust Company of the West Group, Inc. is 865
South Figuerga Street, Los Angeles, California 90017.
(o) The business address of Thomson Horstmann & Bryant, Inc. is Park 80
West/Plaza Two, Saddle Brook, New Jersey 07663.
ELECTION OF DIRECTORS
(PROPOSAL 1)
Seven Directors are proposed to be elected at the Annual Meeting, all
of whom currently are Directors. The Bylaws of the Company were amended by the
Board of Directors in November 1996 to increase the number of Directors
comprising the Board of Directors from six to seven. A Director serves until
the next annual meeting of shareholders or until his successor is elected and
qualified. Vacancies on the Board of Directors may be filled by the majority
vote of the Directors then in office or the sole remaining Director.
NOMINEES
Frank P. Krasovec, age 53, has served as Chairman of the Company since
October 1989, and from 1974 until May 1994 he served as either the Chairman or
President of Radio Cap Company, Inc., a subsidiary of the Company ("RCC"). Since
1983, Mr. Krasovec has also been the Chairman of Littlefield Real Estate
Company, a real estate investment firm, and manages other personal investments.
Littlefield Real Estate Company is currently being liquidated; a substantial
majority of its properties have been sold and contracts for the sale of its
remaining
4
<PAGE> 7
properties are scheduled to close by December 31, 1996. Mr. Krasovec currently
devotes a substantial majority of his time to the business of the Company.
Robert P. Whitesell, age 53, has been the President and Chief
Operating Officer of the Company since 1989. Mr. Whitesell is also Chairman
of each of the Company's subsidiaries. From February 1989 to May 1994, Mr.
Whitesell served as President of RCC. He has been involved in the promotional
products industry since 1971 and held various positions in management of the
Papermate division of the Gillette Company and the Everglide division of
Scripto, Inc. prior to joining the Company.
Robert L. Seibert, age 66, has served as a Director of the Company
since October 1989 and was a director of Norwood Products, Inc. (the
"Predecessor Company") from December 1988 to October 1989. Since 1978, he has
served as a director of Advertising Unlimited, Inc., a supplier of promotional
product calendars and served as its Chairman from 1978 to December 1994. Mr.
Seibert has also been a director of Northstar Guaranty since 1992.
John H. Wilson III, age 54, has served as a Director of the Company
since December 1991. Since April 1983, he has served as President of the U.S.
Equity Corporation, a private venture capital company. Mr. Wilson is also a
director of Capital Southwest Corp., Whitehall Corp., Encore Wire Corporation
and Palm Harbor Homes.
John H. Josephson, age 35, has served as a Director of the Company
since June 1993. Mr. Josephson has been employed by Allen & Company
Incorporated since August 1987 and has been a director of that firm since
February 1995. Mr. Josephson is also a director of Medical Resources, Inc.,
OFI Holdings, Inc., SESAC Holdings, Inc. and Virgol Servicos de Conveniencia,
SA.
Harold Holland, age 66, has served as a Director of the Company since
July 1994. Mr. Holland was the founder of ArtMold Products Corporation
("ArtMold") in 1960 and served as its President and Chairman until July 1994,
when ArtMold was acquired by the Company.
Roy D. Terracina, age 50, was elected as a Director by the Board of
Directors in November 1996 to fill the vacancy caused by the increase in the
size of the Board from six to seven Directors. Mr. Terracina was the owner and
chief executive officer of Sterling Foods, Inc. from 1984 until he sold the
company in 1993. He is currently a partner of Jungle Labs, a supplier of
chemicals to the pet industry. Mr. Terracina is also a director of Texas
Commerce Bank, National Association, United Services Advisors, Inc. and Mesirow
Partners.
DIRECTORS COMPENSATION
Members of the Board of Directors who are not employees of the Company
receive annual Director's fees of $20,000. In addition, members of the Board
of Directors are reimbursed for their expenses for attending Board and
committee meetings. Non-employee Directors are given the option of receiving
warrants to purchase shares of Common Stock in lieu of cash Director's fees.
These warrants are exercisable at any time during the five-year period
following their issuance. For fiscal year 1996, Messrs. Josephson and Wilson
each received in lieu of cash
5
<PAGE> 8
Director's fees warrants to purchase 4,728 shares of Common Stock at an
exercise price of $16.25 per share.
Pursuant to the Company's Non-Employee Director Stock Purchase Plan,
warrants to purchase 6,000 shares of Common Stock are granted to each Director
who is not an employee of the Company at the time the Director is first elected
to the Board of Directors. These warrants vest one year after they are granted
and are exercisable at any time during the following four years.
BOARD COMMITTEES AND MEETINGS
The Board of Directors has standing Audit and Compensation Committees.
The Audit Committee members are Messrs. Seibert (Chairman), Wilson and
Josephson. The Audit Committee annually recommends to the Board of Directors
the appointment of independent certified accountants as auditors for the
Company, discusses and reviews the scope and the fees of the prospective annual
audit and reviews the results with the auditors, reviews compliance with
existing major accounting and financial policies of the Company, reviews the
adequacy of the financial organization of the Company and considers comments by
the auditors regarding internal controls and accounting procedures and
management's response to those comments. The Audit Committee held one meeting
during the fiscal year ended August 31, 1996.
The Compensation Committee members are Messrs. Wilson (Chairman),
Seibert and Josephson. The Compensation Committee reviews and makes
recommendations to the Board regarding salaries, compensation and benefits of
executive officers and key employees of the Company and administers the
Company's stock option plans. The Compensation Committee held four meetings
during the fiscal year ended August 31, 1996.
The Board of Directors held six meetings during the fiscal year ended
August 31, 1996. During fiscal 1996 each Director attended at least 75% of the
meetings of the Board of Directors and the meetings held by the committees of
the Board of Directors on which such Director served.
EXECUTIVE OFFICERS
The following table sets forth the name, age and current position with
the Company of each executive officer of the Company ("named executive
officers").
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Frank P. Krasovec 53 Chairman and Chief Executive Officer
Robert P. Whitesell 53 President and Chief Operating Officer
J. Max Waits 43 Secretary, Treasurer and Chief Financial Officer
of the Company
John K. Finnell 48 Vice President of Product Development and
Sourcing
</TABLE>
6
<PAGE> 9
Officers are elected to hold office until the annual meeting of the
Board of Directors, which generally follows immediately after the annual
meeting of shareholders, or until their respective successors are elected and
have qualified. Officers serve at the discretion of the Board of Directors.
Information regarding Messrs. Krasovec and Whitesell is set forth
under the caption "Election of Directors."
J. Max Waits has served as Chief Financial Officer, Secretary and
Treasurer of the Company since May 1994. Mr. Waits was the Controller of RCC
from August 1991 until May 1994. He is also the Secretary of each of the
Company's operating companies. Prior to joining RCC, Mr. Waits served as
corporate controller/operating director and held various other financial
positions with Scripto Tokai Corporation from February 1984 to February 1989
and as sales manager of Robertex Inc. from February 1989 to August 1991.
John K. Finnell was elected Vice President of Product Development and
Sourcing of the Company in May 1994. From April 1993 until May 1994, Mr.
Finnell served as Vice President of Marketing of the Company. Mr. Finnell held
various sales and marketing positions with RCC from 1985 to April 1993.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
compensation paid by the Company for services rendered during fiscal 1994, 1995
and 1996 to the Company's chief executive officer and each other executive
officer as of the end of such fiscal year who received compensation in excess
of $100,000 for fiscal 1996 (collectively, the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Securities
Fiscal Other Annual Underlying
Name Year Salary Bonus Compensation Options/SARs (#)
---- ---- ------ ----- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Frank P. Krasovec 1996 $266,346 -- -- 10,000
Chairman and Chief 1995 $241,680 -- -- 9,000
Executive Officer 1994 222,503 -- -- 6,000
Robert P. Whitesell 1996 179,322 -- 10,000
President and Chief 1995 152,884 $45,000 -- 9,000
Operating Officer 1994 126,538 20,000 -- 6,000
J. Max Waits 1996 121,053 -- -- 8,000
Secretary, Treasurer and 1995 107,230 32,000 -- 4,500
Chief Financial Officer 1994 84,851 9,000 -- 2,400
John K. Finnell 1996 103,885 -- -- 7,728
Vice President - Product 1995 93,923 22,000(a) -- 3,000
Development and Sourcing 1994 87,970 10,000 -- 6000
</TABLE>
7
<PAGE> 10
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the number and
value of unexercised stock options granted during the last completed fiscal
year to each of the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/ POTENTIAL REALIZABLE VALUE AT
UNDERLYING SARS GRANTED ASSUMED ANNUAL RATES OF
OPTIONS/ TO EMPLOYEES EXERCISE OF STOCK PRICE APPRECIATION
SARS IN FISCAL BASE PRICE EXPIRATION FOR OPTION TERM
NAME GRANTED (#) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ----------- ---- ------ ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frank P. Krasovec 10,000 10.93% $ 17.88 11/16/00 $ 49,399 $ 109,159
Robert P. Whitesell 10,000 10.93% 16.25 11/16/05 102,195 258,983
J. Max Waits 8,000 8.74% 16.25 11/16/05 81,756 207,187
John K. Finnell 3,000 3.28% 16.25 11/16/05 30,659 77,695
4,728 5.17% 16.25 01/23/06 48,318 122,447
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
The following table sets forth information concerning the number and
value of unexercised stock options held by named executive officers at August
31, 1996.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)
------------------ -------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Frank P. Krasovec -- -- 2,000/23,000 $1,500/$20,838
Robert P. Whitesell -- -- 2,000/23,000 4,000/36,080
J. Max Waits -- -- 5,562/6,100 $64,792/17,241
John K. Finnell -- -- 1,200/7,800 7,200/17,160
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During fiscal 1996, the Compensation Committee of the Board of
Directors was made up of three independent non- employee Directors. The
Committee is responsible for analyzing the performance of the officers of the
Company and making recommendations to the entire Board of Directors concerning
their salaries, benefits and other compensation. The Committee also
administers the Company's stock option and compensation plans.
8
<PAGE> 11
Compensation of officers consists of three elements: (i) base salary,
(ii) annual incentive bonuses and (iii) long-term incentives in the form of
stock options. Annual cash bonuses are paid if the Company or its operating
companies achieve financial targets designed to reflect above-average
performance relative to the promotional products industry and the general
economy. Stock options are used to align the interests of shareholders and
officers by rewarding performance that builds shareholder value. These
elements are combined to build compensation packages that attract, motivate and
retain the management talent necessary to insure the success of the Company.
Base salaries for officers are determined by evaluating the
responsibilities of the position, individual performance by the officer,
contributions to the growth, revenue and earnings of the Company, the
experience of the officer and the number of years of his or her service with
the Company. These salaries are reviewed annually and adjustments are
determined by the Company's performance and the individual's contribution to
that performance.
For fiscal 1996, the Company's incentive bonus plan covered executives
of the Company and five of the Company's operating subsidiaries: ArtMold
Products Corporation, Barlow Promotional Products, Inc., Key Industries, Inc.,
Air-Tex Corporation and Radio Cap Company, Inc. Under the plan, pre-determined
amounts were available for the payment of cash bonuses based on both individual
performance and achievement of operating income targets by the subsidiaries.
Officers and other key managers participated in the bonus plans during fiscal
1996 based upon percentages set for them at the beginning of the fiscal year.
Stock options are granted to officers from time to time as determined
by the Committee. Stock options are granted with an exercise price not less
than the fair market value of the Common Stock on the date of grant. Options
are generally exercisable between three and ten years from the date granted.
Stock options are an important part of the overall compensation package
provided to officers. Since the full benefit of the compensation package
cannot be realized unless the Common Stock appreciates over the period that the
stock options vest and become exercisable, the Company believes that the grant
of stock options provides incentive for the creation of long-term shareholder
value.
These compensation policies apply to all officers of the Company,
including the named executive officers. Annual base salaries and incentive
bonus targets for executive officers were determined by the entire Board of
Directors, based upon the recommendations of the Compensation Committee and the
Board's evaluation of the factors described above.
Mr. Krasovec's base annual salary was initially set by the Board of
Directors at approximately $250,000 for the 1996 fiscal year. Effective
January 1, 1996, that amount was increased to approximately $275,000. In
recommending this increase in Mr. Krasovec's compensation, the Committee took
into account the time and effort required of him in implementing the Company's
acquisition strategy and the Company's success in achieving its operating
objectives.
9
<PAGE> 12
Mr. Krasovec continues to effectively lead the Company through
identifying, evaluating and negotiating the terms of strategic acquisitions,
hiring key personnel and establishing a strategic focus to position the Company
for the future. Under Mr. Krasovec's leadership, during the 1996 fiscal year
the Company completed a Common Stock offering which netted the Company
approximately $31 million and the acquisitions of Ocean Specialty Manufacturing
Corporation, Tee-Off Enterprises, Inc. and Alpha Products, Inc. The Company's
sales have grown from $32.5 million in fiscal 1991 to $152.0 million during
fiscal 1996. The Company's success in implementing its operating and
acquisition strategy has increased net income from $568,000 in fiscal 1991 to
$4.2 million in fiscal 1996.
Compensation Committee:
Robert L. Seibert
John H. Wilson III
John H. Josephson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is or has been an officer or
employee of the Company or any of its subsidiaries. There are no persons who
participated in deliberations concerning executive officer compensation in
fiscal 1996 that had any relationship that would require disclosure pursuant to
Item 404 of Regulation S-K as promulgated by the Securities and Exchange
Commission.
No executive officer of the Company served as a member of the
compensation committee (or other Board committee performing similar functions)
or board of directors of another corporation, one of whose executive officers
served on the Company's Compensation Committee or Board of Directors.
COMMON STOCK PERFORMANCE GRAPH
The Common Stock began trading publicly on June 16, 1993. The
following performance graph compares the cumulative return since June 16, 1993
of the Common Stock with that of Standard and Poor's 500 Stock Index and a
group of the Company's peer corporations (the "Peer Group"). Each index
assumes $100 invested on June 16, 1993 and is calculated assuming quarterly
reinvestment of dividends and quarterly weighting by market capitalization.
10
<PAGE> 13
COMPARISON OF 38 MONTH CUMULATIVE TOTAL RETURN
AMONG
NORWOOD PROMOTIONAL PRODUCTS, INC., STANDARD AND POOR'S 500 STOCK INDEX
AND A PEER GROUP
(PERFORMANCE RESULTS THROUGH AUGUST 31, 1996)
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
JUNE 16, AUG. 28, SEPT. 3, SEPT. 2, AUG. 31,
1993 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Norwood Promotional Products, Inc. 100 113 95 141 132
Standard & Poor's 500 Stock Index 100 104 106 133 158
Peer Group 100 105 107 103 128
</TABLE>
11
<PAGE> 14
THE PEER GROUP IS COMPOSED OF THE FOLLOWING COMPANIES:
<TABLE>
<CAPTION>
COMPANY NAME SYMBOL
------------ ------
<S> <C>
Ha-Lo Industries HALO
Tandy Brands Accessories TBAC
Forschner Group, Inc. FSNR
Lillian Vernon Corp. LVC
CSS Industries Inc. CSS
</TABLE>
The Companies above were selected as a peer group due to similar
industries and market capitalization.
SECTION 16 COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, Directors,
certain officers, and beneficial owners of 10% or more of the Company's Common
Stock are required from time to time to file with the Securities and Exchange
Commission reports on Forms 3, 4 or 5, relating principally to transactions in
Company securities by such persons. Based solely upon a review of Forms 3 and
4 and amendments thereto furnished to the Company during its fiscal year 1996
and thereafter, Forms 5 and amendments thereto furnished to the Company with
respect to its fiscal year 1996, and written representations received by the
Company from a Director, officer or beneficial owner of more than 10% of the
Common Stock ("reporting persons") that no Form 5 is required, the Company
believes that all reporting persons filed on a timely basis the reports
required by Section 16(a) of the Securities Exchange Act of 1934 during the
Company's fiscal year 1996, except that John H. Wilson III filed on May 3, 1996
a Form 4 report that was due on April 10, 1996 relating to his exercise of
options to purchase 2,857 shares of Company Common Stock.
CERTAIN TRANSACTIONS
In connection with the acquisition of the Barlow(R) and Salm(R)
product lines in May 1992, the Company sold an aggregate of 173,333 shares of
Common Stock to officers and certain employees of the Company for $5.25 per
share. To assist these officers and employees in financing the purchase of
these shares, Radio Cap Company, Inc., a wholly owned subsidiary of the
Company, made loans in an aggregate principal amount of $510,000, including
loans of $208,783 to Frank P. Krasovec and $120,002 to John K. Finnell. The
loans provide for annual interest at the Chemical Bank prime rate plus 2%
(10.5% at August 31, 1996), payable quarterly, with principal payable in
quarterly installments beginning September 1995 and the balance of the loan due
in June 1997. The loans were secured by a pledge of the Common Stock purchased
with the loan proceeds. Mr. Krasovec and Mr. Finnell have repaid their loans
in full during the fiscal year ending August 31, 1996.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
OF THE INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
12
<PAGE> 15
PROPOSAL TO AMEND THE INCENTIVE STOCK COMPENSATION PLAN
(PROPOSAL 2)
GENERAL
The Company's Amended and Restated 1994 Incentive Stock Compensation
Plan (the "Plan") was originally adopted by the Board of Directors of the
Company on November 14, 1994 and approved by the Shareholders of the Company on
January 25, 1995. The Plan is designed to encourage stock ownership by certain
officers and employees of the Company and any present or future subsidiaries of
the Company (collectively, "Subsidiaries") so that the employees may acquire or
increase their proprietary interest in the success of the Company and have
additional incentive to remain in the employ of the Company.
Under the Plan as currently in effect, 190,000 shares of Common Stock
are reserved for stock options and other awards. As of the date of this proxy
statement, a total of 175,728 shares of Common Stock have been issued or are
currently reserved for issuance upon exercise of stock options granted pursuant
to the Plan, and 14,272 shares currently remain available for future awards.
On November 15, 1996, the Board of Directors unanimously approved an amendment
to the Plan to increase the total number of shares of Common Stock available
for awards under the Plan from 190,000 to 410,000, and directed that the
amendment be submitted to a vote of the shareholders at the Annual meeting. If
the proposal to amend the Plan is approved by the Shareholders, up to 234,272
shares of Company Common Stock would be available for issuance under the Plan,
in addition to the 175,728 shares previously issued or currently reserved for
issuance. The 410,000 shares issued or reserved for issuance under the Plan if
the amendment is approved will represent approximately 7.3% of the Company's
total issued and outstanding and reserved Common Stock.
Employees of the Company or a Subsidiary, including the Company's
executive officers and directors who are employees, are eligible to receive
awards under the Plan. Non-employee directors are not eligible for awards
granted pursuant to the Plan. Awards may be in the form of (i) stock options
to purchase shares of Company Common Stock, (ii) stock appreciation rights,
(iii) restricted stock or restricted units, and (iv) performance bonus awards
in the form of cash or shares of Company Common Stock, or both.
The Plan is administered by a committee composed of non-employee
directors who are not eligible to participate in the Plan (the "Committee").
The Plan allows the cancellation and regrant of previously granted awards.
Based solely upon the closing price of the Company's Common Stock in the NASDAQ
National Market System on December 2, 1996, the market value of the shares of
Company Common Stock reserved for issuance under the Plan is $6,457,500. The
actual value of the securities to be issued will be determined by the fair
market value of the underlying securities on the dates such securities are
issued.
The benefits or amounts of awards that will be received or allocated
to a particular individual or group pursuant to the Plan is not determinable.
The Plan makes no distinction between awards to key employees and officers, and
awards that may be granted to key employees and/or executive officers.
13
<PAGE> 16
The Plan terminates on November 14, 2004, except with respect to
awards then outstanding. No award granted under the Plan shall be assignable
or transferable except by will or the laws of descent and distribution.
AWARDS
Options. The Company may grant stock options ("incentive stock
options") qualifying under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and options ("nonqualified options") not qualifying under
such provision. The Committee also may provide for the automatic grant of
reload options and may issue deferred compensation stock options to provide a
means by which compensation payments can be deferred to future dates.
Incentive stock options are exercisable at a price not lower than 100%
of the fair market value of the stock on the date of the grant, but in the case
of an eligible employee who owns more than 10% of the Common Stock, the
incentive stock options will be exercisable at a price not lower than 110% of
the fair market value on the date of the grant. The Plan provides that the
aggregate fair market value, measured as of the date of grant, of stock covered
by options granted to any employee may not exceed $100,000 in the year in which
such options first become exercisable. The Company may establish vesting
provisions for a stock option so that the option becomes fully vested to the
participant in a series of cumulative portions. The Committee may also
accelerate the vesting of any stock option or portion thereof.
Incentive stock options are exercisable during a period specified in
the agreement granting the option, not to exceed five years from the date the
grant in the case of a 10% shareholder and ten years from the date of grant in
other cases. The term of each stock option, other than incentive stock
options, shall be fixed by the Committee.
Stock Appreciation Rights. A stock appreciation right is an award
entitling a participant under the Plan to receive an amount equal to (or less
than, if the Committee elects) the excess of the fair market value of a share
of Common Stock on the date of exercise over the fair market value of a share
of Common Stock on the date of grant of the stock appreciation right. A stock
appreciation right may be exercised by a participant in accordance with
procedures established by the Committee, but a stock appreciation right may not
be exercisable prior to the first anniversary of the date of its grant.
Payment upon exercise of a stock appreciation right may be made in cash, shares
of Common Stock, a stock option or any combination thereof.
Restricted Stock Awards. Awards of restricted Common Stock
("Restricted Stock") are rights granted by the Committee to receive shares of
Common Stock subject to forfeiture and other restrictions determined by the
Committee. Until the restrictions with respect to any award of Restricted
Stock lapse, the transferability of the Restricted Stock is prohibited or
restricted in the manner and to the extent prescribed by the Committee. The
grant of an award of Restricted Stock constitutes an immediate transfer of the
ownership of the Common Stock evidenced thereby, entitling the recipient to
dividend, voting and other voting rights.
A restricted unit grant (a "Restricted Unit Grant") is an award of
units granted to a participant subject to such terms and conditions as the
Committee deems appropriate, including, without limitation, the requirement
that the participant forfeit such units upon termination of
14
<PAGE> 17
employment for specified reasons within a specified period of time, and
restrictions on the sale, assignment, transfer or other disposition of the
units. Based on the discretion of the Committee at the time a Restricted Unit
Grant is awarded to a participant, a unit will have a value (i) equivalent to
one share of Common Stock, or (i) equivalent to the excess of the fair market
value of a share of Common Stock on the date the restriction lapses over the
fair market value of a share of Common Stock on the date of the grant of the
Restricted Unit Grant (or over such other value as the Committee determines at
the time of the grant).
Performance Bonus Awards. Performance bonus awards granted under the
Plan may be in the form of cash or shares of Common Stock and shall be granted
on terms approved by the Committee.
ADJUSTMENTS
In the event of any change in capitalization affecting the Common
Stock of the Company, such as a stock dividend, stock split, recapitalization,
merger, consolidation, split-up, combination, exchange of shares, other form of
reorganization, or any other change affecting the Common Stock, the Board of
Directors, in its discretion, may make proportionate adjustments as it deems
appropriate to reflect such change with respect to (i) the maximum number of
shares of Common Stock which may be sold or awarded to any participant, (ii)
the number of shares of Common Stock covered by each outstanding award, and
(iii) the price per share in respect of the outstanding awards.
Notwithstanding the foregoing, the Board of Directors may only increase the
aggregate number of shares of Common Stock for which awards may be granted
under the Plan solely to reflect the change, if any, of the capitalization of
the Company or a subsidiary of the Company. The Committee may also make such
adjustments in the number of shares covered by and the price or other value of
any outstanding awards in the event of a spin-off or other distribution (other
than normal cash dividends) of Company assets to shareholders.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE(A) NUMBER OF OPTIONS
----------------- ------------ -----------------
<S> <C> <C>
Frank P. Krasovec, -- 5,000
Chairman and Chief
Executive Officer
Robert P. Whitesell, -- 5,000
President and Chief
Operating Officer
J. Max Waits, 5,000
Secretary, Treasurer
and Chief Financial
Officer
John K. Finnell -- 2,500
Vice President Product
Development and
Sourcing
Executive Group -- 24,500
Non-Executive Officers -- 8,000
</TABLE>
15
<PAGE> 18
- ---------------------------------
(a) The options issued to Mr. Krasovec under the Plan were granted at an
exercise price of $18.563 per share which was at least 110% of the
closing price per share of the Company's Common Stock as reported by
NASDAQ as of November 15, 1996. The options issued to Messrs.
Whitesell, Waits and Finnell were granted at an exercise price of
$16.875 per share, the closing price per share of the Company's Common
Stock as reported by NASDAQ as of November 15, 1996.
AMENDMENT AND TERMINATION.
The Board of Directors may terminate or amend the Plan without
shareholder approval, except that approval of the shareholders is required for
an amendment that (a) increases the aggregate number of shares of Common Stock
that may be issued under the Plan (except for adjustment pursuant to Section 12
of the Plan), (b) materially modifies the requirements as to eligibility for
participation in the Plan, or (c) materially increases the benefits accruing to
participants under the Plan. Neither the Board of Directors nor the Committee
may amend, alter, discontinue or terminate the requirements concerning
incentive stock options unless (i) (a) such modifications are made to comply
with changes in the tax laws, or (b) the Plan is completely terminated, or (ii)
make any amendment, alteration or modification to the Plan that would impair
the vested rights of a participant under any award granted under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following general summary is based upon the Code and does not
include a discussion of any state or local tax consequences.
Incentive Stock Options. A participant does not realize taxable
income upon the grant or exercise of an incentive stock option.
The income tax treatment of any gain or loss realized upon a
participant's disposition of shares of Common Stock received upon exercise of
an incentive stock option depends on the timing of the disposition. If the
optionee holds the shares received upon exercise of an incentive stock option
for at least two years from the date such incentive stock option was granted,
or one year from the date of exercise, the difference (if any) between the
amount realized from the sale of such shares and the participant's tax basis
will be taxed as long-term capital gain or loss.
If a participant disposes of the shares of Common Stock before the end
of the applicable holding periods described above, such participant may be
deemed to be in receipt of taxable income in the year of the disqualifying
disposition, depending on the selling price. If the selling price exceeds the
fair market value of the incentive stock option on the date of exercise, the
excess of that fair market value over the exercise price is taxable to the
participant as ordinary income, and the excess of the selling price over the
fair market value is taxable to the participant as capital gain. If the
selling price exceeds the exercise price but not the fair market value on the
date of exercise, the excess of the selling price over the exercise price is
taxable to the participant as ordinary income. If the selling price is less
than the exercise price, the difference is treated as capital loss.
16
<PAGE> 19
The Company is not entitled to a deduction for federal income tax
purposes with respect to the grant or exercise of an incentive stock option or
the disposition of shares of Common Stock acquired upon exercise (if the
applicable holding periods have been met). In the event of a disqualifying
disposition, however, the Company is entitled to a federal income tax deduction
in an amount equal to the ordinary income recognized by the participant.
Certain participants may be subject to the alternative minimum tax
which in individual cases could reduce or eliminate any tax benefits to them
under the Plan.
Nonqualified Stock Option. A participant will not recognize any
taxable income upon the grant of a nonqualified option. However, upon exercise
of a nonqualified option, a participant must recognize ordinary income in an
amount equal to the excess of the fair market value of the shares of Common
Stock at the time of exercise over the exercise price. Upon the subsequent
disposition of the shares, the participant will realize a capital gain or loss,
depending on whether the selling price exceeds the fair market value of the
shares on the date of exercise. The participant's holding period in the
shares, for capital gains and losses purposes, begins on the date of exercise.
A participant's tax basis in the shares of Common Stock received on
exercise of a nonqualified option will be equal to the amount of consideration
paid by the participant on exercise, plus the amount of ordinary income
recognized as a result of the receipt of such shares. The Company will be
entitled to a deduction for federal income tax purposes at the same time and in
the same amount as the participant recognizes taxable income, provided that the
Company satisfies its withholding tax obligation with respect to such income.
If a participant exercises a nonqualified option by delivering other
shares of the Company's Common Stock, the participant will not recognize gain
or loss with respect to the shares delivered by the participant, even if the
then fair market value of such shares is different from the participant's tax
basis therein. The participant, however, will be taxed as described above with
respect to the exercise of the nonqualified option as if the participant had
paid the exercise price in cash, and the Company likewise generally will be
entitled to an equivalent tax deduction. The participant's tax basis in the
shares of Common Stock received on such exercise will be equal to the
participant's basis in the number of shares surrendered on such exercise plus
the fair market value of the number of shares received in excess of the number
of shares surrendered and the holding period for such number of shares received
will include the holding period of the shares surrendered.
RESTRICTED STOCK AND DEFERRED STOCK
Generally, an employee to whom an award of Restricted Stock is made
will recognize ordinary income for federal income tax purposes in an amount
equal to the excess of the fair market value of the shares of Common Stock
received, at the time the shares first become transferable or are no longer
subject to forfeiture, over the purchase price, if any, paid by the employee
for such Common Stock, and such amount will then be deductible for federal
income tax purposes by the Company. For tax purposes, in addition to other
restrictions, the Common Stock is considered to be subject to a substantial
risk of forfeiture as long as the sale of the shares could subject the employee
to suit under the "short swing profit" provisions of Section 16 of the
17
<PAGE> 20
Securities and Exchange Act of 1934. Alternatively, if the recipient so
elects, the recipient will recognize ordinary income on the date of grant in
the case of an award of Restricted Stock in an amount equal to the excess of
the fair market value of the shares of Common Stock (without taking into
account any lapse restrictions) on such date, over the purchase price, if any,
paid by the employee for such Common Stock, and such amount will then be
deductible by the Company. In the event of the forfeiture of the Common Stock
included in an award of Restricted Stock, the employee will not be entitled to
any income tax deduction except to the extent the employee paid for such Common
Stock. Upon a sale of the Common Stock included in an award of Restricted
Stock, the employee will recognize capital gain or loss, as the case may be,
equal to the difference between the amount realized from such sale and the
employee's tax basis for such shares of Common Stock.
Any dividend (including any interest earned thereon) payable with
respect to shares of Common Stock that have not vested pursuant to the terms of
an award of Restricted Stock will be taxable to the recipient employee as
ordinary compensation income at the time his right to such dividend is no
longer subject to a risk of forfeiture.
STOCK APPRECIATION RIGHTS
A participant will not recognize any taxable income upon the grant of
a stock appreciation right (an "SAR"). Upon exercise, however, a participant
must recognize ordinary income equal to the fair market value of the shares of
Company's Common Stock he receives. Upon the subsequent disposition of the
shares, the participant will recognize a capital gain or loss, depending on
whether the selling price exceeds the fair market value of the shares on the
date of exercise. The participant's holding period in the shares, for capital
gains and losses purposes, begins on the date of exercise.
A participant's tax basis in the shares of Common Stock he receives on
exercise of an SAR will be equal to the fair market value of such shares. The
Company will be entitled to a deduction for federal income tax purposes at the
same time and in the same amount as the participant recognizes taxable ordinary
income, provided that the Company satisfies its withholding tax obligations
with respect to such income.
VOTE REQUIRED FOR ADOPTION OF THE AMENDMENT OF THE PLAN
The proposed amendment to the Plan will require the affirmative vote
of a majority of the total number of shares of Common Stock present or
represented and entitled to vote at the Annual Meeting or any adjournment
thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE PROPOSED AMENDMENT TO THE INCENTIVE STOCK COMPENSATION PLAN.
18
<PAGE> 21
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL 3)
The Board of Directors has selected Ernst & Young LLP as independent
public accountants for the Company to audit its consolidated financial
statements for the fiscal year ending August 30, 1997, and requests that the
shareholders ratify such selection. The affirmative vote of a majority of the
outstanding shares of Common Stock present or represented at the Annual Meeting
in person or by proxy will be required for the ratification of the appointment
by the Board of Directors of Ernst & Young LLP as independent public
accountants. Ernst & Young LLP served as the Company's independent public
accountants for the fiscal year ended August 31, 1996 and has reported on the
Company's consolidated financial statements for such year. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting and will be
afforded an opportunity to make a statement and will be available to respond to
appropriate questions from shareholders.
While shareholder ratification is not required for the selection of
Ernst & Young LLP, since the Board of Directors has the responsibility for
selecting the Company's independent public accountants, the selection is being
submitted for ratification at the Annual Meeting with a view towards soliciting
the shareholders' opinions, which the Board of Directors will take into
consideration in future deliberations.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY FOR THE FISCAL YEAR ENDING AUGUST 31, 1996.
OTHER BUSINESS
Management knows of no other business to be brought before the Annual
Meeting. If any other proposals should properly come before the Annual
Meeting, it is intended that the shares represented by proxies shall be voted
in accordance with the judgment of the person or persons exercising the
authority confessed by the proxies. The persons named in the accompanying
proxy will vote the proxy as in their discretion they may deem appropriate,
unless they are directed by the proxy to do otherwise.
DATE FOR RECEIPT OF PROPOSALS
Any shareholder wishing to submit a proposal for inclusion in the
proxy statement for the Company's Annual Meeting of Shareholders to be held in
January 1998 pursuant to the shareholder proposal rules of the Securities and
Exchange Commission should submit the proposal in writing to J. Max Waits,
Secretary, Norwood Promotional Products, Inc., The Renaissance Plaza, 70 N.E.
Loop 410, Suite 295, San Antonio, Texas 78216. The Company must receive a
proposal by August 18, 1997 to be included in the proxy statement.
19
<PAGE> 22
By Order of the Board of Directors
/s/ J. MAX WAITS
J. MAX WAITS
Secretary
December 20, 1996
San Antonio, Texas
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO
DO NOT EXPECT TO ATTEND THE MEETING AND WISH THEIR STOCK TO BE VOTED ARE URGED
TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
20
<PAGE> 23
NORWOOD PROMOTIONAL PRODUCTS, INC.
THE RENAISSANCE PLAZA
70 N.E. LOOP 410, SUITE 295
SAN ANTONIO, TEXAS 78216
December 20, 1996
Dear Norwood Promotional Products, Inc. Shareholder:
You are cordially invited and encouraged to attend the Annual Meeting of
Shareholders of Norwood Promotional Products, Inc. The meeting will be held on
Tuesday, January 21, 1997 at 10:00 a.m. Central Time in the San Jacinto West
Room at The Four Seasons Hotel, 98 San Jacinto Blvd., Austin, Texas.
If you cannot personally attend the meeting, please vote your preference on the
proxy card attached below and return it promptly. Your participation in NPPI's
business, whether in person or by proxy, is an important part of the Company's
governance.
I look forward to and appreciate your participation in Norwood Promotional
Products, Inc.'s Annual Meeting of Shareholders.
Sincerely,
/s/ FRANK P. KRASOVEC
Frank P. Krasovec
Chairman and Chief Executive Officer
Detach Proxy Form Here
- --------------------------------------------------------------------------------
ITEM 3. RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR 1997.
FOR AGAINST ABSTAIN
------------ ---------- ----------
In their sole discretion, the Proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any adjournment
thereof.
This Proxy will be voted as specified in the spaces provided therefore or, if
no such specification is made, it will be voted for the election of directors
and for Items 2 and 3. The matters in Items 1, 2 and 3 are proposed by the
Company.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
NORWOOD PROMOTIONAL PRODUCTS, INC.
SIGN HERE
--------------------------------------------
(Please sign exactly as name appears hereon)
SIGN HERE
--------------------------------------------
(Executors, administrators, trustees, etc.
should so indicate when signing)
Dated
--------------------------------------------
<PAGE> 24
Detach Proxy Form Here
- --------------------------------------------------------------------------------
PROXY NORWOOD PROMOTIONAL PRODUCTS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - JANUARY 21, 1997
The undersigned, revoking all previous proxies, hereby appoints Frank P.
Krasovec and Robert P. Whitesell, or either of them as Proxy or Proxies of the
undersigned, each with the power to appoint his substitute, to vote, as
designated below, all of the shares of Common Stock of Norwood Promotional
Products, Inc. (the "Company") held of record by the undersigned on December 2,
1996, at the annual meeting of shareholders to be held at 10:00 a.m. Central
Time on January 21, 1997, in the San Jacinto West Room at The Four Seasons
Hotel, 98 San Jacinto Blvd., Austin, Texas, and at any adjournment thereof.
ITEM 1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY to vote
-------- (except as marked to the ----- for all nominees listed below.
contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee strike
a line through the nominee's name in the list below.)
Frank P. Krasovec, Robert P. Whitesell, Robert L. Seibert,
John H. Wilson III, John H. Josephson, Harold Holland, Roy D. Terracina
ITEM 2. APPROVAL OF THE AMENDMENT TO NORWOOD PROMOTIONAL PRODUCTS, INC. 1994
INCENTIVE STOCK COMPENSATION PLAN
FOR AGAINST ABSTAIN
---------- ----------- ---------
(CONTINUED, AND TO BE SIGNED ON THE OTHER SIDE.)
