<PAGE> 1
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:
<TABLE>
<S> <C>
/ / 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
</TABLE>
PRIMESOURCE CORPORATION
- --------------------------------------------------------------------------------
(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)(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> 2
[LOGO]
-------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-------------
TO THE SHAREHOLDERS:
The third annual meeting of shareholders of PrimeSource Corporation
will be held at the Pennsauken Country Club, 3800 Haddonfield Road, Pennsauken,
New Jersey on Tuesday, May 6, 1997 at 9:30 a.m., for the following purposes:
1. To elect three directors to serve terms of three years each
and one director to serve a term of one year.
2. To ratify the selection of Coopers & Lybrand L.L.P. as
independent auditors for the fiscal year ending December 31,
1997.
3. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 14, 1997
are entitled to notice of, and to vote at, this meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Barry C. Maulding
Barry C. Maulding
Corporate Secretary
Pennsauken, New Jersey
April 7, 1997
IMPORTANT
EACH SHAREHOLDER IS URGED TO SIGN AND
RETURN PROMPTLY THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
<PAGE> 3
[LOGO]
FAIRWAY CORPORATE CENTER
4350 HADDONFIELD ROAD
SUITE 222
PENNSAUKEN, NEW JERSEY 08109
---------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 6, 1997
---------------------
This proxy statement, which was first mailed to shareholders on April
7, 1997, is furnished in connection with the solicitation of proxies on behalf
of the Board of Directors of PrimeSource Corporation (the "Corporation") to be
voted at the annual meeting of the shareholders of the Corporation to be held at
9:30 a.m. on May 6, 1997 at the Pennsauken Country Club, 3800 Haddonfield Road,
Pennsauken, New Jersey for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders.
VOTING
Shareholders who execute proxies retain the right to revoke them at any
time before they are voted. A proxy may be revoked by written notice to the
Corporate Secretary of the Corporation at Fairway Corporate Center, 4350
Haddonfield Road, Suite 222, Pennsauken, New Jersey 08109; by submission of a
proxy with a later date; or by a request in person to return the executed proxy.
The cost of solicitation of proxies will be borne by the Corporation.
Under the Pennsylvania Business Corporation Law, the election of the
Corporation's Directors requires the vote of a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote thereon. Accordingly, the indication of an abstention on a proxy or the
failure to vote either by proxy or in person will be treated as neither a vote
"for" nor "against" the election of any Director. On all other matters, the
affirmative vote of a majority of the shares present in person or represented by
proxy at the meeting shall be required.
Shares represented by proxies containing an abstention as to any matter
will be treated as shares that are present and entitled to vote for purposes of
determining a quorum. The presence in person or by proxy of a majority of the
outstanding shares shall be necessary to constitute a quorum to take action at
the meeting.
Similarly, the Corporation will treat shares held by brokers or
nominees for the accounts of others as to which voting instructions have not
been given as shares that are present and entitled to vote for purposes of
determining a quorum. Moreover, for purposes of determining the election of the
Corporation's Directors, brokers and nominees may vote shares for which no
instructions have been given in their discretion under applicable securities
laws.
Shareholders of record at the close of business on March 14, 1997 are
entitled to vote at the meeting on the basis of one vote for each share of
common stock held, except that cumulative voting rights may be exercised with
respect to the election of Directors as described in the following paragraph. On
March 14, 1997, there were 6,514,779 shares of common stock outstanding.
A shareholder wishing to exercise cumulative voting rights in the
election of Directors may multiply the number of shares which he or she is
entitled to vote by the total number of Directors to be elected (four) and may
distribute the total number of such votes among one or more nominees in such
proportion as he or she desires. The proxies shall have the discretionary
authority to vote cumulatively and
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<PAGE> 4
to distribute such votes among the nominees so as to assure the election of the
nominees of the Board of Directors, except such nominees as to whom a
shareholder withholds authority to vote and except where a shareholder has
directed that votes be cast cumulatively by specific instructions to the
proxies.
Proxies in the form enclosed, if duly signed, marked and received in
time for voting, will be voted in accordance with the directions of the
shareholders.
SECURITY OWNERSHIP
The following table sets forth, as of February 1, 1997, all
shareholders of the Corporation who were known by the Corporation to own
beneficially more than 5% of the outstanding shares, each director of the
Corporation, each named executive officer, and all directors and executive
officers as a group. As required by SEC regulations, also shown are shares over
which the named person could acquire such powers within 60 days by exercising
stock options under the Corporation's stock option plans.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership(1)
Name and Address -------------------------------------------------------
of Beneficial Owner Direct Indirect Total (2) Percent
- ------------------- ------ -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Marie Baur Dillin 420 471,362 (3) 471,782 7.2
1408 S. Highland Park Dr.
Lake Wales, FL 33853
Acquirable
Name of Director Within
or Executive Officer 60 Days
- -------------------- -------
Fred C. Aldridge, Jr. 16,866 --- 22,841 * 5,975
Philip J. Baur, Jr. 30,454 126,223 (4) 156,677 2.4 ---
William A. DeMarco (5) 2,017 29 3,921 * 1,875
Richard E. Engebrecht 48,495 25,887 113,463 1.7 39,081
John H. Goddard, Jr. 10,905 1,268 18,888 * 6,715
Gary MacLeod 8,113 6,034 (6) 14,147 * ---
James F. Mullan (5) 15,844 1,231 33,325 * 16,250
Edward N. Patrone --- 1,000 (7) 1,000 * ---
John M. Pettine 18,350 31 18,381 * ---
D. James Purcell 1,261 241 2,752 * 1,250
Andrew V. Smith 13,298 --- 13,298 * ---
James H. Wiborg 112,852 (8) 64,874 (8) 177,726 2.7 ---
Dennis M. Zewiske 5,709 819 17,528 * 3,875
All directors and executive
officers as a group (14 persons) 284,164 221,603 587,904 8.9 77,704
</TABLE>
- -------------------------
* Represents less than 1% of the outstanding shares.
(1) Except as otherwise indicated, beneficial ownership represents sole
voting and sole investment power with respect to $.01 par value
common stock, the Corporation's only outstanding class of stock.
(2) Represents the total shares over which the named person has any
voting or investment power and includes the shares in the "Acquirable
Within 60 Days" column as required by SEC regulations.
(3) This amount represents:
a) 106,000 shares held in a trust for which Ms. Dillin is
co-trustee and shares voting and investment power with
Northern Trust Bank;
b) 285,099 shares held in three trusts for which Ms. Dillin
is co-trustee and shares voting and investment power with
FirstUnion Bank; and
c) 80,263 shares held in two trusts for which Ms. Dillin is
co-trustee and shares voting and investment power with her
brother Philip J. Baur, Jr. and CoreStates Bank.
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<PAGE> 5
(4) This amount represents:
a) 8,144 shares in a trust of which Mr. Baur has sole voting
and investment power;
b) 7,196 shares owned by the Philippian Foundation, a
charitable foundation of which Mr. Baur is trustee and has
sole voting and investment power;
c) 7,191 shares owned by Mr. Baur's spouse;
d) 6,784 shares held in two trusts for which Mr. Baur shares
voting and investment power with CoreStates Bank, the
co-trustee;
e) 60,037 shares held in a trust (for the benefit of Mr.
Baur's children) for which Mr. Baur shares voting and
investment power;
f) 20,226 shares held in a trust (for the benefit of Marie
Dillin's children) for which Mr. Baur shares voting and
investment power;
g) 11,262 shares held in a trust at a bank for the benefit of
Mr. Baur and his children, for which Mr. Baur shares
investment power as co-trustee and has sole voting power;
and
h) 5,383 shares in an IRA at a stock brokerage firm.
This indirect total for Mr. Baur does not include 238,387 shares in
a trust for which Mr. Baur is the sole income beneficiary but has no
voting or investment power. Mr. Baur's sister, Marie Dillin, shares
voting and investment power as to these shares--see footnote 3(b)
above.
(5) Does not include 33,909 shares owned by the Corporation's 401(k)
Savings Plan and held in a trust for the benefit of employees
participating in the Plan. Messrs. Mullan and DeMarco are two of the
three plan trustees. The employees have the sole power to direct the
voting of these shares; therefore, the trustees disclaim beneficial
ownership of these shares.
(6) Mr. MacLeod shares voting and investment power as co-trustee with
James H. Wiborg and one other person of a trust that holds these
shares. Mr. MacLeod has no beneficial interest in these shares.
(7) Mr. Patrone disclaims beneficial ownership of these 1,000 shares
owned by his spouse. These shares have been listed under indirect
ownership as required by SEC rules.
(8) 9,925 shares are in a trust over which Mr. Wiborg has full voting
and investment powers and is the beneficiary. Mr. Wiborg shares
voting and investment power with two co-trustees in 9,359 shares
held by two trusts in which he has no beneficial ownership. Mr.
MacLeod is a co-trustee for 6,034 of the 9,359 shares. 45,590 shares
owned by Mr. Wiborg's spouse are included under indirect ownership
as required by SEC rules.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and holders of more than ten
percent of the Corporation's Common Stock to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock of the Corporation. SEC regulations require the filing
parties to furnish the Corporation with copies of all Section 16(a) forms they
file. To the Corporation's knowledge, during the fiscal year ended December 31,
1996, all parties subject to Section 16(a) timely complied with the filing
requirements except Philip J. Baur, Jr. who was four days late in filing a Form
4 report reporting a February 1996 sale by a trust of which he is a co-trustee
and co-beneficiary.
ELECTION OF DIRECTORS
Your Corporation has a classified board of ten directors. Three or four
directors are normally scheduled to be elected each year for a term of three
years. Messrs. Aldridge, Gooddard, and Pettine, all of whom are current
directors, have been nominated to be reelected this year for a term which
expires in 2000. Mr. Klaus Oebel, a new nominee, has been nominated to serve for
a one year term expiring in 1998. Mr. Smith will reach the mandatory retirement
date in 1997, as will continuing director Mr. Wiborg. This arrangement is
necessary to rebalance the number of directors in the three classes due to the
retirement of two directors in the same class last year. The Board of Directors
recommends a vote FOR their reelections, and unless you indicate otherwise, your
signed proxy will be voted for the election of these nominees.
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<PAGE> 6
The Board of Directors expects that all of the nominees will be
available for election, but if any of them is not a candidate at the time the
election occurs, it is intended that such proxy will be voted for the election
of another nominee to be designated to fill any such vacancy by the Nominating
Committee of the Board of Directors of the Corporation.
NOMINEE FOR ELECTION - TERM TO EXPIRE IN 1998
Klaus D. Oebel, age 55, has been President of the Communications
Systems Group of Aydin Corporation, a Pennsylvania based systems integrator and
manufacturer of electronic data transfer products, since 1996. For the prior 18
years he was an international management consultant specializing in developing
and implementing organizational strategies. He has a Masters degree in Economics
and Political Science. Mr. Oebel served as a consultant to the Corporation in
the 1994-96 time period.
NOMINEES FOR REELECTION - TERM TO EXPIRE IN 2000
Fred C. Aldridge, Jr., age 63, has served as a director of the
Corporation since 1993. He is a senior partner at the Philadelphia law firm of
Stradley, Ronon, Stevens & Young. Mr. Aldridge is also President and a director
of a private charitable foundation, President and a director of a Pennsylvania
public utility company, and a director of Tasty Baking Company.
John H. Goddard, Jr., age 50, is Executive Vice President of the
Corporation and President of its Momentum Division. He was President, Chief
Executive Officer and a director of Momentum Corporation from 1992 until
September 1994. He became a director of PrimeSource Corporation on September 1,
1994 when Momentum Corporation merged into PrimeSource Corporation. Mr. Goddard
was also President of Momentum Graphics Inc., a subsidiary of Momentum, from
1990 to 1994.
John M. Pettine, age 54, has served as a director of the Corporation
since 1981. Mr. Pettine was elected Vice President and Chief Financial Officer
of Tasty Baking Company in 1991 after having served as Vice President of Finance
of Tasty Baking Company since 1983. He is also a director of Tasty Baking
Company.
CONTINUING DIRECTORS - TERM EXPIRES IN 1998
Gary MacLeod, age 63, is Chairman, Laird Norton Trust Company, a
private trust and investment management company. Mr. MacLeod was also Chairman
and/or Chief Executive Officer of Laird Norton Trust Company from 1975 to 1993
when he retired. Mr. MacLeod was re-elected Chairman and Chief Executive Officer
in January, 1995. Mr. MacLeod was a director of Momentum Corporation since its
formation in 1989 and became a director of PrimeSource Corporation on September
1, 1994 when Momentum Corporation merged into PrimeSource Corporation.
James F. Mullan, age 57, has been President of the Corporation and has
served as a member of its Board of Directors since 1982. Mr. Mullan was also
elected Chief Executive Officer of the Corporation in 1991.
CONTINUING DIRECTORS - TERM EXPIRES 1999
Philip J. Baur, Jr., age 66, retired, has served as a director of the
Corporation since 1965. Mr. Baur held executive positions with Tasty Baking
Company and has also served as a director of Tasty Baking Company since 1954 and
as its Chairman of the Board since 1981. He is also a director of the
Pennsylvania Manufacturers' Association.
Richard E. Engebrecht, age 70, retired, was a director of Momentum
Corporation since its formation in 1989 and became a director of PrimeSource
Corporation on September 1, 1994 when Momentum Corporation merged into
PrimeSource Corporation. From 1989 to 1992 Mr. Engebrecht was Chairman and Chief
Executive Officer of Momentum Corporation. Mr. Engebrecht is also a director of
PENWEST, LTD., VWR Scientific Products Corporation and SeaMED Corporation.
Edward N. Patrone, age 62, retired, has been a senior consultant to
Alco Standard Corporation, a national distributor of paper and office products,
since 1991. From 1979 through 1991 he served as a director of Alco Standard
Corporation and in various senior executive capacities from 1983 through 1988.
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<PAGE> 7
From 1988 through 1991, he was President and Chief Executive Officer of Paper
Corporation of America. He is also a director of Compucom Corporation and
Nocopi, Inc.
DIRECTORS' COMPENSATION
Each director receives for services an annual retainer of $8,000. In
addition, the directors receive fees of $800 for attending Board of Directors
meetings ($1,600 per meeting if an additional day of travel is required), fees
of $500 for attending Board Committee meetings, and, when applicable,
reimbursement of travel expenses in connection with meetings. Each member of the
Executive Committee receives an annual retainer of $2,000 and the Chairman of
each standing Committee of the Board receives an annual retainer of $1,000.
Directors Goddard and Mullan receive no annual Board or Committee retainers and
also receive no meeting fees.
In connection with Richard E. Engebrecht's retirement as Chief
Executive Officer of Momentum Corporation at the end of 1992, Momentum entered
into an Employment Agreement with Mr. Engebrecht. This agreement provided for an
annual salary of $50,000 in each of 1994 and 1995. Under this agreement Mr.
Engebrecht assisted the Company in strategic business planning, management
development, acquisitions and related transactions, continuing support of the
quality process, special projects and serve as Chairman of the Board of
Directors. This salary was in lieu of normal retainers he would otherwise have
been entitled to as a member of the Board of Directors and as Chairman and a
member of the Executive Committee of the Board.
In connection with the ending of Mr. Engebrecht's Employment Agreement
in December 1995, the Board of Directors, following the recommendation of its
Compensation Committee, approved a $20,000 annual retainer for Mr. Engebrecht in
consideration of his services to the Corporation as Chairman of the Board. This
retainer was effective January 1, 1996 and is in lieu of the normal director's
$8,000 annual retainer and in addition to normal meeting fees and Board
Committee retainers that a non-employee director would normally receive.
Mr. Engebrecht retains the stock options he previously held as CEO of
Momentum Corporation and, pursuant to authorization from the Board of Directors,
in February 1996 the expiration date of these 39,081 options was extended to now
expire 180 days after he ceases to be a director of the Corporation for any
reason. Mr. Engebrecht will reach the mandatory retirement age for directors in
1999. If they had not been extended, these options would have expired on March
30, 1996.
Director Fred Aldridge held stock options to purchase 5,975 shares at
$11.50 which were granted to him under the 1993 Replacement Option Plan in
connection with the spinoff of the Corporation from Tasty Baking Co. Pursuant to
Board authorization, the option exercise price for these options was repriced in
February 1996 to $6.11 per share.
On August 27, 1996, the Board of Directors of the Corporation granted
10-year stock options to purchase 3,000 shares at $6.50 per share to each of the
eight non-employee directors of the Corporation. The option exercise price was
the fair market value of the Corporation's stock at the time of grant, and the
options become exercisable at the rate of 25% per year beginning on August 27,
1997.
COMMITTEES OF THE BOARD OF DIRECTORS
The Corporation's Board of Directors has standing Executive,
Nominating, Audit/Pension, and Compensation Committees. The members of each
committee and the functions performed thereby are outlined below:
EXECUTIVE COMMITTEE
Mr. Richard E. Engebrecht, Chairman
Mr. Fred C. Aldridge
Mr. John H. Goddard
Mr. James F. Mullan
Four meetings were held during 1996.
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<PAGE> 8
Functions: Authority to exercise all the powers of the Board of Directors
between meetings of the Board except to the extent limited by law and
certain other exceptions specified in the enabling resolution.
NOMINATING COMMITTEE
Mr. Philip J. Baur, Chairman
Mr. Richard E. Engebrecht
Mr. John H. Goddard
Mr. James F. Mullan
One meeting was held during 1996.
Functions:
1. Make recommendations to the Board as to selection of the Chairman
and Vice Chairman of the Board, the Chief Executive Officer and
the President.
2. Receive, review, and maintain files of individuals qualified to
be recommended as nominees for election as directors and present
recommendations to the Board of Directors as replacement
directors are required.
3. Review, at least annually, the capability of each incumbent
director as to health, availability to serve, conflicts of
interest, and other factors relevant to qualifications.
4. Present annually to the Board of Directors, a list of those
individuals recommended for nomination for election to the Board
of Directors.
5. Present recommendations to the Board of Directors as new
committees may be created or as replacement committee members
may be required.
AUDIT / PENSION COMMITTEE
Mr. Andrew V. Smith, Chairman
Mr. Fred C. Aldridge
Mr. Gary MacLeod
Two meetings were held during 1996.
Functions:
1. Make recommendations to the Board on the selection and
termination of independent auditors.
2. Meet with the independent auditors and financial management of
the Corporation to review the scope of the proposed audit for the
current year and the audit procedures to be utilized.
3. Review with the independent auditors and internal personnel the
adequacy of the Corporation's internal auditing, accounting, and
financial controls.
4. Review the financial statements to be contained in the Annual
Report to Shareholders with the independent auditors to determine
that the independent auditors are satisfied with the disclosure
and content of the financial statements to be presented to the
Shareholders. Any significant changes in accounting principles
should be reviewed by the Committee.
5. Periodically review with the independent auditors and the
Corporation's financial personnel any significant litigation and
the performance of the risk management function of the
Corporation.
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<PAGE> 9
6. Review and make recommendations to the Board of Directors with
respect to the performance of third parties responsible for the
administration and investment of retirement plan funds. The
Committee is responsible for approving the hiring and termination
of investment advisors and portfolio managers.
7. Review proposed amendments to the retirement plans.
8. Review annually the expense reports of the Chief Executive
Officer and the Executive Vice President of the Corporation.
COMPENSATION COMMITTEE
Mr. Edward N. Patrone, Chairman
Mr. John M. Pettine
Mr. James H. Wiborg
Two meetings were held during 1996.
Functions:
1. Formulate and adopt the Corporation's policy on executive
compensation including the operation and administration of all
compensation practices affecting senior management.
2. Recommend compensation for executive officers of the Corporation.
3. Review or make proposals concerning stock purchase, savings plans
and similar employee benefits. Review all other employee benefits
as they affect senior management and make recommendations to the
Board of Directors.
4. Review management's recommendations with respect to the
participants, targets and potential bonus payouts specified in
any management bonus plans applicable to senior management.
Review and recommend Board approval of any bonus plans or bonus
targets for elected officers of the Corporation.
5. Make grants or awards under all stock based incentive plans of
the Corporation and otherwise exercise all discretionary action
with respect to those plans.
6. Recommend benefit levels in the Corporation's retirement program.
7. The Chairman of the Committee is authorized to recommend, for
adoption and execution by the President, any amendment to any
retirement plan or employee welfare benefit plan which is
necessary to maintain the qualification and tax exempt status of
such plan under the Internal Revenue Code and does not materially
affect benefit levels.
8. Recommend director's fees and retainers.
The entire Board of Directors of the Corporation met six times during
1996. Attendance at the Board of Directors and Board Committee meetings averaged
over 93% among all directors during 1996. Each director attended 75% or more of
the aggregate number of Board meetings and meetings of the committees on which
he served.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth the compensation paid by the Corporation
to its Chief Executive Officer and the four other highest paid executive
officers of the Corporation for services rendered during the last three calendar
years.
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<PAGE> 10
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
Long-Term Compensation
Awards
-----------------------
Name and Principal Annual Compensation Restricted
Positions at ------------------- Stock Stock All Other
December 31, 1996 Year Salary Bonus Awards Options (2) Compensation (3)
- ----------------- ---- ------ ----- ------ ----------- ----------------
($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
James F. Mullan 1996 250,000 175,000 --- 28,150 450
President & CEO 1995 250,000 125,000 --- 46,850 450
1994 214,519 150,000 --- --- 450
John H. Goddard, Jr.(4) 1996 200,000 75,000 --- 31,861 1,296
Executive Vice 1995 200,000 0 --- --- 1,498
President & President, 1994 222,876 15,000 --- 10,650(5) 1,622
Momentum
Dennis M. Zewiske 1996 140,000 70,000 --- 19,500 450
President, Phillips & 1995 140,000 40,000 --- --- 450
Jacobs South 1994 114,717 65,677 --- --- 450
William A. DeMarco 1996 115,000 69,000 --- 12,500 521
Vice President & CFO 1995 115,000 60,000 --- --- 450
1994 94,901 70,000 --- --- 450
D. James Purcell 1996 115,000 67,000 --- 9,000 450
President, Jetcom 1995 110,000 60,000 --- --- 450
1994 104,000 58,673 --- --- 450
</TABLE>
- ----------------------------------------
(1) This table does not include columns for Other Annual Compensation and
Long-Term Incentive Plan Payouts. There is no amount to report in the
column for Long-Term Incentive Plan Payouts, and the amount of Other
Annual Compensation paid to the named executive officers was in each
case for perquisites which are not reportable since they did not
exceed 10% of salary and bonus for any named executive officer.
(2) Includes both new options granted in November 1996 and new options
issued in exchange for cancellation of old underwater options early
in 1996.
(3) Consists of matching contributions by the Corporation under its
401(k) retirement plans, and, for Mr. Goddard, also includes
profit-sharing contributions under the Momentum Employee Stock
Ownership Plan prior to September 1, 1994. For Mr. Goddard and
Mr. DeMarco this column also includes the taxable portion of life
insurance coverage.
(4) The 1994 compensation shown for Mr. Goddard was from Momentum
Corporation for the first eight months of 1994 until it merged into
the Corporation on September 1, 1994 plus compensation from the
Corporation for September through December, 1994.
(5) These options were cancelled in 1996.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's compensation programs for executive officers are
administered by the Compensation Committee of the Board. The Committee is
composed of three directors, none of whom is an executive officer of the
Corporation. All issues pertaining to compensation of executive officers of the
Corporation are submitted to the full Board of Directors for final approval with
the exception of awards of stock options and restricted stock under the
Corporation's long term incentive stock plans which the Committee has authority
to grant.
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<PAGE> 11
The Compensation Committee of the Board of Directors of the Corporation
adopted the following policy on executive compensation on March 4, 1997.
Executive Compensation Policy
Compensation Policies Applicable to Executive Officers. The purpose of
PrimeSource's executive compensation program is to attract, retain and motivate
qualified executives to manage the business of PrimeSource and its subsidiaries
to maximize profits and shareholder value. Executive compensation in the
aggregate is made up principally of the executive's annual base salary, a bonus
and awards of restricted stock or stock options under PrimeSource's 1993 long
term incentive stock plan. PrimeSource's Compensation Committee (the
"Committee") annually considers and makes recommendations to the full Board of
Directors as to executive compensation including changes in base salary and
bonuses.
Consistent with the above-noted purpose of the executive compensation
program, it is the policy of the Committee, in recommending the aggregate annual
compensation of executive officers of PrimeSource, to consider the overall
performance of PrimeSource, the performance of the operating unit or area for
which the executive has responsibility, and the individual contribution and
performance of the executive. The performance of PrimeSource and the operating
unit or area for which the executive has responsibility are significant factors
in determining aggregate compensation although they are not necessarily
determinative. While shareholders' total return is considered by the Committee,
it is subject to the vagaries of the public marketplace and will not be weighted
as heavily as operating unit earnings or earnings per share and individual
performance. PrimeSource's compensation program focuses on PrimeSource's
strategic plans, corporate performance measures, and specific corporate goals
which should directly or indirectly lead to an increasing stock price over time.
The corporate performance measures which the Committee considers include sales,
gross profits, earnings, and comparisons of sales, gross profits and earnings
with prior years and with budgets.
A substantial portion of the annual compensation of the executives is
directly related to corporate performance. In 1996 the Corporation exceeded its
Board-approved budget for consolidated pre-tax income. Bonuses for 1996
represented approximately 25% to 41% of the total annual compensation for the
Chief Executive Officer and the eight executives who report to him. Bonuses are
calculated and awarded based upon both objective formulas and subjective
business judgment. 1996 bonuses for the eight executives and the Chief Executive
Officer were primarily determined by formulas established at the beginning of
1996, and 1997 target bonuses have also been based on formulas established at
the beginning of 1997. Different formulas are applied to the executives
depending on their areas of responsibility.
The Committee does not rely on any fixed formulas or specific numerical
criteria in determining an executive's annual salary. It considers both
corporate and personal performance criteria, competitive compensation levels,
the economic environment and changes in the cost of living, and (with respect to
officers other than the Chief Executive Officer) relies heavily upon the
recommendation of the Chief Executive Officer. The Committee then exercises
business judgment based on all these criteria and the purposes of the executive
compensation program. The Committee retains the power to waive performance
criteria under any compensation program.
It is the Committee's belief that the Corporation's long-term incentive
programs should strongly align executive incentives with the interests of
shareholders. The Committee and Board believe the executives of the Corporation
have done an exceptional job of responding to the challenges of the merger with
Momentum as well as those presented by a dynamic industry environment and in
making strategic acquisitions. As it stood at the end of November 1995, the then
outstanding stock options would likely have failed to adequately incent or
reward the key executives of the Corporation. Accordingly, on November 28, 1995,
the Committee recommended to the Board of Directors that each officer and key
employee holding stock options granted prior to the 1994 merger, with exercise
prices above the current market value, be given the opportunity to exchange
these "underwater" options for replacement stock options at the current market
value in lieu of granting additional options at the current stock price. This
recommendation was adopted and implemented in February 1996. In general, the
Corporation's stock option awards are not directly tied to performance factors.
The Committee believes that the employment agreements with the senior
executives have not had an effect on their compensation levels. The employment
agreements do not call for any minimum bonus, only minimum salaries, some of
which are below their current salary level. The potential compensation
9
<PAGE> 12
under these agreements held by the Chief Executive Officer and the Chief
Financial Officer for certain termination scenarios were, at their suggestion,
reduced at the end of 1996 as will be described in the proxy statement to
shareholders.
Compensation of the Chief Executive Officer. Mr. Mullan joined
PrimeSource in 1970, became President in 1982 and Chief Executive Officer in
1991. For 1996, Mr. Mullan received a base salary of $250,000 and was awarded a
bonus of $175,000, the latter an increase from his 1995 bonus of $125,000. Mr.
Mullan's 1996 bonus represents approximately 2.6% of PrimeSource's 1996
consolidated pre-tax income. In lieu of an increase in base salary for 1996, at
the beginning of 1996 the Committee gave Mr. Mullan the opportunity to earn a
target bonus equal to 70% of his base salary if the Corporation achieved the
pre-tax consolidated income in the Corporation's 1996 budget adopted by the
Board of Directors. This budget figure was exceeded and the target bonus was
awarded. The Committee noted that the Corporation has performed well in a
dynamic environment and that Mr. Mullan was instrumental in the favorable
acquisition of a major competitor in 1996.
In November 1996, the Committee granted Mr. Mullan stock options to
purchase a total of 10,000 shares of stock, bringing his total to 75,000 stock
options. The Committee awarded 15 other executives stock options to purchase a
total of 41,000 shares. In granting these new options the Committee considered
the fact that there were options to purchase less than 400,000 shares
outstanding. The Committee believes that through the use of significant stock
options, the Chief Executive Officer's and other executives' interests are
directly tied to enhancing shareholder value.
March 4, 1997
The Compensation Committee
Edward N. Patrone, Chairman
John M. Pettine
James H. Wiborg
EXECUTIVE BONUS PLANS
Executive bonus plans are administered by the Compensation Committee of
the Board. As noted above in the Compensation Committee Report, these plans are
specifically tailored for each senior executive and may or may not involve a
pre-set formula and may or may not have a maximum amount for the bonus the
executive can be awarded. The Committee may authorize annual cash or deferred
awards to any full-time salaried management employee of the Corporation or its
subsidiaries but typically permits the president of each operating unit the
discretion to make awards, if any, to key managers in his unit.
STOCK OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
% of Total Annual Rates of Stock
Number of Shares Options Granted Option Price Appreciation
Underlying to Employees Exercise Expiration for 10-Year Option Term
Name Options Granted in 1996 Price ($/share) Date 0%($) 5%($) 10%($)
- ---- --------------- ------- --------------- ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
James F. Mullan 18,150(a) 5.1% $6.11 11/29/05 $0 $69,742 $176,740
James F. Mullan 10,000 2.8% $6.97 11/25/06 $0 $43,828 $111,084
John H. Goddard, Jr. 26,861(a) 7.6% $6.11 11/29/05 $0 $103,214 $261,565
John H. Goddard, Jr. 5,000 1.4% $6.97 11/25/06 $0 $21,914 $55,542
Dennis M. Zewiske 15,500(a) 4.4% $6.11 11/29/05 $0 $59,559 $150,935
Dennis M. Zewiske 4,000 1.1% $6.97 11/25/06 $0 $17,531 $44,434
William A. DeMarco 7,500(a) 2.1% $6.11 11/29/05 $0 $28,819 $73,033
William A. DeMarco 5,000 1.4% $6.97 11/25/06 $0 $21,914 $55,542
D. James Purcell 5,000(a) 1.4% $6.11 11/29/05 $0 $19,213 $48,689
D. James Purcell 4,000 1.1% $6.97 11/25/06 $0 $17,531 $44,434
</TABLE>
(a) These were replacement options for underwater options that were surrendered
in 1996, as described below.
10
<PAGE> 13
Twenty-five percent of these incentive stock options granted to the
officers listed above become exercisable on each anniversary of the grant until
fully exercisable after four years. All stock options have a 10-year term and
were granted at fair market value.
If the market price for PrimeSource stock appreciates at 5% per year
for the same 10-year period, the shares held by all shareholders of the
Corporation as a group would have increased in value by $25,033,038. At the 10%
appreciation rate, the increase in value for the shareholders would be
$72,368,771.
TEN-YEAR OPTION/REPRICINGS
<TABLE>
<CAPTION>
Length of
Original
Number of Option Term
Securities Market Price Remaining at
Underlying of Stock at Exercise Price New Date of
Date of Options Time of at Time of Exercise Repricing
Name Repricing Repriced (#) Repricing($) Repricing ($) Price ($) (Years)
---- --------- ------------ ------------ -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
James F. Mullan 2/9/96 5,650 5.50 11.50 6.11 7.51
President & Chief 2/9/96 12,500 5.50 11.50 6.11 7.51
Executive Officer
John H. Goddard, Jr. 2/4/96 829 5.25 10.81 6.11 2.24
Executive Vice President 2/4/96 15,382 5.25 9.51 6.11 7.54
& President, Momentum 2/4/96 10,650 5.25 13.03 6.11 8.14
Dennis M. Zewiske 2/27/96 7,500 5.50 11.50 6.11 7.46
President, Phillips & 2/27/96 8,000 5.50 11.50 6.11 7.46
Jacobs South
William A. DeMarco 2/9/96 7,500 5.50 11.50 6.11 7.51
Vice President &
Chief Financial Officer
D. James Purcell 2/9/96 5,000 5.50 11.50 6.11 7.51
President, Jetcom
Barry C. Maulding 2/9/96 3,990 5.50 9.51 6.11 7.54
Vice President, General
Counsel & Corporate
Secretary
</TABLE>
In addition to the above named executive officers, in February 1996, 51
other officers or key employees also elected to exchange underwater stock
options to purchase an aggregate of 172,281 shares for a like number of
replacement options with a $6.11 exercise price.
STOCK OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of securities Value of unexercised
underlying unexercised in-the-money
Shares acquired options at 12/31/96 options at 12/31/96
Name on exercise Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
James F. Mullan 0 16,250 58,750 $27,666 $91,422
John H. Goddard, Jr. 0 6,715 25,146 $11,432 $38,511
Dennis M. Zewiske 0 3,875 15,625 $6,597 $23,162
William A. DeMarco 0 1,875 10,625 $3,192 $8,952
D. James Purcell 0 1,250 7,750 $2,128 $6,529
</TABLE>
11
<PAGE> 14
The Corporation has never granted stock appreciation rights of any
kind.
DEFINED BENEFIT AND SUPPLEMENTAL RETIREMENT PLANS
In 1993 and 1994 certain employees of the Corporation, including
Messrs. Mullan, Zewiske, and DeMarco participated in a defined benefit,
non-contributory pension plan maintained by Tasty Baking Company. The assets
allocable to the Corporation's participants in that plan were transferred
effective January 1, 1995 to a new PrimeSource Corporation Pension Plan
("Pension Plan"). This new Pension Plan has benefits comparable to those under
the Tasty Baking Company plan and all employees of the Corporation and it's
subsidiaries except employees of the Momentum and TK Gray Divisions participate
in the Pension Plan as of January 1, 1995.
Annual amounts which were contributed to the Pension Plan and charged
to expenses during the year were computed on an aggregate actuarial basis and
cannot be individually allocated. The remuneration covered by the Pension Plan
includes salaries and bonuses paid to plan participants as set out in the
Summary Compensation Table. Benefits under the plan are calculated as a
percentage of average remuneration over the last five years of employment, which
percentage depends on the employee's total number of years of service. Benefits
under the Pension Plan are subject to reduction for Social Security and are
presently restricted under the Internal Revenue Code to a maximum of $125,000
per year. The Internal Revenue Code also limits the level of compensation which
may be used to determine benefits under these qualified plans to $160,000 per
year. Messrs. Mullan, Goddard, Zewiske, DeMarco and Purcell have 27, 9, 21, 16
and 2 years, respectively, of credited service under this Pension Plan.
Additional benefits may be payable under the SERP described below.
Compensation of executive officers covered by the Pension Plan includes
salaries and bonuses. Compensation of all non-executive officer employees
covered by the Retirement Plan includes salaries, commissions and bonuses.
The following table, applicable only to Messrs. Mullan, Zewiske and
DeMarco, shows the approximate annual retirement benefits which will be payable
in total under the Pension Plan, Social Security, and Supplemental Executive
Retirement Plan ("SERP") at the normal retirement age of 65 (assuming
continuation of the plans) for specified years of service and levels of average
remuneration.
<TABLE>
<CAPTION>
Final Average 15 or More
Remuneration Years of Service
------------ ----------------
<S> <C>
$150,000 $67,500
200,000 90,000
250,000 112,500
300,000 135,000
350,000 157,500
400,000 180,000
450,000 202,500
500,000 225,000
</TABLE>
The SERP is designed and intended to encourage key executives to
continue in the service of the Corporation by providing them upon their
retirement with a supplemental retirement benefit equal to the difference
between (i) 45% of the average 60 highest calendar months compensation paid by
the Corporation during the 120 calendar months immediately preceding the
executive's separation from service, and (ii) the sum of the executive's primary
Social Security benefits, payments for which the executive would be eligible to
receive from the Corporation's pension plan on a single life annuity basis, and
any other retirement benefits for which the executive is eligible. A surviving
spouse is also entitled to certain benefits under the SERP. Messrs. Mullan,
Zewiske, DeMarco and one other officer are the only current employees who have
been designated to participate in the SERP.
The Corporation has entered into a Trust Agreement with Meridian Trust
Company for the benefit of the participants in the SERP. Under this Trust
Agreement, the Corporation is obligated to deposit sufficient funds with the
Trustee to enable it to purchase annuity contracts to fund the SERP in the event
of a change in control or potential change in control of the Corporation. To
date no funding has occurred or is required.
12
<PAGE> 15
Generally, employees of the Corporation (but not its subsidiaries) have
been eligible to participate in the Corporation's benefit plans. Employees of
the Corporation's subsidiaries are covered generally by separate employee
benefit plans.
Effective January 1, 1994, the Corporation adopted a 401(k) Savings
Plan for the benefit of most of its employees. Under this plan the Corporation
will match employee contributions up to $450 per year. Employees in the Momentum
and T K Gray Divisions were not eligible to participate in this Savings Plan as
they had a separate 401(k) plan until January 1, 1997 when the former Momentum
401(k) Plan was merged into this Savings Plan. Employees of the Dixie Type
subsidiary do not participate in this plan and have a separate 401(k) plan.
Upon the merger with Momentum, the Corporation became the plan sponsor
of the Momentum Retirement Plan (the "Retirement Plan"). Nearly all regular,
full-time employees of the Momentum and T K Gray Divisions of the Corporation
were eligible to participate in this Retirement Plan. Effective January 1, 1997
this Retirement Plan was merged into the Corporation's Pension Plan described
above and nearly all full-time employees of the Corporation are now eligible to
participate. Retirement benefits for the employees formerly participating in the
Retirement Plan will be calculated using a combination of the Retirement Plan
formula and the present formula under the Pension Plan.
The table below shows the estimated annual benefits payable under the
Pension Plan and Supplemental Benefits Plan (described below) to Mr. Goddard in
specified remuneration and years-of-service classifications. The retirement
benefits shown are based upon retirement at age 65 and the payments of a
single-life annuity. These benefits are not subject to any deduction for Social
Security or other offset amounts.
<TABLE>
<CAPTION>
Highest average
annual earnings during Years of Service
any five consecutive ----------------------------------------------------------------
years of employment 10 15 20 25 35
------------------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
$150,000 $23,808 $31,596 $39,396 $47,196 $62,784
200,000 $26,832 $37,620 $48,420 $59,220 $80,820
250,000 $29,856 $43,644 $57,444 $71,244 $98,844
300,000 $32,880 $49,680 $66,480 $83,280 $116,868
350,000 $35,904 $55,704 $75,492 $95,304 $134,892
</TABLE>
As noted above, Section 415 of the Internal Revenue Code currently
limits pensions which may be paid under plans qualified under the Internal
Revenue Code to an annual benefit of $120,000. In addition, Section 401 of the
Internal Revenue Code limits compensation which may be used to determine
benefits under qualified plans to $160,000 per year.
Momentum Corporation established a Supplemental Benefits Plan in 1991
for certain designated Momentum executive officers to whom the Section 415 and
401 limits apply, or may apply in the future, so that these individuals would
obtain retirement benefits comparable to other retirement plan participants not
impacted by the Section 415 and 401 limits. Accordingly, the benefits in the
table above have not been limited by Sections 415 and 401, but at the present
time Mr. Goddard is the only employee designated to participate in this
Supplemental Benefits Plan.
Under the terms of the 1990 Momentum spin-off agreement with VWR
Corporation, VWR Corporation has agreed to pay two-thirds of all amounts payable
to PrimeSource Chairman Richard Engebrecht under the Supplemental Benefits Plan
described above, and the Corporation will pay the remaining one-third. The
Corporation has guaranteed payment of the two-thirds payable by VWR Corporation
and, likewise, VWR Corporation has guaranteed payment of the one-third payable
by the Corporation. Effective January 1, 1993, Mr. Engebrecht ceased being a
regular employee of Momentum Corporation and began drawing retirement pay under
both the Retirement Plan ($9,044 per month) and the Supplemental Benefits Plan
($8,489 per month).
The following table shows the estimated annual benefits payable under
the Pension Plan to Mr. Purcell in specified remuneration and years-of-service
classifications. Mr. Purcell currently has two years of credited service under
the Pension Plan and is 47 years old.
13
<PAGE> 16
<TABLE>
<CAPTION>
Highest average
annual earnings during Years of Service
any five consecutive ---------------------------------------------------------------------------
years of employment 5 10 15 20 25 30
------------------- ----- ------ ------ ------ ------ ----
<S> <C> <C> <C> <C> <C> <C>
$120,000 $5,997 $11,995 $17,992 $23,990 $29,987 $35,985
150,000 $7,797 $15,995 $23,392 $31,190 $38,987 $46,785
180,000 $8,397(a) $16,795(a) $25,192(a) $33,590(a) $41,987(a) $50,385(a)
</TABLE>
(a) Covered compensation limited to $160,000 by Internal Revenue Code.
AGREEMENTS WITH CERTAIN OFFICERS
Momentum Corporation and John H. Goddard, Jr. entered into a change of
control agreement (the "Agreement") in 1991. This Agreement, now superseded by a
new employment agreement described below, became a PrimeSource contract with the
September, 1994 merger. This Agreement provided that Mr. Goddard would have
received compensation for up to 24 months if his employment terminated for any
reason other than gross misconduct, death, or disability, provided such
termination occured within 24 months after certain defined events which might
lead to a change of control of the Corporation. The compensation would have been
paid at a rate equal to Mr. Goddard's current salary ($200,000) and target
bonus. Mr. Goddard would have also continued to have "employee" status for the
24 month period and be entitled to retain most employee benefits.
The estimated aggregate amount which would have been payable to Mr.
Goddard in the event of a change of control (assuming he received payment at the
same rate for the maximum 24 month period) was $500,000. This does not include
the value of any employee benefits which might have been payable during the 24
month period.
The September, 1994 merger of Momentum Corporation into Phillips &
Jacobs, Incorporated to form PrimeSource Corporation constituted a change of
control for purposes of this Agreement. Accordingly, if Mr. Goddard had chosen
to leave the employment of the Corporation prior to September 1, 1996, other
than for certain disqualifying events, he would have received the payments and
benefits set out above.
EMPLOYMENT AGREEMENTS
Each of the five named executives has entered into an employment
agreement with the Corporation. The agreement with Mr. Zewiske was entered into
in 1988 and Messrs. Mullan, Goddard and DeMarco entered into their present
agreements in December, 1996. Mr. Purcell entered into a 3-year agreement in
1993 which expired on October 31, 1996. That agreement provided for a minimum
salary of $104,000 plus participation in executive bonus programs during its
term.
The prior employment agreements for Messrs. Mullan and DeMarco and the
ongoing agreement for Mr. Zewiske contain termination arrangements pursuant to
which each would continue to receive an amount equal to his annual salary,
$250,000, $120,000, and $140,000, respectively, upon termination of his
employment under the following circumstances: (a) termination by the Corporation
except for cause or upon death, retirement or three years prior notice with
respect to Mr. Mullan, and two years prior notice with respect to Messrs.
DeMarco and Zewiske, (b) termination by the executive because his authority or
duties are changed so as to be inconsistent with his training and experience, or
(c) termination by the executive because of a breach of his employment agreement
by the Corporation. The annual salary would have been payable for three years
for Mr. Mullan and for two years for Messrs. DeMarco and Zewiske. This payment
would be in addition to any other damages which the executive may suffer as a
result of such termination.
The employment agreements for Messrs. Mullan and DeMarco were
terminated on December 31, 1996 and new agreements were simultaneously entered
into. These replacement agreements are essentially the same as the prior
agreements except they provide one year less salary continuation if the
executive's employment is ended in a setting not involving a "change of control"
of the Corporation.
14
<PAGE> 17
Mr. Goddard had no previous employment agreement but did have a change
of control agreement as described above. The employment agreement Mr. Goddard
entered into in December, 1996 is identical to Mr. DeMarco's except Mr.
Goddard's specified base salary is $200,000 per year. The employment agreement
for Mr. Goddard replaced his change of control agreement.
Each of the ongoing employment agreements described above has no fixed
term and can be terminated by the Board of Directors upon giving a specified
advance notice. Each of the agreements except Mr. Zewiske's also contain
non-competition and confidentiality provisions spanning any period of continuing
compensation.
CERTAIN TRANSACTIONS
Dennis M. Zewiske, President of the Phillips & Jacobs South Division,
is a part owner of the 14,350 square feet Orlando, Florida facility currently
leased to the Corporation. The term of this lease runs through March 31, 2001.
The rent on this facility is $5,382 per month. The Corporation is also
responsible for payment of all utilities and maintaining fire insurance. These
provisions are consistent with the terms of the Corporation's other leases.
Management believes that the terms of this lease are as favorable to the
Corporation as could have been obtained from unaffiliated parties.
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
PrimeSource stock with the NASDAQ Composite Index and the NASDAQ Non-Financial
Index for the period from July 21, 1993 through December 31, 1996. July 21, 1993
is the date on which trading of PrimeSource stock commenced. The graph assumes
$100 invested on July 21, 1993 in PrimeSource stock, the NASDAQ Composite Index
and the NASDAQ Non-Financial Stocks Index. Total shareholder return assumes
reinvestment of dividends. The stock price performance is not necessarily
indicative of future price performance.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
July 21, 1993 Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PrimeSource $100.00 $93.39 $82.92 $54.64 $75.41
NASDAQ Composite $100.00 $110.43 $107.94 $152.53 $187.75
NASDAQ Non-Financial $100.00 $112.05 $107.38 $147.65 $182.53
</TABLE>
15
<PAGE> 18
APPROVAL OF INDEPENDENT AUDITORS
The Audit/Pension Committee of the Board of Directors request that the
shareholders ratify its selection of Coopers & Lybrand L.L.P., Certified Public
Accountants, as independent public auditors for the Corporation for the current
fiscal year. If the shareholders do not ratify the selection of Coopers &
Lybrand, another firm of certified public accountants will be selected as
independent public auditors by the Board of Directors.
Representatives of Coopers & Lybrand will be present at the
shareholders' meeting with the opportunity to make a statement if they desire
and will be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR this selection.
SHAREHOLDER PROPOSALS
In order for proposals of shareholders to be considered for inclusion
in the Proxy Statement and proxy for the 1998 annual meeting of the
shareholders, said proposals must be received by the Corporate Secretary of the
Corporation not later than December 29, 1997.
OTHER BUSINESS
The Board of Directors has no knowledge of any other business to be
acted upon at this meeting. However, if any other business is presented to the
meeting, proxies will be voted in accordance with the judgment of the person or
persons voting such proxies unless the proxies are so marked to preclude such
discretionary authority.
The Corporation's Annual Report for the fiscal year ended December 31,
1996 has been mailed to the shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
Barry C. Maulding
April 7, 1997 Corporate Secretary
16
<PAGE> 19
PROXY--PRIMESOURCE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS FOR THE 1997 ANNUAL MEETING
The undersigned hereby appoints Richard E. Engebrecht and James Mullan, and
each of them, with full power of substitution, as proxies to vote the shares
which the undersigned is entitled to vote at the 1997 Annual Meeting of
Shareholders of the Corporation to be held at the Pennsauken Country Club, 3800
Haddonfield Road, Pennsauken, New Jersey on May 6, 1997, at 9:30 a.m. and any
adjournments thereof.
Your Board of Directors recommends you vote FOR the election of directors
and FOR the proposal to ratify the appointment of Coopers & Lybrand L.L.P.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
below)* listed below
*INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name on the line below.
Fred C. Aldridge, Jr.; John H. Goodard, Jr.; John M. Pettine;; Kllaus D. Oebel
_________________________________________________________________
2. PROPOSAL TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. as
independent public auditors for the year ending December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on other side)
(continued from other side)
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholders. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 and 2.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such. If a corporation, please sign in full
corporate name by President or the
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
Date:________________________________, 1997
____________________________________________
(Signature)
____________________________________________
(Signature if jointly)
IMPORTANT, PLEASE SIGN AND RETURN PROMPTLY.
