<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 Section 240.4a-11(c) or Section
240.14a-12
INTEGRITY INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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
1000 CODY ROAD
MOBILE, ALABAMA 36695
April 16, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Integrity Incorporated, which will be held at the Adam's Mark, 64 South
Waterstreet, Mobile, Alabama 36602, on Friday, May 9, 1997, at 2:00 p.m. local
time.
We look forward to your attendance at the Annual Meeting so that you can
vote your shares in person and become better acquainted with members of the
Board of Directors and management team. Two items of business, which will be
considered and voted upon this year, are explained in the accompanying Proxy
Statement. Even if you are planning to attend, please complete the enclosed
proxy card and return it in the enclosed envelope so that your shares may be
voted. You will still be able to vote your shares in person if you attend the
Annual Meeting.
If you have any questions about the Proxy Statement or the 1996 Annual
Report, please contact Ms. Alison S. Richardson at (334) 633-9000.
Sincerely,
P. MICHAEL COLEMAN
Chairman, President and
Chief Executive Officer
<PAGE> 3
INTEGRITY INCORPORATED
1000 CODY ROAD
MOBILE, ALABAMA 36695
NOTICE TO THE HOLDERS OF CLASS A COMMON STOCK
OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 1997
Notice is hereby given to the holders of the $.01 par value per share
Class A common stock (the "Class A Common Stock") of Integrity Incorporated
(the "Company") that the Annual Meeting of Stockholders (the "Annual Meeting")
of the Company will be held at the Adam's Mark, 64 South Waterstreet, Mobile,
Alabama 36602, on Friday, May 9, 1997, at 2:00 p.m., local time, for the
following purposes:
(i) To elect five directors to serve until the 1998 Annual Meeting of
Stockholders;
(ii) To ratify the selection of Price Waterhouse LLP as independent
auditors for the fiscal year ending December 31, 1997; and
(iii) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Only those stockholders of record at the close of business on March 12,
1997, are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. The transfer books will not be closed. A complete list
of stockholders entitled to vote at the Annual Meeting will be available at the
Annual Meeting.
By Order of the Board of Directors,
ALISON S. RICHARDSON
April 16, 1997 Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE, SIGN,
DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED BUSINESS REPLY
ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING YOU MAY, IF YOU WISH, WITHDRAW YOUR
PROXY APPOINTMENT AND VOTE IN PERSON.
<PAGE> 4
INTEGRITY INCORPORATED
1000 CODY ROAD
MOBILE, ALABAMA 36695
April 16, 1997
PROXY STATEMENT
FOR CLASS A COMMON STOCK
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 1997
INTRODUCTION
This Proxy Statement is furnished to holders of the $.01 par value per
share Class A common stock ("Class A Common Stock") of Integrity Incorporated,
a Delaware corporation (the "Company" or "Integrity"), in connection with the
solicitation of proxies by the Company's Board of Directors from holders of the
outstanding shares of Class A Common Stock for use at the Annual Meeting of
Stockholders to be held at 2:00 p.m. local time at the Adam's Mark, 64 South
Waterstreet, Mobile, Alabama 36602, on Friday, May 9, 1997, and at any
adjournments thereof (the "Annual Meeting").
The Annual Meeting will be held for the following purposes: (i) to elect
five directors to serve until the 1998 Annual Meeting of Stockholders and until
their successors are elected and qualified; (ii) to ratify the selection of
Price Waterhouse LLP as independent auditors for the fiscal year ending
December 31, 1997; and (iii) to transact such other business as may properly
come before the Annual Meeting or any adjournments thereof.
The Company's mailing address and the location of its principal executive
offices is 1000 Cody Road, Mobile, Alabama 36695. This Proxy Statement and the
accompanying Proxy are first being mailed to stockholders of the Company on or
about April 17, 1997.
STOCKHOLDERS ENTITLED TO VOTE
Only stockholders of record of the Company at the close of business on
March 12, 1997 (the "Record Date") will be entitled to notice of, and to vote
at, the Annual Meeting. On the Record Date, there were 2,079,000 shares of the
Class A Common Stock issued and outstanding held by approximately 106
stockholders of record. In addition, there were 3,435,000 shares of the
Company's $.01 par value per share Class B common stock ("Class B Common
Stock") issued and outstanding held by three stockholders of record. The
Company's stock transfer books will not be closed and shares may be transferred
subsequent to the Record Date. However, all votes must be cast in the names of
stockholders of record on the Record Date.
Pursuant to the Certificate of the Company, holders of Class A Common
Stock are entitled to one vote per share. Holders of Class B Common Stock are
entitled to ten votes per share. All actions submitted to a vote of
stockholders are voted on by holders of Class A and Class B Common Stock voting
together as a single class.
QUORUM AND VOTING REQUIREMENTS
Pursuant to the Company's Bylaws, the holders of shares of the Class A
Common Stock and Class B Common Stock entitled to cast a majority of the votes
on the matters at issue at the Annual Meeting, present in person or by proxy,
shall constitute a quorum. For the purpose of determining the presence of a
quorum, abstentions and broker nonvotes will be counted as present.
<PAGE> 5
Proposal I, the election of five directors, requires the affirmative vote
of a plurality of the votes of the shares of Class A Common Stock and Class B
Common Stock represented and entitled to vote in the election at the Annual
Meeting, provided a quorum is present. With respect to Proposal I, the
election of directors, stockholders may (1) vote "for" all five nominees, (2)
"withhold" authority to vote "for" all such nominees, or (3) "withhold"
authority to vote for any individual nominee or nominees but vote for all other
nominees. Because directors are elected by a plurality of the votes
represented and entitled to vote, withholding authority to vote with respect to
one or more nominees will have no effect on the outcome of the election.
Similarly, any "broker nonvotes" (which occur when shares held by brokers or
nominees for beneficial owners are voted on some matters but not on others)
will have no effect on the outcome of the election of directors.
Proposal II, the ratification of auditors, requires the affirmative vote
of a majority of the votes of the shares of Class A Common Stock and Class B
Common Stock represented and entitled to vote generally in the election of
directors at the Annual Meeting, provided a quorum is present. With respect to
Proposal II, the ratification of auditors, stockholders may (1) vote "for,"
(2) vote "against," or (3) "abstain" from voting on the proposal. An
abstention will have the same effect as a vote "against" while a broker nonvote
will have no effect on the outcome of the ratification of auditors.
PROXIES
If the enclosed Proxy is executed, returned in time and not revoked, the
shares represented thereby will be voted in accordance with the instructions
indicated in such Proxy. IF NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE
VOTED FOR (I) THE ELECTION OF ALL DIRECTOR NOMINEES, (II) RATIFICATION OF PRICE
WATERHOUSE LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31,
1997; AND (III) IN THE BEST JUDGMENT OF SUCH PROXIES AS TO ANY OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.
A stockholder who has given a Proxy may revoke it at any time prior to its
exercise at the Annual Meeting by either (i) giving written notice of
revocation to the Secretary of the Company, (ii) properly submitting to the
Company a duly executed Proxy bearing a later date, or (iii) appearing at the
Annual Meeting and voting in person. All written notices of revocation of
Proxies should be addressed as follows: Integrity Incorporated, 1000 Cody Road,
Mobile, Alabama 36695, Attention: Alison S. Richardson, Secretary.
- 2 -
<PAGE> 6
PROPOSAL I
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall
consist of not less than three, nor more than twelve individuals with the exact
number of directors determined by resolution of the Board of Directors.
Pursuant to the Company's Bylaws, the Board of Directors has set the number of
directors of the Company at five and has nominated the following individuals
for election by the holders of Class A Common Stock and Class B Common Stock as
directors of the Company:
P. Michael Coleman
Jean C. Coleman
John B. Ellis
Charles V. Simpson
Heeth Varnedoe III
Each director will be elected to hold office until the 1998 Annual Meeting
of Stockholders and until their earlier death, resignation or removal. The
persons designated as proxies intend to vote the shares represented thereby in
favor of the election to the Board of Directors of the nominees whose names
appear above, unless either authority to vote for any or all of the nominees is
withheld or such proxy has previously been revoked. It is believed that the
nominees will be available and able to serve as directors. In the event that a
nominee is unable to serve (which is not anticipated), the persons designated
as proxies will cast votes for the remaining nominees and for such other person
as they may select. It is anticipated that management stockholders of the
Company will vote for the election of the nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR ELECTION AS
DIRECTORS. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE STOCKHOLDER, THE
SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES
WILL BE VOTED FOR THE NOMINEES. THE AFFIRMATIVE VOTE OF A PLURALITY OF THE
VOTES OF THE SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK, VOTING
TOGETHER AS A SINGLE CLASS, REPRESENTED AND ENTITLED TO VOTE IN THE ELECTION AT
THE ANNUAL MEETING AT WHICH A QUORUM IS PRESENT IS REQUIRED FOR THE ELECTION OF
THE NOMINEES.
- 3 -
<PAGE> 7
CERTAIN INFORMATION CONCERNING NOMINEES
The following table sets forth the names of the nominees for election as
directors, their ages, the year in which they were first elected a director,
their positions with the Company, their principal occupations and employers for
at least the last five years, and any other directorships held by them in
certain other companies. For information concerning membership on Committees
of the Board of Directors, see "Meetings of the Board of Directors and
Committees" below. For information concerning directors' ownership of Common
Stock, see "Beneficial Owners of More Than Five Percent of the Company's Common
Stock; Shares Held by Directors and Executive Officers" below.
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS
NAME AND YEAR FIRST DURING AT LEAST THE PAST FIVE YEARS, AND OTHER
ELECTED DIRECTOR AGE DIRECTORSHIPS
- ---------------- --- ------------------------------------------------------
<S> <C> <C>
P. Michael Coleman 43 Mr. Coleman co-founded the Company in 1987 when he
(1987) and a partner purchased the music operations of
Integrity Communications, Inc. from Charles Simpson
Ministries, Inc. Prior to 1987, Mr. Coleman was
involved in various organizations in the Christian
communications industry.
Jean C. Coleman 50 Mrs. Coleman is a full-time homemaker in Mobile,
(1993) Alabama and is the wife of P. Michael Coleman.
John B. Ellis 72 Mr. Ellis is a private investor of Atlantic Realty
(1994) Co., Flowers Industries, Inc., Hughes Supply, Inc.,
Intermet Corporation, Interstate/Johnson Lane, Inc.,
Oxford Industries, Inc., and a director emeritus of
Genuine Parts Company.
Charles V. Simpson 60 Mr. Simpson has been the Senior Pastor of the
(1987) Covenant Church of Mobile for more than five years.
Reverend Simpson is also the leader of Charles
Simpson Ministries which publishes Christian Conquest
magazine, The Covenant and the Kingdom curriculum,
and a monthly pastoral letter.
Heeth Varnedoe III 60 Mr. Varnedoe has been President and Chief Operating
(1993) Officer of Flowers Industries Inc., a publicly-traded
company which produces bread and other baked
products, since January 1986. Mr. Varnedoe also
serves on the Board of Directors of Flowers
Industries Inc.
</TABLE>
- 4 -
<PAGE> 8
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Board of Directors. The property, affairs and business of the Company are
under the general management of its Board of Directors as provided by the laws
of Delaware and the Bylaws of the Company. The Company has standing Audit and
Compensation Committees of the Board of Directors.
Audit Committee. The members of the Audit Committee are John B. Ellis
(Chairman) and Heeth Varnedoe III. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews with the
independent public accountants the plans and results of the audit engagement,
approves professional services provided by the independent public accountants,
reviews the independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of the Company's
internal accounting controls. The Audit Committee held two meetings during
1996.
Compensation Committee. The members of the Compensation Committee are
Heeth Varnedoe III (Chairman) and John B. Ellis. The function of the
Compensation Committee is to review and approve the compensation of executive
officers and establish targets and incentive awards under incentive
compensation plans of the Company. The Compensation Committee held two
meetings during 1996.
The Board of Directors held four meetings during 1996. Each director,
during the period he or she was a director, attended at least 75% of the
meetings of the Board of Directors. Each member of a committee, during the
period he or she was a committee member, attended at least 75% of the meetings
of each committee on which they served.
COMPENSATION OF DIRECTORS
The Company intends to pay a fee of $1,000 for each Board and committee
meeting attended by its directors who are not employees of the Company, former
employees of the Company or members of the immediate family of a current or
former employee of the Company. The Company will reimburse the directors for
travel expenses incurred in connection with their activities on behalf of the
Company.
Pursuant to the Integrity Incorporated 1994 Stock Option Plan for Outside
Directors (the "Director Plan") adopted by the Company, each director (other
than employees, former employees or immediate family members of current or
former employees) automatically receives on the day following each annual
meeting of stockholders a grant of options to purchase 1,000 shares of Class A
Common Stock. Such options will have an exercise price equal to 100% of the
fair market value of the Class A Common Stock at the date of grant of such
option. In addition, each eligible director who was serving on the Board of
Directors at the time of the completion of the initial public offering of the
Company's Class A Common Stock in July 1994 received a grant of options to
purchase 1,000 shares of Class A Common Stock with an exercise price equal to
the initial public offering price of the Class A Common Stock.
BENEFICIAL OWNERS OF MORE THAN FIVE PERCENT OF THE COMPANY'S COMMON STOCK;
SHARES HELD BY DIRECTORS AND EXECUTIVE OFFICERS
Based solely upon information made available to the Company, the following
table sets forth certain information with respect to the beneficial ownership
of Class A Common Stock and Class B Common Stock as of December 31, 1996 by (i)
each person who is known by the Company to beneficially own more than five
percent of either Class A or Class B Common Stock; (ii) each nominee for
director of the Company; (iii) each of the Named Executive Officers (as defined
under "Executive Compensation" below); and (iv) all officers and directors as a
group. Except as otherwise indicated, the holders listed below have sole
voting and investment power with respect to all shares of Class A or Class B
Common Stock beneficially owned by them.
- 5 -
<PAGE> 9
[CAPTION]
<TABLE>
SHARES OF CLASS A SHARES OF CLASS B
COMMON STOCK COMMON STOCK
------------ ------------ PERCENTAGE OF
NAME AND ADDRESS CLASS A AND CLASS B
OF BENEFICIAL OWNER NUMBER PERCENTAGE (1) NUMBER PERCENTAGE (1) COMMON STOCK (1)
- ------------------- ------ -------------- ------ -------------- ----------------
<S> <C> <C> <C> <C> <C>
SoGen International Fund, Inc.(2) 626,500 31.3% -- -- 11.4%
Societe Generale Asset Management Corp.
1221 Avenue of the Americas
New York, New York 10020
The Coleman Limited Partnership
c/o Mr. P. Michael Coleman
8561 Z. Dawes Lake Road
Mobile, Alabama 36619 -- -- 223,021 6.5% 4.0%
P. Michael Coleman (3) 65,100 3.1% 3,435,000 100.0% 63.5%
Jean C. Coleman (4) -- -- 208,633 6.1% 3.8%
John B. Ellis (5) 3,000 * -- -- *
Charles V. Simpson (6) 3,500 * -- -- *
Heeth Varnedoe III (6) 3,500 * -- -- *
Donald J. Moen (7) 37,400 1.8% -- -- *
Jerry Weimer -- -- -- -- --
All executive officers and directors
as a group (12 persons) (8) 129,500 6.2% 3,435,000 100.0% 64.6%
</TABLE>
- ---------------------------------
* Less than 1%.
(1) Based upon 2,079,000 shares of Class A Common Stock issued and outstanding
as of December 31, 1996 and 3,435,000 shares of Class B Common Stock issued
and outstanding as of December 31, 1996. Except as indicated, the
information presented does not include 525,000 shares of Class A Common
Stock reserved for issuance upon exercise of stock options under the
Incentive Plan and 25,000 shares of Class A Common Stock reserved for
issuance upon exercise of stock options under the Director Plan.
(2) Based on a Schedule 13G filed on February 14, 1997. SoGen International
Fund, Inc. has sole voting and dispositive power as to 300,000 shares and
Societe Generale Asset Management Corp., its investment advisor, has sole
voting and dispositive power as to 326,500 shares.
(3) Includes 65,000 shares of Class A Common Stock held by The Coleman
Charitable Foundation, Inc. over which Mr. Coleman, as Chairman, has
shared voting and dispositive power; 223,021 shares of Class B Common
Stock held by The Coleman Limited Partnership, over which Mr. Coleman, as
General Partner, has sole voting and dispositive power; and 208,633 shares
of Class B Common Stock held by Jean C. Coleman.
(4) Does not include 65,000 shares of Class A Common Stock held by The
Coleman Charitable Foundation, Inc. over which Mrs. Coleman, as Vice
Chairman, has shared voting and dispositive power.
(5) Includes options to purchase 2,000 shares of Class A Common Stock granted
under the Director Plan which are immediately exercisable.
(6) Includes options to purchase 3,000 shares of Class A Common Stock granted
under the Director Plan which are immediately exercisable.
(7) Includes options to purchase 30,000 shares of Class A Common Stock which
are immediately exercisable.
(8) Includes options to purchase 55,000 shares of Class A Common Stock which
are immediately exercisable.
- 6 -
<PAGE> 10
EXECUTIVE OFFICERS OF THE COMPANY
Except for Mr. Coleman, discussed above, the following table sets forth
the names of the executive officers of the Company, their ages, their positions
with the Company and their principal occupations and employers for at least the
last five years. For information concerning executive officers' ownership of
Common Stock, see "Beneficial Owners of More Than Five Percent of the Company's
Common Stock; Shares Held by Directors and Executive Officers."
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY AND PRINCIPAL
NAME AGE OCCUPATIONS DURING AT LEAST THE PAST FIVE YEARS
- ---- --- -----------------------------------------------
<S> <C> <C>
Donald J. Moen 46 Mr. Moen joined the Company as Creative/Product
Director in February 1988 and is currently
Executive Vice President-Creative. In this
position, Mr. Moen provides creative input to the
product creation process. Also as an artist and
songwriter, Mr. Moen has completed numerous
recordings for the Company and has been a worship
leader for the Hosanna! Music series. In 1994,
the Company's musical "God With Us," for which
Mr. Moen was the key creative director, won a
Dove Award for best musical. In 1993, he was a
Dove Award nominee for his recording "Worship
with Don Moen," and in 1992, he was a nominee for
his song "God Will Make a Way."
Keith J. Manwaring 50 Mr. Manwaring joined the Company in November 1990
as the Managing Director of the Company's
Australian subsidiary. In February 1992, Mr.
Manwaring transferred to the Company's
headquarters in Mobile, Alabama where he assumed
the position of Vice President, International,
Church Resources and Special Sales. In September
1995, certain areas of the Company were
restructured and Mr. Manwaring became solely
responsible for international sales as Senior
Vice President, International. In December 1996,
Mr. Manwaring's title was changed to Senior Vice
President, General Manager International Group to
again reflect some restructuring of the Company.
Prior to joining the Company, Mr. Manwaring
served as General Manager of the Logos
Foundation, the Company's former Australian
distributor, from January 1985 to November 1990.
Jerry Weimer 49 Mr. Weimer joined the Company in March 1996 as
Executive Vice President, Chief Operating
Officer. In this position, Mr. Weimer manages
and oversees Integrity's day-to-day operations in
the Creative/Product Development, Retail
Marketing and Sales, Distribution Center and
International groups. Mr. Weimer's previous
experience includes more than 15 years in the
music industry. From 1992 to 1996, he held the
position of Executive Vice President of Word,
Inc., the former Christian music division of
Thomas Nelson, Inc., and prior to 1991, he was
President of the Gaither Management Group, which
is involved in Christian music publishing.
</TABLE>
- 7 -
<PAGE> 11
<TABLE>
<S> <C> <C>
Christopher P. Long 36 Mr. Long joined the Company in May 1994 as Vice
President, Music Production. In May 1995, Mr.
Long was promoted to Vice President, Creative
Group and in 1996, he was promoted to Senior Vice
President and General Manager of Integrity
Records and Publishing Group. In this position,
Mr. Long is responsible for the product creation
process, including song development, song
publishing, copyright administration and
business/legal affairs. Prior to joining the
Company, Mr. Long was employed by AT&T
Corporation as a National Account Manager. Mr.
Long's prior musical experience includes
performance and training in popular, classical
and jazz idioms, and his prior professional
experience includes various positions with
Concord Jazz Records.
Alison S. Richardson 31 Mrs. Richardson joined the Company in May 1989 as
a Financial Analyst. She was promoted to
Accounting Manager in August 1991, to the
position of Corporate Controller in April 1992,
Vice President, Corporate Controller in May 1994,
and to her current position of Senior Vice
President of Administration and Finance in
December 1996. Mrs. Richardson's
responsibilities include management of the
accounting department and all aspects of internal
and external financial reporting. She also is
responsible for the administrative function of
the Company, including facilities management,
risk management, human resources and information
systems. Prior to joining the Company, Mrs.
Richardson was employed by the national
accounting firm of Pannell, Kerr, Forster from
January 1987 to May 1989.
Danny McGuffey 43 Mr. McGuffey joined the Company in December 1996
as Senior Vice President, General Manager of the
Integrity Label Group. In this position, he is
responsible for retail marketing, sales, creative
services, strategic planning and special markets.
Prior to joining Integrity, Mr. McGuffey was
Vice President of Marketing and Sales for Star
Song Communications, a Christian music publisher,
from 1992 to December 1996, where he was
instrumental in the marketing and sales
development of over 30 artists and labels. He
also held the position of Vice President of
Marketing and Sales for Reunion Records from 1991
to 1992 and began his career in the music
industry in 1980 with the Sparrow Corporation, a
Christian music publisher.
Jerry O'Connor 49 Mr. O'Connor joined the Company in December 1996
as Vice President and General Manager, Direct to
Consumer. One of his main responsibilities will
be to develop new methods of increasing sales in
this area by expanding consumer awareness to the
Company's vast array of products. With over 25
years experience in direct to consumer sales,
before joining Integrity, Mr. O'Connor was a Vice
President with Tupperware Corporation, where he
directed the entry into over 30 new markets,
providing incremental sales and service
improvement. Mr. O'Connor began his career at
Tupperware Corporation in 1970 and was promoted
to the position of Vice President in 1989.
</TABLE>
- 8 -
<PAGE> 12
EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended December 31, 1994, 1995 and 1996 for
(i) the President and Chief Executive Officer of the Company; and (ii) the two
other most highly compensated executive officers of the Company whose total
salary and bonus exceeded $100,000 (determined as of December 31, 1996 and
collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
---------------------- ----------------------
Name and Securities All Other
Principal Position Year Salary Bonus Underlying Options Compensation (1)
- ------------------ ---- ---------- ---------- ---------------------- --------------
<S> <C> <C> <C> <C> <C>
P. Michael Coleman 1996 $276,042 -- -- $ 1,800
Chairman, President and 1995 299,704 -- -- 2,197
Chief Executive Officer 1994 286,880 $24,778 -- 15,000
Donald J. Moen 1996 136,744 -- -- 770
Executive Vice President, 1995 135,625 -- 50,000 --
Creative Director 1994 130,000 23,726 50,000 9,732
Jerry Weimer 1996 134,616 -- 100,000 1,632
Executive Vice President, 1995 -- -- -- --
Chief Operating Officer 1994 -- -- -- --
</TABLE>
- ------------------------
(1) Comprised of contributions made by the Company to the Company's Profit
Sharing Plan on behalf of each of the Named Executive Officers.
- 9 -
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------------------
Percent of Potential Realizable Value at
Number of Total Options Assumed Annual Rates of Stock
Securities Granted to Price Appreciation
Underlying Options Employees in Exercise or Expiration for Option Term
Name Granted (1) Fiscal Year Base Price Date -----------------------------
- ---- -------------------- -------------------- -------------------- ---------- 5% 10%
-- --
<S> <C> <C> <C> <C> <C> <C>
Michael Coleman -- -- -- -- -- --
Donald J. Moen -- -- -- -- -- --
70,000 37% 2.875 3/26/06 126,565 320,788
Jerry Weimer 30,000 16% 1.563 11/1/06 29,489 74,731
</TABLE>
- --------------------
(1) All of the options were granted under the Incentive Plan with a vesting
schedule pursuant to which 20% of the options become exercisable one year
following the date of grant and 20% of the options become exercisable on
each of the second, third, fourth and fifth anniversaries of the date of
grant.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Name at Fiscal Year-End(1) at Fiscal Year-End
- ---- -------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
P. Michael Coleman -- -- -- --
Donald J. Moen 30,000 70,000 -- (2)
Jerry Weimer -- 100,000 -- 46,890(2)
</TABLE>
- -------------------
(1) No options were exercised by the Named Executive Officers in 1996.
(2) The exercise price of all of Mr. Moen's and 70,000 of Mr. Weimer's
options to purchase shares of Class A Common Stock was higher than the
fair market value of the Class A Common Stock as of December 31, 1996
($1.625) and thus none of such options were "in-the-money" as of such
date. The exercise price of 30,000 of Mr. Weimer's options to purchase
Class A Common Stock was lower than the fair market value of the Class A
Common Stock as of December 31, 1996 ($1.625) and thus such options were
valued at $46,890.
Employment Arrangements
Employment Agreements. The Company has entered into an employment
agreement (the "Employment Agreement") with Mr. Weimer for the position
of Executive Vice President/Chief Operating Officer. Mr. Weimer's Employment
Agreement provides for a base salary of $175,000, and Mr. Weimer is eligible to
receive cash bonuses under the executive cash bonus compensation system
established from time to time by the Company. The term of the Employment
Agreement begins on March 28, 1996, and continues until terminated for death,
disability, cause or upon mutual written agreement. The Employment Agreement
also may be terminated after Mr. Weimer has been employed by the Company
for at least eighteen (18) months, upon six (6) months prior written notice of
termination from the Company to Mr. Weimer. The Company, at its sole
discretion, may elect to pay Mr. Weimer an amount equal to his salary for six
(6) months in lieu of providing the above-mentioned notice. The Employment
Agreement
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<PAGE> 14
contains non-competition, non-solicitation and confidentiality
provisions and expressly incorporates the Key Employee Change in Control
Agreement agreed to and executed by Mr. Weimer and the Company.
Change in Control Agreements. The Company has entered into change in
control agreements (the "Change in Control Agreements") with certain Named
Executive Officers as well as other senior officers of the Company. The Change
in Control Agreements provide that in the event the officer is employed by the
Company at the time of a Change in Control (as defined in the Change in Control
Agreement), the officer shall be entitled to supplemental employment benefits
should his employment with the Company terminate within 18 months after the
Change in Control has occurred. The Change in Control Agreements provide that
such termination of employment can be involuntary, other than termination for
cause or the result of death, disability, or retirement age, or voluntary,
following a material change in the nature or location of his position or a
material change in the benefits provided to the officer by the Company. The
supplemental benefits that are required to be provided to the officer upon such
a termination include a severance payment in an amount equal to one-half of the
officer's annual base salary as well as various other benefits including basic
life insurance, long-term disability insurance, health insurance and other
medical benefits.
Without the consent of the officer, the terms of the Change in Control
Agreement may be terminated or amended by the Company following the first
anniversary of its execution at any time prior to the first to occur of (1) a
Change in Control, (ii) the public announcement of a proposal for transaction
that, if consummated, will constitute a Change in Control, or (iii) the Board
of Directors learns of a proposal for a transaction that, if consummated, would
constitute a Change in Control. Upon the occurrence of any of the foregoing
events, the Change in Control Agreements continue in effect at such time
without termination or further change by the Company until the earlier of (x)
18 months following any Change in Control, or (y) the final withdrawal or
termination of a proposal under item (ii) or (iii) that, had it been
consummated, would have constituted a Change in Control, at which time the
Change in Control Agreement may, once again, be amended or terminated by the
Company until one of such events occurs.
A Change in Control, as defined in the Change in Control Agreements,
includes, among other things: a change of control of the Company such
that any person, other than current affiliates of the Company, becomes the
beneficial owner of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities; any
consolidation, merger or share exchange involving the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of Company stock would be converted into cash, securities or other
property; the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or substantially all of the assets of
the Company are sold or otherwise transferred to parties that are not within a
controlled group of corporations in which the Company is a member.
Cash Incentive Plan. The Company has adopted the Integrity Incorporated
1995 Cash Incentive Plan (the "Cash Incentive Plan"). Under the Cash Incentive
Plan key employees of the Company are eligible to be awarded Units which are
payable only in cash. The Units vest in one-fifth increments on each
anniversary of the date of grant until vested in full. In addition, a
participant becomes fully vested, but not paid, in all of the Units of his or
her award on the date which is six months after the occurrence of a Change in
Control (as defined in the Cash Incentive Plan) of the Company if he or she is
an employee of the Company on such date (such six-month period being referred
to as the "Transition Period") or upon his or her termination of employment
with the Company as a result of death, disability, retirement after attaining
retirement age, or termination by the Company other than for cause during the
Transition Period. Participants are entitled to interim payments under the
Cash Incentive Plan on January 15 of each of the five years beginning January
15, 1997, unless the participant has previously received a final payment.
Participants are entitled to a final payment on January 15, 2001, or January 15
of the year following the participant's termination of employment or next
following the end of the Transition Period following a Change in Control. The
value of the Units, and the calculation of interim and final payments, is
determined based on the difference between the fair market value of a number of
shares of the Class A
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<PAGE> 15
Common Stock of the Company equal to the number of Units at the date of
determination and the fair market value of the same number of shares on the date
of grant of the Units. The Board of Directors may discontinue the Cash
Incentive Plan at any time, and may amend it from time to time; however, no
outstanding award under the Cash Incentive Plan may be revoked or altered in a
manner unfavorable to the participant without the consent of the participant.
In 1995, awards were made under the Cash Incentive Plan to certain of the Named
Executive Officers, as well as other senior officers of the Company, which
awards, individually, currently do not have a value in excess of $100,000. In
1996, one award was made under the Cash Incentive Plan to one of the Named
Executive Officers, which currently does not have a value in excess of $100,000.
Severance Agreements. The Company has entered into severance agreements
(the "Severance Agreements") with certain Named Executive Officers as well as
other senior officers of the Company. The Severance Agreements provide for the
payment of severance benefits to such persons upon their termination of
employment by the Company without cause. Such persons are not entitled to
severance benefits under the Severance Agreement if they voluntarily resign,
quit, abandon their job or cannot perform their duties due to death or
disability. In addition, if an officer is entitled to severance benefits upon
termination of employment under the terms of a Change in Control Agreement, as
described above, the officer shall not be entitled to any benefits under the
Severance Agreement.
-12-
<PAGE> 16
STOCKHOLDER RETURN COMPARISON.
The following line graph presentation compares cumulative stockholder
returns of the Company with the Nasdaq Stock Market (U.S. Companies) and a Peer
Index over the period beginning with the Company's initial public offering on
July 1, 1994 through December 31, 1996 (assuming the investment of $100 in the
Company's Class A Common Stock, the Nasdaq Stock Market (U.S. Companies) and
the Peer Index on July 1, 1994, and reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURNS
[PERFORMANCE GRAPH]
YEAR-END CUMULATIVE RETURNS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995 1996
-------- ------- -------
<S> <C> <C> <C>
INTEGRITY INCORPORATED 66.667 23.611 18.056
THE NASDAQ STOCK MARKET 106.9956 151.137 186.048
PEER INDEX 105.362 126.457 142.938
</TABLE>
Total return calculations for the Nasdaq Stock Market (U.S. Companies) and
the Peer Index were prepared by the Center for Research in Security Prices, The
University of Chicago. The Peer Index is based upon the companies comprising
the Publishing Index in the Dow Jones Media Industry Group. Specific
information regarding the companies comprising the Peer Index will be provided
to any stockholder upon request to Alison S. Richardson, at the Company.
-13-
<PAGE> 17
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
Overview and Philosophy. The Compensation Committee of the Board of
Directors (the "Compensation Committee") is responsible for reviewing and
making decisions under a delegation of authority from the Board with respect to
salaries, wages, bonuses, stock options and other benefits for officers of the
Company.
The objectives of the Company's executive compensation program are to:
- Encourage the achievement of Company performance by providing
compensation which directly relates to the performance of the individual and
the achievement of internal strategic objectives.
- Establish compensation policies and guidelines that will attract and
retain qualified personnel through an overall level of compensation opportunity
that is competitive within the Company's industry.
- Promote a direct relationship between compensation and Company
performance by facilitating executive officer stock ownership through stock
option awards.
Overall, the Company's executive officer compensation program is comprised
of base salary, annual cash incentive bonus compensation, long-term incentive
compensation in the form of stock options, and various other benefits,
including a medical plan, which are generally available to all employees of the
Company.
Base Salary. The base salaries for the Company's executive officers vary
depending on the responsibilities of the officers. While the executive officer
base salary compensation is designed to be competitive with other companies in
the Company's industry, the Company believes that bonus compensation described
below better serves the compensation philosophy of the Company.
1996 Cash Incentive Compensation. In order to maximize the common
interests of the Company's stockholders and its management, the Company has
adopted the Cash Incentive Plan that is based on the Company's operating
performance. Under this system, the Company's budgeted financial performance
goals are set at the beginning of each fiscal year. Cash bonuses will then be
awarded in the judgment of the Compensation Committee based on the achievement
of budgeted targets and the individual performance of the executive officer.
As a result of his performance, one of the Company's executive officers
received a cash bonus under this plan for fiscal 1996.
Stock Options. The stock option programs of the Company are long-term
incentive plans for executive officers and employees intended to relate
employee and stockholder long-term interests by creating a strong and direct
link between compensation and stockholder returns. In general, stock option
awards are granted on an annual basis if warranted by the Company's growth and
profitability. To encourage long-term performance, options generally vest over
a five-year period. The Compensation Committee considers current stock
ownership and option holdings in deciding the number of options to be awarded to
each recipient.
-14-
<PAGE> 18
Compensation of Chief Executive Officer. In fiscal 1996, the Chief
Executive Officer of the Company, Mr. P. Michael Coleman, was compensated
pursuant to an unwritten employment agreement approved by the Board of
Directors of the Company prior to the Company's initial public offering in July
1994. Under the agreement, Mr. Coleman received a base salary of $276,042
during fiscal 1996.
The Compensation Committee has adopted several plans and agreements
designed to assist the Company in retaining key employees of outstanding
ability during a period of financial difficulty and consideration of various
alternatives to enhance stockholder value, including business transactions with
third parties. These plans and agreements are designed to offer key employees
an increased incentive to join or continue in the service of the Company and to
increase their efforts for its welfare by participating in the growth of the
Company. Specifically, the Compensation Committee adopted a form of Change in
Control Agreement, the Cash Incentive Plan, and a form of Severance Agreement,
which were utilized with various key employees. See "Proposal I - Election of
Directors -- Executive Compensation -- Employment Arrangements."
Section 162(m) of the Internal Revenue Code (the "Code") adopted as part
of the Revenue Reconciliation Act of 1993, generally limits to $1 million the
deduction that can be claimed by any publicly-held corporation for compensation
paid to any "covered employee" in any taxable year beginning after December 31,
1993. The term covered employee for this purpose is defined generally as the
Chief Executive Officer and the four other highest paid employees of the
corporation. Performance-based compensation is outside the scope of the $1
million limitation, and hence, generally can be deducted by a publicly-held
corporation without regard to amount, provided that, among other requirements,
such compensation is approved by the stockholders. The Compensation Committee
has not, and, given the current levels of executive compensation in the
Company, does not foresee the need in the immediate future, to formulate a
policy for the Company with regard to Section 162(m) and executive
compensation. Generally speaking, the Compensation Committee's executive
compensation policies are performance-based.
COMPENSATION COMMITTEE
Heeth Varnedoe III
John B. Ellis
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<PAGE> 19
CERTAIN TRANSACTIONS
Donald J. Moen. Mr. Donald J. Moen, Integrity's Executive Vice
President-Creative, is also one of the Company's exclusive songwriters and
artists. Mr. Moen received royalties of $206,000 in 1996.
The Board of Directors of the Company has adopted a policy which requires
that transactions between the Company and its officers, directors or other
affiliates shall be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties on an arm's-length basis and, further,
that any such transaction shall be approved by a majority of the Company's
directors who have no interest in any such transaction.
-16-
<PAGE> 20
PROPOSAL II
APPROVAL OF SELECTION OF AUDITORS
The Company's Board of Directors has selected Price Waterhouse LLP to
conduct the annual audit of the financial statements of the Company for the
fiscal year ending December 31, 1997. Price Waterhouse LLP has no financial
interest, direct or indirect, in the Company, and does not have any connection
with the Company except in its professional capacity as an independent auditor.
The ratification by the holders of Class A Common Stock of the selection
of Price Waterhouse LLP as independent auditors is not required by law or by
the Bylaws of the Company. The Board of Directors, consistent with the
practice of many publicly held corporations, is nevertheless submitting this
selection to the holders of Class A Common Stock and the Class B Common Stock.
If this selection is not ratified at the Annual Meeting, the Board of Directors
intends to reconsider its selection of independent auditors for the fiscal year
ending December 31, 1997. Even if the selection is ratified, the Board of
Directors in its sole discretion may direct the appointment of a different
independent accounting firm at any time during the fiscal year if the Board
determines that such a change would be in the best interest of the Company and
its stockholders.
The Audit Committee, which is composed of directors who are not employees
of the Company, approves in advance all material non-audit services to be
provided by Price Waterhouse LLP and believes that these services have no
effect on audit independence.
Representatives of Price Waterhouse LLP will be present at the Annual
Meeting and will have an opportunity to make a statement, if they so desire,
and respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION
OF THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1997. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE
STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS
MADE, THE SHARES WILL BE VOTED FOR RATIFICATION. THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE VOTES OF THE SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON
STOCK, VOTING TOGETHER AS A SINGLE CLASS, REPRESENTED AND ENTITLED TO VOTE AT
THE ANNUAL MEETING AT WHICH A QUORUM IS PRESENT IS REQUIRED FOR APPROVAL OF
PROPOSAL II.
STOCKHOLDER PROPOSALS
Any proposal which a Company stockholder intends to be presented at the
next annual meeting of stockholders to be held in 1998 must be received by the
Company on or before December 6, 1997. Only proper proposals which are timely
received will be included in the Proxy Statement and Proxy.
OTHER MATTERS
FILINGS UNDER SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities to file reports of
ownership and changes in ownership of such securities with the Securities and
Exchange Commission and the National Association of Securities Dealers, Inc.
Officers, directors and greater than ten percent beneficial owners are required
by applicable regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no
Forms 5 were required, the Company believes that
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<PAGE> 21
during fiscal 1996 all of its officers and directors complied with all
applicable filing requirements with the exception of: Danny McGuffey and Jerry
O'Connor who failed to file timely a Form 3.
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers or other employees of the Company, personally, by telephone
or by telegraph. The Company does not expect to pay any compensation for the
solicitation of proxies, but may reimburse brokers, custodians or other persons
holding stock in their names or in the names of nominees for their expenses in
sending proxy materials to principals and obtaining their instructions.
MISCELLANEOUS
Management does not know of any matters to be brought before the Annual
Meeting other than as described in this Proxy Statement. Should any other
matters properly come before the Annual Meeting, the persons designated as
proxies will vote in accordance with their best judgment on such matters.
AVAILABILITY OF ANNUAL REPORT
ACCOMPANYING THIS PROXY STATEMENT IS A COPY OF THE COMPANY'S ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1996. STOCKHOLDERS WHO WOULD LIKE ADDITIONAL
COPIES OF THE ANNUAL REPORT SHOULD DIRECT THEIR REQUESTS IN WRITING TO:
INTEGRITY INCORPORATED, 1000 CODY ROAD, MOBILE, ALABAMA 36695, ATTENTION:
ALISON S. RICHARDSON.
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<PAGE> 22
APPENDIX
PROXY INTEGRITY INCORPORATED
MOBILE, ALABAMA
ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Integrity Incorporated (the "Company"),
Mobile, Alabama, hereby constitutes and appoints P. Michael Coleman or Alison S.
Richardson either one of them, each with full power of substitution, to vote the
number of shares of Class A Common Stock which the undersigned would be entitled
to vote if personally present at the Annual Meeting of Stockholders to be held
at the Adam's Mark, 64 South Waterstreet, Mobile, Alabama, 36602, on Friday, May
9, 1997, at 2:00 p.m., local time, or at any adjournments thereof (the "Annual
Meeting"), upon the proposals described in the Notice of Annual Meeting of
Stockholders and Proxy Statement, both dated April 17, 1997, the receipt of
which is acknowledged, in the manner specified below. The proxies, in their
discretion, are further authorized to vote for the election of a person to the
Board of Directors if any nominee named herein becomes unable to serve or for
good cause will not serve, are further authorized to vote on matters which the
Board of Directors does not know a reasonable time before making the proxy
solicitation will be presented at the Annual Meeting, and are further authorized
to vote on other matters which may properly come before the Annual Meeting and
any adjournments thereof. The Board of Directors recommends a vote FOR Proposals
1 and 2.
1. ELECTION OF DIRECTORS. On the proposal to elect the following slate of
directors to serve until the 1998 Annual Meeting of Stockholders of the
Company and until their successors are elected and qualified:
<TABLE>
<S> <C>
P. Michael Coleman Charles V. Simpson
Jean C. Coleman Heeth Varnedoe III
John B. Ellis
FOR [ ] WITHHOLD AUTHORITY [ ]
</TABLE>
To withhold authority for any individual nominee(s), write the name of the
nominee(s) in the space provided:
------------------------------------------------------------------------------
2. SELECTION OF AUDITORS. On the proposal to ratify the selection of Price
Waterhouse LLP as the Company's independent auditors for the fiscal year
ending December 31, 1997:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued on other side)
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2 AND WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.
Shares Held:
-----------------------------------------------------------------------------
------------------------------
Signature of Stockholder
------------------------------
Signature of Stockholder (If
held Jointly)
Dated:
----------------------- , 1997
Month Day
Please sign exactly as your
name appears on your stock
certificate and date. Where
shares are held jointly, each
stockholder should sign. When
signing as executor,
administrator, trustee, or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
president or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
THIS PROXY IS SOLICITED ON BEHALF OF INTEGRITY INCORPORATED'S BOARD OF DIRECTORS
AND MAY BE
REVOKED BY THE STOCKHOLDER PRIOR TO ITS EXERCISE.
