<PAGE>
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
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
<TABLE>
<S> <C>
BIG FLOWER PRESS HOLDINGS, INC.
- - -----------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - -----------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on the 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>
BIG FLOWER PRESS HOLDINGS, INC.
NOTICE OF ANNUAL
MEETING OF
STOCKHOLDERS AND
PROXY STATEMENT
PLEASE COMPLETE, SIGN, DATE AND RETURN
WITH YOUR PROXY PROMPTLY
[LOGO]
THURSDAY, NOVEMBER 7, 1996
AT 9:00 A.M.
GOLDMAN, SACHS & CO.
ONE NEW YORK PLAZA
NEW YORK, NEW YORK
<PAGE>
[LOGO]
BIG FLOWER PRESS HOLDINGS, INC.
3 EAST 54TH STREET
NEW YORK, NEW YORK 10022
(212) 521-1600
October 4, 1996
Dear Stockholder:
It is our pleasure to invite you to join us at the 1996 Annual Meeting of
Stockholders of Big Flower Press Holdings, Inc. which will be held at 9:00 a.m.,
on Thursday, November 7, 1996, in the forty-third floor auditorium of Goldman,
Sachs & Co., One New York Plaza, New York, New York.
We will report to you at the meeting on the Company's current operations and
outlook. The meeting will also include a question and discussion period. The
Board of Directors and management hope that many of you will be able to attend
in person.
At the meeting, you will be asked to consider and vote on the election of
three (3) directors and the ratification of the appointment of Deloitte & Touche
LLP as the Company's independent certified public accountants. The Board of
Directors has unanimously approved the proposals and recommends that you vote
FOR each of them. Please give this proxy material your careful attention, as the
discussion is important to your decisions on the matters being presented.
The formal notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted, regardless of the size of
your holdings. Accordingly, whether or not you plan to attend the meeting in
person, please mark, sign, date and return the enclosed proxy. Our Annual Report
(including our Transition Report on Form 10-K for the transition period from
July 1, 1995 to December 31, 1995) also accompanies these proxy materials.
Sincerely,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
R. Theodore Ammon Edward T. Reilly
Chairman and Chief President and Chief
Executive Officer Operating Officer
</TABLE>
<PAGE>
[LOGO]
BIG FLOWER PRESS HOLDINGS, INC.
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, NOVEMBER 7, 1996
------------------------
The 1996 Annual Meeting of Stockholders of Big Flower Press Holdings, Inc.
(the "Company") will be held on Thursday, November 7, 1996, at 9:00 a.m., local
time, in the forty-third floor auditorium of Goldman, Sachs & Co., One New York
Plaza, New York, New York, for the following purposes:
(1) To elect three (3) directors to hold office as specified in the
accompanying Proxy Statement;
(2) To ratify the appointment of Deloitte & Touche LLP as the Company's
independent certified accountants; and
(3) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Stockholders entitled to vote at the meeting or any adjournment or
postponement thereof are holders of record of the Company's Common Stock at the
close of business on September 23, 1996.
By order of the Board of Directors
Mark A. Angelson
Executive Vice President and
General Counsel and
Secretary of the Board of Directors
October 4, 1996
YOUR VOTE IS IMPORTANT! STOCKHOLDERS ARE CORDIALLY INVITED TO
ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE
COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED
ENVELOPE. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE
MEETING.
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
3 EAST 54TH STREET
NEW YORK, NEW YORK 10022
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
GENERAL
The accompanying proxy is solicited by the Board of Directors (the "Board of
Directors" or the "Board") of Big Flower Press Holdings, Inc. (the "Company" or
"Big Flower") in connection with the 1996 Annual Meeting of Stockholders of the
Company to be held on Thursday, November 7, 1996, at 9:00 a.m., local time, in
the forty-third floor auditorium of Goldman, Sachs & Co., One New York Plaza,
New York, New York (the "Meeting"), and at any adjournment or postponement of
the Meeting. This Proxy Statement and a proxy are first being mailed to
stockholders on or about October 7, 1996. The mailing address of the Company's
principal executive office is 3 East 54th Street, New York, New York 10022.
When a proxy is returned properly dated and signed, the shares represented
thereby will be voted by the persons named as proxies in accordance with each
stockholder's directions. Stockholders may specify their choices by marking the
appropriate boxes on the enclosed proxy. If a proxy is dated, signed and
returned without specifying choices, the shares will be voted as recommended by
the Board of Directors FOR the election of each of the three nominees for
directors named below and FOR the ratification and approval of Deloitte & Touche
LLP as independent accountants for the Company for the year ended December 31,
1996 ("Proposal (2)"). The Company does not have cumulative voting in the
election of directors. Under the Company's Amended and Restated By-Laws (the
"By-Laws"), business transacted at the Meeting is confined to the purposes
stated in the Notice of the Meeting. The proxy being solicited does, however,
convey discretionary authority to the persons named therein as proxies to vote
on other business as may properly be brought before the Meeting. The proxy may
be revoked by the stockholder at any time prior to the time it is voted by
giving notice of such revocation either personally or in writing to the
Secretary of the Company.
VOTING SECURITIES
All holders of record of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), at the close of business on September 23, 1996 are
entitled to vote on all business of the Meeting. At the close of business on
such day, the Company had 14,715,745 shares of Common Stock outstanding and
entitled to vote at the Meeting. Each share of Common Stock entitles the holder
to one vote per share. The presence, in person or by proxy, of stockholders
entitled to cast at least a majority of the votes which all stockholders are
entitled to cast shall constitute a quorum.
Under the General Corporation Law of the State of Delaware, the state in
which the Company is incorporated, and the Company's By-Laws, if a quorum is
present at the Meeting, the affirmative vote of a plurality of the votes cast is
required for the election of directors. The affirmative vote of a majority of
the voting power present (in person or by proxy) and entitled to vote at the
Meeting is required for approval of Proposal (2). In accordance with Delaware
law, abstentions and broker "non-votes" will not be counted as being present at
the Meeting for this purpose. Broker "non-votes" and the shares as to which a
stockholder abstains will be included for purposes of determining whether a
quorum of shares is present at the Meeting.
The Company has been informed that the 2,145,144 shares of Common Stock
owned by R. Theodore Ammon, the Chairman and Chief Executive Officer of Big
Flower, and the 4,470,992 shares of Common Stock owned by Apollo Big Flower
Partners, L.P., will be voted in accordance with the recommendation of
<PAGE>
the Board of Directors FOR the election of each of the nominees for director
named below and FOR Proposal (2).
PROPOSAL 1.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The directors of the Company are divided into three classes, designated
Class I, Class II and Class III. Each class consists, as nearly as possible, of
one-third of the total number of directors constituting the entire Board of
Directors. Currently, the Class I directors are Messrs. Minow, Scheller and
Yorke; the Class II directors are Ms. Manley and Mr. Diamandis; and the Class
III directors are Messrs. Ammon, Black and Reilly. For certain information
regarding the Class II and Class III directors of the Company, see "Directors
and Executive Officers" below. The initial Class I directors were elected to
hold office until the date of the Meeting; the initial Class II directors were
elected to hold office until the date of the 1997 Annual Meeting of
Stockholders; and the initial Class III directors were elected to hold office
until the date of the 1998 Annual Meeting of Stockholders and, in each case,
until his or her successor is elected and qualified and subject to his or her
prior death, resignation, retirement, disqualification or removal.
Mr. Scheller, a current director of the Company, will not stand for
re-election, but will continue to serve as a director of the Company until the
Meeting. It is recommended that the three (3) nominees herein named be elected
as directors of the Company, with each director to hold office for three years
until the Annual Meeting of Stockholders for the year in which such director's
three year term expires, and until his successor is elected and qualified or
until his prior death, resignation, retirement, disqualification or removal. Two
of the three nominees are presently serving as directors of the Company and were
classified as Class I directors at a meeting of the Board of Directors held on
November 10, 1995 (in the case of Mr. Edward M. Yorke) and at a meeting of the
Board of Directors held on September 30, 1996 (in the case of Mr. Minow), in
each case to serve until the 1996 annual meeting of the Company's stockholders
and until such director's successor is duly chosen and qualified or until his
prior death, resignation, retirement, disqualification or removal. The Company
is unaware of any reason why any of the nominees named herein would be unwilling
or unable to serve as a director. Should, however, any nominee for director be
unwilling or unable to serve at the time of the Meeting or any adjournment or
postponement thereof, the persons named in the proxy will vote for the election
of such other person for such directorship as the Board of Directors may
recommend.
2
<PAGE>
Certain information regarding each person nominated by the Board of
Directors, including his principal occupation during the past five years and
current directorships, is set forth below. Unless otherwise indicted, all
nominees have had the indicated principal occupations for the past five years.
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS AND OTHER INFORMATION
- - ------------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
Robert M. Kimmitt............. 48 Mr. Kimmitt has been a managing director of Lehman Brothers since 1993,
currently serving as the head of its Washington office. Prior to joining
Lehman Brothers, Mr. Kimmitt served from 1991 to 1993 as American
Ambassador to Germany, and from 1989 to 1991 as Under Secretary of State
for Political Affairs. He was a partner in the Washington office of Sidley
& Austin from 1987 to 1989. Mr. Kimmitt served as a member of the National
Security Council staff at the White House from 1978 to 1985 and General
Counsel of the Department of the Treasury from 1985 to 1987. Mr. Kimmitt
serves on the board of Mannesmann Corporation of Duesseldorf, Germany, a
global industrial, automotive, and telecommunications company, and on the
U.S. Group Council of BMW Corporation of Munich, Germany.
Newton N. Minow............... 70 Mr. Minow has been a Director of Big Flower since September 30, 1996. Since
1991, Mr. Minow has been counsel to the law firm of Sidley & Austin, where
he served as Partner from 1965 to 1991. He also served as Chairman of the
Federal Communications Commission from 1961 to 1963. He is a director of
Sara Lee Corporation, Aon Corporation, Manpower, Inc. and True North
Communications, Inc. Mr. Minow is Chairman of the Carnegie Corporation of
New York, a Trustee and former Chairman of the Board of Trustees of The
RAND Corporation, and former Chairman of the Board of Governors of the
Public Broadcasting Service. Mr. Minow is also a Life Trustee of the
University of Notre Dame and a Life Trustee of Northwestern University.
Edward M. Yorke............... 37 Mr. Yorke has been a Director of Big Flower since 1993. Since 1992, he has
been an officer of Apollo Advisors, L.P., which, together with an
affiliate, serves as managing general partner of Apollo Investment Fund,
L.P., AIF II, L.P. and Apollo Investment Fund III, L.P., private securities
investment funds, and of Lion Advisors, L.P., which acts as a financial
advisor to and a representative for certain institutional investors with
respect to securities investments. From 1990 to 1992, Mr. Yorke was a vice
president in the high yield capital markets group of BT Securities Corp.
Mr. Yorke is a director of Aris Industries, Inc., Salant Corporation and
Telemundo Group, Inc.
</TABLE>
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Class II
and Class III directors of the Company and the executive officers of the
Company, all of whom are U.S. citizens.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- - --------------------------------- --- ------------------------------------------------------------------------
<S> <C> <C>
R. Theodore Ammon................ 47 Class III Director; Chairman; Chief Executive Officer and Principal
Financial Officer
Leon D. Black.................... 43 Class III Director
Edward T. Reilly................. 49 Class III Director; President and Chief Operating Officer
Peter G. Diamandis............... 64 Class II Director
Joan D. Manley................... 64 Class II Director
Mark A. Angelson................. 45 Executive Vice President and General Counsel and Secretary of the Board
of Directors
</TABLE>
Set forth below is certain additional information concerning the persons
listed above.
R. THEODORE AMMON has been the Chairman of the Board, Chief Executive
Officer and Principal Financial Officer of Big Flower since its inception. Mr.
Ammon has also been the Chairman of the Board of Treasure Chest since 1993. Mr.
Ammon was a General Partner of Kohlberg Kravis Roberts & Co. (a New York and San
Francisco-based investment firm) from 1990 to 1992, and an executive of such
firm prior to 1990. Mr. Ammon is also a member of the Board of Directors of Host
Marriott Corporation, Foodbrands America, Inc., Culligan Water Technologies,
Inc. and Samsonite Corporation. In addition, Mr. Ammon serves on the Board of
Directors of the New York YMCA, on the Board of Trustees of Bucknell University
and on the Board of Directors of Jazz at Lincoln Center.
LEON D. BLACK has been a Director of Big Flower since 1993. Mr. Black is one
of the founding principals of Apollo Advisors, L.P., which, together with an
affiliate, serves as managing general partner of Apollo Investment Fund, L.P.,
AIF II, L.P. and Apollo Investment Fund III, L.P., private securities investment
funds, and of Apollo Real Estate Advisors, L.P., which, together with an
affiliate acts as managing general partner of Apollo Real Estate Investment
Fund, L.P. and Apollo Real Estate Investment Fund II, L.P., and of Lion
Advisors, L.P., which acts as a financial advisor to and a representative for
certain institutional investors with respect to securities investments. Mr.
Black is a director of Converse, Inc., Culligan Water Technologies, Inc.,
Furniture Brands International, Inc., Samsonite Corporation, Telemundo Group,
Inc. and Vail Resorts, Inc.
EDWARD T. REILLY has been President and Chief Operating Officer of Big
Flower since March 1996 and a Director of the Company since June 1996. He is
also a director of Treasure Chest, Laser Tech Color, Inc. and Webcraft
Technologies, Inc., each a subsidiary of Big Flower. Prior to joining Big
Flower, Mr. Reilly held a variety of executive positions with McGraw-Hill, Inc.,
a publishing and communications company, in their Broadcast and Publication
groups from 1968 to 1996, and served as president of McGraw-Hill Broadcasting
from 1987 to 1996. Mr. Reilly has been active in television industry affairs,
having served as the Chairman of the Television Bureau of Advertising and as a
member of the Board of Directors of the National Association of Broadcasters.
PETER G. DIAMANDIS has been a Director of Big Flower since September 1994.
Mr. Diamandis has been Vice Chairman of Donnelley Marketing, Inc., a marketing
company, since 1991 and has been the Chairman of TVSM, Inc., a magazine
publishing company, since 1991. From 1988 to 1991, Mr. Diamandis served as
President and Chief Executive Officer of Hachette Publications, which purchased
Diamandis Communications Inc. in 1988. From 1987 to 1988, Mr. Diamandis served
as Chairman, President and Chief
4
<PAGE>
Executive Officer of Diamandis Communications Inc., a publisher of special
interest magazines. From 1983 to 1987, Mr. Diamandis was President of CBS
Magazines ("CBS"). In 1982, Mr. Diamandis joined CBS as Vice President, Group
Publisher, Women's Day, and served as President of CBS from September 1983 to
1987. Mr. Diamandis serves on the Board of Trustees of Bucknell University and
the Board of Directors of the Publishers Information Bureau.
JOAN D. MANLEY has been a Director of Big Flower since September 1994. Ms.
Manley retired from Time Incorporated in 1984, where she had held numerous
positions since 1960. At the time of her retirement, Ms. Manley was Group Vice
President and a director of Time Incorporated. Ms. Manley serves on the Board of
Directors of Aon Corporation, Sara Lee Corporation, Scholastic, Inc. and Viking
Office Products, Inc. and is a Trustee of the Keystone Center.
MARK A. ANGELSON has been Executive Vice President and General Counsel and
Secretary of the Board of Directors of Big Flower since March 1996. He is also a
director of Treasure Chest, Laser Tech Color, Inc. and Webcraft Technologies,
Inc. Prior to joining Big Flower, Mr. Angelson was a partner of the law firm
Sidley & Austin from 1982 to 1996. Mr. Angelson was Co-Chair of Sidley's
international operations, founder of the firm's English law practice and manager
of the firm's offices in Singapore, New York and London. Mr. Angelson is
admitted to practice law in the State of New York, in England and in Wales. He
is also a Trustee of American School in London Foundation, Inc., a Fellow of
Royal Society of Arts and a member of the Advisory Board of Jobs for the Future,
Inc.
The term of office of each executive officer is until the organizational
meeting of the Big Flower Board following the next annual meeting of Big Flower
stockholders and until his successor is elected and qualified or until his prior
death, resignation, retirement, disqualification or removal.
BOARD MEETINGS AND CERTAIN COMMITTEES OF THE BOARD
Four meetings of the full Board of Directors were held during the fiscal
year ended June 30, 1995 ("Fiscal 1995") and five meetings of the full Board of
Directors were held during the transition period from July 1, 1995 to December
31, 1995 (the "TP95"). On March 21, 1996, the Board of Directors elected to
change the Company's fiscal year from a 12-month period ending June 30th to a
calendar year. Each incumbent director other than Mr. Leon D. Black attended
more than 75% of the aggregate of all meetings of the Board of Directors that
were held after such director's election to the Board and of all committees of
the Board of Directors that such director was eligible to attend in Fiscal 1995.
The Company has standing audit and compensation committees whose current
functions and members are described below. It is anticipated that at its first
meeting following the Meeting, the Board will designate the directors to serve
on each of these Committees until the next annual meeting of stockholders. The
Company does not have a nominating committee.
AUDIT COMMITTEE. The Audit Committee is composed of Ms. Joan Daniels Manley
(Chairman), Messrs. Peter G. Diamandis and Leon D. Black. This Committee is
charged with the responsibility of satisfying itself of the propriety and
accuracy of the financial statements of the Company. In the course of performing
its functions, the Audit Committee (i) reviews the Company's internal accounting
controls and its annual consolidated financial statements, (ii) reviews with the
Company's independent certified public accountants the scope of their audit,
their report and their recommendations, (iii) considers the possible effect on
the independence of such accountants in approving non-audit services requested
of them, and (iv) recommends the action to be taken with respect to the
appointment of the Company's independent certified public accountants. The Audit
Committee did not meet during Fiscal 1995 or during TP95.
COMPENSATION COMMITTEE. The Compensation Committee is composed of Messrs.
Sanford G. Scheller (Chairman), Peter G. Diamandis and Leon D. Black. The
Committee is charged with the responsibility of (i) considering, advising and
making recommendations with respect to employee and director compensation
matters, benefits and standards applicable to the executive officers of the
Company, (ii) taking such
5
<PAGE>
actions with respect thereto that are not reserved to the Board of Directors,
and (iii) administering the Big Flower Press Holdings, Inc. Restated 1993 Stock
Award and Incentive Plan (the "Plan"), Treasure Chest's Executive Incentive Plan
("EIP"), and such other salary or compensation plans as the Committee is
designated to administer. The Compensation Committee did not meet during Fiscal
1995 or during TP95.
COMPENSATION OF DIRECTORS
Directors of Big Flower who are also executive officers of Big Flower or its
subsidiaries do not receive any additional compensation for service as a member
of the Board of Directors of Big Flower or any of its committees. All other
directors of Big Flower are paid an annual fee of $25,000. For information
relating to compensation of the Company's management directors, see "Employment
and Severance Agreements" below.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Big Flower's directors, executive officers, and
persons who own more than ten percent of Big Flower's Common Stock, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange.
Directors, executive officers and greater than ten percent stockholders are
required by the SEC regulations to furnish Big Flower with copies of all Forms
3, 4 and 5 they file.
Based solely on Big Flower's review of the copies of such forms it has
received, or written representations from certain reporting persons that no Form
5's were required for these persons, Big Flower believes that all its directors,
executive officers and greater than ten percent beneficial owners complied with
all filing requirements applicable to them with respect to Fiscal 1995 except
for the following inadvertent omission: BT Investment Partners, Inc. ("BTIP"),
the holder of all of the outstanding shares of Class B Common Stock of the
Company (which are non-voting securities), did not file a report with respect to
one transaction on a timely basis. When this inadvertent omission was
discovered, BTIP promptly filed the appropriate reports.
6
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth the beneficial ownership as of September 23,
1996 by each person known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock (constituting the only class of
voting capital stock of the Company), each director of the Company and nominee
for director of the Company who has such ownership, each executive officer whose
name appears in the Summary Compensation Table below who was an executive
officer of the Company as of September 23, 1996 and all directors and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------------
<S> <C> <C>
NAME AND ADDRESS OF AMOUNT AND NATURE
BENEFICIAL OWNER OF OWNERSHIP (A) PERCENTAGE OF CLASS
- - -------------------------------------------------------------------- ------------------ ---------------------
R. Theodore Ammon (b)............................................... 2,245,344 15.2%
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Apollo Big Flower Partners, L.P..................................... 4,470,992 30.4%
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
BT Investment Partners, Inc. (c).................................... 1,738,692 10.6%
280 Park Avenue
New York, New York 10017
Goldman, Sachs & Co. (d)............................................ 1,679,582 11.4%
85 Broad Street
New York, New York 10004
Leon D. Black (e)................................................... -- --
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Edward M. Yorke (e)................................................. -- --
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Peter G. Diamandis (f).............................................. 13,400 *
c/o Donnelly Marketing Inc.
70 Seaview Avenue
Stamford, Connecticut 06902
Joan D. Manley (g).................................................. 13,400 *
P.O. Box 1353
Dillon, Colorado 80435
Sanford G. Scheller (h)............................................. 273,172 1.8%
c/o Treasure Chest Advertising Company, Inc.
13000 Sawgrass Village--Suite 28
Ponte Vedra Beach, Florida 32082
Edward T. Reilly.................................................... -- --
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Newton N. Minow (i)................................................. 10,000 *
Suite 4800
One First National Plaza
Chicago, Illinois 60603
All directors and executive officers as a group
(9 persons) (e)(j)................................................ 2,555,316 17.1%
</TABLE>
- - ------------------------
* less than 1%
(FOOTNOTES CONTINUED ON NEXT PAGE)
7
<PAGE>
(FOOTNOTES CONTINUED FROM PRIOR PAGE)
(a) This column includes shares which directors and executive officers have the
right to acquire within 60 days. Except as otherwise indicated, each person
and entity has sole voting and dispositive power with respect to the shares
set forth in the table.
(b) Includes (x) 6,000 shares held by Mr. Ammon as general partner of a
partnership in which certain family members are the limited partners and
have 99% of the economic interests, (y) options to purchase 100,000 shares
of Common Stock which will vest within 60 days and (z) 200 shares owned by
Mr. Ammon's minor children, as to which Mr. Ammon disclaims beneficial
ownership. Additionally, Mr. Ammon holds unvested options to purchase
200,000 shares of Common Stock, subject to vesting ratably in November 1997
and November 1998.
(c) Represents shares of Class B Common Stock of the Company, which are not
voting but are convertible into shares of Common Stock under certain
circumstances.
(d) Shares are held for various customers of Goldman, Sachs & Co.
(e) Does not include shares owned by Apollo Big Flower Partners, L.P.
("Apollo"). Mr. Black and Mr. Yorke are officers of Apollo Capital
Management, Inc., the general partner of Apollo Advisors, L.P., the managing
general partner of AIF II, L.P., which in turn acts as the general partner
of Apollo. Messrs. Black and Yorke expressly disclaim beneficial ownership
with respect to such shares.
(f) Includes options to purchase 13,400 shares of Common Stock which are
presently exercisable.
(g) Includes options to purchase 13,400 shares of Common Stock which are
presently exercisable.
(h) Includes options to purchase 100,646 shares of Common Stock which are either
presently exercisable or will become exercisable within 60 days.
(i) Does not include an option to purchase 13,400 shares of Common Stock (which
option is presently exercisable) which was granted to Mr. Minow on September
30, 1996, upon his election to the Board of Directors.
(j) Includes options to purchase 227,446 shares of Common Stock which are
presently exercisable.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
INTRODUCTION. This report to stockholders presents an overview of both the
charter of the Compensation Committee of the Board of Directors (the
"Compensation Committee") and of the Company's compensation philosophy. The
Compensation Committee is composed entirely of non-management directors.
THE COMPENSATION COMMITTEE'S ROLE. The Compensation Committee's principal
function is to review and approve the compensation program for the executive
officers and other senior executives of the Company (the "Executive Compensation
Program") and to administer grants under the Plan.
The Company's Executive Compensation Program is designed to motivate the
executives to achieve the Company's business objectives, with a special emphasis
on increasing stockholder value, earnings per share ("EPS") and earnings before
interest expense, taxes, depreciation and amortization expense ("EBITDA"). The
Company's executive officers are currently employed pursuant to multi-year
employment agreements, the purpose of which is to retain the services of such
officers for extended periods. The minimum salary to which each such executive
officer is entitled is specified in the employment agreement, but the annual
bonus for such executive officers with respect to periods beginning in 1997,
which is a major part of an executive officer's cash compensation, and awards of
stock options for executive officers, are subject to approval by the
Compensation Committee from time to time. The principal terms of the employment
agreements of certain executive officers are described under "Employment and
Severance Agreements" below.
OVERALL OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM. The Executive
Compensation Program is designed to help the Company retain, motivate and
recruit the executives needed to maximize the
8
<PAGE>
Company's return to stockholders. The Company's explicit objective is to pay at
levels required to secure the services of exceptionally talented executive
officers, in particular, and employees, in general, necessary to achieve its
long-term financial, strategic and stock price growth goals. Since one of the
Company's objectives is rapid revenue growth, by internal expansion and through
acquisitions, the Company has recruited the executive talent required to run a
company which is larger than the Company in its present form. Toward that end,
the Executive Compensation Program is designed to provide:
- Levels of compensation that are highly competitive with those provided in
the various markets in which the Company competes for its executive
resources.
- Incentive compensation that:
- varies with the financial performance of the Company and/or its various
business units;
- varies with the performance of the Company's stock price; and
- effectively rewards individual performance.
- Equity-based compensation that ties executives' long-term financial
interests to growth in the Company's market value per share.
PROVIDING HIGHLY COMPETITIVE LEVELS OF COMPENSATION. The Company provides
its executive officers with a total compensation package that--at expected
levels of performance--is generally intended to compare favorably with
compensation packages provided to executives in the information industries (as
adjusted to reflect the Company's size) who hold comparable positions or have
similar qualifications. In addition, such compensation takes into account the
highly unusual roles and combinations of responsibilities undertaken by Big
Flower's executive officers.
Given the Company's aggressive stockholder return objectives, the Company
has designed salary and incentive programs intended to attract exceptionally
high-caliber executives and is committed to paying these executives a
substantial portion of their compensation based directly on the performance of
the Company and, in appropriate cases, on the performance of a particular
business unit.
To establish appropriate competitive frames of reference, the Company looks
toward pay levels offered by leading-performance companies in the relevant
markets for executive talent. The Company periodically assesses an executive's
competitive level of compensation based on information drawn from a variety of
sources, including proxy statements, compensation surveys and external
compensation consultants. The Company's review of competitive compensation
levels incorporates a case-by-case approach that considers each position's
relative content, accountabilities and scope of responsibility. The Company also
takes into account its businesses, current size and expected growth, expected
contributions from specific executives and other similar factors. For senior
executives, this review includes an examination of pay data for comparable
positions within the information industries, as well as data for other
diversified holding companies and pay data for individuals with backgrounds
comparable to such officers.
While the expected value of an executive's compensation package is set at a
highly competitive level, each executive officer's pay package places a
significant portion of pay at risk, and the actual value of the package will
exceed or fall below this level depending on actual Company results. The Company
is committed to the pay-for-performance philosophy and is implementing an
Executive Compensation Program which ensures that stockholders receive
performance-for-pay.
ENSURING INCENTIVE COMPENSATION VARIES WITH PERFORMANCE. The Executive
Compensation Program is designed to ensure that incentive compensation varies
with the performance of the Company and its business units. Awards paid under
the EIP and the grants under the Plan will be directly tied to the short-and
long-term financial performance (especially EPS and EBITDA) of the Company and
its business units, as well as the performance of the Company's stock price.
9
<PAGE>
The Company's various incentive plans each serve different purposes and, as
such, employ different measures of performance and cover different periods of
time. Accordingly, an executive officer's total compensation will not typically
vary based on any single measure of Company or business unit performance over a
particular period of time. However, in combination, these plans provide a
powerful incentive-- focusing management attention on those measures important
to stockholders (such as growth, EPS and EBITDA), holding participants
accountable for poor results and rewarding them for superior accomplishments.
The Company also believes that effectively rewarding performance helps drive
managers to contribute in ways that enhance the financial and stock performance
of the Company and its various business units. Although the Executive
Compensation Program provides compensation that varies with financial and stock
price performance, an executive's incentive awards may also be influenced by
qualitative assessment of Company, business unit and individual performance, as
appropriate. For all executive officers, these assessments are made by the
Compensation Committee.
OVERVIEW OF THE EXECUTIVE COMPENSATION PROGRAM. The Executive Compensation
Program is comprised of three principal elements: the base salary program,
annual incentives under the EIP and grants of stock and option awards under the
Plan. Each of these is designed and administered with the explicit purpose of
furthering the stockholders' interests by facilitating the employment of
highly-talented executives and motivating them to achieve exceptional levels of
performance. An overview of each of these elements and of how each is intended
to support stockholder interests is provided below.
BASE SALARY COMPENSATION. The Company's base salary program is intended
to provide base salary levels that are competitive in the external market
for executive talent, reflect an individual's on-going performance, and are
periodically increased based on the executive's performance, the Company's
overall financial performance and expected salary increases in the market
for executive talent.
ANNUAL INCENTIVE COMPENSATION. The EIP for executive officers and key
employees of the Company's principal business units provides competitive
annual pay opportunities linked to the Company's and/or business unit's
annual financial performance. The EIP sets annual incentive target awards at
levels that are competitive in the context of the Company's total Executive
Compensation Program, and the appropriate mix of variable and fixed
compensation. Financial performance is assessed annually against pre-set
financial and strategic objectives.
LONG-TERM INCENTIVE COMPENSATION. The Company provides the executives
of the Company's principal business units with stock-based incentives
intended to provide competitive long-term incentive opportunities, enable
participants to build significant wealth when meaningful stockholder wealth
has been created, and directly link a significant portion of total pay to
the Company's long-term stock performance. Although the Plan is generally
designed to provide periodic grants of options on the Common Stock, it also
provides for the use of restricted stock awards.
OTHER EXECUTIVE COMPENSATION. In addition, the Company provides executives
with benefits and perquisites such as a 401(k) plan, health and life insurance
benefits and tax and financial planning advice. Overall, the Compensation
Committee believes the provided levels of benefits and perquisites are necessary
and, in combination with the previously mentioned compensation elements,
facilitate the Company's ability to secure the most appropriate executive
talents.
CEO COMPENSATION. During TP95, the Compensation Committee approved the
Company's entering into an Employment Agreement with Mr. R. Theodore Ammon, the
Company's Chief Executive Officer. See "Employment and Severance Agreements"
below.
The Committee took no action during Fiscal 1995 or TP95 to establish a
policy with respect to the payment of compensation to the Company's executive
officers of amounts that qualify for tax deductibility under the $1 million
limit on deductible compensation under The Omnibus Budget Reconciliation Act of
10
<PAGE>
1993 (the "Tax Act"). The Company is currently engaged in a comprehensive review
of its Executive Compensation Program, and the Committee believes it would be
better able to determine the appropriateness of a policy regarding the Tax Act
if the matter were considered in the context of establishing executive
compensation for the Company's first full year of operations, after TP95.
SUMMARY. The Compensation Committee believes the Executive Compensation
Program will ensure the Company's ability to retain, motivate and attract the
executive resources required to maximize long-term stockholder returns. The
Company's competitive pay philosophy facilitates the employment of talented
executives. The emphasis on variable pay and the direct link to both financial
and stock performance ties this competitive pay to critical measures of Company
performance. In combination, all these elements act in the best interests of the
Company's stockholders and are worthy of your support.
The Compensation Committee
Sanford G. Scheller, Chairman
Peter G. Diamandis
Leon D. Black
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for TP95 and for the
fiscal years ended June 30, 1993, June 30, 1994 and June 30, 1995, to R.
Theodore Ammon, the Chief Executive Officer of Big Flower, Donald E. Roland, the
Chief Executive Officer of Treasure Chest, and each of the four other most
highly paid executive officers of Treasure Chest who were serving as executive
officers as of the end of TP95 (the "Named Executive Officers"). With the March
1996 acquisition of Webcraft Technologies, Inc. and the recent hiring of Messrs.
Reilly and Angelson as executive officers of Big Flower, the executive officers
of Big Flower are Messrs. Ammon, Reilly and Angelson.
11
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
-------------
COMPENSATION
-------------
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
----------------------------------------- UNDERLYING ALL OTHER
FISCAL OTHER ANNUAL OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR BONUS ($)(1) COMPENSATION ($) SALARY($) (#) ($)(2)
- - --------------------------------------- ----------- ------------ ---------------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
R. Theodore Ammon...................... TP95 344,750 -- -- 300,000 --
Chief Executive Officer of Big Flower 1995 643,750 392,600 -- -- 2,310
and Chairman of the Board of Treasure 1994 529,615 447,200 -- -- --
Chest 1993 -- -- -- -- --
Donald E. Roland....................... TP95 224,267 -- 112,315(3) -- 1,713
Chief Executive Officer and President 1995 321,513 163,080 -- -- 943
of Treasure Chest 1994 289,380 185,760 -- 26,001 876
1993 247,710 92,400 -- -- 5,566
Herbert W. Moloney III................. TP95 113,667 -- -- -- 1,815
Senior Vice President, Marketing and 1995 177,551 111,740 8,661(4) -- 1,723
Sales of Treasure Chest 1994 -- -- -- -- --
1993 -- -- -- -- --
David E. Glick......................... TP95 112,500 -- -- -- --
Senior Vice President and General 1995 211,769 107,670 318,461(5) -- 3,346
Manager of Treasure Chest 1994 191,734 127,280 -- 12,441 1,771
1993 164,780 47,145 -- -- 5,464
Wayne S. Lynn.......................... TP95 112,500 -- -- -- 3,079
Senior Vice President and General 1995 204,263 97,310 24,548(6) 7,775 --
Manager of Treasure Chest 1994 54,977 31,820 21,385(7) -- --
1993 -- -- -- -- --
Thomas R. Zimmer....................... TP95 112,500 -- -- -- 727
Senior Vice President and General 1995 198,333 115,070 -- 2,488 2,971
Manager of Treasure Chest 1994 151,140 80,550 -- 8,460 2,530
1993 133,157 44,640 -- -- 2,302
</TABLE>
- - ------------------------
(1) Annual bonuses under EIP are scheduled to be determined and paid with
respect to the plan year ending June 30, 1996 in October 1996.
(2) Amounts shown for TP95 reflect 401(k) matching contributions made by
Treasure Chest to the officers' individual accounts under the Treasure Chest
Advertising Company, Inc. Savings Plus Plan.
(3) $108,315 in relocation cost reimbursements (including tax gross up) and
$4,000 in auto allowance.
(4) $8,661 in auto allowance.
(5) $308,741 in relocation cost reimbursements (including tax gross up) and
$9,720 in auto allowance.
(6) $14,828 in relocation cost reimbursements (including tax gross up) and
$9,720 in auto allowance.
(7) $18,955 in relocation cost reimbursements (including tax gross up) and
$2,430 in auto allowance.
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<PAGE>
The following table sets forth option grants to purchase Common Stock made
to the Named Executive Officers during Fiscal 1995 and TP95 under the Plan. The
Company did not grant any stock appreciation rights during Fiscal 1995 or during
TP95.
OPTION/SAR GRANTS IN FISCAL 1995 AND TP95
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------- ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL 1995/TP95 ($/SHARE) DATE 5%($) 10%($)
- - -------------------------------- ------------- ------------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
R. Theodore Ammon (1)........... 300,000 100% 16.00 11/21/05 3,018,694 7,649,963
Donald E. Roland................ 0 0 -- -- -- --
Herbert W. Moloney III.......... 0 0 -- -- -- --
David E. Glick.................. 0 0 -- -- -- --
Wayne S. Lynn (3)............... 7,775 15.2 7.46 1/10/05 36,476 92,437
Thomas R. Zimmer (3)............ 2,488 4.9 7.46 1/10/05 11,673 29,580
</TABLE>
- - ------------------------
(1) Mr. Ammon's options were granted on November 21, 1995 (during TP95) and vest
at the rate of 33 1/3% on each anniversary of the date of grant. The
exercise price of $16.00 was equal to the price at which shares of Common
Stock were offered to the public in the Company's initial public offering.
(2) The potential gains shown are net of the exercise price of the options and
do not include the effect of any taxes associated with exercise. The amounts
are for the assumed rates of appreciation only, do not constitute
projections of future stock price performance, and may not necessarily be
realized. Actual gains, if any, upon exercise of the options will depend on
the future performance of the Common Stock, continued employment of the
optionee with the Company and other factors.
(3) The options granted to Messrs. Lynn and Zimmer were granted on January 10,
1995 (during Fiscal 1995) and vest at the rate of 20% on each anniversary of
the date of grant.
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<PAGE>
The following table sets forth the number and value of options to purchase
Common Stock held by the Named Executive Officers as of the end of TP95.
AGGREGATED OPTION/SAR EXERCISES IN TP95
AND TRANSITION PERIOD-END VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS/SARS
OPTIONS/SARS AT END OF TP95
AT END OF TP95 (#) ($)
SHARES ------------------ -----------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE (#) REALIZED ($) UNEXERCISABLE (1) UNEXERCISABLE (2)
----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
R. Theodore Ammon.............................. -- -- 0/300,000 0/0
Donald E. Roland (2)........................... -- -- 20,801/31,202 255,436/383,161
Herbert W. Moloney III......................... -- -- 3,110/12,440 36,605/146,419
David E. Glick (2)............................. -- -- 9,953/14,929 122,223/183,328
Wayne S. Lynn.................................. -- -- 3,110/12,440 36,605/146,419
Thomas R. Zimmer (2)........................... -- -- 7,763/14,133 94,822/171,523
</TABLE>
- - ------------------------
(1) Except with respect to Mr. Ammon, shares of Common Stock purchasable upon
the exercise of options listed as "exercisable" are subject to certain
restrictions on transfer until November 1, 1996.
(2) Value of all options for Messrs. Roland and Glick and 16,920 options for Mr.
Zimmer does not include $.89 per option share paid by such individuals to
purchase such options.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The following table sets forth annual amounts payable upon retirement under
Treasure Chest's supplemental executive retirement plan (the "SERP").
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REMUNERATION 5 10 15 20 25 30
- - ------------- --------- --------- --------- --------- --------- ---------
1$50,000..... $ 7,500 $ 15,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000
175,000..... 8,750 17,500 26,250 35,000 43,750 52,500
200,000..... 10,000 20,000 30,000 40,000 50,000 60,000
225,000..... 11,250 22,500 33,750 45,000 56,250 67,500
250,000..... 12,500 25,000 37,500 50,000 62,500 75,000
275,000..... 13,750 27,500 41,250 55,000 68,750 82,500
300,000..... 15,000 30,000 45,000 60,000 75,000 90,000
500,000..... 25,000 50,000 75,000 100,000 125,000 150,000
600,000..... 30,000 60,000 90,000 120,000 150,000 180,000
700,000..... 35,000 70,000 105,000 140,000 175,000 210,000
800,000..... 40,000 80,000 120,000 160,000 700,000 240,000
900,000..... 45,000 90,000 135,000 180,000 225,000 270,000
</TABLE>
The compensation covered by the SERP includes the executive's entire annual
base salary. Messrs. Ammon, Roland, Moloney, Glick, Lynn and Zimmer currently
have 2, 12, 1, 12, 11 and 26 years of service, respectively. Benefits under the
SERP are computed by multiplying the participant's average salary for the last
five years prior to retirement by a percentage equal to one percent for each
year of service up to a
14
<PAGE>
maximum of 30 years. Benefits under the SERP are not subject to a deduction for
Social Security or other offset amounts.
EMPLOYMENT AND SEVERANCE AGREEMENTS
AMMON EMPLOYMENT AGREEMENT. The Company and Treasure Chest entered into an
employment agreement (the "Ammon Agreement") with Mr. Ammon, effective November
20, 1995, pursuant to which Mr. Ammon serves as Chairman and Chief Executive
Officer of the Company, Chairman of Treasure Chest and a Director of the
Company. The initial term of the Ammon Agreement is three years, subject to
automatic one-year extensions commencing on the second anniversary of the Ammon
Agreement, unless either the Company or Mr. Ammon provides specified notice to
the contrary. Mr. Ammon is required to devote to the Company the time necessary
for the effective conduct of his duties under the Ammon Agreement and is
permitted to engage in outside business interests that do not conflict with such
duties or otherwise compete with the Company. Mr. Ammon is entitled to receive
an initial base salary equal to $750,000 per year; an annual bonus targeted at
not less than 50% of base salary (assuming bonus targets under the EIP are met);
an annual payment of $108,000 with respect to life insurance premiums; and
certain fringe benefits, including participation in the SERP. Mr. Ammon has been
granted an option to purchase 300,000 shares of Common Stock (a) with a ten-year
term, (b) at an exercise price equal to $16.00 per share and (c) vesting ratably
over a three-year period. Mr. Ammon is also entitled to receive a supplemental
retirement benefit, subject to certain vesting and benefit accrual requirements
and to offset by amounts payable under the SERP, of up to 50% of his final
average compensation (including salary and EIP bonus) commencing at age 60 upon
termination of his employment other than for "cause" (as defined in the Ammon
Agreement). Mr. Ammon will have the right to terminate the Ammon Agreement in
the event of the material breach thereof by the Company or for other "good
reason" (as defined in the Ammon Agreement). In such event, or if the Company
terminates Mr. Ammon's employment without cause, Mr. Ammon will generally be
entitled to receive the salary and bonus otherwise payable to him over the
remaining term of the Ammon Agreement, or for a period of six months, if
greater, all outstanding stock incentive awards would immediately vest, Mr.
Ammon would receive additional service credit for purposes of the supplemental
retirement benefit, and the life insurance and certain fringe benefits would
continue during the severance period. Upon the termination of his employment
following a "change in control" of the Company (as defined in the Ammon
Agreement), Mr. Ammon would (i) be entitled to receive a lump sum amount equal
to three times his base salary and bonus, (ii) become vested in any outstanding
restricted stock awards, (iii) have the right to receive a cash payment equal to
the spread on all outstanding stock options, (iv) receive a lump sum payment
with respect to foregone fringe benefits, (v) receive additional service credit
for purposes of the supplemental retirement benefit and (vi) be entitled to a
payment sufficient to offset the effects of any excise tax imposed under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code").
REILLY EMPLOYMENT AGREEMENT. The Company and Treasure Chest entered into an
employment agreement with Mr. Reilly, effective March 29, 1996 (the "Reilly
Agreement"), pursuant to which Mr. Reilly will serve as President and Chief
Operating Officer of the Company and as Vice Chairman of the Board of Directors
of Treasure Chest. The initial term of the Reilly Agreement is three years,
subject to automatic one-year extensions commencing on the second anniversary of
the Reilly Agreement, unless either the Company or Mr. Reilly provides specified
notice to the contrary. Mr. Reilly is required to devote to the Company all of
his working time, attention and efforts. Mr. Reilly is entitled to receive an
initial base salary of $500,000 per year; an annual bonus targeted at not less
than 50% of base salary (assuming bonus targets under the EIP are met), with a
guaranteed annual bonus of $250,000 payable with respect to the fiscal year of
the Company ending December 31, 1996; a signing bonus of $37,000 to compensate
Mr. Reilly with respect to the value of stock options granted by his previous
employer and forfeited in connection with his termination of employment
therewith; and certain fringe benefits, including participation in the SERP. Mr.
Reilly has been granted an option to purchase 200,000 shares of Common Stock (a)
with a ten-year term, (b) at an exercise price of $12.75 per share, and (c)
vesting in installments of 20%
15
<PAGE>
each on December 31, 1996, 1997, 1998, and 1999 and the remaining 20% on the
fourth anniversary of the Reilly Agreement, provided that all such options will
immediately vest upon the occurrence of a "change in control" of the Company (as
defined in the Reilly Agreement). Mr. Reilly will have the right to terminate
the Reilly Agreement in the event of the material breach thereof by the Company
or for other "good reason" (as defined in the Reilly Agreement). In such event,
or if the Company terminates Mr. Reilly's employment without "cause" (as defined
in the Reilly Agreement), (i) Mr. Reilly will be entitled to receive a lump sum
amount equal to the sum of (A) two times the sum of (x) his then base salary
plus (y) the highest annual performance bonus Mr. Reilly received in the three
years preceding such termination of employment, plus (B) the present value of
all fringe benefits payable under the remaining term of the Reilly Agreement,
(ii) all outstanding equity incentive awards (including stock options) will
immediately vest and remain exercisable for a period of one year following the
date of such termination (or, if earlier, until the end of the option term), and
(iii) Mr. Reilly would be entitled to receive a payment sufficient to offset the
effects of any excise tax imposed under Section 4999 of the Code. During the
term of the Reilly Agreement (and, in the event Mr. Reilly terminates his
employment other than for good reason or the Company terminates Mr. Reilly's
employment for cause, for a period of one year beyond the expiration of the
employment term), Mr. Reilly will be subject to certain non-competition and
non-solicitation requirements.
ANGELSON EMPLOYMENT AGREEMENT. The Company and Treasure Chest entered into
an employment agreement with Mr. Angelson, effective March 21, 1996 (the
"Angelson Agreement"), pursuant to which Mr. Angelson will serve as Executive
Vice President, General Counsel and Secretary of the Board of Directors of the
Company and as General Counsel and a member of the Board of Directors of
Treasure Chest. The initial term of the Angelson Agreement is three years,
subject to automatic one-year extensions commencing on the second anniversary of
the Angelson Agreement, unless either the Company or Mr. Angelson provides
specified notice to the contrary. Mr. Angelson is required to devote to the
Company and its affiliates all of his working time, attention and efforts. In
consideration for his services Mr. Angelson is entitled to receive an initial
base salary of $450,000 per year; an annual bonus targeted at not less than 50%
of base salary (assuming bonus targets under the EIP are met), with a guaranteed
annual bonus of $225,000 payable with respect to the fiscal year of the Company
ending December 31, 1996; annual premium payments during the term of employment
with respect to a $2 million split-dollar life insurance policy or policies to
be acquired and owned by Mr. Angelson; and certain fringe benefits, including
participation in the SERP and payment of certain expenses in connection with Mr.
Angelson's relocation from London to New York. Mr. Angelson has been granted an
option to purchase 150,000 shares of Common Stock (a) with a ten-year term, (b)
at an exercise price of $12.625 per share, and (c) vesting in installments of
10% on December 31, 1996, 15% on the first anniversary of the Angelson Agreement
and 25% on each of the next three anniversaries of the Angelson Agreement,
provided, that all such options will immediately vest upon the occurrence of a
"change in control" of the Company (as defined in the Angelson Agreement). Mr.
Angelson will have the right to terminate the Angelson Agreement in the event of
the material breach thereof by the Company or for other "good reason" (as
defined in the Angelson Agreement). In such event, or if the Company terminates
Mr. Angelson's employment without "cause" (as defined in the Angelson
Agreement), (i) Mr. Angelson will be entitled to receive a lump sum amount equal
to the sum of (A) two times the sum of (x) his then base salary plus (y) the
highest annual performance bonus Mr. Angelson received in the three years
preceding such termination of employment, plus (B) the present value of all
insurance premium payments and other fringe benefits payable under the remaining
term of the Angelson Agreement, (ii) all outstanding equity incentive awards
(including stock options) will immediately vest and remain exercisable for a
period of one year following the date of such termination (or, if earlier, until
the end of the option term), and (iii) Mr. Angelson would be entitled to receive
a payment sufficient to offset the effects of any excise tax imposed under
Section 4999 of the Code. During the term of the Angelson Agreement (and, in the
event Mr. Angelson terminates his employment other than for good reason or the
Company terminates
16
<PAGE>
Mr. Angelson's employment for cause, for a period of one year beyond the
expiration of the employment term), Mr. Angelson will be subject to certain
non-competition and non-solicitation requirements.
SEVERANCE AGREEMENTS. The Company and Treasure Chest entered into severance
agreements with each of Messrs. Roland, Glick, Kaplan, Lynn, Zimmer and Moloney
(the "Executive Severance Agreements"). In July 1996, the Company and Treasure
Chest also executed an Executive Severance Agreement with Mr. William G.
Schaefer, Senior Vice President--Legal Affairs of Treasure Chest, in connection
with Mr. Schaefer's employment with Treasure Chest. The Executive Severance
Agreements provide that if a covered executive's employment is terminated by the
Company without "cause" or by the executive for "good reason" within one year
following a "change in control" of Treasure Chest (each as defined in the
Executive Severance Agreements), the executive would receive severance in an
amount equal to three times base salary plus bonus. In addition, (i) all
outstanding stock incentive awards would immediately vest and become
exercisable, (ii) the executive would receive a pro rata bonus payout under the
EIP, and (iii) the executive would be entitled to two years of continued welfare
benefits. The total amount of benefits payable to each executive would be
limited, if necessary, to provide that the Company would suffer no loss of a
deduction pursuant to Section 280G of the Code.
In addition, Mr. Roland is currently covered under Treasure Chest's
Severance Benefit Plan (the "Severance Benefit Plan"), which provides that if
his employment is terminated (other than by reason of death, "disability,"
"retirement," termination for "cause" or termination other than for "good
reason" (each as defined in the Severance Benefit Plan) within three years
following a "change in control" (as defined in the Severance Benefit Plan), he
would be entitled to receive monthly severance benefits for a period of four
years. The total amount of such severance benefits would be equal to two and
one-half times Mr. Roland's base salary at the time of such termination which,
at his current base salary, would be approximately $1,093,000. The acquisition
of Treasure Chest by Big Flower in 1993 constituted a change in control for
purposes of the Severance Benefit Plan. Mr. Roland's Executive Severance
Agreement is not currently in effect, but will become effective and supersede
his entitlement to benefits under the Severance Benefit Plan in the event of a
subsequent change in control of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to November 20, 1995, the Company's Compensation Committee during TP95
consisted of Sanford G. Scheller, R. Theodore Ammon and Leon D. Black, and
following such date consisted of Mr. Scheller, Mr. Black and Mr. Peter G.
Diamandis. Mr. Scheller serves as Chairman of the Compensation Committee. There
were no interlocks involving members of the Compensation Committee.
17
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
BIG FLOWER PRESS HOLDINGS, INC.
COMPARISON OF CUMULATIVE TOTAL RETURN:
BIG FLOWER VS. S&P 500 & S&P PUBLISHING (NEWSPAPER)
TOTAL RETURN TO STOCKHOLDERS
REINVESTED DIVIDENDS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BIG FLOWER PRESS HLDGS INC S&P 500 INDEX PUBLISHING (NEWSPAPER) - 500
<S> <C> <C> <C>
22-Nov-95 100.00 100.00 100.00
Dec-95 100.81 103.11 101.00
</TABLE>
This total stockholders return model assumes reinvested dividends.
CERTAIN TRANSACTIONS
On January 10, 1995 certain officers, members of management and key
employees of Treasure Chest purchased an aggregate of 84,842 shares of Common
Stock (which shares are subject to certain "call" provisions) and were granted
options to purchase 49,208 shares of Common Stock pursuant to the 1993 Stock
Plan. Treasure Chest loaned an aggregate of $212,000 to such investors for such
purchases, including $66,000 to Herbert W. Moloney III, Senior Vice President,
Marketing and Sales of Treasure Chest. The loans to the above management
investors are evidenced by promissory notes bearing interest at the rate of 8%
per annum. The promissory notes are secured by the shares of Common Stock
purchased by the investors, and the notes become due upon the earlier to occur
of the date the "call" provision with respect to the shares is exercised and
seven years from the date of the notes. Under the Company's credit agreement
with its banks, the Company is generally permitted to make payments of up to
$4,000,000 per year to purchase Common Stock pursuant to the "call" provisions.
In connection with the resignation of Robert Turner, the former Vice
President, Human Resources of Treasure Chest, in March 1995, Treasure Chest
accelerated the payment of $150,000 in severance benefits payable to him under
the Severance Benefit Plan.
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PROPOSAL 2.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
INTRODUCTION
The Board of Directors has selected Deloitte & Touche LLP ("Deloitte") to be
the Company's independent certified public accountants for its fiscal year ended
December 31, 1996. Deloitte has acted as the Company's independent certified
public accountants since July, 1993.
Representatives of Deloitte will be present at the Meeting with the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
REQUIRED VOTE
Ratification of the appointment of the independent certified public
accountant requires the affirmative vote of a majority in voting power present
(in person or by proxy) and entitled to vote at the Meeting. In the event that
the Company's stockholders fail to ratify the appointment of Deloitte, the
selection of the Company's independent certified public accountants will be
submitted to the Company's Board of Directors for reconsideration.
OTHER MATTERS
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation of proxies by use of the mails, some of the officers, directors
and employees of the Company and its subsidiaries, none of whom will receive
additional compensation therefor, may solicit proxies in person or by telephone,
facsimile or other means. Solicitation will also be made by employees of
Georgeson & Company, which firm will be paid a fee of $6,000, plus expenses. As
is customary, the Company will, upon request, reimburse brokerage firms, banks,
trustees, nominees and other persons for their out-of-pocket expenses in
forwarding proxy materials to their principals.
STOCKHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
From time to time, stockholders present proposals which may be proper
subjects for inclusion in the proxy statement and for consideration at the
Company's Annual Meeting. To be considered, proposals must be submitted on a
timely basis. Proposals for the 1997 Annual Meeting must be received by the
Company no later than March 1, 1997, and must otherwise comply with Rule 14a-8
under the Exchange Act.
Big Flower's By-Laws currently impose certain additional procedural
requirements for submitting stockholder proposals to Annual Meetings of
Stockholders. Any such proposal must be specified in a written notice given by a
stockholder of record on the date of giving the notice specified below and on
the record date for such Meeting, in accordance with all of the following
requirements. Such notice must be delivered to, or mailed and received at, the
principal executive office of the Company addressed to the attention of the
Secretary, not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such notice of the
date of the Annual Meeting was mailed or such public disclosure of the date of
the Annual Meeting was made, whichever first occurs. Such notice must set forth
as to each matter such stockholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be brought before the meeting
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and the reasons for conducting such business at such meeting, (ii) the name and
record address of such stockholder, (iii) the class or series and number of
shares of capital stock of the Company which are owned beneficially or of record
by such stockholder, (iv) a description of all arrangements or understandings
between such stockholder and any other person or persons (including their names)
in connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (v) a representation
that such stockholder intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting. The Company may require a
proposed nominee for director to furnish such other information as may be
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee or which may be reasonably required to determine the eligibility
of such proposed nominee to serve as a director of the Company. At the request
of the Board of Directors, any individual nominated by the Board of Directors
for election as a director shall furnish to the Secretary of the Company that
information required to be set forth in a stockholder's notice of nomination
which pertains to a nominee. The Chairman of the meeting may, if the facts
warrant, determine that a nomination or stockholder proposal was not made in
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination or proposal shall be
disregarded. Any questions relating to stockholder proposals should be submitted
in writing to the Secretary of the Company, at 3 East 54th Street, New York, New
York 10022.
INFORMATION INCORPORATED BY REFERENCE
The Company hereby incorporates by reference into this Proxy Statement "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Company's Transition Report on Form 10-K for the Transition
Period from July 1, 1995 to December 31, 1995, a copy of which is being provided
to stockholders along with this Proxy Statement.
By Order of the Board of Directors
New York, New York
October 4, 1996
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