<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
(AMENDMENT NO. )
-------------------------------------------
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<CAPTION>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
[X] Definitive Proxy Statement the Commission Only
[ ] Definitive Additional Materials (as permitted by
[ ] Soliciting Material Pursuant to Rule Rule 14a-6(e)(2))
14a-11(c) or
Rule 14a-12
</TABLE>
-------------------
BIG FLOWER PRESS HOLDINGS, INC.
(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):
<TABLE>
<CAPTION>
<S> <C>
[x] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) 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:
</TABLE>
- --------------------------------------------------------------------------------
<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]
TUESDAY, JUNE 24, 1997
AT 9:00 A.M.
GOLDMAN, SACHS & CO.
85 BROAD STREET
NEW YORK, NEW YORK
<PAGE>
[LOGO]
BIG FLOWER PRESS HOLDINGS, INC.
3 EAST 54TH STREET
NEW YORK, NEW YORK 10022
(212) 521-1600
May 13, 1997
Dear Stockholder:
It is our pleasure to invite you to join us at the 1997 Annual Meeting of
Stockholders of Big Flower Press Holdings, Inc. which will be held at 9:00 a.m.,
on Tuesday, June 24, 1997, in the thirtieth floor auditorium of Goldman, Sachs &
Co., 85 Broad Street, 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 you will be able to attend in
person.
At the meeting, you will be asked to consider and vote on the election of
two (2) directors, certain amendments to the Big Flower Press Holdings, Inc.
Restated 1993 Stock Award and Incentive Plan 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 Annual Report on Form 10-K for the fiscal year ended December 31,
1996) also accompanies these proxy materials.
Sincerely,
<TABLE>
<S> <C>
[LOGO] [LOGO]
R. Theodore Ammon Edward T. Reilly
Chairman President and
Chief Executive Officer
</TABLE>
<PAGE>
[LOGO]
BIG FLOWER PRESS HOLDINGS, INC.
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, JUNE 24, 1997
------------------------
The 1997 Annual Meeting of Stockholders of Big Flower Press Holdings, Inc.
(the "Company") will be held on Tuesday, June 24, 1997, at 9:00 a.m., local
time, in the thirtieth floor auditorium of Goldman, Sachs & Co., 85 Broad
Street, New York, New York, for the following purposes:
(1) To elect two (2) directors to hold office as specified in the
accompanying Proxy Statement;
(2) To consider and act upon certain amendments to the Big Flower Press
Holdings, Inc. Restated 1993 Stock Award and Incentive Plan;
(3) To ratify the appointment of Deloitte & Touche LLP as the Company's
independent certified accountants; and
(4) To transact such other business as may properly come before the
meeting or any adjournment(s) or postponement(s) 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 May 9, 1997.
By order of the Board of Directors
Mark A. Angelson
EXECUTIVE VICE PRESIDENT AND
GENERAL COUNSEL AND
SECRETARY OF THE BOARD OF DIRECTORS
May 13, 1997
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 1997 Annual Meeting of Stockholders of the
Company (the "Meeting") to be held on Tuesday, June 24, 1997, at 9:00 a.m.,
local time, in the thirtieth floor auditorium of Goldman, Sachs & Co., 85 Broad
Street, New York, New York, and at any adjournment(s) or postponement(s) of the
Meeting. This Proxy Statement and a proxy are first being mailed to stockholders
on or about May 16, 1997. 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
directions specified on the proxy. 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 two nominees for
directors named below, FOR approval of certain amendments to the Big Flower
Press Holdings, Inc. Restated 1993 Stock Award and Incentive Plan ("Proposal
(2)"), and FOR the ratification and approval of Deloitte & Touche LLP as
independent accountants for the Company for the year ended December 31, 1997
("Proposal (3)"). 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 authority
to the persons named therein as proxies to vote in their discretion on other
business which 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 May 9, 1997 are entitled
to vote on all business of the Meeting. At the close of business on such day,
the Company had 16,760,470 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 approvals of Proposals (2) and (3). 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 2,217,144 shares of Common Stock
owned by R. Theodore Ammon, the Chairman of Big Flower, and the 4,470,922 shares
of Common Stock owned by Apollo Big Flower Partners, L.P., will be voted in
accordance with the recommendation of the Board of Directors FOR the election of
each of the nominees for director named below and FOR Proposals (2) and (3).
<PAGE>
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. Kimmitt, Minow 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 I and Class III directors of the Company, see "Directors and
Executive Officers" below. The Class I directors were reelected at the 1996
Annual Meeting of Stockholders to hold office until the date of the 1999 Annual
Meeting of Stockholders; the initial Class II directors were elected to hold
office until the date of the Meeting; 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 a successor is elected and qualified and subject to a
director's prior death, resignation, retirement, disqualification or removal.
It is recommended that the two (2) nominees herein named be elected as
directors of the Company, with each director to hold office until the Annual
Meeting of Stockholders for the year in which such director's three year term
expires, and until a successor is elected and qualified or until such director's
prior death, resignation, retirement, disqualification or removal. Both nominees
are presently serving as directors of the Company and were classified as Class
II directors at a meeting of the Board of Directors held on November 10, 1995.
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.
Certain information regarding each person nominated by the Board of
Directors, including such nominee's principal occupation during the past five
years and current directorships, is set forth below. Unless otherwise indicated,
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>
Peter G. Diamandis 65 Peter G. Diamandis has been a Director of Big Flower since September 1994. Mr.
Diamandis was Vice Chairman of Donnelley Marketing, Inc., a marketing company,
from 1991 through 1996. He has also 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 Executive Officer of Diamandis Communications
Inc., a publisher of special interest magazines. In 1982, Mr. Diamandis joined
CBS Magazines ("CBS") as Vice President, Group Publisher, Women's Day, and
served as President of CBS from September 1983 to 1987. Mr. Diamandis is a
former Chairman of Magazine Publishers of America. Mr. Diamandis serves on the
Board of Trustees of Bucknell University.
Joan D. Manley 64 Joan D. Manley has been a Director of Big Flower since September 1994. Ms.
Manley retired from Time Incorporated in 1984, where she 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 and Viking Office Products, Inc. and is
a Trustee of the Keystone Center.
</TABLE>
2
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Class I 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
Leon D. Black........................................ 45 Class III Director
Robert M. Kimmitt.................................... 49 Class I Director
Newton N. Minow...................................... 71 Class I Director
Edward T. Reilly..................................... 50 Class III Director; President and Chief Executive
Officer
Edward M. Yorke...................................... 38 Class I Director
Mark A. Angelson..................................... 46 Executive Vice President and General Counsel and
Secretary of the Board of Directors
Richard L. Ritchie................................... 50 Executive Vice President and Chief Financial Officer
</TABLE>
Set forth below is certain additional information concerning the persons
listed above.
R. THEODORE AMMON has been the Chairman of the Board of Big Flower since its
inception. From 1993 until April 1997, Mr. Ammon also served as the Chief
Executive Officer of the Company. 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, Jazz
@ Lincoln Center and the Institute of International Education, and on the Board
of Trustees of Bucknell University.
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 its
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. 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.
ROBERT M. KIMMITT has been a Director of Big Flower since November 1996.
Since May, 1997, he has been a partner in the law firm of Wilmer, Cutler &
Pickering. From 1993 to May, 1997, Mr. Kimmitt was a managing director of Lehman
Brothers and 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. He
is also on the Board of the German Marshall Fund.
NEWTON N. MINOW has been a Director Big Flower since September 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 former 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
3
<PAGE>
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 T. REILLY has been Chief Executive Officer of the Company since April
1997, President of Big Flower since March 1996 and a Director of the Company
since June 1996. He was also the Chief Operating Officer of Big Flower from
March 1996 until April 1997. He is also a director of Treasure Chest Advertising
Company, Inc. ("TC Advertising"), 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, a member
of the Board of Directors of the Ad Council and a member of the Board of
Directors of the National Association of Broadcasters. Mr. Reilly is also a
Trustee of Lynchburg College.
EDWARD M. YORKE has been a Director of Big Flower since 1993. He has been an
officer since 1992 of Apollo Advisors, L.P., which together with its 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 financial advisor to and 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.
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 TC Advertising, 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, and as a solicitor in England
and 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.
RICHARD L. RITCHIE has been Executive Vice President and Chief Financial
Officer of Big Flower since January 1997. Prior to joining Big Flower, Mr.
Ritchie served as Senior Vice President and Chief Financial Officer of
Harte-Hanks Communications, Inc. from 1986 to 1996.
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 a successor is elected and qualified or until such
officer's prior death, resignation, retirement, disqualification or removal.
BOARD MEETINGS AND CERTAIN COMMITTEES OF THE BOARD
Ten meetings of the full Board of Directors were held during the fiscal year
ended December 31, 1996 ("Fiscal 1996"). Each incumbent director other than Mr.
Leon D. Black and Mr. Edward M. Yorke 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 1996.
The Company has standing audit, compensation and nominating committees
(each, a "Standing Committee") 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 Standing Committees
until the next annual meeting of stockholders.
AUDIT COMMITTEE. The Audit Committee is composed of Ms. Joan D. Manley
(Chairman), Messrs. Robert M. Kimmitt and Newton N. Minow. This Committee is
charged with the responsibility of satisfying itself as to the propriety and
reasonableness of the financial statements of the Company. In
4
<PAGE>
discharging such responsibility, the Audit Committee relies, as appropriate, on
the reports of the Company's independent certified public accountants and on
discussions with the Company's financial management. In the course of performing
its functions, the Audit Committee also (i) reviews with the Company's
independent certified public accountants the scope of their audit, their report
and their recommendations, (ii) considers the possible effect on the
independence of such accountants in approving non-audit services requested of
them, and (iii) recommends the action to be taken with respect to the
appointment of the Company's independent certified public accountants. The Audit
Committee met once during Fiscal 1996.
COMPENSATION COMMITTEE. The Compensation Committee is composed of Messrs.
Peter G. Diamandis (Chairman), Leon D. Black, Robert M. Kimmitt and Newton N.
Minow. This Committee is charged with the responsibility of (i) reviewing,
advising and making recommendations with respect to employee salary and
compensation plans, benefits and standards applicable to the executive officers
of the Company, (ii) taking such actions with respect thereto that are not
specifically reserved to the Board of Directors, and (iii) administering the Big
Flower Press Holdings, Inc. Restated 1993 Stock Award and Incentive Plan (the
"Plan"), TC Advertising's Executive Incentive Plan ("EIP"), and such other
salary or compensation plans as this Committee is designated to administer. The
Compensation Committee met seven times during Fiscal 1996.
NOMINATING COMMITTEE. The Nominating Committee is composed of Mr. R.
Theodore Ammon (Chairman), Mr. Peter G. Diamandis and Ms. Joan D. Manley. This
Committee is charged with the responsibility of considering and recommending
individuals to be considered by the Board of Directors for membership on the
Board of Directors. The Nominating Committee was established in March 1997.
The Nominating Committee will also consider nominations for Board membership
by stockholders. The Nominating Committee has adopted the following rules with
respect to considering such nominations: (i) the nominating stockholder must
have owned shares of common stock of the Company for at least six months prior
to the date the nomination is submitted; (ii) the nomination must be received by
the Nominating Committee 120 days before the mailing date for proxy material
applicable to the annual meeting for which such nomination is proposed for
submission; and (iii) a detailed statement setting forth the qualifications, as
well as the written consent, of each party nominated must accompany each
nomination submitted.
COMPENSATION OF DIRECTORS
Directors of Big Flower who are also employees 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 (each, a "non-employee director") are paid an annual fee
of $25,000 for serving on the Board. In addition, effective as of June 24, 1997,
(a) the Chairman of each of the Corporation's Standing Committees who is a
non-employee director will be paid an annual retainer of $2,500 and (b) each
member of such Standing Committees (including any Chairman who is a non-employee
director) will be paid a fee of $1,000 for each Standing Committee meeting
attended by such member. In addition, if Proposal (2) is approved at the
Meeting, each non-employee director will be given the option of electing to
receive all or a portion of their annual retainer and meeting fees in the form
of (a) shares of common stock, par value $0.01 per share, of the Company
("Common Stock"), (b) options to purchase shares of Common Stock, or (c) cash.
See "Proposal 2. Approval of Matters With Respect to the Big Flower Press
Holdings, Inc. Restated 1993 Stock Award and Incentive Plan" below. Furthermore,
if Proposal (2) is approved at the Meeting, each member of the Board of
Directors of Big Flower who is not an employee of Big Flower, any of its
subsidiaries or any of its affiliates (a "non-management director") will receive
(i) an option to purchase 13,400 shares of Common Stock (the "Initial Election
Option") on the date that such director is first elected to the Board of
Directors and (ii) an option to purchase 1,000 shares of Common Stock (the
"Reelection Option") on each anniversary of the date that such director is
elected to the Board of Directors. Each Initial Election Option has a term of
ten years, and each Reelection Option has a term of five years. Each such option
vests immediately upon the date of grant.
5
<PAGE>
Each such option has an exercise price equal to the closing price (the "Closing
Price") of a share of Common Stock on the New York Stock Exchange on the date of
grant, which exercise price may be paid in cash, by check or in
previously-acquired unrestricted shares of Common Stock, valued at the Closing
Price on the date of such exercise. See "Proposal 2. Approval of Matters With
Respect to the Big Flower Press Holdings, Inc. Restated 1993 Stock Award and
Incentive Plan" below. For information relating to compensation of the Company's
directors who are also its employees, see "Employment Arrangements with
Executive Officers" below.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1996 except
for the following inadvertent omission: Messrs. Angelson and Reilly did not file
a report within 10 days of commencing their employment with the Company with
respect to the grant of their stock options described below. When this
inadvertent omission was discovered, each of such individuals promptly filed the
appropriate reports.
6
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth the beneficial ownership as of May 9, 1997 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 May 9, 1997 and all directors and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENTAGE OF
BENEFICIAL OWNER OF OWNERSHIP (A) CLASS
- -------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
R. Theodore Ammon (b)..................................................... 2,317,144 13.7%
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Apollo Big Flower Partners, L.P........................................... 4,470,922 26.7%
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
BT Investment Partners, Inc. (c).......................................... 1,738,692 9.4%
280 Park Avenue
New York, New York 10017
Goldman, Sachs & Co. (d).................................................. 2,056,882 12.3%
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
Peter G. Diamandis (f).................................................... 13,400 *
700 Canal Street
Stamford, Connecticut 06902
Robert M. Kimmitt (f)..................................................... 13,400 *
c/o Lehman Brothers
800 Connecticut Avenue, N.W.
Suite 1200
Washington, DC 20006
Joan D. Manley (f)........................................................ 13,400 *
P. O. Box 1353
Dillon, Colorado 80435
Newton N. Minow (g)....................................................... 23,400 *
c/o Sidley & Austin
One First National Plaza
Suite 4800
Chicago, Illinois 60603
</TABLE>
- ------------------------
* Less than one percent.
(TABLE CONTINUED ON NEXT PAGE)
7
<PAGE>
(TABLE CONTINUED FROM PRIOR PAGE)
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENTAGE OF
BENEFICIAL OWNER OF OWNERSHIP (A) CLASS
- -------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Edward T. Reilly (h)...................................................... 47,800 *
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Edward M. Yorke (e)....................................................... -- --
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Mark A. Angelson (i)...................................................... 42,700 *
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Richard L. Ritchie........................................................ -- --
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
All directors and current executive officers as a group
(10 persons) (e) (j).................................................... 2,471,244 14.5%
</TABLE>
- ------------------------
* Less than one percent.
(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 are presently exercisable and (z) 200 shares owned by
Mr. Ammon's minor children, as to which Mr. Ammon disclaims beneficial
ownership.
(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) Represents 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 40,000 shares of Common Stock which are
presently exercisable.
(i) Includes options to purchase 37,500 shares of Common Stock which are
presently exercisable.
(j) Includes options to purchase 231,100 shares of Common Stock which are
presently exercisable.
8
<PAGE>
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-employee 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"), operating income
plus depreciation, amortization and merger costs ("EBITDA") and after tax return
on invested capital. Certain of 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 executive officers of the Company are described
under "Employment Arrangements with Executive Officers" 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 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 advertising and marketing
services 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 demanding roles and combinations of
responsibilities undertaken by Big Flower's executive officers.
9
<PAGE>
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 advertising and marketing services 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 seeking to implement
an Executive Compensation Program which provides stockholders with
performance-for-pay.
ENSURING THAT 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, EBITDA and after tax return on
invested capital) of the Company and its business units, as well as the
performance of the Company's stock price.
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.
However, in combination, these plans provide a powerful incentive--focusing
management attention on those measures important to stockholders (such as
growth, EPS, EBITDA and after tax return on invested capital), holding
participants accountable for poor results and rewarding them for superior
accomplishments.
The Company also believes that effectively rewarding performance helps
motivate 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 adjusted based on the
executive's performance, the Company's overall financial
performance and expected
10
<PAGE>
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. Mr. Ammon was the Company's Chief Executive Officer from
its inception until April 1997, at which time Mr. Reilly became the Company's
Chief Executive Officer. For a discussion of the Company's Employment Agreements
with Messrs. Ammon and Reilly, see "Employment Arrangements with Executive
Officers" below.
The Committee took no action during Fiscal 1996 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 1993 (the
"Tax Act"). The Committee intends to judge the appropriateness of a policy
regarding the Tax Act on an individual basis.
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
Peter G. Diamandis, Chairman
Leon D. Black
Robert M. Kimmitt
Newton N. Minow
11
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid in respect of Fiscal
1996, the transition period from July 1, 1995 to December 31, 1995 ("TP95") and
for the fiscal years ended June 30, 1995 and June 30, 1994, to R. Theodore
Ammon, who served as the Chairman and Chief Executive Officer of the Company
during each of the foregoing periods, and to each of the other most highly paid
executive officers of the Company who were serving as executive officers as of
the end of Fiscal 1996 (the "Named Executive Officers"). With the hiring of Mr.
Ritchie as Executive Vice President and Chief Financial Officer of Big Flower
and the retirement of Mr. Scheller from his office as Vice Chairman of the
Company, the current executive officers of Big Flower are Messrs. Ammon, Reilly,
Angelson and Ritchie.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------- UNDERLYING
SALARY OTHER ANNUAL OPTIONS/SARS
NAME AND PRINCIPAL POSITION PERIOD ($)(1) BONUS ($) COMPENSATION ($) (#)(2)
- -------------------------------------------- --------- ------------ ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
R. Theodore Ammon........................... 1996 752,178 334,219 (3) --
Chairman and former Chief Executive TP95 344,750 114,844 (3) 300,000
Officer of Big Flower 1995 646,060 392,600 (3) --
1994 529,615 447,200 (3) --
Edward T. Reilly (4)........................ 1996 376,593 287,000(5) (3) 200,000
President and Chief Executive Officer of TP95 -- -- -- --
Big Flower 1995 -- -- -- --
1994 -- -- -- --
Mark A. Angelson (4)........................ 1996 315,000 225,000 343,982(6) 150,000
Executive Vice President and General TP95 -- -- -- --
Counsel and Secretary of the Board of Big 1995 -- -- -- --
Flower 1994 -- -- -- --
Sanford G. Scheller (7)..................... 1996 150,012 -- 16,000(8) --
Former Vice Chairman of Big Flower TP95 75,000 -- -- --
1995 437,310 241,600 130,649(9) --
1994 424,104 275,200 -- 100,646
</TABLE>
- ------------------------------
(1) Includes amounts contributed to 401(k) plan by the Company on behalf of the
Named Executive Officer at such Officer's election.
(2) All stock option grants were made pursuant to the Plan and are described
below under "Options Granted in Fiscal 1996" and "Employment Arrangements
with Executive Officers."
(3) Perquisites and other personal benefits did not exceed the lesser of $50,000
or 10% of the total annual salary and bonus reported under the headings of
"Salary" and "Bonus."
(4) The Named Executive Officer began his employment with Big Flower in Fiscal
1996; therefore, the Named Executive Officer did not receive any
compensation from Big Flower prior to that time.
(5) Includes a one-time signing bonus of $37,000 to reimburse Mr. Reilly for
certain costs incurred in connection with his leaving his previous position.
(6) Includes relocation costs of $335,862 (including tax gross up).
(7) Mr. Scheller retired as Vice Chairman and Director of Big Flower on November
7, 1996.
(8) Represents auto allowance.
(9) Represents $120,449 in relocation costs (including tax gross up) and $10,200
in auto allowance.
12
<PAGE>
OPTIONS GRANTED IN FISCAL 1996
The following table sets forth certain information with respect to options
to purchase shares of Common Stock granted to the Named Executive Officers
during Fiscal 1996. The Company did not grant any stock appreciation rights to
any of the Named Executive Officers and no stock options were exercised by any
Named Executive Officer during Fiscal 1996.
OPTIONS GRANTED IN FISCAL 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
NUMBER OF % OF TOTAL GRANT DATE VALUE
SECURITIES OPTIONS -------------------
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE ($)
NAME GRANTED(#) FISCAL 1996 ($/SHARE) DATE (1)
- ---------------------------------------- ----------- ----------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Edward T. Reilly (2).................... 200,000 39% $ 12.75 3/29/06 1,659,900
Mark A. Angelson(3)..................... 150,000 30% $ 12.625 3/21/06 1,216,940
</TABLE>
- ------------------------------
(1) These values were calculated using a Black-Scholes option pricing model. The
actual value, if any, that an executive may realize will depend on the
excess, if any, of the stock price over the exercise price on the date the
options are exercised, and no assurance exists that the value realized by an
executive will be at or near the value estimated by the Black-Scholes model.
The following assumptions were used in the calculations:
(a) assumed option term of 10 years;
(b) stock price volatility factor of 0.5236;
(c) 6.50% annual discount rate;
(d) no dividend payment; and
(e) 3% discount to Black-Scholes ratio for each year an option remains
unvested.
(2) Mr. Reilly's options were granted on March 29, 1996. 20% of these options
vested on December 31, 1996. 20% of these options will vest on each of
December 31, 1997, 1998 and 1999 with the remaining 20% vesting on the
fourth anniversary of the Reilly Agreement (as defined below). The exercise
price of $12.75 was equal to the Closing Price on the date of the grant as
reported on the New York Stock Exchange. The options will be exercisable at
any time between the date of vesting and the tenth anniversary of the date
of grant. See "Employment Arrangements with Executive Officers" below.
(3) Mr. Angelson's options were granted on March 21, 1996. 10% of these options
vested on December 31, 1996, and 15% of these options vested on March 21,
1997. 25% of these options will vest on each of the next three anniversaries
of the Angelson Agreement (as defined below). The exercise price of $12.625
was equal to the Closing Price on the date of grant as reported on the New
York Stock Exchange. The options will be exercisable at any time between the
date of vesting and the tenth anniversary of the date of grant. See
"Employment Arrangements with Executive Officers" below.
OPTION VALUES AT END OF FISCAL 1996
The following table sets forth certain information concerning the number and
the value at the end of Fiscal 1996 of unexercised in-the-money options to
purchase Common Stock granted to the Named Executive Officers as of the end of
Fiscal 1996. No stock appreciation rights have been granted to any of the Named
Executive Officers.
13
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL 1996 END AT FISCAL 1996 END
(#) ($)
SHARES --------------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
- ----------------------------------------- ----------------- --------------- --------------------- --------------------
<S> <C> <C> <C> <C>
R. Theodore Ammon........................ -0- -0- 100,000/200,000 275,000/550,000
Edward T. Reilly......................... -0- -0- 40,000/160,000 240,000/960,000
Mark A. Angelson......................... -0- -0- 15,000/135,000 91,875/826,875
Sanford G. Scheller (2).................. -0- -0- 100,646/0 1,563,032/0
</TABLE>
- ------------------------------
(1) Based on the Closing Price of $18.75 of Big Flower's Common Stock on
December 31, 1996, the last trading day of Fiscal 1996, less the exercise
price payable for such shares.
(2) Value of options does not include $.89 purchase price per optioned share
paid by Mr. Scheller to purchase such options.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The following table sets forth annual amounts payable upon retirement under
TC Advertising'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 80,000 120,000 160,000 200,000 240,000
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, Reilly and Angelson currently have 3, 1, and 1
year(s) of service, respectively. At the time of his retirement from the
Company, Mr. Scheller agreed to forego any claims for payment under the SERP in
exchange for certain other retirement benefits. See "Employment Arrangements
with Executive Officers" below. 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
maximum of 30 years. Benefits under the SERP are not subject to a deduction for
Social Security or other offset amounts.
14
<PAGE>
EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS
AMMON EMPLOYMENT AGREEMENT. The Company has entered into an employment
agreement with Mr. Ammon, effective November 20, 1995 (as amended to date, the
"Ammon Agreement"), pursuant to which Mr. Ammon currently serves as Chairman of
the Board and served as Chief Executive Officer of the Company until April 1997.
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 was 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. Pursuant to the Ammon Agreement, the Compensation Committee
conducted an annual review of Mr. Ammon's compensation and determined to
increase his annual bonus target to not less than 75% of his base salary
(assuming bonus targets under the EIP are met).
If Mr. Ammon's employment with the Company is terminated other than for
"cause" (as defined in the Ammon Agreement), Mr. Ammon will be entitled to
receive a supplemental retirement benefit, subject to certain vesting and
benefit accrual requirements and subject to being offset by amounts payable
under the SERP, of up to 50% of his final average compensation (including salary
and EIP bonus), which benefit would commence at age 60. 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, (i) Mr. Ammon will be entitled generally to receive the salary
and bonus otherwise payable to him over the greater of (x) the remaining term of
the Ammon Agreement and (y) a period of six months; (ii) all outstanding equity
incentive awards (including stock options) would immediately vest; (iii) Mr.
Ammon would receive additional service credit for purposes of the supplemental
retirement benefit; and (iv) 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 all
outstanding equity incentive 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"). During the term of the Ammon Agreement (and, in the event Mr.
Ammon terminates his employment other than for good reason or the Company
terminates Mr. Ammon's employment for cause, for a period of one year beyond the
expiration of the employment term), Mr. Ammon will be subject to certain non-
competition and non-solicitation requirements.
REILLY EMPLOYMENT AGREEMENT. The Company has entered into an employment
agreement with Mr. Reilly, effective March 29, 1996 (the "Reilly Agreement"),
pursuant to which Mr. Reilly currently serves as President and Chief Executive
Officer of the Company. 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
15
<PAGE>
$250,000 payable with respect to Fiscal 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 (the Closing
Price on the date of the grant as reported on the New York Stock Exchange), and
(c) vesting in installments of 20% 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).
Pursuant to the Reilly Agreement, the Compensation Committee conducted an annual
review of Mr. Reilly's compensation and determined to raise his base salary to
$550,000 per year, effective as of May 1, 1997, and to increase his annual bonus
target to not less than 75% of his base salary (assuming bonus targets under the
EIP are met). Mr. Reilly was also granted (x) an option to purchase 100,000
shares of Common Stock (1) with a ten year term, (2) at an exercise price of
$18.375 per share (the Closing Price on the date of the grant as reported on the
New York Stock Exchange), and (3) vesting 100% on April 29, 1998, the
anniversary date of such grant, and (y) an option to purchase 100,000 shares of
Common Stock (1) with a ten year term, (2) at an exercise price of $21.13 per
share (which represents a 15% premium over the Closing Price on the date of the
grant as reported on the New York Stock Exchange), and (3) vesting ratably over
the period of 3 years from the date of such grant.
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 has entered into an employment
agreement with Mr. Angelson, effective March 21, 1996 (the "Angelson
Agreement"), pursuant to which Mr. Angelson serves as Executive Vice President
and General Counsel and Secretary of the Board of Directors of the Company. 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. 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
Fiscal 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 (the Closing Price on the date of the grant
as reported on the New York Stock Exchange), and (c) vesting in installments of
10% on December 31, 1996, 15% on March 21, 1997 and 25% on each of the next
three anniversaries of the Angelson Agreement, provided, that all such options
will immediately vest
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<PAGE>
upon the occurrence of a "change in control" of the Company (as defined in the
Angelson Agreement). Pursuant to the Angelson Agreement, the Compensation
Committee conducted an annual review of Mr. Angelson's compensation and
determined to raise his base salary to $475,000 per year and to increase an
annual bonus target to not less than 75% of such base salary (assuming bonus
targets under EIP are met). Mr. Angelson was also granted an option to purchase
58,300 shares of Common Stock (1) with a ten year term, (2) at an exercise price
of $18.125 per share (the Closing Price on the date of the grant as reported on
the New York Stock Exchange), and (3) vesting 100% on March 25, 1998, the
anniversary date of such grant.
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 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.
RITCHIE EMPLOYMENT ARRANGEMENTS. The Company entered into a letter
agreement with Mr. Ritchie, on December 13, 1996 (the "Ritchie Agreement"),
pursuant to which Mr. Ritchie serves as Executive Vice President and Chief
Financial Officer of the Company. Mr. Ritchie is required to devote to the
Company all of his working time, attention and efforts. In the event that Mr.
Ritchie's employment should be terminated by the Company other than for "cause"
(as defined in the Executive Severance Agreement discussed below) prior to a
"change in control" of the Company (as defined in the Executive Severance
Agreement discussed below), Mr. Ritchie will be entitled to a payment equal to
one year's base salary. Mr. Ritchie is entitled to receive an initial base
salary of $400,000 per year; an annual bonus targeted at not less than 50% of
base salary (assuming bonus targets under the EIP are met); and certain fringe
benefits, including participation in the SERP and payment of certain expenses in
connection with his relocation from Texas to New York. On January 6, 1997, Mr.
Ritchie was granted an option to purchase 100,000 shares of Common Stock (a)
with a ten-year term, (b) at an exercise price of $18.00 per share (the Closing
Price on the date of the grant as reported on the New York Stock Exchange), and
(c) vesting in installments of 25% on January 6 of each of 1998, 1999, 2000 and
2001, provided that all such options will immediately vest upon the occurrence
of a "change in control" of the Company. Pursuant to the Ritchie Agreement, the
Compensation Committee conducted a review of Mr. Ritchie's compensation and
determined to increase his annual bonus target to not less than 75% of his base
salary (assuming bonus targets under the EIP are met).
In addition, the Company has entered into a severance agreement with Mr.
Ritchie, effective January 6, 1997 (the "Executive Severance Agreement"), which
provides that if Mr. Ritchie's employment is terminated by the Company other
than for "cause" or by Mr. Ritchie for "good reason" (as defined in the
Executive Severance Agreement) following a "change in control" of the Company,
Mr. Ritchie will receive a lump sum amount equal to two times the sum of (x) the
greater of his annual base salary in effect immediately prior to the termination
of employment and his annual base salary in effect immediately prior to the
"change in control" and (y) the greater of the target bonus for Mr. Ritchie
under the EIP in the year immediately preceding that in which the termination
occurs and the average such bonus for the three years
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<PAGE>
immediately preceding the "change in control." In addition, (i) all outstanding
stock incentive awards (including stock options) will immediately vest and
remain exercisable until at least 90 days following the "change in control," and
(ii) Mr. Ritchie would be entitled to two years of continued medical and other
insurance benefits. The total amount of benefits payable to Mr. Ritchie would be
limited to the extent necessary to preserve the Company's deduction pursuant to
Section 280G of the Code.
SCHELLER RETIREMENT AGREEMENT. In February 1996, Big Flower, TC Advertising
and Mr. Scheller entered into a retirement agreement (the "Retirement
Agreement") to memorialize the terms of Mr. Scheller's retirement from TC
Advertising. The Retirement Agreement provides that Mr. Scheller will receive
(i) payments equal to $12,501 per month for a period of 15 years commencing on
the date of termination of his employment with TC Advertising, which occurred in
June 1995, and (ii) certain perquisites, including certain medical insurance
payments. Furthermore, the Company agreed that all of Mr. Scheller's options
became fully exercisable and vested on March 1, 1996.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee during Fiscal 1996 prior to November 7,
1996 consisted of Messrs. Scheller (Chairman), Black and Diamandis, and
following such date consisted of Messrs. Diamandis (Chairman), Black, Kimmitt
and Minow. There were no interlocks involving members of the Compensation
Committee.
STOCK PRICE PERFORMANCE GRAPH
The following graphs compare the cumulative total stockholder returns
(assuming reinvestment of dividends) of the Company's common stock, the Standard
& Poor's 500 Index (the "S&P 500 Index"), the Standard & Poor's Advertising and
Marketing Services Index (the "Advertising and Marketing Index"), and the
Standard & Poor's Publishing (Newspaper) Index (the "Newspaper Index"). The
comparisons reflected in the graph are not intended to forecast the future
performance of the Company's common stock and may not be indicative of such
future performance. The graph assumes $100 invested on November 22, 1995 (the
date of the Company's initial public offering) in the Company's common stock and
each of the indices.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN*:
BIG FLOWER VS. S&P 500, ADVERTISING AND MARKETING INDEX
AND NEWSPAPER INDEX.
TOTAL RETURN TO STOCKHOLDERS
REINVESTED DIVIDENDS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SERVICE (ADVERTISING/MKTG) -
BIG FLOWER PRESS HLDGS INC S&P 500 INDEX 500 PUBLISHING (NEWSPAPER) - 500
<S> <C> <C> <C> <C>
22-Nov-95 100.00 100.00 100.00 100.00
Dec-95 100.81 103.11 113.46 101.00
Dec-96 121.95 126.78 129.61 128.41
</TABLE>
* Assumes that the value of the investment in Big Flower common stock and in
each index was $100 on November 22, 1995 and that all dividends were
reinvested.
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The Company selected the Advertising and Marketing Index for comparison for
1996 because such index more closely resembles the Company's lines of business
following the Company's acquisitions of six advertising and marketing-related
companies in 1996. In view of such acquisitions, the Company believes that it is
more appropriate to compare its total cumulative returns to the advertising and
marketing companies in the Advertising and Marketing Index than to the
publishing and newspaper companies in the Newspaper Index. As a result of the
addition of an index, the above graph compares the total cumulative returns of
the Company's common stock with both the Advertising and Marketing Index and the
Newspaper Index.
The total percentage return for the Big Flower common stock for Fiscal 1996
was approximately 20.97%. This compares with the total percentage return for
such period of 14.23% for the Advertising and Marketing Index; 22.96% for the
S&P 500 Index; and 27.14% for the Newspaper Index. These percentages assume that
all dividends were reinvested.
CERTAIN TRANSACTIONS
During Fiscal 1996, the Company paid approximately (x) $830,000 in fees to
BT Securities Corporation, an affiliate of BT Investment Partners, Inc.
("BTIP"), for advice and underwriting services in connection with certain of the
Company's debt and (y) $2,240,000 to Bankers Trust Company, an affiliate of
BTIP, in connection with its role as agent and lender under a credit facility
with TC Advertising.
PROPOSAL 2.
APPROVAL OF AMENDMENTS TO THE BIG FLOWER PRESS HOLDINGS, INC. RESTATED 1993
STOCK AWARD AND INCENTIVE PLAN
INTRODUCTION
In 1993, as part of the Company's program to provide senior management with
incentives linked to longer-term business unit and corporate performance, the
Board of Directors and stockholders of the Company approved the Plan. The Plan
is designed to provide senior corporate and business unit managers, key
employees, consultants and advisors to the Company with stock based incentives
which are intended to provide competitive long-term incentive opportunities and
tie long-term compensation to increases in the Company's stock price. To further
the purposes of the Plan, the Compensation Committee amended the Plan, subject
to approval of the Company's stockholders, to (a) increase the maximum number of
shares of Common Stock that are reserved and available for issuance under the
Plan from 3,484,114 to 5,484,114, (b) permit non-employee directors to
participate in the Plan, (c) authorize (i) Initial Election Options to purchase
13,400 shares of Common Stock to be granted to each non-management director on
the date that such director is first elected to the Board of Directors and (ii)
Reelection Options to purchase 1,000 shares of Common Stock to be granted to
each non-management director on each anniversary of the date that such director
is elected to the Board of Directors, (d) permit non-employee directors to elect
to receive any annual retainer and/or meeting fees that may become payable in
shares of Common Stock or options to purchase shares of Common Stock and, (e)
permit the exercise of options by non-employee directors and non-management
directors by delivery of previously acquired shares of Common Stock held by such
directors for at least six months (collectively, the "Amendments"). The Board of
Directors believes that the Amendments will provide the Compensation Committee
with increased flexibility in promoting the interests of the Company and
stockholders by (x) securing for the Company and its stockholders the benefits
of the additional incentive interest in the ownership of the Company's capital
stock by its directors and (y) assisting the Company to secure and retain the
services of such directors.
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REQUIRED VOTE
Approval of Proposal (2) requires the affirmative vote of holders of a
majority of the total shares of Common Stock outstanding and entitled to vote at
the Meeting. If Proposal (2) is approved, the Amendments will become effective.
If Proposal (2) is not approved, the Amendments will not become effective and
the Plan will continue in effect as previously adopted by the Board of Directors
and approved by the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENTS
TO THE PLAN.
SUMMARY OF PLAN PROVISIONS AND PROPOSED AMENDMENTS
THE FOLLOWING DESCRIPTION OF THE PLAN IS MERELY A SUMMARY OF CERTAIN
PROVISIONS THEREOF AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF THE PLAN
ATTACHED HERETO AS EXHIBIT A. SUCH EXHIBIT A IS A PART OF THIS PROXY STATEMENT
AND SHOULD BE READ IN CONNECTION WITH THE FOLLOWING SUMMARY. IN EXHIBIT A,
LANGUAGE IN BRACKETS [ ] CURRENTLY APPEARS IN THE PLAN BUT WILL BE DELETED IF
PROPOSAL (2) IS APPROVED AND LANGUAGE THAT IS UNDERLINED WILL BE ADDED TO THE
PLAN IF PROPOSAL (2) IS APPROVED.
PURPOSE. The purpose of the Plan is to promote the interests of the Company
and its stockholders by (i) securing for the Company and its stockholders the
benefits of the additional incentive inherent in the ownership of the capital
stock of the Company by selected officers, and key employees of, and key
consultants and advisors to, the Company and its subsidiaries, including the
individuals named in the Summary Compensation Table, who are important to the
success and growth of the business of the Company and its subsidiaries and (ii)
assisting the Company to secure and retain the services of such persons. The
Plan provides for granting to such persons (a) options to purchase shares of
Common Stock, (b) Stock Appreciation Rights or Limited Stock Appreciation Rights
(each as defined in the Plan), (c) Performance Shares (as defined in the Plan),
(d) Deferred Stock (as defined in the Plan), (e) Restricted Stock (as defined in
the Plan) and (f) any combination of the foregoing (collectively, "Equity
Interests"). Approximately 125 officers and key employees, no consultants or
advisors and, subject to stockholder approval of the Amendments, eight directors
are eligible to participate under the Plan.
ADMINISTRATION. The Plan is administered by the Compensation Committee.
Subject to the limitations and conditions of the Plan, the Compensation
Committee has authority to determine the amounts, times, forms and terms and
conditions of grants under the Plan. All decisions made by the Compensation
Committee pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and the participants in the Plan.
SHARES SUBJECT TO THE PLAN. The total number of shares of Common Stock
reserved and available for issuance under the Plan is currently 3,484,114. From
the Plan's inception in 1993 through May 9, 1997, various rights exercisable for
an aggregate of 3,349,441 shares of Common Stock have been granted under the
Plan, leaving only 134,673 shares available for future options or awards.
The number of shares of Common Stock remaining available for grants under
the Plan are insufficient, however, to adequately provide for the participation
of the number of employees and directors eligible to receive such grants,
especially in light of automatic grants of options to non-management directors
described below. Accordingly, the Compensation Committee adopted amendments to
the Plan (subject to stockholder approval) to increase the aggregate number of
shares of Common Stock available for issuance under the Plan by an additional
2,000,000 shares. Therefore, subject to stockholder approval of the Amendments,
the maximum number of shares of Common Stock reserved and available for issuance
under the Plan will be 5,484,114. The shares of Common Stock may be either
authorized but unissued shares or treasury shares, including such shares
re-acquired by the Company.
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<PAGE>
If an option expires or terminates for any reason during the term of the
Plan and prior to the exercise in full of such option or if other Equity
Interests are forfeited as provided in the grant of such Equity Interest, the
number of shares of Common Stock previously subject to but not delivered under
such option, or grant of such Equity Interest, shall be available for the grant
of options or other Equity Interests thereafter. In addition, if any shares of
Common Stock have been pledged as collateral for indebtedness incurred by a
participant in connection with the exercise of a stock option and such shares
are returned to the Company in satisfaction of such indebtedness, such shares
will again be available for issuance in connection with future awards under the
Plan.
CERTAIN PROVISIONS RELATING TO OPTIONS. For Federal income tax purposes,
options granted pursuant to the Plan may be either "incentive stock options" as
such term is defined in Section 422 of the Code, or "non-qualified stock
options." In the case of an incentive stock option, the price per share to be
paid by the optionee on the date such option is exercised may not be less than
the Fair Market Value (as defined in the Plan) on the date such option is
granted. The period after which options granted under the Plan may be exercised
shall be determined by the Compensation Committee with respect to each option
granted but may not exceed ten years from the date on which the option is
granted. The exercise price of such options is to be paid in cash or its
equivalent, except that the Compensation Committee may in its discretion allow
such payment to be made (in whole or in part) by surrender of unrestricted
shares of Common Stock already owned by the optionee, or, in the case of the
exercise of a non-qualified stock option, Restricted Stock or Performance
Shares, in each case at their Fair Market Value on the date of exercise.
AUTOMATIC GRANTS TO NON-MANAGEMENT DIRECTORS. Subject to stockholder
approval of the Amendments, the Plan has been amended to authorize each director
of the Company who is a non-management director to receive under the Plan on (i)
the date of his or her initial election or appointment to the Board of Directors
options to purchase 13,400 shares of Common Stock and (ii) the date of each
subsequent annual meeting of stockholders of the Company at which such director
is reelected, he or she receives options to purchase 1,000 shares of Common
Stock. Each Initial Election Option has a term of ten years, and each Reelection
Option has a term of five years, in each case subject to earlier termination
upon the optionholder's termination of service to the Company. Each such option
is exercisable immediately upon the date of grant. The price per share of Common
Stock to be paid by the holder of such an option is equal to the Closing Price
on the date the option is granted. The purchase price of the shares of Common
Stock as to which such an option is exercised may be paid in cash, by check and
by delivery of unrestricted shares of Common Stock held by the optionee for at
least six months, at the director's election.
ELECTIVE PURCHASE OF SHARES. Subject to stockholder approval of the
Amendments, the Plan has been amended to permit non-employee directors to elect
to receive in shares of Common Stock or options to purchase shares of Common
Stock all or any portion of the annual retainer fees and/or Board of Directors
or committee meeting attendance fees (the "Fees") that otherwise would be
payable to him or her in cash.
Any election (other than an initial election made within a specified period
following the approval of the Amendments or the time a non-employee director
first becomes a member of the Board) to receive shares of Common Stock or
options to purchase shares of Common Stock rather than cash must be made at
least six months in advance of payment and shall continue in effect until
revoked by an election made at least six months in advance. There shall be no
limit on the number of elections or revocations that may be made by a
non-employee director, except that no such election (other than an initial
election made within a specified period following the approval of the Amendments
or the time a non-employee director first becomes a member of the Board) or
revocation may take effect until at least six months after such election or
revocation shall have been delivered to the Secretary of the Company. Any shares
of Common Stock payable under such an election shall be issued on the same date
that the Fees would have been paid in cash. The number of shares of Common Stock
to be issued on account of an election to receive shares of Common Stock in
payment of Fees shall be based on the Closing Price on the date as of which the
Fees are payable. Cash will be paid in lieu of issuing any fractional share of
Common Stock. Any options to
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<PAGE>
purchase shares of Common Stock that are issuable under such an election shall
be issued on the same date that the Fees would have been paid in cash. The
number of shares of Common Stock for which such options would be exercisable
shall be determined by dividing the Fees that would be payable on such date by
the Closing Price on such date and multiplying the quotient by four. Cash will
be paid in lieu of issuing any option for fractional shares of Common Stock.
Such options would have an exercise price equal to the Closing Price on such
date, would vest immediately upon the date of grant and remain exercisable for
five years from the date of grant. Such exercise price may be paid in the same
manner as described above for automatic grants to non-management directors.
CERTAIN PROVISIONS APPLICABLE TO RESTRICTED STOCK, DEFERRED STOCK AND
PERFORMANCE SHARES. The Compensation Committee may grant Restricted Stock,
Deferred Stock and Performance Shares to certain eligible persons at any time.
In granting such Equity Interests, the Compensation Committee shall determine in
its sole discretion the period or periods during which the restrictions on
transferability applicable to such Equity Interests will be in force (the
"Restricted Period"). During the Restricted Period applicable to each grant of
Equity Interests, such Equity Interests may not be sold, assigned, transferred
or otherwise disposed of, or mortgaged, pledged or otherwise encumbered. With
respect to Equity Interests, the Compensation Committee shall determine in its
sole discretion the restrictions on vesting which will apply to the Equity
Interests for the Restricted Period.
STOCKHOLDER RIGHTS. Except for the restrictions on transferability, a
grantee of Restricted Stock or Performance Shares will have the rights of a
holder of the shares of Common Stock, including the right to receive dividends
paid on such shares and the right to vote such shares at meetings of
stockholders of the Company. However, (i) no optionee will have any of the
rights of a stockholder with respect to any shares of Common Stock unless and
until he or she has exercised his or her option with respect to such shares of
Common Stock and had paid the full exercise price therefor and (ii) participants
will generally not have the rights of a stockholder with respect to stock
subject to Deferred Stock award during the Restricted Period; PROVIDED, HOWEVER,
that dividends declared during the Restricted Period with respect to the number
of shares covered by a Deferred Stock award will be paid to the participant.
AMENDMENT AND TERMINATION. The Board of Directors may amend, alter or
discontinue the Plan, but no amendment, alteration or discontinuance shall be
made that would impair the rights of a participant under any award theretofore
granted without such participant's consent, or that without the approval of the
stockholders would (a) except for certain exceptions relating to anti-dilution
adjustments, increase the total number of shares of Common Stock reserved under
the Plan, (b) charge the class of persons eligible to participate in the Plan or
(c) extend the maximum term during which options may be exercised under the
Plan.
EFFECTIVE DATE AND DURATION OF THE PLAN AND AMENDMENTS. The Plan became
effective as of October 26, 1993, the date of its approval by the Company's
stockholders. The Amendments shall, upon approval by stockholders, become
effective as of June 24, 1997. The term during which options and other Equity
Interests may be granted under the Plan expires on October 26, 2003.
TREATMENT OF STOCK OPTIONS
The following summary of United States federal income tax considerations is
based on an analysis of the present provisions of the Code and the regulations
promulgated thereunder. In addition, an optionee may be subject to state and/or
local income tax consequences in the jurisdiction in which he or she works
and/or resides, which are not addressed in this discussion. This discussion
assumes that an optionee who acquires shares of Company stock holds such shares
as capital assets within the meaning of Section 1221 of the Code. Each optionee
should therefore consult his or her personal tax advisor to determine the impact
of U.S. federal, state and local taxes applicable to exercise of options and
subsequent dispositions of shares acquired pursuant to such options.
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<PAGE>
INCENTIVE STOCK OPTIONS. The grant or exercise of an incentive stock option
does not result in taxable income to the optionee or a deduction to the Company.
However, the excess of the fair market value on the date of exercise of the
shares acquired over the option exercise price will generally be included in
alternative minimum taxable income. Whether an optionee is subject to the
alternative minimum tax will depend on such optionee's other taxable income.
If an optionee does not dispose of shares acquired pursuant to an incentive
stock option before the later of two years from the date of grant of such option
and one year after the date of exercise of the option, any gain or loss realized
on a subsequent disposition of such shares will be treated as a long-term
capital gain or loss. If, however, an optionee disposes of shares acquired
pursuant to an incentive stock option before the expiration of the one-year and
two-year periods described above (a "disqualifying disposition"), an amount
equal to the excess of the fair market value of the shares at the time of the
option's exercise (or the proceeds of the disposition, if less) over the option
price will, in the year of disposition, be taxable to the optionee as ordinary
income and deductible by the Company. If the shares are disposed of at a loss,
the loss will be a capital loss.
An optionee's basis for capital gains purposes in shares acquired pursuant
to the exercise of an incentive stock option will be the amount paid by the
optionee upon exercise of the option. However, if the optionee does not hold the
shares for the one-year and two-year holding periods discussed above, the
optionee's basis in the shares is increased by an amount equal to the amount
taxable as ordinary income.
NONSTATUTORY STOCK OPTIONS. The grant of an option which is not an
incentive stock option (a "nonstatutory stock option") does not result in
taxable income to the optionee or a deduction to the Company. Upon the exercise
of a nonstatutory stock option, an amount equal to the excess of the fair market
value of the shares acquired on the date of exercise of such option over the
option price is taxable to the optionee as ordinary income and deductible by the
Company. The optionee's basis for capital gains purposes in the shares acquired
is equal to the sum of the exercise price and the amount taxable as ordinary
income. Gain or loss on a subsequent disposition of shares acquired pursuant to
a nonstatutory stock option will be treated as capital gain or loss, and will be
long-term capital gain or loss is such shares were held for more than one year
after the date of exercise.
EXERCISE OF OPTIONS WITH PREVIOUSLY ACQUIRED SHARES. If an optionee uses
previously acquired shares to pay all or a portion of the option price on the
exercise of a stock option (whether or not an incentive stock option), no gain
or loss is recognized with respect to the previously acquired shares. The shares
received upon exercise of the option, to the extent of the number of previously
acquired shares exchanged therefor, will have the same basis and holding period
for capital gain purposes as the previously acquired shares.
If the option is a nonstatutory stock option, the additional shares received
have a basis equal to the sum of the cash paid on exercise and the ordinary
income taxable to the optionee as a result of the exercise. If the option is an
incentive stock option, the additional shares have a basis equal to the cash
paid on exercise (plus, if the one-year and two-year periods discussed above
have not been met with respect to shares acquired upon the previous exercise of
an incentive stock option, the amount includable in income). In each case, the
holding period for capital gain purposes begins on the date of the exercise of
the option.
The use of shares previously acquired by exercising an incentive stock
option in satisfaction of all or part of the exercise price for another option
(whether or not such other option is an incentive stock option) is a disposition
of the previously acquired shares for purposes of whether such shares have been
held for the one-year and two-year periods discussed above. All shares acquired
upon the exercise of an incentive stock option, including the previously
acquired shares, are considered to have been acquired upon the date of exercise
for purposes of these holding periods.
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PROPOSAL 3.
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, 1997. 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS.
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 $6,500, 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 1998 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 1998 Annual Meeting must be received by the
Company no later than January 15, 1998, 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 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.
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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 Annual Report on Form 10-K for the Fiscal Year
Ended December 31, 1996, a copy of which is being provided to stockholders along
with this Proxy Statement.
By Order of the Board of Directors
Mark A. Angelson
EXECUTIVE VICE PRESIDENT AND
GENERAL COUNSEL AND
SECRETARY OF THE BOARD OF DIRECTORS
New York, New York
May 13, 1997
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EXHIBIT A
BIG FLOWER PRESS HOLDINGS, INC.
RESTATED 1993 STOCK AWARD AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the Big Flower Press Holdings, Inc. Restated 1993
Stock Award and Incentive Plan (the "Plan"). The Plan was first adopted by the
Board of Directors on October 26, 1993, subject to the approval of the
stockholders of Big Flower Press Holdings, Inc., a Delaware corporation
("Holdings"), which approval was obtained on the same date. The Plan, as
subsequently amended and restated, was adopted by the Board of Directors on
October 24, 1994, subject to the approval of the stockholders of Holdings, which
approval was obtained on October 25, 1994. An amendment to the Plan was adopted
by the Board of Directors on November 10, 1995 subject to (i) the approval of
the stockholders of Holdings, which approval was obtained on the same date, and
(ii) the closing of Holdings' initial public offering of its common stock (the
"Closing"), which took place on November 28, 1995. The purpose of the Plan is to
enable the Company to attract and retain highly qualified DIRECTORS AND OTHER
personnel who will contribute to the Company's success by their ability,
ingenuity and industry and to provide incentives to the participating DIRECTORS,
officers, other key employees, consultants and advisors that are linked directly
to increases in stockholder value and will therefore inure to the benefit of all
stockholders of the Company.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(1) "ADMINISTRATOR" means the Board, or if the Board does not administer the
Plan, the Committee in accordance with Section 2.
(2) "BOARD" means the Board of Directors of Holdings.
(3) "CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
(4) "COMMITTEE" means the Compensation Committee of the Board plus such
additional individuals as the Board shall designate in order to fulfill the
Disinterested Persons requirement of Rule 16b-3 as promulgated by the Securities
and Exchange Commission (the "Commission") under the Securities Exchange Act of
1934 (the "Act"), and as such Rule may be amended from time to time, or any
successor definition adopted by the Commission, or any other Committee the Board
may subsequently appoint to administer the Plan. The Committee shall be composed
entirely of individuals who meet the qualifications referred to in Rule 16b-3.
If at any time the Board shall not administer the Plan, then the functions of
the Board specified in the Plan shall be exercised by the Committee.
(5) "COMPANY" means Holdings and any Subsidiary (or any successor
corporation).
(6) "DEFERRED STOCK" means an award made pursuant to Section 7 below of the
right to receive Stock at the end of a specified deferral period.
(7) "DISABILITY" means the inability of a Participant to perform
substantially his duties and responsibilities to the Company by reason of a
physical or mental disability or infirmity (i) for a continuous period of six
months, or (ii) at such earlier time as the Participant submits medical evidence
satisfactory to the Company that he has a physical or mental disability or
infirmity which will likely prevent him from returning to the performance of his
work duties for six months or longer. The date of such Disability shall be on
the last day of such six-month period or the day on which the Participant
submits such satisfactory medical evidence, as the case may be.
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BRACKETS [__] INDICATE PROPOSED DELETIONS; UNDERLINING INDICATES PROPOSED
ADDITIONS.
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(8) "DISINTERESTED PERSON" shall have the meaning set forth in Rule 16b-3 of
the Act, and as such Rule may be amended from time to time, or any successor
definition adopted by the Commission.
(9) "EFFECTIVE DATE" means the date provided pursuant to Section [11] 12.
(10) "ELIGIBLE EMPLOYEE" means an employee of the Company eligible to
participate in the Plan pursuant to Section 4.
(11) "FAIR MARKET VALUE" means, as of any given date, with respect to any
awards granted hereunder, at the discretion of the Administrator and subject to
such limitations as the Administrator may impose, (A) if the Stock is publicly
traded, the closing sale price of the Stock on such date as reported in the Wall
Street Journal, or the average of the closing price of the Stock on each day on
which the Stock was traded over a period of up to twenty trading days
immediately prior to such date, (B) the fair market value of the Stock as
determined in accordance with a method prescribed in the agreement evidencing
any award hereunder, or (C) the fair market value of the Stock as otherwise
determined by the Administrator in the good faith exercise of its discretion.
(12) "INCENTIVE STOCK OPTION" means any Stock Option intended to be
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(13)_"INITIAL ELECTION OPTION" HAS THE MEANING SET FORTH IN SECTION 8 BELOW.
____(14) "LIMITED STOCK APPRECIATION RIGHT" means a Stock Appreciation Right
that can be exercised only in the event of a "Change of Control" (as defined in
the award evidencing such Limited Stock Appreciation Right).
[(14)](15) "NON-QUALIFIED STOCK OPTION" means any [STOCK OPTION] STOCK
OPTION that is not an Incentive Stock Option, including an [STOCK OPTION] STOCK
OPTION that provides (as of the time such option is granted) that it will not be
treated as Incentive Stock Option.
[(15)](16) "PARENT CORPORATION" means any corporation (other than Holdings)
in an unbroken chain of corporations ending with Holdings, if each of the
corporations in the chain (other than Holdings) owns stock possessing 50% or
more of the combined voting power of all classes of stock in one of the other
corporations in the chain.
[(16)](17) "PARTICIPANT" means any DIRECTOR OF HOLDINGS WHO IS NOT AN
EMPLOYEE OF THE COMPANY (A "NON-EMPLOYEE DIRECTOR"), ANY DIRECTOR OF HOLDINGS
WHO IS NOT AN EMPLOYEE OF THE COMPANY OR ANY OF ITS AFFILIATES (A
"NON-MANAGEMENT DIRECTOR"), Eligible Employee, or any consultant or advisor to
the Company (I) selected by the Administrator, pursuant to the Administrator's
authority in Section 2 below OR (II) ENTITLED PURSUANT TO SECTION 8 BELOW, to
receive grants of Stock Options, Stock Appreciation Rights, Limited Stock
Appreciation Rights, Restricted Stock awards, Deferred Stock awards, Performance
Shares, INITIAL ELECTION OPTIONS, REELECTION OPTIONS or any combination of the
foregoing.
[(17)](18) "PERFORMANCE SHARE" means an award of shares of Stock pursuant to
Section 7 that subject to restrictions based upon the attainment of specified
performance objectives.
(19)_"REELECTION OPTION" HAS THE MEANING SET FORTH IN SECTION 8 BELOW.
____(20)[(18)] "RESTRICTED STOCK" means an award granted pursuant to Section 7
of shares of Stock subject to certain restrictions.
[(19)](21) "STOCK" means the Common Stock, $.01 par value, of Holdings.
[(20)](22) "STOCK APPRECIATION RIGHT" means the right pursuant to an award
granted under Section 6 to receive an amount equal to the difference between (A)
the Fair Market Value, as of the date such Stock Appreciation Right or portion
thereof is surrendered, of the shares of Stock covered by such right or such
portion thereof, and (B) the aggregate exercise price of such right or such
portion thereof.
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[(21)](23) "STOCK OPTION" means any option to purchase shares of Stock
granted pursuant to Section 5.
[(22)](24) "SUBSIDIARY" means any corporation (other than Holdings) in an
unbroken chain of corporations beginning with Holdings, if each of the
corporations (other than the last corporation) in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Board in accordance with the
requirements of Rule 16b-3 of the Act, or by the Committee which shall be
appointed by the Board and which shall serve at the pleasure of the Board.
The Administrator shall have the power and authority to grant to
NON-EMPLOYEE DIRECTORS, NON-MANAGEMENT DIRECTORS, Eligible Employees and
consultants and advisors to the Company, pursuant to the terms of the Plan: (a)
Stock Options, (b) Stock Appreciation Rights or Limited Stock Appreciation
Rights, (c) Restricted Stock, (d) Performance Shares, (e) Deferred Stock [OR (F)
], (F) INITIAL ELECTION OPTIONS, (G) REELECTION OPTIONS OR (H) any combination
of the foregoing.
In particular, the Administrator shall have the authority:
(a) to select those employees of the Company who shall be Eligible
Employees;
(b) to determine whether and to what extent Stock Options, Stock
Appreciation Rights, Limited Stock Appreciation Rights, Restricted Stock,
Deferred Stock, Performance Shares or a combination of the foregoing, are to be
granted hereunder to NON-EMPLOYEE DIRECTORS, NON-MANAGEMENT DIRECTORS, Eligible
Employees, consultants and advisors to the Company;
(c) to determine the number of shares to be covered by each such award
granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder (including, but not limited to, (x)
the restrictions applicable to Restricted or Deferred Stock awards and the
conditions under which restrictions applicable to such Restricted or Deferred
Stock shall lapse, and (y) the performance goals and periods applicable to the
award of Performance Shares); and
(e) to determine the terms and conditions, not inconsistent with the terms
of the Plan, which shall govern all written instruments evidencing the Stock
Options, Stock Appreciation Rights, Limited Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Performance Shares, INITIAL ELECTION OPTIONS,
REELECTION OPTIONS or any combination of the foregoing.
The Administrator shall have the authority, in its discretion, to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall from time to time deem advisable; to interpret the terms
and provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); and to otherwise supervise the administration of
the Plan.
All decisions made by the Administrator pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and the
Participants.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for issuance
under the Plan shall be [3,484,114] 5,484,114. Such shares may consist, in whole
or in part, of authorized and unissued shares or treasury shares, The aggregate
number of shares of Stock as to which Stock Options, Stock Appreciation Rights,
Restricted Stock [AND], Performance Shares, INITIAL ELECTION OPTIONS AND
REELECTION OPTIONS may be granted to any individual during any calendar year may
not, subject to adjustment as provided in this
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Section 3. exceed 80% of the shares of Stock reserved for the purposes of the
Plan in accordance with the provisions of this Section 3.
To the extent that (i) a Stock Option, INITIAL ELECTION OPTION OR REELECTION
OPTION expires or is otherwise terminated without being exercised, or (ii) any
shares of Stock subject to any Restricted Stock, Deferred Stock or Performance
Share award granted hereunder are forfeited, such shares shall again be
available for issuance in connection with future awards under the Plan. If any
shares of Stock have been pledged as collateral for indebtedness incurred by a
Participant in connection with the exercise of a Stock Option and such shares
are returned to the Company in satisfaction of such indebtedness, such shares
shall again be available for issuance in connection with future awards under the
Plan.
In the event of any merger, reorganization, consolidation, recapitalization,
stock dividend, or other change in corporate structure affecting the Stock, a
substitution or adjustment shall be made in (i) the kind and aggregate number of
shares reserved for issuance under the Plan, (ii) the kind, number and option
price of shares subject to outstanding Stock Options, INITIAL ELECTION OPTIONS
AND REELECTION OPTIONS granted under the Plan, and (iii) the kind, number and
purchase price of shares issuable pursuant to awards of Restricted Stock,
Deferred Stock and Performance Shares, as may be determined by the
Administrator, in its sole discretion. Such other substitutions or adjustments
shall be made as may be determined by the Administrator, in its sole discretion.
An adjusted option price shall also be used to determine the amount payable by
Holdings upon the exercise of any Stock Appreciation Right or Limited Stock
Appreciation Right associated with any Stock Option. In connection with any
event described in this paragraph, the Administrator may provide, in its
discretion, for the cancellation of any outstanding awards and payment in cash
or other property in exchange therefor.
SECTION 4. ELIGIBILITY.
[OFFICERS] NON-EMPLOYEE DIRECTORS, NON-MANAGEMENT DIRECTORS, OFFICERS
(including officers who are directors of the Company), other key employees of
the Company, consultants and advisors to the Company who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company shall be eligible to be granted Stock Options, Stock Appreciation
Rights, Limited Stock Appreciation Rights, Restricted Stock awards, Deferred
Stock awards [OR], Performance Shares, INITIAL ELECTION OPTIONS OR REELECTION
OPTIONS hereunder. The Participants under the Plan shall be selected from time
to time by the Administrator, in its sole discretion, from among the
NON-EMPLOYEE DIRECTORS, NON-MANAGEMENT DIRECTORS, Eligible Employees,
consultants and advisors to the Company recommended by the senior management of
the Company, and the Administrator shall determine, in its sole discretion, the
number of shares covered by each award. IN ADDITION, INITIAL ELECTION OPTIONS
AND REELECTION OPTIONS SHALL BE GRANTED AUTOMATICALLY TO NON-MANAGEMENT
DIRECTORS AS PROVIDED IN SECTION 8 HEREOF.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone or in addition to other awards granted
under the Plan. Any Stock Option granted under the Plan shall be in such form as
the Administrator may from time to time approve, and the provisions of Stock
Option awards need not be the same with respect to each optionee. Recipients of
Stock Options shall enter into a subscription and/or award agreement with
Holdings, in such form as the Administrator shall determine, which agreement
shall set forth, among other things, the exercise price of the option, the term
of the option and provisions regarding exercisability of the option granted
thereunder.
The Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options.
The Administrator shall have the authority to grant TO any Eligible Employee
EITHER Incentive Stock Options, Non-Qualified Stock Options, or both types of
Stock Options (in each case with or without Stock Appreciation Rights or Limited
Stock Appreciation Rights). [CONSULTANTS] NON-EMPLOYEE DIRECTORS, NON-
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MANAGEMENT DIRECTORS, CONSULTANTS and advisors may only be granted Non-Qualified
Stock Options (with or without Stock Appreciation Rights or Limited Stock
Appreciation Rights). To the extent that any Stock Option does not qualify as an
Incentive Stock Option, it shall constitute a separate Non-Qualified Stock
Option. More than one option may be granted to the same optionee and be
outstanding concurrently hereunder.
Stock Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:
(1) OPTION PRICE. The option price per share of Stock purchasable under a
Stock Option shall be determined by the Administrator in its sole discretion at
the time of grant but shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value of the Stock on such date, and shall not, in
any event, be less than the par value of the Stock. If an employee owns or is
deemed to own (by reason of the attribution rules applicable under Section
425(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation and an Incentive Stock Option is
granted to such employee, the option price of such Incentive Stock Option (to
the extent required by the Code at the time of grant) shall be no less than 110%
of the Fair Market Value of the Stock on the date such Incentive Stock Option is
granted.
(2) OPTION TERM. The term of each Stock Option shall be fixed by the
Administrator, but no Stock Option shall be exercisable more than ten years
after the date such Stock Option is granted; PROVIDED, HOWEVER, that if an
employee owns or is deemed to own (by reason of the attribution rules of Section
425(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation and an Incentive Stock Option is
granted to such employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five years from
the date of grant.
(3) EXERCISABILITY. Stock Options shall be exercisable at such time or times
and subject to such terms and conditions as shall be determined by the
Administrator at or after grant. The Administrator may provide, in its
discretion, that any Stock Option shall be exercisable only in installments, and
the Administrator may waive such installment exercise provisions at any time in
whole or in part based on such factors as the Administrator may determine, in
its sole discretion.
(4) METHOD OF EXERCISE. Subject to Section 5(3) above, Stock Options may be
exercised in whole or in part at any time during the option period, by giving
written notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment in full of the purchase price in cash or its
equivalent as determined by the Administrator. As determined by the
Administrator, in its sole discretion, payment in whole or in part may also be
made in the form of unrestricted Stock already owned by the optionee, or, in the
case of the exercise of a Non-Qualified Stock Option, Restricted Stock or
Performance Shares subject to an award hereunder (based, in each case, on the
Fair Market Value of the Stock on the date the option is exercised); PROVIDED,
HOWEVER, that in the case of an Incentive Stock Option, the right to make
payment in the form of already owned shares may be authorized only at the time
of grant. If payment of the option exercise price of a Non-Qualified Stock
Option is made in whole or in part in the form of Restricted Stock or
Performance Shares, the shares received upon the exercise of such Stock Option
(to the extent of the number of shares of Restricted Stock or Performance Shares
surrendered upon exercise of such Stock Option) shall be restricted in
accordance with the original terms of the Restricted Stock or Performance Share
award in question, except that the Administrator may direct that such
restrictions shall apply only to that number of shares equal to the number of
shares surrendered upon the exercise of such option. An optionee shall generally
have the rights to dividends and any other rights of a stockholder with respect
to the Stock subject to the option only after the optionee has given written
notice of exercise, has paid in full for such shares, and, if requested, has
given the representation described in paragraph (1) of Section [10] 11.
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The Administrator may require the voluntary surrender of all or a portion of
any Stock Option granted under the Plan as a condition precedent to a grant of a
new Stock Option. Subject to the provisions of the Plan, such new Stock Option
shall be exercisable at the price, during such period and on such other terms
and conditions as are specified by the Administrator at the time the new Stock
Option is granted; PROVIDED, HOWEVER, should the Administrator so require, the
number of shares subject to such new Stock Option shall not be greater than the
number of shares subject to the surrendered Stock Option. Upon their surrender,
Stock Options shall be canceled and the shares previously subject to such
canceled Stock Options shall again be available for grants of Stock Options and
other awards hereunder.
(5) LOANS. The Company may make loans available to Stock Option holders in
connection with the exercise of outstanding options granted under the Plan, as
the Administrator, in its discretion, may determine. Such loans shall (i) be
evidenced by promissory notes entered into by the Stock Option holders in favor
of the Company, (ii) be subject to the terms and conditions set forth in this
Section 5(5) and such other terms and conditions, not inconsistent with the
Plan, as the Administrator shall determine, (iii) bear interest, if any, at such
rate as the Administrator shall determine, and (iv) be subject to Board approval
(or to approval by the Administrator to the extent the Board may delegate such
authority). In no event may the principal amount of any such loan exceed the sum
of (x) the exercise price less the par value of the shares of Stock covered by
the option, or portion thereof, exercised by the holder, and (y) any federal,
state, and local income tax attributable to such exercise. The initial term of
the loan, the schedule of payment of principal and interest under the loan, the
extent to which the loan is to be with or without recourse against the holder
with respect to principal or interest and the conditions upon which the loan
will become payable in the event of the holder's termination of employment WITH,
OR THE TERMINATION OF SUCH HOLDER'S SERVICE WITH, THE COMPANY shall be
determined by the Administrator. Unless the Administrator determines otherwise,
when a loan is made, shares of Stock having a Fair Market Value at least equal
to the principal amount of the loan shall be pledged by the holder to the
Company as security for payment of the unpaid balance of the loan, and such
pledge shall be evidenced by a pledge agreement, the terms of which shall be
determined by the Administrator, in its discretion; PROVIDED, HOWEVER, that each
loan shall comply with all applicable laws, regulations and rules of the Board
of Governors of the Federal Reserve System and any other governmental agency
having jurisdiction.
(6) NON-TRANSFERABILITY OF OPTIONS. Unless otherwise determined by the
Administrator subject to the limitations on transferability set forth in Rule
16b-3, no Stock Option shall be transferable by the optionee, and all Stock
Options shall be exercisable, during the optionee's lifetime, only by the
optionee.
(7) TERMINATION OF EMPLOYMENT OR SERVICE. If an optionee's employment with
or service as a NON-EMPLOYEE DIRECTOR, NON-MANAGEMENT DIRECTOR, consultant or
advisor to the Company terminates by reason of death, Disability or for any
other reason, the Stock Option may thereafter be exercised to the extent
provided in the applicable subscription or award agreement, or as otherwise
determined by the Administrator.
(8) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent that the
aggregate Fair Market Value (determined as of the date of the Incentive Stock
Option is granted) of shares of Stock with respect to which Incentive Stock
Options granted to an [OPTIONEE] OPTIONEE under this Plan and all other option
plans of the Company or its Parent Corporation become exercisable for the first
time by the [OPTIONEE] OPTIONEE during any calendar year exceeds $100,000, such
Stock Options shall be treated as Non-Qualified Stock Options.
SECTION 6. STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS.
(1) GRANT AND EXERCISE. Stock Appreciation Rights and Limited Stock
Appreciation Rights may be granted either alone ("Free Standing Rights") or in
conjunction with all or part of any Stock Option granted under the Plan
("Related Rights"). In the case of a Non-Qualified Stock Option, Related Rights
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may be granted either at or after the time of the grant of such Stock Option. In
the case of an Incentive Stock Option, Related Rights may be granted only at the
time of the grant of the Incentive Stock Option.
A Related Right or applicable portion thereof granted in conjunction with a
given Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option, except that, unless
otherwise provided by the Administrator at the time of grant, a Related Right
granted with respect to less than the full number of shares covered by a related
Stock Option shall only be reduced if and to the extent that the number of
shares covered by the exercise or termination of the related Stock Option
exceeds the number of shares not covered by the Related Right.
A Related Right may be exercised by an optionee, in accordance with
paragraph (2) of this Section 6, by surrendering the applicable portion of the
related Stock Option. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in paragraph
(2) of this Section 6. Stock Options which have been so surrendered, in whole or
in part, shall no longer be exercisable to the extent the Related Rights have
been so exercised.
(2) TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to such
terms and conditions, not inconsistent with the provisions of the Plan, as shall
be determined from time to time by the Administrator, including the following:
(a) Stock Appreciation Rights that are Related Rights ("Related Stock
Appreciation Rights") shall be exercisable only at such time or times and to the
extent that the Stock Options to which they relate shall be exercisable in
accordance with the provisions of Section 5 and this Section 6 of the Plan;
PROVIDED, HOWEVER, that no Related Stock Appreciation Right shall be exercisable
during the first six months of its term, except that this additional limitation
shall not apply in the event of death or Disability of the optionee prior to the
expiration of such six-month period.
(b) Upon the exercise of a Related Stock Appreciation Right, an optionee
shall be entitled to receive up to, but not more than, an amount in cash or that
number of shares of Stock (or in some combination of cash and shares of Stock)
equal in value to the excess of the Fair Market Value of one share of Stock as
of the date of exercise over the option price per share specified in the related
Stock Option multiplied by the number of shares of Stock in respect of which the
Related Stock Appreciation Right is being exercised, with the Administrator
having the right to determine the form of payment.
(c) Related Stock Appreciation Rights shall be transferable or exercisable
only when and to the extent that the underlying Stock Option would be
transferable or exercisable under paragraph (6) of Section 5 of the Plan.
(d) Upon the exercise of a Related Stock Appreciation Right, the Stock
Option or part thereof to which such Related Stock Appreciation Right is related
shall be deemed to have been exercised for the purpose of the limitation set
forth in Section 3 of the Plan on the number of shares of Stock to be issued
under the Plan, but only to the extent of the number of shares issued under the
Related Stock Appreciation Right.
(e) A Related Stock Appreciation Right granted in connection with an
Incentive Stock Option may be exercised only if and when the Fair Market Value
of the Stock subject to the Incentive Stock Option exceeds the exercise price of
such Stock Option.
(f) Stock Appreciation Rights that are Free Standing Rights ("Free Standing
Stock Appreciation Rights") shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the Administrator
at or after grant; PROVIDED, HOWEVER, that no Free Standing Stock Appreciation
Right shall be exercisable during the first six months of its term, except that
this limitation shall not apply in the event of death or Disability of the
recipient of the Free Standing Stock Appreciation Right prior to the expiration
of such six-month period.
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(g) The term of each Free Standing Stock Appreciation Right shall be fixed
by the Administrator, but no Free Standing Stock Appreciation Right shall be
exercisable more than ten years after the date such right is granted.
(h) Upon the exercise of a Free Standing Stock Appreciation Right, a
recipient shall be entitled to receive up to, but not more than, an amount in
cash or that number of shares of Stock (or any combination of cash or shares of
Stock) equal in value to the excess of the Fair Market Value of one share of
Stock as of the date of exercise over the price per share specified in the Free
Standing Stock Appreciation Right (which price shall be no less than 100% of the
Fair Market Value of the Stock on the date of grant) multiplied by the number of
shares of Stock in respect of which the right is being exercised, with the
Administrator having the right to determine the form of payment.
(i) Free Standing Stock Appreciation Rights shall be transferable or
exercisable only when and to the extent that a Stock Option would be
transferable or exercisable under paragraph (6) of Section 5 of the Plan.
(j) In the event of the termination of employment or service of a
Participant who has been granted one or more Free Standing Stock Appreciation
Rights, such rights shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Administrator at or
after grant.
(k) Limited Stock Appreciation Rights may only be exercised within the
30-day period following a "Change of Control" (as defined by the Administrator
in the agreement evidencing such Limited Stock Appreciation Right) and, with
respect to Limited Stock Appreciation Rights that are Related Rights ("Related
Limited Stock Appreciation Rights"), only to the extent that the Stock Options
to which they relate shall be exercisable in accordance with the provisions of
Section 5 and this Section 6 of the Plan; PROVIDED, HOWEVER, that no Related
Limited Stock Appreciation Right shall be exercisable during the first six
months of its term, except that this additional limitation shall not apply in
the event of death or Disability of the optionee prior to the expiration of such
six-month period.
(l) Upon the exercise of a Limited Stock Appreciation Right, the recipient
shall be entitled to receive an amount in cash equal in value to the excess of
the "Change of Control Price" (as defined in the agreement evidencing such
Limited Stock Appreciation Right) of one share of Stock as of the date of
exercise over (A) the option price per share specified in the related Stock
Option, or (B) in the case of a Limited Stock Appreciation Right which is a Free
Standing Stock Appreciation Right, the price per share specified in the Free
Standing Stock Appreciation Right, such excess to be multiplied by the number of
shares in respect of which the Limited Stock Appreciation Right shall have been
exercised.
SECTION 7. RESTRICTED STOCK, DEFERRED STOCK AND PERFORMANCE SHARES.
(1) GENERAL. Restricted Stock, Deferred Stock or Performance Share awards
may be issued either alone or in addition to other awards granted under the
Plan. The Administrator shall determine the NON-EMPLOYEE DIRECTORS,
NON-MANAGEMENT DIRECTORS, Eligible Employees, consultants and advisors to whom,
and the time or times at which, grants of Restricted Stock, Deferred Stock or
Performance Share awards shall be made; the number of shares to be awarded; the
price, if any, to be paid by the recipient of Restricted Stock, Deferred Stock
or Performance Share awards; the Restricted Period (as defined in paragraph (3)
hereof) applicable to Restricted Stock or Deferred Stock awards; the date or
dates on which restrictions applicable to such Restricted Stock or Deferred
Stock awards shall lapse during such Restricted Period; and all other conditions
of the Restricted Stock, Deferred Stock and Performance Share awards. The
Administrator may also condition the grant of Restricted Stock, Deferred Stock
awards or Performance Shares upon the exercise of Stock Options, or upon such
other criteria as the Administrator may determine, in its sole discretion. The
provisions of Restricted Stock, Deferred Stock or Performance Share awards need
not be the same with respect to each recipient. In the discretion of the
Administrator,
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loans may be made to Participants in connection with the purchase of Restricted
Stock under substantially the same terms and conditions as provided in Section
5(5) with respect to the exercise of stock options.
(2) AWARDS AND CERTIFICATES. The prospective recipient of a Restricted
Stock, Deferred Stock or Performance Share award shall not have any rights with
respect to such award, unless and until such recipient has executed an agreement
evidencing the award (a "Restricted Stock Award Agreement," "Subscription
Agreement," "Deferred Stock Award Agreement," "Performance Share Award
Agreement," or other award agreement, as appropriate) and delivered a fully
executed copy thereof to the Company, within a period of sixty days (or such
other period as the Administrator may specify after the award date). Except as
otherwise provided below in this Section 7(2), (i) each Participant who is
awarded Restricted Stock or Performance Shares shall be issued a stock
certificate in respect of such shares of Restricted Stock or Performance Shares;
and (ii) such certificate shall be registered in the name of the Participant,
and shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award.
The Company may require that the stock certificates evidencing Restricted
Stock or Performance Share awards hereunder be held in the custody of the
Company until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award or Performance Share award, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Stock covered by such award.
With respect to Deferred Stock awards, at the expiration of the Restricted
Period, stock certificates in respect of such shares of Deferred Stock shall be
delivered to the participant, or his legal representative, in a number equal to
the number of shares of Stock covered by the Deferred Stock award.
(3) RESTRICTIONS AND CONDITIONS. The Restricted Stock, Deferred Stock and
Performance Share awards granted pursuant to this Section 7 shall be subject to
the following restrictions and conditions:
(a) Subject to the provisions of the Plan and the Restricted Stock Award
Agreement, Subscription Agreement, Deferred Stock Award Agreement, Performance
Share Award Agreement or other award agreement, as appropriate, governing such
award, during such period as may be set by the Administrator commencing on the
grant date (the "Restricted Period"), the Participant shall not be permitted to
sell, transfer, pledge or assign shares of Restricted Stock, Performance Shares
or Deferred Stock awarded under the Plan; PROVIDED, HOWEVER, that the
Administrator may, in its sole discretion, provide for the lapse of such
restrictions in installments and may accelerate or waive such restrictions in
whole or in part based on such factors and such circumstances as the
Administrator may determine, in its sole discretion, including, but not limited
to, the attainment of certain performance related goals, the Participant's
termination of employment or service, death or Disability or the occurrence of a
"Change of Control" as defined in the agreement evidencing such award.
(b) Except as provided in paragraph (3)(a) of this Section 7, the
Participant shall generally have, with respect to the shares of Restricted Stock
or Performance Shares, all of the rights of a stockholder with respect to such
stock during the Restricted Period. The Participant shall generally not have the
rights of a stockholder with respect to stock subject to Deferred Stock awards
during the Restricted Period; PROVIDED, HOWEVER, that dividends declared during
the Restricted Period with rlbspect to the number of shares covered by a
Deferred Stock award shall be aid to the Participant. Certificates for shares of
unrestricted Stock shall be delivered to the Participant promptly after, and
only after, the Restricted Period shall expire without forfeiture in respect of
such shares of Restricted Stock, Performance Shares or Deferred Stock, except as
the Administrator, in its sole discretion, shall otherwise determine.
(c) The rights of holders of Restricted Stock, Deferred Stock, and
Performance Share awards upon termination of employment or service for any
reason during the Restricted Period shall be set forth in the Restricted Stock
Award Agreement, Subscription Agreement, Deferred Stock Award Agreement,
Performance Share Award Agreement or other award agreement, as appropriate,
governing such awards.
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SECTION 8._AUTOMATIC GRANTS TO NON-MANAGEMENT DIRECTORS: ELECTIVE PURCHASE OF
SHARES AND OPTIONS BY NON-EMPLOYEE DIRECTORS.
____(1)_AUTOMATIC GRANTS TO NON-MANAGEMENT DIRECTORS.
____NOTWITHSTANDING ANY OTHER PROVISION IN THE PLAN TO THE CONTRARY, EACH
NON-MANAGEMENT DIRECTOR SHALL RECEIVE ON THE DATE OF HIS OR HER INITIAL ELECTION
OR APPOINTMENT TO THE BOARD A NON-QUALIFIED STOCK OPTION (EACH, AN "INITIAL
ELECTION OPTION") TO PURCHASE 13,400 SHARES OF STOCK. IN ADDITION, ON THE DATE
OF EACH SUBSEQUENT ANNUAL MEETING OF STOCKHOLDERS OF HOLDINGS AT WHICH A
NON-MANAGEMENT DIRECTOR IS REELECTED, HE OR SHE SHALL RECEIVE A NON-QUALIFIED
STOCK OPTION (EACH, A "REELECTION OPTION" AND TOGETHER WITH AN INITIAL ELECTION
OPTION, THE "AUTOMATIC OPTIONS") TO PURCHASE 1,000 SHARES OF STOCK. EACH SUCH
INITIAL ELECTION OPTION SHALL HAVE A TERM OF TEN YEARS, AND EACH SUCH REELECTION
OPTION SHALL HAVE A TERM OF FIVE YEARS, IN EACH CASE EACH SUBJECT TO THE
PROVISIONS OF THIS SECTION 8(1) BELOW. EACH SUCH AUTOMATIC OPTION SHALL VEST AND
BECOME EXERCISABLE ON THE DATE OF THE GRANT. THE EXERCISE PRICE FOR EACH
AUTOMATIC OPTION SHALL BE EQUAL TO THE CLOSING PRICE PER SHARE OF STOCK ON THE
PRINCIPAL STOCK EXCHANGE ON WHICH THE STOCK IS THEN LISTED FOR TRADING (THE
"CLOSING PRICE") ON THE DATE OF THE GRANT, WHICH EXERCISE PRICE SHALL BE PAID IN
CASH, BY CHECK, OR BY DELIVERY OF UNRESTRICTED SHARES OF STOCK HELD BY THE
NON-MANAGEMENT DIRECTOR FOR AT LEAST SIX MONTHS (VALUED AT THE CLOSING PRICE ON
THE DATE OF SUCH EXERCISE), AT THE NON-MANAGEMENT DIRECTOR'S ELECTION.
____SUBJECT TO THE PROVISIONS OF THE APPLICABLE AUTOMATIC OPTION AWARD, THE
UNEXERCISED PORTION OF ANY SUCH AUTOMATIC OPTION SHALL AUTOMATICALLY AND WITHOUT
NOTICE TERMINATE AND BECOME NULL AND VOID AT THE TIME OF THE EARLIEST TO OCCUR
OF THE FOLLOWING:
____(A)_THE EXPIRATION OF TEN YEARS FROM THE DATE ON WHICH SUCH AUTOMATIC OPTION
WAS GRANTED; AND
____(B)_IF THE NON-MANAGEMENT DIRECTOR'S SERVICES TO HOLDINGS ARE TERMINATED FOR
ANY REASON, THE PORTION OF AUTOMATIC OPTIONS GRANTED TO SUCH NON-MANAGEMENT
DIRECTOR WHICH WERE EXERCISABLE IMMEDIATELY PRIOR TO SUCH TERMINATION MAY BE
EXERCISED FOR A PERIOD OF 90 DAYS FOLLOWING THE DATE OF SUCH TERMINATION (OR
UNTIL THE EXPIRATION OF SUCH AUTOMATIC OPTION TERM, IF EARLIER).
____(2)_ELECTIVE PURCHASE OF SHARES AND OPTIONS BY NON-EMPLOYEE DIRECTORS.
____IN ADDITION TO ANY OTHER BENEFIT TO WHICH ANY NON-EMPLOYEE DIRECTOR MAY BE
ENTITLED UNDER THE TERMS OF THE PLAN, A NON-EMPLOYEE DIRECTOR SHALL BE PERMITTED
TO ELECT TO RECEIVE ALL OR ANY PORTION OF THE ANNUAL RETAINER FEES AND/OR BOARD
OR COMMITTEE MEETING ATTENDANCE FEES, IF ANY (COLLECTIVELY, THE "FEES") THAT
OTHERWISE WOULD BE PAYABLE IN CASH TO SUCH NON-EMPLOYEE DIRECTOR, IN SHARES OF
STOCK OR NON-QUALIFIED STOCK OPTIONS TO PURCHASE SHARES OF STOCK (EACH AN
"ELECTIVE OPTION"), IN EACH CASE RATHER THAN CASH IN ACCORDANCE WITH THE
PROVISIONS OF THIS SECTION 8(2).
____ANY NON-EMPLOYEE DIRECTOR MAY ELECT TO RECEIVE ALL OR ANY PORTION OF HIS OR
HER FEES IN SHARES OF STOCK OR ELECTIVE OPTIONS TO PURCHASE SHARES OF STOCK
RATHER THAN CASH BY DELIVERING A WRITTEN ELECTION (AN "ELECTION NOTICE," THE
ELECTION SET FORTH THEREIN BEING REFERRED TO AS THE "ELECTION") TO THE SECRETARY
OF HOLDINGS. AN ELECTION SHALL CONTINUE IN EFFECT UNTIL IT IS REVOKED BY
DELIVERY TO THE SECRETARY OF HOLDINGS OF A WRITTEN REVOCATION NOTICE (A
"REVOCATION") OR MODIFIED BY DELIVERY TO THE SECRETARY OF HOLDINGS OF A NEW
ELECTION NOTICE. ANY ELECTION OR REVOCATION UNDER THIS SECTION 8(2) SHALL BE
EFFECTIVE WITH RESPECT TO FEES THAT OTHERWISE WOULD BE PAID AFTER THE LATER OF
(X) WITH RESPECT TO AN INITIAL ELECTION (AS DEFINED BELOW), THE DATE OF RECEIPT
BY THE SECRETARY OF HOLDINGS OF THE ELECTION NOTICE OR, IF LATER, THAT DATE
SPECIFIED IN SUCH ELECTION NOTICE, AND (Y) WITH RESPECT TO ANY REVOCATION OR ANY
ELECTION OTHER THAN INITIAL ELECTION, SIX MONTHS AFTER THE DATE OF RECEIPT BY
THE SECRETARY OF HOLDINGS OF SUCH REVOCATION OR ELECTION NOTICE. THERE SHALL BE
NO LIMIT ON THE NUMBER OF ELECTIONS OR REVOCATIONS THAT MAY BE MADE BY A
NON-EMPLOYEE DIRECTOR. A NON-EMPLOYEE DIRECTOR WHO DOES NOT ELECT TO HAVE ALL OR
A PORTION OF HIS OR HER FEES BE PAID IN SHARES OF STOCK OR ELECTIVE OPTIONS TO
PURCHASE SHARES OF STOCK SHALL RECEIVE HIS OR HER FEES IN CASH ON THE DATE THAT
SUCH FEES ARE OTHERWISE DUE.
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____ANY SHARES OF STOCK ISSUABLE UNDER THIS SECTION 8(2) SHALL BE ISSUED TO THE
NON-EMPLOYEE DIRECTOR ON THE SAME DATE THAT THE FEES WOULD HAVE BEEN PAID IN
CASH. THE NUMBER OF SHARES OF STOCK TO BE ISSUED TO A NON-EMPLOYEE DIRECTOR WHO
MAKES AN ELECTION UNDER THIS SECTION 8(2) SHALL BE DETERMINED BY DIVIDING (I)
THE AMOUNT OF SUCH NON-EMPLOYEE DIRECTOR'S FEES FOR WHICH HE OR SHE HAS MADE AN
ELECTION UNDER THIS SECTION 8(2) BY (II) THE CLOSING PRICE ON THE DATE AS OF
WHICH THE FEES WOULD OTHERWISE BE PAYABLE (SUCH QUOTIENT BEING REFERRED TO AS
"ELECTED SHARES").
____ANY ELECTIVE OPTIONS TO BE GRANTED UNDER THIS SECTION 8(2) SHALL BE GRANTED
TO THE NON-EMPLOYEE DIRECTOR ON THE SAME DATE THAT THE FEES WOULD HAVE BEEN PAID
IN CASH, SHALL VEST IMMEDIATELY UPON THE DATE OF SUCH GRANT AND REMAIN
EXERCISABLE FOR FIVE YEARS THEREAFTER. THE EXERCISE PRICE OF SUCH ELECTIVE
OPTIONS SHALL BE EQUAL TO THE CLOSING PRICE ON THE DATE SUCH FEES WOULD BE
PAYABLE, WHICH EXERCISE PRICE MAY BE PAID IN CASH, BY CHECK, OR BY DELIVERY OF
UNRESTRICTED SHARES OF STOCK HELD BY THE NON-EMPLOYEE DIRECTOR FOR AT LEAST SIX
MONTHS (VALUED AT THE CLOSING PRICE ON THE DATE OF SUCH EXERCISE), AT THE
NON-EMPLOYEE DIRECTOR'S ELECTION. THE NUMBER OF SHARES OF STOCK FOR WHICH EACH
ELECTIVE OPTION WOULD BE EXERCISABLE SHALL BE DETERMINED BY MULTIPLYING THE
ELECTED SHARES BY FOUR.
____ONLY FULL SHARES OF STOCK AND ELECTIVE OPTIONS EXERCISABLE FOR FULL SHARES
OF STOCK SHALL BE ISSUED TO PURSUANT TO THIS SECTION. IF THE FORMULAE SET FORTH
ABOVE WOULD RESULT IN A NON-EMPLOYEE DIRECTOR RECEIVING ANY FRACTIONAL SHARES OF
STOCK OR ELECTIVE OPTIONS EXERCISABLE FOR ANY FRACTIONAL SHARES OF STOCK, THEN,
IN LIEU OF SUCH FRACTIONAL SHARES OF STOCK OR SUCH PORTION OF ELECTIVE OPTIONS,
THE NON-EMPLOYEE DIRECTOR SHALL BE PAID CASH.
____FOR PURPOSES OF THIS SECTION 8(2), AN "INITIAL ELECTION" MEANS AN ELECTION
RECEIVED BY THE SECRETARY OF HOLDINGS FROM A NON-EMPLOYEE DIRECTOR ON A DATE NOT
LATER THAN THE LATER OF (A) 10 DAYS FOLLOWING THE DATE ON WHICH THE HOLDINGS
STOCKHOLDERS SHALL HAVE APPROVED THE ADDITION TO THE PLAN OF THIS SECTION 8(2)
AND (B) 10 DAYS AFTER A NON-EMPLOYEE DIRECTOR IS FIRST ELECTED A DIRECTOR OF
HOLDINGS.
SECTION 9. AMENDMENT AND TERMINATION.
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would impair the rights of a
Participant under any award theretofore granted without such Participant's
consent, or that without the approval of the stockholders (as described below)
would:
(1) except as provided in Section 3, increase the total number of shares of
Stock reserved for the purpose of the Plan;
(2) change the class of DIRECTORS, employees, consultants and advisors
eligible to participate in the Plan; or
(3) extend the maximum option period under paragraph (2) of Section 5 of the
Plan.
Notwithstanding the foregoing, stockholder approval under this Section [8] 9
shall only be required at such time and under such circumstances as stockholder
approval would be required under Rule 16b-3 of the Act with respect to any
material amendments to any employee benefit plan of the Company.
The Administrator may amend the terms of any award theretofore granted,
prospectively or retroactively, but, subject to Section 3 above, no such
amendment shall impair the rights of any holder without his or her consent.
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SECTION [9] 10. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.
SECTION [10] 11. GENERAL PROVISIONS.
(1) The Administrator may require each person purchasing shares pursuant to
a Stock Option, AN INITIAL ELECTION OPTION OR A REELECTION OPTION to represent
to and agree with the Company in writing that such person is acquiring the
shares without a view to distribution thereof. The certificates for ANY such
shares may include any legend which the Administrator deems appropriate to
reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.
(2) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangement may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any DIRECTOR, employee, consultant or advisor of the Company any
right to continued employment with, OR PROVISION OF SERVICES TO, the Company, as
the case may be, nor shall it interfere in any way with the right of the Company
to terminate the employment or service of any of its DIRECTORS, employees,
consultants or advisors at any time.
(3) Each Participant shall, no later than the date as of which the value of
an award first becomes includible in the gross income of the Participant for
federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any federal, state, or
local taxes of any kind required by law to be withheld with respect to the
award. The obligations of the Company under the Plan shall be conditional on the
making of such payments or arrangements, and the Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the Participant.
(4) No member of the Board or the Administrator, not any officer or employee
of the Company acting on behalf of the Board or the Administrator, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Board or the
Administrator and each and any officer or employee of the Company acting on
their behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action, determination or
interpretation.
SECTION [11] 12. EFFECTIVE DATE OF PLAN.
The Plan became effective (the "Effective Date") on October 26, 1993, the
date Holdings' stockholders formally approved the Plan.
SECTION [12] 13. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Limited Stock Appreciation Right,
Restricted Stock, Deferred Stock [OR], Performance Share, INITIAL ELECTION
OPTION OR REELECTION OPTION award shall be granted pursuant to the Plan on or
after the tenth anniversary of the Effective Date, but awards theretofore
granted may extend beyond that date.
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