UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended January 1, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _________ to __________
Commission File Number 0-6187
BANTA CORPORATION
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0148550
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(State or other jurisdiction (IRS Employer
of incorporation or organization) I.D. Number)
225 Main Street, Menasha, Wisconsin 54952
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (920) 751-7777
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
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Common Stock, $.10 par value New York Stock Exchange
Rights to Purchase Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (X) Yes ( ) No
Indicate by check mark if disclosure of delinquent files pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
Aggregate market value of voting stock held by non-affiliates of the
registrant as of March 3, 2000: $455,561,000.
Number of shares of common stock outstanding as of March 3, 2000:
25,398,503.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the year ended January 1, 2000
(incorporated into Parts I and II).
(2) Definitive Proxy Statement for annual meeting of shareholders to be held on
April 25, 2000 (incorporated into Part III).
<PAGE>
PART I
Item 1. Business.
General.
Banta Corporation (the "Corporation" or "Banta"), together with its
subsidiaries, is one of the largest printing organizations in the United States,
providing a broad range of printing and digital imaging services. The
Corporation was incorporated in Wisconsin in 1901. Its principal executive
offices are located at 225 Main Street, Menasha, Wisconsin, 54952. The
Corporation had a total of approximately 7,200 employees at the end of fiscal
1999.
The Corporation operates in two primary business segments, print and
turnkey services, with other business operations in healthcare products. The
print segment provides products, including digital imaging, and services to
publishers of educational and general books, special interest magazines, and is
a supplier of direct marketing materials and consumer and business catalogs. The
turnkey services segment provides supply-chain management, product assembly,
fulfillment and product localization services primarily to technology companies
in the U.S. and Europe. Healthcare products is primarily engaged in the
production of disposable products used in outpatient clinics, dental offices and
hospitals. Footnote 12 to the Corporation's Consolidated Financial Statements in
the Corporation's Annual Report to Shareholders for the fiscal year ended
January 1, 2000 includes further information on the Corporation's business
segments.
At the end of fiscal 1999, the Corporation's operations were conducted
at 35 production facilities in the United States located in Wisconsin,
Minnesota, California, Connecticut, Florida, Georgia, Illinois, Massachusetts,
Missouri, Ohio, Texas, Utah, Virginia and Washington and at five European
production facilities located in Ireland, Scotland and The Netherlands.
In the second quarter of 1999, the Corporation recorded a $55.0
million restructuring charge ($38.5 million or $1.40 per diluted share, after
tax). The restructuring primarily involved the Corporation's print segment and
resulted in three facility closings, the elimination of certain underperforming
business assets and a work force reduction of nearly 9%. These closings and the
related asset writedowns resulted from the Corporation's decision to exit
non-strategic businesses and discontinue activities that management determined
were unlikely to deliver future acceptable profitability and shareholder value.
Targeted objectives of the restructuring included earnings growth, increased
efficiencies and enhanced shareholder returns. The Corporation achieved its
cost-saving objectives for 1999 and expects substantial benefits to continue in
2000.
The following table sets forth the approximate percentage of printing
segment net sales contributed by each class of similar products and services
which accounted for ten percent or more of printing segment net sales for any of
the last three fiscal years.
1999 1998 1997
---- ---- ----
Books 29% 29% 30%
Direct Marketing 24 25 25
Catalogs 23 24 23
Magazines 17 16 14
Other 7 6 8
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TOTAL 100% 100% 100%
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During 1999, the Corporation acquired a 50 percent equity interest in
a newly formed joint venture, Banta G. Imagen S. de R.L. de C.V., based in
Queretaro Mexico, which provides a variety of products and services for the
commercial print market. The purchase price paid for the interest in the joint
venture was not material to the Corporation.
<PAGE>
This document includes forward-looking statements. Statements that
describe future expectations, plans, results or strategies are considered
forward-looking. Such statements are subject to certain risks and uncertainties
which could cause actual results to differ materially from those currently
anticipated. Factors that could affect actual results include, among others,
changes in customer order patterns or demand for the Corporation's products,
changes in raw material costs and availability, success with operational
start-ups, pricing actions by competitors, success in the implementation of the
Corporation's plan to enhance revenues and margins, and general changes in
economic conditions. These factors should be considered in evaluating the
forward-looking statements, and undue reliance should not be placed on such
statements. The forward-looking statements included herein are made as of the
date hereof, and the Corporation undertakes no obligation to update publicly
such statements to reflect subsequent events or circumstances.
Customers.
The Corporation sells its products and services to a large number of
customers and generally does not have long-term production contracts with its
customers. Production agreements covering one to three years are, however, more
frequent for turnkey services, magazine and catalog production. In addition to
these production agreements, the Corporation entered into three significant
long-term contracts during 1999. In October, the Corporation announced a
five-year agreement with Compaq Computer having a total revenue range of $600
million to $800 million. Under this contract, Banta will configure, test and
distribute worldwide Compaq's hard drives, which are used in mid-range and
high-end servers typically found in information technology centers. Banta opened
a 260,000-square-foot complex in Houston, Texas to serve North America.
Additional locations will be in Ireland and Singapore in connection with the
Compaq contract. In January 1999, the Corporation announced a 10-year, $100
million contract with IDG Books Worldwide, Inc. ("IDGB") to provide printing
services and advanced systems and technologies for order fulfillment and
distribution. To meet this requirement, Banta constructed a 250,000-square-foot,
state-of-the-art distribution center in Harrisonburg, Virginia, which will be
dedicated to the distribution of all IDGB products. The Corporation also entered
into a five-year, multimillion-dollar agreement to print and distribute ProBook
catalogs for The Home Depot.
Substantially all sales are made to customers through employees of the
Corporation and its subsidiaries based on customer specifications. The fifteen
largest customers accounted for approximately 25%, 29% and 27% of net sales
during 1999, 1998, and 1997, respectively. No customer accounted for more than
10% of the Corporation's net sales in 1999, 1998, or 1997. In the opinion of
management, the loss of any single customer would not have a material long-term
adverse effect on the Corporation.
Backlog.
The Corporation is primarily a manufacturing services company and
provides its customers with printing, converting and other services. Lead time
for services varies, depending upon the type of customer, the industry being
serviced and seasonal factors including cyclical paper availability. Backlogs
would be expressed in terms of time scheduled on equipment and not dollar value.
Consequently, the dollar value of backlog is not readily available.
Markets Served.
Set forth below is a description of the primary markets the
Corporation serves:
o Books
The Corporation prints consumable elementary and high school workbooks
and other products for publishers of educational and general book markets
including textbooks (primarily soft cover), testing materials and paperbound
books. Print opportunities in the consumable educational workbook market have
decreased during the last several years as publisher consolidations have
resulted in fewer companies offering educational products. Additionally, the
effort to improve the nation's educational system has prompted schools to invest
portions of their curriculum budget in alternate teaching methods. Some of these
efforts have replaced consumable workbooks with other instructional materials
including non-print services. A strong textbook adoption period is projected for
years 2000 and 2001, providing additional revenue opportunities from publishers
who participate in the state textbook adoption program.
<PAGE>
At the end of 1999, the Corporation had two facilities serving the
computer equipment and software industry's print manuals, both of which use
offset printing and high speed photocopying. In conjunction with the
Corporation's second quarter 1999 restructuring, the Kent, Washington facility
which served this market, was closed primarily due to the replacement of print
documentation with CD-ROM and online documentation. Remaining Banta operations
serving the software and documentation markets continue to reinforce their sales
efforts toward other publishers who utilize formats that fit the Corporation's
existing equipment, including self-help instructional books and other soft cover
products.
The Corporation's book units also produce multimedia products for
educational and other publishers. Services include project management, assembly,
fulfillment and distribution of customer products.
o Direct Marketing
Printed materials for direct marketing customers are provided
primarily by three plants. These products vary in format and size and include
magazine and catalog inserts, bill stuffers, brochures, booklets, cards and
target market products designed to sell a product or solicit a response. Over
the past several years, the Corporation has invested in imaging equipment which
personalizes direct mail pieces at press speeds. Banta believes that this
capability is important to its customers. With the closing of the facility in
Berkeley, Illinois, in conjunction with the 1999 second quarter restructuring,
the Corporation currently performs only limited mailing and fulfillment services
for its direct marketing customers.
o Catalogs
Two of the Corporation's facilities produce catalogs primarily for the
consumer, business-to-business, industrial and retail catalog markets. Bindery
services provide ink-jet labeling and demographic binding (which allows several
different versions of the same catalog to be bound simultaneously). Distribution
services are provided by various operating units of the Corporation, including
computerized mail distribution planning systems. The provision of these services
assist the Corporation's customers in minimizing postage costs and are an
integral part of catalog printing services.
o Magazines
The Corporation's three plants serving the magazine market print, sort
and mail magazines representing more than 750 different titles. These magazines
include primarily short-to-medium run publications (usually less than 350,000
copies) which are generally distributed to subscribers by mail. The
Corporation's magazine customers are primarily publishers of specialty
magazines, including religious, business and professional journals and hobby,
craft and sporting publications. The Corporation provides its customers with
computerized mailing lists and distribution services.
o Turnkey
The Corporation's product offerings in its turnkey market
classification include supply-chain management, manufacturing, procurement,
packaging, assembly and worldwide distribution services for computer software
publishers, as well as manufacturers of computer hardware and consumer
electronics primarily in the United States and Europe. These facilities also
perform computer disk replication, product packaging and distribution.
o Healthcare Products
One of the Corporation's operating units, Banta Healthcare Products,
Inc. (BHP), converts poly film and paper into single-use products for the
healthcare and food service industries. In addition, BHP extrudes films, using
both cast and blown extruders, for use in its manufacturing processes and for
sale to external customers. Its products include plastic garment covers,
examination gowns, stretcher sheets, and examination table paper and pillow
covers. During 1999, business alliances were formed in Europe, Canada, Latin
America and the Far East, opening access to product sourcing opportunities and
to international distribution.
<PAGE>
o Digital Imaging
Prepress services are provided by several of the Corporation's
facilities to publishers, printers and advertising agencies. Such services
include the conversion of full-color photographs, art and text into color
separated film and digital files for use in the production of printing plates.
These units also provide electronic graphic design, digital photography and
on-demand print services. During the last several years, these units have
diversified their customer base to include packaging customers and increased
their ability to maximize plant utilization by connecting their facilities
through an extensive network of high-speed telecommunication lines. The
Corporation also offers multiple graphic communication solutions to its
customers.
The Corporation's Digital Content Management Solutions Center in
Cambridge Massachusetts provides sophisticated database systems for archiving,
managing, retrieving and enabling multiple uses of customer digital information.
The Corporation's service offerings also include CD-ROM production, CD
Interactive programming and the development of interactive online products for
the World Wide Web including web site hosting and maintenance and electronic
commerce solutions. During 1999, the Corporation continued to invest in the Bo
media digital content management system that automates customer's production
process by streamlining information storage and retrieval for print and
electronic distribution. Initial software programs were developed in 1998 with
the enterprisewide software released in December 1999.
Competitive Conditions.
The Corporation is subject to competition from a large number of
companies, several of which have greater resources and capacity than the
Corporation. The graphic arts industry has continued to experience consolidation
over the last few years. This trend has resulted in fewer competitors, which are
larger than the Corporation in size and product offerings. The major competitive
factors in the Corporation's business are quality of finished products,
distribution capabilities, ongoing customer service, price and availability of
time on equipment, which is appropriate in size and function for a given
project. The consolidation of customers within certain of the Corporation's
markets provides both greater competitive pricing pressures and opportunities
for increased volume solicitation. In recent years, excess capacity in the
printing industry has resulted in lower unit prices. Despite the unit price
reductions, the Corporation has been able to remain competitive in part because
it is financially able to invest in modern technologically advanced equipment,
which helps reduce unit costs, and because of productivity gains resulting from
Continuous Improvement programs.
There are seasonal fluctuations in the usage of printing equipment
which in times of low demand and excess capacity can give rise to price
discounting. In the educational book market, for instance, activity is greater
in the first half of the year, and in the other markets, activity is greater in
the second half of the year. Computer software and hardware products for which
the Company provides fulfillment and printing services are also typically in
greater demand during the second half of the year, although the release of a new
product by a major customer can increase activity on an "event" basis at any
time during the year.
Raw Materials.
The principal raw material used by the Corporation is paper. Most of
the Corporation's production facilities are located in heavily concentrated
papermaking areas, and the Corporation can generally obtain quality paper at
competitive prices. The Corporation is not dependent upon any one source for its
paper or other raw materials.
During 1999, the price of paper fell significantly during the first
half of the year, but rebounded to near 1998 prices by year-end. It is customary
for printers to adjust sales prices to reflect market fluctuations in paper
prices. In 1998 and 1997 the price of paper grades used most frequently by the
Corporation remained stable.
The Corporation uses a number of other raw materials including ink,
resins, packaging materials and subcontracted components. The cost of these
materials remained relatively stable in 1999, 1998 and 1997.
<PAGE>
Development.
The graphic arts industry, made up primarily of firms much smaller in
size than the Corporation, tends to rely upon equipment and material suppliers
for research and development. The Corporation is engaged in long-range research
and development relating to technology and system enhancements, and has spent
significant amounts of money for such purposes. The Corporation believes that
its research and development investments are above the industry average. One of
the objectives of the Corporation's technical research and development effort is
to establish a competitive advantage in existing markets by focusing on
improving operating procedures, increasing machine speeds and improving
monitoring of paper usage, as well as working on the development of proprietary
inks, coatings, adhesives and machine modifications.
To help fulfill its research and development objectives, the
Corporation maintains labs staffed with full-time personnel whose task is to
enhance current technologies for market-specific applications. The effort is
guided by the Corporation's Research and Development Council, which is made up
of representatives from the Corporation's different operating groups. The
Corporation also has increased its emphasis on the development of new products
and services in many areas, including the development of digital technologies
that encompass software solutions for digital content management and electronic
commerce. During the last several years, 60 professional and technical employees
have worked primarily on research and development activities. Additionally,
approximately 10 persons from quality control and engineering devoted a portion
of their time to research and development.
The Corporation has environmental compliance programs primarily for
control of internal and external air quality, groundwater quality, disposal of
waste material and all aspects of the work environment concerning employee
health. Capital expenditures for air quality equipment have approximated 1% to
3% of total capital expenditures in each of the last three years. Planned
capital expenditures for environmental control equipment are expected to be in
the same range for 2000. The Corporation also incurs ongoing costs in monitoring
compliance with environmental laws, in connection with disposal of waste
materials and in connection with laws governing the remediation of sites at
which the Corporation has previously disposed of waste materials. Requirements
of the U.S. Environmental Protection Agency and state officials nationwide,
relating to disposal of wastes in landfill sites, are increasing and resulting
in higher costs for the Corporation and its competitors. Costs for environmental
compliance and waste disposal have not been material to the Corporation in the
past, but the Corporation presently believes that expenditures for these
purposes will have a negative impact on its earnings and those of its
competition in the future. These increased costs should not have a material
impact on the Corporation's competitive position, assuming similar expenditures
are required to be made by competitors. The Corporation does not believe at the
present time that any cost, claims or penalties that may be incurred or assessed
under environmental laws, in connection with known environmental assessment and
remediation matters, beyond any reserves already provided, will have a material
adverse effect upon the operations or consolidated financial position of the
Corporation.
Foreign Operations.
Footnote 12 to the Corporation's Consolidated Financial Statements in
the Corporation's Annual Report to Shareholders for the fiscal year ended
January 1, 2000 includes information on the Corporation's foreign operations.
The disclosures contained in such footnote are hereby incorporated herein by
reference.
<PAGE>
EXECUTIVE OFFICERS OF THE CORPORATION
Business Experience
Name, Age, Position During Last Five Years
Donald D. Belcher; 61................. Chairman of the Board of the Corporation
Chairman, President and Chief since May 1995; President and Chief
Executive Officer Executive Officer of the Corporation.
Gerald A. Henseler; 59................ Executive Vice President and Chief
Executive Vice President and Financial Officer of the Corporation.
Chief Financial Officer
Ronald D. Kneezel; 43................. Vice President, General Counsel and
Vice President, General Counsel Secretary of the Corporation.
and Secretary
Dennis J. Meyer; 44................... Vice President Marketing of the
Vice President Marketing Corporation.
John E. Tiffany; 60................... Vice President Manufacturing of the
Vice President Manufacturing Corporation.
Henry M. Wells, III; 55............... Vice President Human Resources of the
Vice President Human Resources Corporation since April 1996; Senior
Vice President of EJ Brach Corporation
(a confectioner) from 1988 until
joining the Corporation.
There are no family relationships between the executive officers of the
Corporation.
All of the executive officers are elected or appointed annually by the
Corporation's Board of Directors. Each officer holds office until his successor
has been elected or appointed or until his death, resignation or removal.
<PAGE>
Item 2. Properties.
The Corporation and its subsidiaries own operating plants located in
Wisconsin, Connecticut, Ohio, Minnesota, Missouri, North Carolina, Utah and
Virginia, as well as several warehouse facilities for storage of materials. As
of the end of fiscal 1999, these owned facilities included approximately
3,444,000 square feet of space utilized as follows: office space 317,000,
manufacturing 1,857,000 and warehouse 1,270,000. The Corporation leases its
headquarters office located in Menasha, Wisconsin. The Corporation also leases
production facilities in Wisconsin, California, Florida, Georgia, Illinois,
Massachusetts, Michigan, Minnesota, Texas, Utah and Washington, as well as
warehouse space in numerous locations. European production facilities located in
Ireland, Scotland and The Netherlands are also leased. The total of all leased
facilities contain approximately 3,336,000 square feet of space. The buildings
owned and leased by the Corporation are primarily of steel and brick
construction.
One plant owned by the Corporation and certain equipment are pledged
to secure issues of industrial revenue bonds in the principal amount of
$1,500,000 as of January 1, 2000.
Item 3. Legal Proceedings.
The Corporation is not involved in any material pending legal
proceedings, as defined by this item.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Under long-term debt agreements to which the Corporation is a party,
the payment of cash dividends by the Corporation is subject to certain
limitations. As of January 1, 2000, approximately $89,965,000 of retained
earnings was not restricted under these agreements.
The information set forth under the caption "Dividend Record and
Market Prices" (but excluding the graphs related thereto) in the Corporation's
Annual Report to Shareholders for the fiscal year ended January 1, 2000 is
hereby incorporated herein by reference in response to this Item.
Item 6. Selected Financial Data.
The information set forth under the caption "Five-Year Summary of
Selected Financial Data" (but excluding the graphs related thereto) in the
Corporation's Annual Report to Shareholders for the fiscal year ended January 1,
2000 is hereby incorporated herein by reference in response to this Item.
Item 7. Management's Discussion and Analysis of Financial Condition and
Operations.
The information set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Operations" in the Corporation's Annual
Report to Shareholders for the fiscal year ended January 1, 2000 is hereby
incorporated herein by reference in response to this item.
<PAGE>
Item 7A. Quantitative and Qualitative Discussion about Market Risk.
The information set forth under the caption "Management's Discussion
and Analysis of Financial Position and Operations" in the Corporation's Annual
Report to Shareholders for the fiscal year ended January 1, 2000 is hereby
incorporated herein by reference in response to this item.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Balance Sheets of the Corporation and subsidiaries as
of January 1, 2000 and January 2, 1999, and the related consolidated Statements
of Earnings, Cash Flows and Shareholders' Investment for the fiscal years ended
January 1, 2000, January 2, 1999 and January 3, 1998, together with the related
notes thereto and the Report of Independent Public Accountants thereon set forth
in the Corporation's Annual Report to Shareholders for the fiscal year ended
January 1, 2000, are hereby incorporated herein by reference in response to a
portion of this item.
The information set forth under the caption "Unaudited Quarterly
Financial Information" in the Corporation's Annual Report to Shareholders for
the fiscal year ended January 1, 2000 is hereby incorporated herein by reference
in response to a portion of this item.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information under the captions "Election of Directors" and "Other
Matters-Section 16(a) Beneficial Ownership Reporting Compliance" contained in
the Corporation's definitive proxy statement for the annual meeting of
shareholders to be held on April 25, 2000, as filed with the Securities Exchange
Commission, is hereby incorporated herein by reference in response to a portion
of this item. Reference is also made to the information under the heading
"Executive Officers of the Corporation" included under Item 1 of Part I of this
report.
Item 11. Executive Compensation.
The information under the captions "Board of Directors" and "Executive
Compensation" (other than the information under the subheading "Committee Report
on Executive Compensation") contained in the Corporation's definitive proxy
statement for the annual meeting of shareholders to be held on April 25, 2000,
as filed with the Securities and Exchange Commission, is hereby incorporated
herein by reference in response to this item.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information under the caption "Stock Ownership" contained in the
Corporation's definitive proxy statement for the annual meeting of shareholders
to be held on April 25, 2000, as filed with the Securities and Exchange
Commission, is hereby incorporated herein by reference in response to this item.
Item 13. Certain Relationships and Related Transactions.
The information under the caption " Election of Directors" contained
in the Corporation's definitive proxy statement for the annual meeting of
shareholders to be held on April 25, 2000, as filed with the Securities and
Exchange Commission, is hereby incorporated herein by reference in response to
this item.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
PAGE REFERENCE
ANNUAL REPORT
FORM 10-K TO SHAREHOLDERS
1. Financial Statements:
Report of Independent Public Accountants 23
Consolidated Balance Sheets
January 1, 2000 and January 2, 1999 24
For the fiscal years ended January 1, 2000,
January 2, 1999, and January 3, 1998:
Consolidated Statements of Earnings 25
Consolidated Statements of Cash Flows 26
Consolidated Statements of
Shareholders' Investments 27
Notes to Consolidated Financial Statements 28-36
2. Financial Statement Schedule:
Report of Independent Public Accountants 14
Schedule II - Valuation and Qualifying Accounts 15
All other schedules have been omitted since the required information is
included in the consolidated financial statements or notes thereto, or
because the information is not required or applicable.
3. Exhibits:
(a) Articles of Incorporation, as amended(1)
(b) Bylaws, as amended(2)
4. (a) Note Purchase Agreement dated June 24, 1988(3)
(b) Promissory Note Agreement dated July 17, 1990(4)
(c) Rights Agreement dated October 29, 1991(5)
(d) Note Purchase and Private Shelf Agreement dated May 12, 1994(6)
(e) Amendment to Promissory Note Agreement dated July 17, 1990(7)
(f) Note Purchase and Medium-term Note Agreement Dated November 2, 1995(8)
[Note: The registrant has outstanding certain issues of industrial revenue
bonds, none of which authorize the issuance of securities in an amount
exceeding 10% of the registrant's consolidated assets. The registrant
hereby agrees to furnish to the Commission upon request a copy of any
instrument with respect to long-term debt under which the total amount of
securities authorized does not exceed 10% of the registrant's consolidated
assets.]
<PAGE>
*10. (a) Amended and Restated Supplemental Retirement Plan for Key Employees(9)
(b) Amendment to Amended and Restated Supplemental Retirement Plan for Key
Employees(10)
(c) Agreement with Gerald A. Henseler(11)
(d) Agreement with Ronald D. Kneezel
(e) Form of Agreements with Dennis J. Meyer, John E. Tiffany and Henry M.
Wells III
(f) Agreement with Donald D. Belcher
(g) 1985 Deferred Compensation Plan for Key Employees, as amended and
restated(12)
(h) 1988 Deferred Compensation Plan for Key Employees, as amended and
restated(13)
(i) Basic Form of Deferred Compensation Agreements under (pre-January
1994) 1985 and 1988 Deferred Compensation Plans for Key Employees(14)
(j) Basic Form of Deferred Compensation under (post-December 1993) 1988
Deferred Compensation plan for Key Employees(15)
(k) Deferred Compensation Plan for Directors, as amended(16)
(l) Revised Form of Indemnity Agreements with Directors and Certain
Officers(17)
(m) Executive Trust Agreement(18)
(n) Amendment to Executive Trust Agreement(19)
(o) 1991 Stock Option Plan, as amended(20)
(p) Description of Supplemental Long-term Disability Plan(21)
(q) Letter Agreement with Donald D. Belcher(22)
(r) Agreement with Gerald A. Henseler(23)
(s) Banta Corporation 1995 Equity Incentive Plan, as amended(24)
(t) Banta Corporation Director Stock Grant Plan(25)
(u) Economic Profit Incentive Compensation Plan(26)
(v) Economic Profit Long-term Incentive Compensation Plan(27)
(w) Amendments to Economic Profit Incentive Plan and Economic Profit
Long-term Incentive Compensation Plan
(x) Key Management Retention Plan(28)
13. Portions of Annual Report to Shareholders for fiscal year ended January 1,
2000 that are incorporated by reference herein.
21. List of Subsidiaries.
23. Consent of Arthur Anderson LLP.
27. Financial Data Schedule for the twelve-month period ended January 1, 2000.
* Exhibits 10(a) through 10(x) are management contracts or compensatory plans
or arrangements. All documents incorporated herein by reference are filed
with the Commission under File No. 0-6187.
<PAGE>
(1) Exhibit No. 19(b) to Form 10-Q for the quarter ended April 3, 1993 is
hereby incorporated herein by reference.
(2) Exhibit No. 3(c) to Form 10-K for the year ended January 2, 1999 is hereby
incorporated herein by reference
(3) Exhibit No. 4(a) to Form 10-Q for the quarter ended July 2, 1988 is hereby
incorporated herein by reference.
(4) Exhibit No. 4 to Form 10-Q for the quarter ended September 29, 1990 is
hereby incorporated herein by reference.
(5) Exhibit No. 4.1 to the Form 8-K dated October 29, 1991 is hereby
incorporated herein by reference.
(6) Exhibit No. 4(a) to Form 10-Q for the quarter ended July 2, 1994 is hereby
incorporated herein by reference.
(7) Exhibit No. 4(c) to Form 10-Q for the quarter ended July 2, 1994 is hereby
incorporated herein by reference.
(8) Exhibit No. 4(a) to Form 10-Q for the quarter ended September 30, 1995 is
hereby incorporated herein by reference.
(9) Exhibit No. 10(a) to Form 10-K for the year ended December 30, 1995 is
hereby incorporated herein by reference.
(10) Exhibit No. 10(b) to Form 10-K for the year ended December 28, 1996 is
hereby incorporated herein by reference.
(11) Exhibit No. 10 to From 10-K for the year ended January 1, 1983 is hereby
incorporated herein by reference.
(12) Exhibit No. 10(j) to Form 10-K for the year ended December 30, 1989 is
hereby incorporated herein by reference.
(13) Exhibit No. 10(a) to Form 10-Q for the quarter ended April 2, 1994 is
hereby incorporated herein by reference.
(14) Exhibit No. 10(l) to Form 10-K for the year ended December 30, 1989 is
hereby incorporated herein by reference.
All documents incorporated herein by reference are filed with the Commission
under File No. 0-6187.
<PAGE>
(15) Exhibit No. 10(b) to Form 10-Q for the quarter ended April 2, 1994 is
hereby incorporated herein by reference.
(16) Exhibit No. 10(m) to Form 10-K for the year ended December 28, 1996 is
hereby incorporated herein by reference.
(17) Exhibit No. 10(a) to Form 10-Q for the quarter ended March 28, 1992 is
hereby incorporated herein by reference .
(18) Exhibit No. 10(r) to Form 10-K for the year ended December 30, 1989 is
hereby incorporated herein by reference.
(19) Exhibit No. 10(s) to Form 10-K for the year ended January 1, 1994 is hereby
incorporated herein by reference.
(20) Exhibit No. 10(t) to Form 10-K for the year ended December 28, 1996 is
hereby incorporated herein by reference.
(21) Exhibit No. 10(a) to Form 10-Q for the quarter ended October 2, 1993 is
hereby incorporated herein by reference.
(22) Exhibit No. 10(a) to Form 10-Q for the quarter ended October 1, 1994 is
hereby incorporated herein by reference.
(23) Exhibit No. 10(dd) to Form 10-K for the year ended December 31, 1994 is
hereby incorporated herein by reference.
(24) Exhibit No. 10.1 to Form 10-Q for the quarter ended July 3, 1999 is hereby
incorporated herein by reference.
(25) Exhibit No. 10(z) to Form 10-K for the year ended December 28, 1996 is
hereby incorporated herein by reference.
(26) Exhibit No. 10(x) to Form 10-K for the year ended January 3, 1998 is hereby
incorporated herein by reference.
(27) Exhibit No. 10(y) to Form 10-K for the year ended January 3, 1998 is hereby
incorporated herein by reference.
(28) Exhibit No. 10.4 to Form 10-Q for the quarter ended July 3, 1999 is hereby
incorporated herein by reference.
All documents incorporated herein by reference are filed with the Commission
under File No. 0-6187.
(b) No Current Reports on Form 8-K were filed by the Corporation during the
quarter ended January 1, 2000.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in the Banta Corporation annual
report to shareholders and incorporated by reference in this Form 10-K, and have
issued our report thereon dated January 31, 2000. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed in the index in item 14(a) (2) is the responsibility of the Corporation's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
The schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
----------------------------------------
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 31, 2000.
<PAGE>
<TABLE>
BANTA CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED January 1, 2000, January 2, 1999 and January 3, 1998
<CAPTION>
DOLLARS IN THOUSANDS
-------------------------------------------------------------------------------
BALANCE, ADDITIONS CHARGES
BEGINNING OF CHARGED TO TO BALANCE, END
YEAR EARNINGS RESERVE, NET OTHER OF YEAR
------------ ------------ ------------ ----------- ------------
Reserve for Doubtful
Receivables:
<S> <C> <C> <C> <C> <C>
1999 $ 3,835 $ 3,189 $ 2,097 $ 0 $ 4,927
=========== =========== =========== ========== ===========
1998 $ 3,708 $ 1,728 $ 1,757 $ 156 (1) 3,835
=========== =========== =========== ========== ===========
1997 $ 3,486 $ 1,408 $ 1,436 $ 250 (1) $ 3,708
=========== =========== =========== ========== ===========
</TABLE>
(1) Consists of additions to the reserve related to acquisitions.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BANTA CORPORATION
DATE: March 31, 2000 BY: /s/ DONALD D. BELCHER
------------------ ---------------------
Donald D. Belcher,
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ DONALD D. BELCHER March 31, 2000
- --------------------------------------------- ------------------
Donald D. Belcher, Chairman, President and
Chief Executive Officer
/s/ GERALD A. HENSELER March 31, 2000
- --------------------------------------------- -----------------
Gerald A. Henseler, Executive Vice President,
Chief Financial Officer, and Director
/s/ BERNARD S. KUBALE March 31, 2000
- --------------------------------------------- -----------------
Bernard S. Kubale, Director
/s/ JAMESON A. BAXTER March 31, 2000
- --------------------------------------------- -----------------
Jameson A. Baxter, Director
/s/ RICHARD L. GUNDERSON March 31, 2000
- --------------------------------------------- -----------------
Richard L. Gunderson, Director
/s/ JOHN F. BERGSTROM March 31, 2000
- --------------------------------------------- -----------------
John F. Bergstrom, Director
<PAGE>
BANTA CORPORATION
EXHIBIT INDEX
Exhibit No. Description
10. (d) Agreement with Ronald D. Kneezel
(e) Form of Agreements with Dennis J. Meyer, John E. Tiffany and
Henry M. Wells III
(f) Agreement with Donald D. Belcher
(w) Amendments to Economic Profit Incentive Plan and Economic Profit
Long-term Incentive Compensation Plan
13. Portions of Annual Report to Shareholders for fiscal year ended
January 1, 2000 that are incorporated by reference herein.
21. List of Subsidiaries.
23. Consent of Arthur Anderson LLP.
27. Financial Data Schedule for the twelve-month period ended January 1,
2000.
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 31st day of December,
1999, by and between Banta Corporation, a Wisconsin corporation (hereinafter
referred to as the "Company"), and Ronald D. Kneezel (hereinafter referred to as
"Executive").
W I T N E S S E T H :
WHEREAS, the Executive is employed by the Company and/or a subsidiary of
the Company (collectively, the "Employer") in a key executive capacity and the
Executive's services are valuable to the conduct of the business of the Company;
WHEREAS, the Company recognizes that circumstances may arise in which a
change in control of the Company occurs, through acquisition or otherwise,
thereby causing uncertainty about the Executive's future employment with the
Employer without regard to the Executive's competence or past contributions
which uncertainty may result in the loss of valuable services of the Executive
to the detriment of the Company and its shareholders, and the Company and the
Executive wish to provide reasonable security to the Executive against changes
in the Executive's relationship with the Employer in the event of any such
change in control;
WHEREAS, the Company and the Executive are desirous that any proposal for
a change in control or acquisition of the Company will be considered by the
Executive objectively and with reference only to the best interests of the
Company and its shareholders; and
WHEREAS, the Executive will be in a better position to consider the
Company's best interests if the Executive is afforded reasonable security, as
provided in this Agreement, against altered conditions of employment which could
result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
<PAGE>
1. Definitions.
(a) Act. For purposes of this Agreement, the term "Act" means the
Securities Exchange Act of 1934, as amended.
(b) Affiliate and Associate. For purposes of this Agreement, the terms
"Affiliate" and "Associate" shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations of the Act.
(c) Beneficial Owner. For purposes of this Agreement, a Person shall be
deemed to be the "Beneficial Owner" of any securities:
(i) which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, (A) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase, or (B) securities issuable upon exercise of Rights issued
pursuant to the terms of the Company's Rights Agreement with First
Wisconsin Trust Company (n/k/a Firstar Bank, N.A.) dated as of October 29,
1991, as amended from time to time (or any successor to such Rights
Agreement), at any time before the issuance of such securities;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Act), including pursuant to any
agreement, arrangement or understanding; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security under this subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if the agreement,
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<PAGE>
arrangement or understanding: (A) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
rules and regulations under the Act and (B) is not also then reportable on
a Schedule 13D under the Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in Subsection 1(c)(ii) above) or disposing of any voting
securities of the Company.
(d) Cause. "Cause" for termination by the Employer of the Executive's
employment after the Effective Date shall, for purposes of this Agreement, be
limited to (i) misappropriation by the Executive of funds of the Employer; (ii)
the Executive personally and secretly obtaining profits from dealings with the
Employer; (iii) the Executive's unreasonable neglect of, or refusal to perform,
his duties or responsibilities (unless significantly changed without the
Executive's consent); and (iv) conviction of a serious crime involving moral
turpitude.
(e) Change in Control of the Company. For purposes of this Agreement, a
"Change in Control of the Company" shall be deemed to occur if (i) any Person
becomes the Beneficial Owner of more than 30% of the outstanding voting stock of
the Company, (A) in whole or in part by means of an offer made to the holders of
any one or more classes of such voting stock to acquire such shares for cash,
securities, other property or any combination thereof, or (B) by any other
means; (ii) the Company sells, transfers or assigns all or substantially all of
its business and assets; (iii) the Company consolidates with or merges into any
other corporation, unless the Company or a subsidiary of the Company is the
continuing or surviving corporation; (iv) the Company acquires, whether through
purchase, merger or otherwise, all or substantially all of the operating assets
or capital stock of another entity and in connection with such acquisition
persons are elected or appointed to the Board of Directors of the Company who
are not directors immediately prior to such acquisition and such persons
constitute a majority of the Board of Directors after such acquisition; or (v)
any Person
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<PAGE>
succeeds in electing two or more directors of the Company in any one election in
opposition to those nominees proposed by management of the Company.
(f) Code. For purposes of this Agreement, the term "Code" means the
Internal Revenue Code of 1986, including any amendments thereto or successor tax
codes thereof.
(g) Covered Termination. For purposes of this Agreement, the term "Covered
Termination" means any termination of the Executive's employment during the
Employment Period where the Termination Date is any date on or prior to the end
of such Employment Period.
(h) Effective Date. For purposes of this Agreement, the term "Effective
Date" shall mean the first day on which a Change in Control of the Company
occurs. Anything in this Agreement to the contrary notwithstanding, if a Change
in Control of the Company occurs and if the Executive's employment with the
Employer is terminated (whether by the Employer, the Executive or otherwise)
during the period of 180 days prior to the date on which the Change in Control
of the Company occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment (i) was at the request of a third party who
has taken steps reasonably calculated to effect a Change in Control of the
Company or (ii) otherwise arose in connection with or in anticipation of a
Change in Control of the Company, then for all purposes of this Agreement, the
term "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
(i) Employment Period. For purposes of this Agreement, the term
"Employment Period" means a period commencing on the Effective Date, and ending
at 11:59 p.m. Central Time on the earlier of the third anniversary of such date
or the Executive's Normal Retirement Date.
(j) Good Reason. For purposes of this Agreement, the Executive shall have
a "Good Reason" for termination of employment on or after the Effective Date in
the event of:
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<PAGE>
(i) any breach of this Agreement by the Company, including
specifically any breach by the Company of its agreements contained in
Sections 4, 5 or 6 hereof;
(ii) the removal of the Executive from, or any failure to reelect or
reappoint the Executive to, any of the positions held with the Employer at
any time during the 180-day period prior to the Effective Date or any
other positions with the Employer to which the Executive shall thereafter
be elected, appointed or assigned, except in the event that such removal
or failure to reelect or reappoint (A) relates to the termination by the
Employer of the Executive's employment for Cause or by reason of
disability pursuant to Section 12 hereof, or (B) is consented to in
writing by the Executive;
(iii) a good faith determination by the Executive that there has
been a significant adverse change, without the Executive's written
consent, in the Executive's working conditions or status with the Employer
from such working conditions or status in effect during the 180-day period
prior to the Effective Date, including but not limited to (A) a
significant change in the nature or scope of the Executive's authority,
powers, functions, duties or responsibilities, or (B) a significant
reduction in the level of support services, staff, secretarial and other
assistance, office space and accoutrements; or
(iv) failure by the Company to obtain the Agreement referred to in
Section 18(a) hereof as provided therein.
(k) Normal Retirement Date. For purposes of this Agreement, the term
"Normal Retirement Date" means "Normal Retirement Date" as defined in the Banta
Corporation Employees Pension Plan, or any successor plan, as in effect on the
Effective Date.
(l) Notice of Termination. For purposes of this Agreement, the term
"Notice of Termination" means a written notice as contemplated by Section 14
hereof.
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<PAGE>
(m) Person. For purposes of this Agreement, the term "Person" shall mean
any individual, firm, partnership, corporation or other entity, including any
successor (by merger or otherwise) of such entity, or a group of any of the
foregoing acting in concert.
(n) Termination Date. For purposes of this Agreement, except as otherwise
provided in Section 10(b) and Section 18(a) hereof, the term "Termination Date"
means (i) if the Executive's employment is terminated by the Executive's death,
the date of death; (ii) if the Executive's employment is terminated by reason of
voluntary early retirement, as agreed in writing by the Company and the
Executive, the date of such early retirement which is set forth in such written
agreement; (iii) if the Executive's employment is terminated for purposes of
this Agreement by reason of disability pursuant to Section 12 hereof, the
earlier of thirty days after the Notice of Termination is given or one day prior
to the end of the Employment Period; (iv) if the Executive's employment is
terminated by the Executive voluntarily (other than for Good Reason), the date
the Notice of Termination is given; and (v) if the Executive's employment is
terminated by the Company (other than by reason of disability pursuant to
Section 12 hereof) or by the Executive for Good Reason, the earlier of thirty
days after the Notice of Termination is given or one day prior to the end of the
Employment Period. Notwithstanding the foregoing,
(A) If termination is for Cause pursuant to Section 1(d)(iii) of this
Agreement and if the Executive has cured the conduct constituting such Cause as
described by the Company in its Notice of Termination within such thirty-day or
shorter period, then the Executive's employment hereunder shall continue as if
the Company had not delivered its Notice of Termination.
(B) If the Company shall give a Notice of Termination for Cause or by
reason of disability and the Executive in good faith notifies the Company that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue his
employment during such dispute and the Termination Date shall be determined
under this paragraph. If the Executive so elects and it is thereafter determined
that Cause or disability (as the case may be) did exist, the Termination Date
shall be the earlier of (1) the date on which the dispute is finally determined,
either (x) by mutual written agreement of the parties or (y) in accordance with
Section 23 hereof, (2) the date of
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<PAGE>
the Executive's death, or (3) one day prior to the end of the Employment Period.
If the Executive so elects and it is thereafter determined that Cause or
disability (as the case may be) did not exist, then the employment of the
Executive hereunder shall continue after such determination as if the Company
had not delivered its Notice of Termination and there shall be no Termination
Date arising out of such Notice. In either case, this Agreement continues, until
the Termination Date, if any, as if the Company had not delivered the Notice of
Termination except that, if it is finally determined that the Company properly
terminated the Executive for the reason asserted in the Notice of Termination,
the Executive shall in no case be entitled to a Termination Payment (as
hereinafter defined) arising out of events occurring after the Company delivered
its Notice of Termination.
(C) If the Executive shall in good faith give a Notice of Termination for
Good Reason and the Company notifies the Executive that a dispute exists
concerning the termination within the fifteen-day period following receipt
thereof, then the Executive may elect to continue his employment during such
dispute and the Termination Date shall be determined under this paragraph. If
the Executive so elects and it is thereafter determined that Good Reason did
exist, the Termination Date shall be the earlier of (1) the date on which the
dispute is finally determined, either (x) by mutual written agreement of the
parties or (y) in accordance with Section 23 hereof, (2) the date of the
Executive's death or (3) one day prior to the end of the Employment Period. If
the Executive so elects and it is thereafter determined that Good Reason did not
exist, then the employment of the Executive hereunder shall continue after such
determination as if the Executive had not delivered the Notice of Termination
asserting Good Reason and there shall be no Termination Date arising out of such
Notice. In either case, this Agreement continues, until the Termination Date, if
any, as if the Executive had not delivered the Notice of Termination except
that, if it is finally determined that Good Reason did exist, the Executive
shall in no case be denied the benefits described in Sections 8(b) and 9 hereof
(including a Termination Payment) based on events occurring after the Executive
delivered his Notice of Termination.
(D) If an opinion is required to be delivered pursuant to Section
9(b)(iii) hereof and such opinion shall not have been delivered, the Termination
Date shall be the
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<PAGE>
earlier of the date on which such opinion is delivered or one day prior to the
end of the Employment Period.
(E) Except as provided in Paragraphs (B) and (C) above, if the party
receiving the Notice of Termination notifies the other party that a dispute
exists concerning the termination within the fifteen-day period following
receipt thereof and it is finally determined that the reason asserted in such
Notice of Termination did not exist, then (1) if such Notice was delivered by
the Executive, the Executive will be deemed to have voluntarily terminated his
employment and (2) if delivered by the Company, the Company will be deemed to
have terminated the Executive other than by reason of death, disability or
Cause.
2. Termination or Cancellation Prior to the Effective Date. The Employer
and the Executive shall each retain the right to terminate the employment of the
Executive at any time prior to the Effective Date. In the event the Executive's
employment is terminated prior to the Effective Date, this Agreement shall be
terminated and cancelled and of no further force and effect and any and all
rights and obligations of the parties hereunder shall cease.
3. Employment Period. If the Executive is employed by the Company or a
subsidiary of the Company on the Effective Date, the Company will, or will cause
the Employer to, continue thereafter to employ the Executive during the
Employment Period, and the Executive will remain in the employ of the Employer,
in accordance with and subject to the terms and provisions of this Agreement.
Any termination of the Executive's employment during the Employment Period which
results in a complete termination of the Executive's employment with the Company
and its subsidiaries, whether by the Company or a subsidiary of the Company,
shall be deemed a termination by the Company for purposes of this Agreement.
4. Duties. During the Employment Period, the Executive shall, in the most
significant capacities and positions held by the Executive at any time during
the 180-day period preceding the Effective Date or in such other capacities and
positions as may be agreed to by the Company and the Executive in writing,
devote the Executive's best efforts and all of the Executive's business time,
attention and skill to the business and affairs of the Employer, as such
business and affairs now exist and as they may hereafter be conducted. The
services
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<PAGE>
which are to be performed by the Executive hereunder are to be rendered in the
same metropolitan area in which the Executive was principally employed during
the 180-day period prior to the Effective Date, or in such other place or places
as shall be mutually agreed upon in writing by the Executive and the Company
from time to time. Without the Executive's consent the Executive shall not be
required to be absent from such metropolitan area more than 60 days in any
fiscal year of the Company.
5. Compensation. During the Employment Period, the Executive shall be
compensated as follows:
(a) The Executive shall receive, at reasonable intervals (but not less
often than monthly) and in accordance with such standard policies as may be in
effect immediately prior to the Effective Date, an annual base salary in cash
equivalent of not less than twelve times the Executive's highest monthly base
salary for the twelve-month period immediately preceding the month in which the
Effective Date occurs (which base salary shall, unless otherwise agreed in
writing by the Executive, include the current receipt by the Executive of any
amounts which, prior to the Effective Date, the Executive had elected to defer,
whether such compensation is deferred under Section 401(k) of the Code or
otherwise), subject to upward adjustment as provided in Section 6 hereof (such
salary amount as adjusted upward from time to time is hereafter referred to as
the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least equal in value to
those provided for the Executive at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to executives of
the Employer of comparable status and position to the Executive. The Executive
shall be reimbursed, at such intervals and in accordance with such standard
policies that are most favorable to the Executive which were in effect at any
time during the 180-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time after the
Effective Date to executives of the Employer of comparable status and position
to the Executive, for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Employer, including travel expenses.
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(c) The Executive shall be included, to the extent eligible thereunder
(which eligibility shall not be conditioned on the Executive's salary grade or
on any other requirement which excludes persons of comparable status and
position to the Executive unless such exclusion was in effect for such plan or
an equivalent plan immediately prior to the Effective Date), in any and all
plans providing benefits for the Company's salaried employees in general,
including but not limited to group life insurance, hospitalization, medical,
dental, profit sharing and stock bonus plans; provided, that, in no event shall
the aggregate level of benefits under such plans in which the Executive is
included be less than the aggregate level of benefits under plans of the Company
and its subsidiaries of the type referred to in this Section 5(c) in which the
Executive was participating at any time during the 180-day period immediately
preceding the Effective Date.
(d) The Executive shall annually be entitled to not less than the amount
of paid vacation and not fewer than the number of paid holidays to which the
Executive was entitled annually at any time during the 180-day period
immediately preceding the Effective Date or such greater amount of paid vacation
and number of paid holidays as may be made available annually to other
executives of the Company and its subsidiaries of comparable status and position
to the Executive.
(e) The Executive shall be included in all plans providing additional
benefits to executives of the Company of comparable status and position to the
Executive, including but not limited to deferred compensation, split-dollar life
insurance, supplemental retirement, stock option, stock appreciation, stock
bonus, long-term incentive compensation (including, without limitation, benefits
under the Company's Economic Profit Long-Term Incentive Compensation Plan or any
successor thereto (the "Long-Term EP Plan")) and similar or comparable plans;
provided, that, in no event shall the aggregate level of benefits under such
plans be less than the aggregate level of benefits under plans of the Company of
the type referred to in this Section 5(e) in which the Executive was
participating at any time during the 180-day period immediately preceding the
Effective Date; provided, further, that any financial or other goals that must
be satisfied in order to be eligible for an award under any such plan shall be
attainable with approximately the same degree of probability as the goals, in
the form most favorable to the Executive, under any comparable plan which was in
effect at any time
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<PAGE>
during the 180-day period prior to the Effective Date and in view of the
Company's existing and projected financial and business circumstances applicable
at the time; provided, further, that in the event the financial or other goals
are not achieved such that the entire amount of incentive compensation is
payable, the plan shall provide for the payment of an amount of incentive
compensation equal to a portion of the maximum payout reasonably related to that
portion of the goals that were achieved; provided, further, that, in the event a
Termination Payment (as defined herein) is otherwise due the Executive and the
Executive is not employed for the entire period for which the incentive
compensation is payable, payment of incentive compensation under each such plan
shall be made on a prorated basis based on the time employed during such period
and calculated with the assumption that the "target" award for which the
Executive is eligible has been earned; provided, further, that payment of
incentive compensation shall not be affected by any circumstance occurring
subsequent to the end of the Employment Period, including termination of the
Executive's employment; and provided, further, that the Company's obligation to
include the Executive in annual bonus or annual incentive compensation plans
shall be determined by Subsection 5(f) hereof.
(f) To assure that the Executive will have an opportunity to earn
incentive compensation on an annual basis after the Effective Date, the
Executive shall be included in a bonus plan of the Company which shall satisfy
the standards described below (such plan, the "Bonus Plan"). Bonuses under the
Bonus Plan shall be payable with respect to achieving such financial or other
goals reasonably related to the business of the Company as the Company shall
establish (the "Goals"), all of which Goals shall be attainable, prior to the
end of the Employment Period, with approximately the same degree of probability
as the goals under the Company's Economic Profit Incentive Compensation Plan, or
the successor to such plan, in the form most favorable to the Executive which
was in effect at any time during the 180-day period prior to the Effective Date
(the "EP Plan") and in view of the Company's existing and projected financial
and business circumstances applicable at the time. The amount of the bonus (the
"Bonus Amount") that the Executive is eligible to earn under the Bonus Plan
shall be no less than the amount of the Executive's maximum award provided in
the EP Plan (such bonus amount herein referred to as the "Target Bonus"), and in
the event the Goals are not achieved such that the entire Target Bonus is not
payable, the Bonus Plan shall provide for a payment of a Bonus Amount equal to a
portion of the Target Bonus reasonably related to that
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<PAGE>
portion of the Goals which were achieved. In the event a Termination Payment is
otherwise due the Executive and the Executive is not employed for the entire
period for which the Bonus Amount is payable, payment of the Bonus Amount shall
be made on a prorated basis based on the time employed during the period and
calculated with the assumption that the "target" bonus for which the Executive
is eligible has been earned. Payment of the Bonus Amount shall not be affected
by any circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment.
6. Annual Compensation Adjustments. During the Employment Period, the
Board of Directors of the Company (or an appropriate committee thereof) will
consider and appraise, at least annually, the contributions of the Executive to
the Employer, and in accordance with the Company's practice prior to the
Effective Date, due consideration shall be given at least annually, to the
upward adjustment of the Executive's Annual Base Salary (i) commensurate with
increases generally given to other executives of the Employer of comparable
status and position to the Executive, and (ii) as the scope of the Employer's
operations or the Executive's duties expand.
7. Termination For Cause or Without Good Reason. If there is a Covered
Termination for Cause or due to the Executive's voluntarily terminating his
employment other than for Good Reason (any such terminations to be subject to
the procedures set forth in Section 14 hereof), then the Executive shall be
entitled to receive only Accrued Benefits pursuant to Section 9(a) hereof.
8. Termination Giving Rise to a Termination Payment. (a) If there is a
Covered Termination by the Executive for Good Reason, or by the Company other
than by reason of (i) death, (ii) disability pursuant to Section 12 hereof, or
(iii) Cause (any such terminations to be subject to the procedures set forth in
Section 14 hereof), then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in lieu of further base salary
for periods following the Termination Date, as liquidated damages and additional
severance pay and in consideration of the covenant of the Executive set forth in
Section 15(a) hereof, the Termination Payment pursuant to Section 9(b) hereof.
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(b) If there is a Covered Termination and the Executive is entitled to
Accrued Benefits and the Termination Payment, then the Executive shall be
entitled to the following additional benefits:
(i) The Executive will be entitled to pension benefits in addition
to the most favorable benefits provided for him under any version of the
Company's Employees Pension Plan and the Company's Supplemental Retirement
Plan (or any successors to such plans) in effect at any time during the
180-day period prior to the Effective Date (the "Retirement Plans"). The
amount of additional pension benefits will be equal to the difference
between the amount the Executive (or in the event of the Executive's
death, the Executive's surviving spouse or other beneficiary) would be
actually entitled to receive upon retirement under the terms and
conditions of the Retirement Plans and the amount the Executive (or such
surviving spouse or beneficiary) would have been entitled to receive under
such terms and conditions if (A) the Executive's benefits under the
Retirement Plans had been fully vested on the Termination Date and (B) (1)
if the Executive is 50 years of age or less on the Termination Date the
Executive had continued to work for the remainder of the Employment Period
or (2) if the Executive is over 50 years of age on the Termination Date he
had continued to work until his 65th birthday, in each case at a rate
equal to the Executive's Annual Cash Compensation (as defined herein);
provided, however, that in no event will the assumed period of continued
employment extend beyond the date on which the Executive elects to begin
receiving the additional pension benefits. The Executive shall be entitled
to elect to receive his additional pension benefits in any form (e.g.
joint and survivor) that would have been available to him under the terms
and conditions of the Retirement Plans and (subject to reduction, if any,
under such terms) at any time after he has attained the age at which early
retirement is permitted. In addition, if the Executive starts to receive
his additional pension benefits before the earliest date on which he is
eligible for unreduced Social Security benefits, the Executive will
receive an amount equal to the difference between his estimated unreduced
Social Security benefit and the actual Social Security benefit to which he
is entitled on the date of such commencement, payable until he attains the
age when he is eligible for unreduced benefits.
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(ii) Until the earlier of the end of the Employment Period or such
time as the Executive has obtained new employment and is covered by
benefits which in the aggregate are at least equal in value to the
following benefits, the Executive shall continue to be covered, at the
expense of the Company, by the most favorable life insurance,
hospitalization, medical and dental coverage provided to the Executive and
the Executive's family during the 180-day period immediately preceding the
Effective Date or, if more favorable to the Executive, the coverage in
effect generally at any time thereafter for executives of the Employer of
comparable status and position to the Executive and their families.
(iii) The Executive shall be entitled to receive at the same time
that the Termination Payment is made all amounts then credited to the
Executive's account in the "Bonus Banks" under both the EP Plan and the
Long-Term EP Plan. Such amounts so paid out shall not be subject to future
forfeiture.
(iv) The Company shall bear up to $10,000 in the aggregate of fees
and expenses of consultants and/or legal or accounting advisors engaged by
the Executive to advise the Executive as to matters relating to the
computation of benefits due and payable under Section 9(b).
(v) The Executive shall receive, at the expense of the Company,
outplacement services, on an individual basis at a level of service
commensurate with the Executive's status with the Employer immediately
prior to the Effective Date (or, if higher, immediately prior to the
termination of the Executive's employment), provided by a nationally
recognized executive placement firm selected by the Company; provided that
the cost to the Company of such services shall not exceed 15% of the sum
of the Executive's Annual Base Salary and most recent annual bonus award
(determined on an annualized basis for any bonus award paid for a period
of less than one year).
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9. Payments Upon Termination.
(a) Accrued Benefits. For purposes of this Agreement, the Executive's
"Accrued Benefits" shall include the following amounts, payable as described
herein: (i) all base salary for the time period ending with the Termination
Date; (ii) reimbursement for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Employer for the time period ending with the
Termination Date; (iii) any and all other cash earned through the Termination
Date and deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) a lump sum payment of the bonus or
incentive compensation with respect to the portion of any year or period in
which the termination occurs calculated on a pro rata basis (assuming an award
equal to the average of the awards (determined on an annualized basis for any
award paid for a period of less than one year and excluding any year or period
for which the Executive did not participate in the plan in question) paid to the
Executive for the three immediately preceding fiscal years or periods, but in no
event shall such assumed award level be less than the "target" level for the
then current fiscal year or period) under all bonus or incentive compensation
plan or plans in which the Executive is a participant; and (v) all other
payments and benefits to which the Executive (or in the event of the Executive's
death, the Executive's surviving spouse or other beneficiary) may be entitled as
compensatory fringe benefits or under the terms of any benefit plan of the
Company, including severance payments under the Company's severance policies and
practices in the form most favorable to the Executive which was in effect at any
time during the 180-day period prior to the Effective Date. Payment of Accrued
Benefits shall be made promptly in accordance with the Company's prevailing
practice with respect to Subsections 9(a)(i), (ii) and (iii) or, with respect to
Subsections 9(a)(iv) and (v), pursuant to the terms of the benefit plan or
practice establishing such benefits.
(b) Termination Payment.
(i) The Termination Payment shall be an amount equal to (A) the
Executive's Annual Base Salary plus (B) an amount equal to the sum of the
highest (x) annual bonus award (determined on an annualized basis for any
bonus award paid for a period of less than one year and excluding any year
for which the Executive did not participate in any bonus plan) and (y)
long-term cash incentives earned with respect to, or, if more favorable to
the Executive, paid to (or deferred by) the Executive in, any one fiscal
year with respect to the three fiscal years preceding the Termination Date
(the aggregate amount set forth in (A) and (B) hereof shall hereafter be
referred to as "Annual Cash Compensation"), times (C) three (3). The
Termination Payment
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shall be paid to the Executive in cash equivalent ten (10) business days
after the Termination Date. Such lump sum payment shall not be reduced by
any present value or similar factor, and the Executive shall not be
required to mitigate the amount of the Termination Payment by securing
other employment or otherwise, nor will such Termination Payment be
reduced by reason of the Executive securing other employment or for any
other reason. The Termination Payment shall be in addition to any other
severance payments to which the Executive is entitled under the Company's
severance policies and practices in the form most favorable to the
Executive which were in effect at any time during the 180-day period prior
to the Effective Date.
(ii) Notwithstanding any other provision of this Agreement, if any
portion of any payment under this Agreement, or under any other agreement
with or plan of the Company (in the aggregate "Total Payments"), would
constitute an "excess parachute payment," the Company shall pay the
Executive an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive after deduction of any excise tax imposed
under Section 4999 of the Code, any interest charges or penalties in
respect of the imposition of such excise tax (but not any federal, state
or local income tax, or employment tax) on the Total Payments, and any
federal, state and local income tax, employment tax, and excise tax upon
the payment provided for by this Subsection 9(b)(ii), shall be equal to
the Total Payments. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax and
employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rate
of taxation in the state and locality of the Executive's domicile for
income tax purposes on the date the Gross-Up Payment is made, net of the
reduction in federal income taxes that may be obtained from the deduction
of such state and local taxes.
(iii) For purposes of this Agreement, the terms "excess parachute
payment" and "parachute payments" shall have the meanings assigned to them
in Section 280G of the Code (or any successor provision) and such
"parachute payments" shall be valued as provided therein. Present value
for purposes of this Agreement shall
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be calculated in accordance with Section 1274(b)(2) of the Code (or any
successor provision). Promptly following delivery of the Notice of
Termination or notice by the Company to the Executive of its belief that
there is a payment or benefit due the Executive which will result in an
excess parachute payment as defined in Section 280G of the Code, the
Executive and the Company, at the Company's expense, shall obtain the
opinion (which need not be unqualified) of nationally recognized tax
counsel ("National Tax Counsel") selected by the Company's independent
auditors and acceptable to the Executive, which opinion sets forth (i) the
amount of the Base Period Income, (ii) the amount and present value of
Total Payments, (iii) the amount and present value of any excess parachute
payments, and (iv) the amount of any Gross-Up Payment. As used in this
Agreement, the term "Base Period Income" means an amount equal to the
Executive's "annualized includible compensation for the base period" as
defined in Sections 280G(d)(1) of the Code. For purposes of such opinion,
the value of any noncash benefits or any deferred payment or benefit shall
be determined by the Company's independent auditors in accordance with the
principles of Section 280G(d)(3) and (4) of the Code (or any successor
provisions), which determination shall be evidenced in a certificate of
such auditors addressed to the Company and the Executive. The opinion of
National Tax Counsel shall be dated as of the Termination Date and
addressed to the Company and the Executive and shall be binding upon the
Company and the Executive. If such National Tax Counsel so requests in
connection with the opinion required by this Subsection 9(b), the
Executive and the Company shall obtain, at the Company's expense, and the
National Tax Counsel may rely on, the advice of a firm of recognized
executive compensation consultants as to the reasonableness of any item of
compensation to be received by the Executive solely with respect to its
status under Section 280G of the Code and the regulations thereunder.
Within five (5) days after the National Tax Counsel's opinion is received
by the Company and the Executive, the Company shall pay (or cause to be
paid) or distribute (or cause to be distributed) to or for the benefit of
the Executive such amounts as are then due to the Executive under
Subsection 9(b)(ii).
(iv) In the event that upon any audit by the Internal Revenue
Service, or by a state or local taxing authority, of the Total Payments or
Gross-Up Payment, a
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change is finally determined to be required in the amount of taxes paid by
Executive, appropriate adjustments shall be made under this Agreement such
that the net amount which is payable to the Executive after taking into
account the provisions of Section 4999 of the Code shall reflect the
intent of the parties as expressed in this Section 9, in the manner
determined by the National Tax Counsel.
(v) The Company agrees to bear all costs associated with, and to
indemnify and hold harmless, the National Tax Counsel of and from any and
all claims, damages, and expenses resulting from or relating to its
determinations pursuant to this Subsection 9(b), except for claims,
damages or expenses resulting from the gross negligence or willful
misconduct of such firm.
10. Death. (a) Except as provided in Section 10(b) hereof, in the event of
a Covered Termination due to the Executive's death, the Executive's estate,
heirs and beneficiaries shall receive all the Executive's Accrued Benefits
through the Termination Date.
(b) In the event the Executive dies after a Notice of Termination is given
(i) by the Company or (ii) by the Executive for Good Reason, the Executive's
estate, heirs and beneficiaries shall be entitled to the benefits described in
Section 10(a) hereof and, subject to the provisions of this Agreement, to such
Termination Payment as the Executive would have been entitled to had the
Executive lived. For purposes of this Subsection 10(b), the Termination Date
shall be the earlier of thirty days following the giving of the Notice of
Termination, subject to extension pursuant to Section 1(n) hereof, or one day
prior to the end of the Employment Period.
11. Retirement. If, during the Employment Period, the Executive and the
Company shall execute an agreement providing for the early retirement of the
Executive from the Company, or the Executive shall otherwise give notice that he
is voluntarily choosing to retire early from the Company, the Executive shall
receive Accrued Benefits through the Termination Date; provided, that if the
Executive's employment is terminated by the Executive for Good Reason or by the
Company other than by reason of death, disability or Cause and the Executive
also, in connection with such termination, elects voluntary early
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retirement, the Executive shall also be entitled to receive a Termination
Payment pursuant to Section 8(a) hereof.
12. Termination for Disability. If, during the Employment Period, as a
result of the Executive's disability due to physical or mental illness or injury
(regardless of whether such illness or injury is job-related), the Executive
shall have been absent from the Executive's duties hereunder on a full-time
basis for a period of 180 days during any 194-day period and, within thirty days
after the Company notifies the Executive in writing that it intends to terminate
the Executive's employment (which notice shall not constitute the Notice of
Termination contemplated below), the Executive shall not have returned to the
performance of the Executive's duties hereunder on a full-time basis, the
Company may terminate the Executive's employment for purposes of this Agreement
pursuant to a Notice of Termination given in accordance with Section 14 hereof.
If the Executive's employment is terminated on account of the Executive's
disability in accordance with this Section, the Executive shall receive Accrued
Benefits in accordance with Section 9(a) hereof and shall remain eligible for
all benefits provided by any long term disability programs of the Company in
effect at the time of such termination.
13. Stock Options. Following a Change in Control of the Company, all stock
options held by the Executive as of the Effective Date (and not otherwise
exercised) will become exercisable in full notwithstanding any percentage
limitations on the exercise of the options and, notwithstanding any termination
of the Executive's employment, shall remain exercisable for a period of not less
than three months after the date of the Change in Control of the Company;
provided, however, that no option shall be exercisable after the expiration date
specified therefor in the applicable stock option agreement.
14. Termination Notice and Procedure. Any Covered Termination by the
Employer or the Executive (other than a termination of the Executive's
employment referenced in the last sentence of Section 1(h) hereof) shall be
communicated by written Notice of Termination to the Executive, if such Notice
is given by the Company, and to the Company, if such Notice is given by the
Executive, all in accordance with the following procedures and those set forth
in Section 24 hereof:
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(a) If such termination is for disability, Cause or Good Reason, the
Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such termination.
(b) Any Notice of Termination by the Company shall have been approved,
prior to the giving thereof to the Executive, by a resolution duly adopted by a
majority of the directors of the Company (or any successor corporation) then in
office.
(c) The Executive shall have thirty days, or such longer period as the
Company may determine to be appropriate, to cure any conduct or act, if curable,
alleged to provide grounds for termination of the Executive's employment for
Cause under this Agreement pursuant to Subsection 1(d)(iii) hereof.
(d) The recipient of any Notice of Termination shall personally deliver or
mail in accordance with Section 24 hereof written notice of any dispute relating
to such Notice of Termination to the party giving such Notice within fifteen
days after receipt thereof. After the expiration of such fifteen days, the
contents of the Notice of Termination shall become final and not subject to
dispute.
15. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event of any Covered
Termination where the Executive is entitled to Accrued Benefits and the
Termination Payment, the Executive shall not, during the balance of the
Employment Period, without the prior written approval of the Company's Board of
Directors, participate in the management of, be employed by, own or (other than
as an employee of or partner in a law firm with not less than fifty attorneys)
act as counsel for any business enterprise at a location within the United
States that engages in substantial competition with the Company or its
subsidiaries, where such enterprise's revenues from any printing services amount
to 10% or more of such enterprise's net revenues and sales for its most recently
completed fiscal year; provided, however, that nothing in this Section 15(a)
shall prohibit the Executive from owning stock or other securities of a
competitor amounting to less than five percent of the outstanding capital stock
of such competitor.
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(b) Confidentiality. During and following the Executive's employment by
the Employer, the Executive shall hold in confidence and not directly or
indirectly disclose or use or copy or make lists of any confidential information
or proprietary data of the Employer, except to the extent authorized in writing
by the Board of Directors of the Company or required by any court or
administrative agency, other than to an employee of the Employer or a person to
whom disclosure is reasonably necessary or appropriate in connection with the
performance by the Executive of duties as an executive of the Employer.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential by
persons engaged in the same business or a business similar to that of the
Employer. All records, files, documents and materials, or copies thereof,
relating to the business of the Employer which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Employer and shall be promptly returned to the Employer upon termination of
employment with the Employer.
16. Expenses and Interest. If, after the Effective Date, (i) a dispute
arises with respect to the enforcement of the Executive's rights under this
Agreement or (ii) any legal or arbitration proceeding shall be brought to
enforce or interpret any provision contained herein or to recover damages for
breach hereof, in either case so long as the Executive is not acting in bad
faith, the Executive shall recover from the Company any reasonable attorneys'
fees and necessary costs and disbursements incurred as a result of such dispute,
legal or arbitration proceeding ("Expenses"), and prejudgment interest on any
money judgment or arbitration award obtained by the Executive calculated at the
rate of interest announced by Firstar Bank, N.A., Milwaukee, Wisconsin (or any
successor bank thereto) from time to time as its prime or base lending rate from
the date that payments to him should have been made under this Agreement. Within
ten days after the Executive's written request therefor, the Company shall pay
to the Executive, or such other person or entity as the Executive may designate
in writing to the Company, the Executive's reasonable Expenses in advance of the
final disposition or conclusion of any such dispute, legal or arbitration
proceeding.
17. Payment Obligations Absolute. The Company's obligation during and
after the Employment Period to pay the Executive the amounts and to make the
benefit and
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other arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any setoff,
counterclaim, recoupment, defense or other right which the Company may have
against him or anyone else. Except as provided in Section 16 of this Agreement,
all amounts payable by the Company hereunder shall be paid without notice or
demand. Each and every payment made hereunder by the Company shall be final, and
the Company will not seek to recover all or any part of such payment from the
Executive, or from whomsoever may be entitled thereto, for any reason
whatsoever.
18. Successors. (a) If the Company sells, assigns or transfers all or
substantially all of its business and assets to any Person or if the Company
merges into or consolidates or otherwise combines (where the Company does not
survive such combination) with any Person (any such event, a "Sale of
Business"), then the Company shall assign all of its right, title and interest
in this Agreement as of the date of such event to such Person, and the Company
shall cause such Person, by written agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree to perform from and
after the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. Failure of the Company to obtain
such agreement prior to the effective date of such Sale of Business shall be a
breach of this Agreement constituting "Good Reason" hereunder, except that for
purposes of implementing the foregoing, the date upon which such Sale of
Business becomes effective shall be deemed the Termination Date. In case of such
assignment by the Company and of assumption and agreement by such Person, as
used in this Agreement, "Company" shall thereafter mean such Person which
executes and delivers the agreement provided for in this Section 18 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law, and this Agreement shall inure to the benefit of, and be
enforceable by, such Person. The Executive shall, in his discretion, be entitled
to proceed against any or all of such Persons, any Person which theretofore was
such a successor to the Company (as defined in the first paragraph of this
Agreement) and the Company (as so defined) in any action to enforce any rights
of the Executive hereunder. Except as provided in this Subsection, this
Agreement shall not be assignable by the Company. This Agreement shall not be
terminated by the voluntary or involuntary dissolution of the Company.
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(b) This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive under Sections 7, 8, 9, 10, 11, 12 and 16 hereof if the
Executive had lived shall be paid, in the event of the Executive's death, to the
Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Company, as such terms are in effect on the Effective Date, that expressly
govern benefits under such plan in the event of the Executive's death.
19. Severability. The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part hereof are declared invalid
or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
20. Amendment. This Agreement may not be amended or modified at any time
except by written instrument executed by a duly authorized officer of the
Company (other than the Executive) on behalf of the Company and by the
Executive.
21. Withholding. The Company shall be entitled to withhold from amounts to
be paid to the Executive hereunder any federal, state or local withholding or
other taxes or charges which it is from time to time required to withhold;
provided, that the amount so withheld shall not exceed the minimum amount
required to be withheld by law. The Company shall be entitled to rely on an
opinion of nationally recognized tax counsel if any question as to the amount or
requirement of any such withholding shall arise.
22. Certain Rules of Construction. No party shall be considered as being
responsible for the drafting of this Agreement for the purpose of applying any
rule construing ambiguities against the drafter or otherwise. No draft of this
Agreement shall be taken into account in construing this Agreement. Any
provision of this Agreement which requires an agreement in writing shall be
deemed to require that the writing in question be signed by the Executive and an
authorized representative of the Company.
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23. Governing Law; Resolution of Disputes. This Agreement and the rights
and obligations hereunder shall be governed by and construed in accordance with
the laws of the State of Wisconsin. Any dispute arising out of this Agreement
shall, at the Executive's election, be determined by arbitration under the rules
of the American Arbitration Association then in effect (in which case both
parties shall be bound by the arbitration award) or by litigation. Whether the
dispute is to be settled by arbitration or litigation, the venue for the
arbitration or litigation shall be Menasha, Wisconsin or, at the Executive's
election, if the Executive is no longer residing or working in the Menasha,
Wisconsin metropolitan area, in the judicial district encompassing the city in
which the Executive resides; provided, that, if the Executive is not then
residing in the United States, the election of the Executive with respect to
such venue shall be either Menasha, Wisconsin or in the judicial district
encompassing that city in the United States among the thirty cities having the
largest population (as determined by the most recent United States Census data
available at the Termination Date) which is closest to the Executive's
residence. The parties consent to personal jurisdiction in each trial court in
the selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process in
the manner provided hereunder for the giving of notices.
24. Notice. Notices given pursuant to this Agreement shall be in writing
and, except as otherwise provided by Section 14(c) hereof, shall be deemed given
when actually received by the Executive or actually received by the Company's
Secretary or any officer of the Company other than the Executive. If mailed,
such notices shall be mailed by United States registered or certified mail,
return receipt requested, addressee only, postage prepaid, if to the Company, to
Banta Corporation, Attention: Secretary (or President, if the Executive is then
Secretary), River Place, 225 Main Street, Menasha, WI 54952, or if to the
Executive, at the address set forth below the Executive's signature to this
Agreement, or to such other address as the party to be notified shall have
theretofore given to the other party in writing.
25. No Waiver. No waiver by either party at any time of any breach by the
other party of, or compliance with, any condition or provision of this Agreement
to be
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performed by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or any prior or subsequent time.
26. Headings. The headings herein contained are for reference only and
shall not affect the meaning or interpretation of any provision of this
Agreement.
27. Prior Agreement(s). This Agreement shall supersede any and all prior
Key Executive Employment and Severance Agreements among the parties hereto,
which prior agreement(s) shall be of no further force or effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
BANTA CORPORATION
(Corporate Seal)
By ____________________________________
Donald D. Belcher
Chairman, President and
Chief Executive Officer
Attest: ______________________________
Gerald A. Henseler
Executive Vice President
and Chief Financial Officer
EXECUTIVE
---------------------------------------
Ronald D. Kneezel
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KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the _____day of
_____________________, by and between Banta Corporation, a Wisconsin corporation
(hereinafter referred to as the "Company"), and _______________________
(hereinafter referred to as "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is employed by the Company and/or a subsidiary of
the Company (collectively, the "Employer") in a key executive capacity and the
Executive's services are valuable to the conduct of the business of the Company;
WHEREAS, the Company recognizes that circumstances may arise in which a
change in control of the Company occurs, through acquisition or otherwise,
thereby causing uncertainty about the Executive's future employment with the
Employer without regard to the Executive's competence or past contributions
which uncertainty may result in the loss of valuable services of the Executive
to the detriment of the Company and its shareholders, and the Company and the
Executive wish to provide reasonable security to the Executive against changes
in the Executive's relationship with the Employer in the event of any such
change in control;
WHEREAS, the Company and the Executive are desirous that any proposal for
a change in control or acquisition of the Company will be considered by the
Executive objectively and with reference only to the best interests of the
Company and its shareholders; and
WHEREAS, the Executive will be in a better position to consider the
Company's best interests if the Executive is afforded reasonable security, as
provided in this Agreement, against altered conditions of employment which could
result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
<PAGE>
1. Definitions. The following terms are used in this Agreement as defined
in Exhibit A:
Act Effective Date
Affiliate and Associate Employment Period
Beneficial Owner Good Reason
Cause Normal Retirement Date
Change in Control of the Company Notice of Termination
Code Person
Covered Termination Termination Date
2. Termination or Cancellation Prior to the Effective Date. The Employer
and the Executive shall each retain the right to terminate the employment of the
Executive at any time prior to the Effective Date. In the event the Executive's
employment is terminated prior to the Effective Date, this Agreement shall be
terminated and cancelled and of no further force and effect and any and all
rights and obligations of the parties hereunder shall cease.
3. Employment Period. If the Executive is employed by the Company or a
subsidiary of the Company on the Effective Date, the Company will, or will cause
the Employer to, continue thereafter to employ the Executive during the
Employment Period, and the Executive will remain in the employ of the Employer,
in accordance with and subject to the terms and provisions of this Agreement.
Any termination of the Executive's employment during the Employment Period which
results in a complete termination of the Executive's employment with the Company
and its subsidiaries, whether by the Company or a subsidiary of the Company,
shall be deemed a termination by the Company for purposes of this Agreement.
4. Duties. During the Employment Period, the Executive shall, in the most
significant capacities and positions held by the Executive at any time during
the 180-day period preceding the Effective Date or in such other capacities and
positions as may be agreed to by the Company and the Executive in writing,
devote the Executive's best efforts and all of the Executive's business time,
attention and skill to the business and affairs of the Employer, as such
business and affairs now exist and as they may hereafter be conducted. The
services which are to be performed by the Executive hereunder are to be rendered
in the same
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metropolitan area in which the Executive was principally employed during the
180-day period prior to the Effective Date, or in such other place or places as
shall be mutually agreed upon in writing by the Executive and the Company from
time to time. Without the Executive's consent the Executive shall not be
required to be absent from such metropolitan area for any number of days in any
fiscal year of the Company exceeding the average number of days per year the
Executive was absent from such metropolitan area during the two fiscal years
preceding the Effective Date.
5. Compensation. During the Employment Period, the Executive shall be
compensated as follows:
(a) The Executive shall receive, at reasonable intervals (but not less
often than monthly) and in accordance with such standard policies as may be in
effect immediately prior to the Effective Date, an annual base salary in cash
equivalent of not less than twelve times the Executive's highest monthly base
salary for the twelve-month period immediately preceding the month in which the
Effective Date occurs (which base salary shall, unless otherwise agreed in
writing by the Executive, include the current receipt by the Executive of any
amounts which, prior to the Effective Date, the Executive had elected to defer,
whether such compensation is deferred under Section 401(k) of the Code or
otherwise), subject to upward adjustment as provided in Section 6 hereof (such
salary amount as adjusted upward from time to time is hereafter referred to as
the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least equal in value to
those provided for the Executive at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to executives of
the Employer of comparable status and position to the Executive. The Executive
shall be reimbursed, at such intervals and in accordance with such standard
policies that are most favorable to the Executive which were in effect at any
time during the 180-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time after the
Effective Date to executives of the Employer of comparable status and position
to the Executive, for any and all monies
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advanced in connection with the Executive's employment for reasonable and
necessary expenses incurred by the Executive on behalf of the Employer,
including travel expenses.
(c) The Executive shall be included, to the extent eligible thereunder
(which eligibility shall not be conditioned on the Executive's salary grade or
on any other requirement which excludes persons of comparable status and
position to the Executive unless such exclusion was in effect for such plan or
an equivalent plan immediately prior to the Effective Date), in any and all
plans providing benefits for the Company's salaried employees in general,
including but not limited to group life insurance, hospitalization, medical,
dental, profit sharing and stock bonus plans; provided, that, in no event shall
the aggregate level of benefits under such plans in which the Executive is
included be less than the aggregate level of benefits under plans of the Company
and its subsidiaries of the type referred to in this Section 5(c) in which the
Executive was participating at any time during the 180-day period immediately
preceding the Effective Date.
(d) The Executive shall annually be entitled to not less than the amount
of paid vacation and not fewer than the number of paid holidays to which the
Executive was entitled annually at any time during the 180-day period
immediately preceding the Effective Date or such greater amount of paid vacation
and number of paid holidays as may be made available annually to other
executives of the Company and its subsidiaries of comparable status and position
to the Executive.
(e) The Executive shall be included in all plans providing additional
benefits to executives of the Company of comparable status and position to the
Executive, including but not limited to deferred compensation, split-dollar life
insurance, supplemental retirement, stock option, stock appreciation, stock
bonus, long-term incentive compensation (including, without limitation, benefits
under the Company's Economic Profit Long-Term Incentive Compensation Plan or any
successor thereto (the "Long-Term EP Plan")) and similar or comparable plans;
provided, that, in no event shall the aggregate level of benefits under such
plans be less than the aggregate level of benefits under plans of the Company of
the type referred to in this Section 5(e) in which the Executive was
participating at any time during the 180-day period immediately preceding the
Effective Date; provided, further, that any financial
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or other goals that must be satisfied in order to be eligible for an award under
any such plan shall be attainable with approximately the same degree of
probability as the goals, in the form most favorable to the Executive, under any
comparable plan which was in effect at any time during the 180-day period prior
to the Effective Date and in view of the Company's existing and projected
financial and business circumstances applicable at the time; provided, further,
that in the event the financial or other goals are not achieved such that the
entire amount of incentive compensation is payable, the plan shall provide for
the payment of an amount of incentive compensation equal to a portion of the
maximum payout reasonably related to that portion of the goals that were
achieved; provided, further, that, in the event a Termination Payment (as
defined herein) is otherwise due the Executive and the Executive is not employed
for the entire period for which the incentive compensation is payable, payment
of incentive compensation under each such plan shall be made on a prorated basis
based on the time employed during such period and calculated with the assumption
that the "target" award for which the Executive is eligible has been earned;
provided, further, that payment of incentive compensation shall not be affected
by any circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment; and provided, further, that
the Company's obligation to include the Executive in annual bonus or annual
incentive compensation plans shall be determined by Subsection 5(f) hereof.
(f) To assure that the Executive will have an opportunity to earn
incentive compensation on an annual basis after the Effective Date, the
Executive shall be included in a bonus plan of the Company which shall satisfy
the standards described below (such plan, the "Bonus Plan"). Bonuses under the
Bonus Plan shall be payable with respect to achieving such financial or other
goals reasonably related to the business of the Company as the Company shall
establish (the "Goals"), all of which Goals shall be attainable, prior to the
end of the Employment Period, with approximately the same degree of probability
as the goals under the Company's Economic Profit Incentive Compensation Plan, or
the successor to such plan, in the form most favorable to the Executive which
was in effect at any time during the 180-day period prior to the Effective Date
(the "EP Plan") and in view of the Company's existing and projected financial
and business circumstances applicable at the time. The amount of the bonus (the
"Bonus Amount") that the Executive is eligible to earn under the Bonus Plan
shall
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be no less than the amount of the Executive's maximum award provided in the EP
Plan (such bonus amount herein referred to as the "Target Bonus"), and in the
event the Goals are not achieved such that the entire Target Bonus is not
payable, the Bonus Plan shall provide for a payment of a Bonus Amount equal to a
portion of the Target Bonus reasonably related to that portion of the Goals
which were achieved. In the event a Termination Payment is otherwise due the
Executive and the Executive is not employed for the entire period for which the
Bonus Amount is payable, payment of the Bonus Amount shall be made on a prorated
basis based on the time employed during the period and calculated with the
assumption that the "target" bonus for which the Executive is eligible has been
earned. Payment of the Bonus Amount shall not be affected by any circumstance
occurring subsequent to the end of the Employment Period, including termination
of the Executive's employment.
6. Annual Compensation Adjustments. During the Employment Period, the
Board of Directors of the Company (or an appropriate committee thereof) will
consider and appraise, at least annually, the contributions of the Executive to
the Employer, and in accordance with the Company's practice prior to the
Effective Date, due consideration shall be given at least annually, to the
upward adjustment of the Executive's Annual Base Salary (i) commensurate with
increases generally given to other executives of the Employer of comparable
status and position to the Executive, and (ii) as the scope of the Employer's
operations or the Executive's duties expand.
7. Termination For Cause or Without Good Reason. If there is a Covered
Termination for Cause or due to the Executive's voluntarily terminating his
employment other than for Good Reason (any such terminations to be subject to
the procedures set forth in Section 14 hereof), then the Executive shall be
entitled to receive only Accrued Benefits pursuant to Section 9(a) hereof.
8. Termination Giving Rise to a Termination Payment. (a) If there is a
Covered Termination by the Executive for Good Reason, or by the Company other
than by reason of (i) death, (ii) disability pursuant to Section 12 hereof, or
(iii) Cause (any such terminations to be subject to the procedures set forth in
Section 14 hereof), then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in
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lieu of further base salary for periods following the Termination Date, as
liquidated damages and additional severance pay and in consideration of the
covenant of the Executive set forth in Section 15(a) hereof, the Termination
Payment pursuant to Section 9(b) hereof.
(b) If there is a Covered Termination and the Executive is entitled to
Accrued Benefits and the Termination Payment, then the Executive shall be
entitled to the following additional benefits:
(i) The Executive will be entitled to pension benefits in addition
to the most favorable benefits provided for him under any version of the
Company's Employees Pension Plan and the Company's Supplemental Retirement
Plan (or any successors to such plans) in effect at any time during the
180-day period prior to the Effective Date (the "Retirement Plans"). The
amount of additional pension benefits will be equal to the difference
between the amount the Executive (or in the event of the Executive's
death, the Executive's surviving spouse or other beneficiary) would be
actually entitled to receive upon retirement under the terms and
conditions of the Retirement Plans and the amount the Executive (or such
surviving spouse or beneficiary) would have been entitled to receive under
such terms and conditions if (A) the Executive's benefits under the
Retirement Plans had been fully vested on the Termination Date and (B) the
Executive had continued to work until the earlier of the third anniversary
of the Effective Date or the Executive's Normal Retirement Date at a rate
equal to the Executive's Annual Cash Compensation (as defined herein);
provided, however, thatin no event will the assumed period of continued
employment extend beyond the date on which the Executive elects to begin
receiving the additional pension benefits. The Executive shall be entitled
to elect to receive his additional pension benefits in any form (e.g.
joint and survivor) that would have been available to him under the terms
and conditions of the Retirement Plans and (subject to reduction, if any,
under such terms) at any time after he has attained the age at which early
retirement is permitted. In addition, if the Executive starts to receive
his additional pension benefits before the earliest date on which he is
eligible for unreduced Social Security benefits, the Executive will
receive an amount equal to the difference between his estimated unreduced
Social Security benefit and the actual Social Security benefit to
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which he is entitled on the date of such commencement, payable until he
attains the age when he is eligible for unreduced benefits.
(ii) Until the earlier of the third anniversary of the Effective
Date or such time as the Executive has obtained new employment and is
covered by benefits which in the aggregate are at least equal in value to
the following benefits, the Executive shall continue to be covered, at the
expense of the Company, by the most favorable life insurance,
hospitalization, medical and dental coverage provided to the Executive and
the Executive's family during the 180-day period immediately preceding the
Effective Date or, if more favorable to the Executive, the coverage in
effect generally at any time thereafter for executives of the Employer of
comparable status and position to the Executive and their families.
(iii) The Executive shall be entitled to receive at the same time
that the Termination Payment is made all amounts then credited to the
Executive's account in the "Bonus Banks" under both the EP Plan and the
Long-Term EP Plan. Such amounts so paid out shall not be subject to future
forfeiture.
(iv) The Company shall bear up to $10,000 in the aggregate of fees
and expenses of consultants and/or legal or accounting advisors engaged by
the Executive to advise the Executive as to matters relating to the
computation of benefits due and payable under Section 9(b).
(v) The Executive shall receive, at the expense of the Company,
outplacement services, on an individual basis at a level of service
commensurate with the Executive's status with the Employer immediately
prior to the Effective Date (or, if higher, immediately prior to the
termination of the Executive's employment), provided by a nationally
recognized executive placement firm selected by the Company; provided
-------- that the cost to the Company of such services shall not exceed
15% of ---- the sum of the Executive's Annual Base Salary and most recent
annual bonus award (determined on an annualized basis for any bonus award
paid for a period of less than one year).
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9. Payments Upon Termination.
(a) Accrued Benefits. For purposes of this Agreement, the Executive's
"Accrued Benefits" shall include the following amounts, payable as described
herein: (i) all base salary for the time period ending with the Termination
Date; (ii) reimbursement for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Employer for the time period ending with the
Termination Date; (iii) any and all other cash earned through the Termination
Date and deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) a lump sum payment of the bonus or
incentive compensation with respect to the portion of any year or period in
which the termination occurs calculated on a pro rata basis (assuming an award
equal to the average of the awards (determined on an annualized basis for any
award paid for a period of less than one year and excluding any year or period
for which the Executive did not participate in the plan in question) paid to the
Executive for the three immediately preceding fiscal years or periods, but in no
event shall such assumed award level be less than the "target" level for the
then current fiscal year or period) under all bonus or incentive compensation
plan or plans in which the Executive is a participant; and (v) all other
payments and benefits to which the Executive (or in the event of the Executive's
death, the Executive's surviving spouse or other beneficiary) may be entitled as
compensatory fringe benefits or under the terms of any benefit plan of the
Company, including severance payments under the Company's severance policies and
practices in the form most favorable to the Executive which was in effect at any
time during the 180-day period prior to the Effective Date. Payment of Accrued
Benefits shall be made promptly in accordance with the Company's prevailing
practice with respect to Subsections 9(a)(i), (ii) and (iii) or, with respect to
Subsections 9(a)(iv) and (v), pursuant to the terms of the benefit plan or
practice establishing such benefits.
(b) Termination Payment.
(i) The Termination Payment shall be an amount equal to (A) the
Executive's Annual Base Salary plus (B) an amount equal to the sum of the
highest (x) annual bonus award (determined on an annualized basis for any
bonus award paid for a period of less than one year and excluding any year
for which the Executive did not participate in any bonus plan) and (y)
long-term cash incentives earned with respect to, or, if more favorable to
the Executive, paid to (or deferred by) the Executive in, any one fiscal
year with respect to the three fiscal years preceding the Termination Date
(the aggregate amount set forth in (A) and (B) hereof shall hereafter be
referred
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to as "Annual Cash Compensation"), times (C) three (3). The Termination
Payment shall be paid to the Executive in cash equivalent ten (10)
business days after the Termination Date. Such lump sum payment shall not
be reduced by any present value or similar factor, and the Executive shall
not be required to mitigate the amount of the Termination Payment by
securing other employment or otherwise, nor will such Termination Payment
be reduced by reason of the Executive securing other employment or for any
other reason. The Termination Payment shall be in addition to any other
severance payments to which the Executive is entitled under the Company's
severance policies and practices in the form most favorable to the
Executive which were in effect at any time during the 180-day period prior
to the Effective Date.
(ii) Notwithstanding any other provision of this Agreement, if any
portion of any payment under this Agreement, or under any other agreement
with or plan of the Company (in the aggregate "Total Payments"), would
constitute an "excess parachute payment," the Company shall pay the
Executive an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive after deduction of any excise tax imposed
under Section 4999 of the Code, any interest charges or penalties in
respect of the imposition of such excise tax (but not any federal, state
or local income tax, or employment tax) on the Total Payments, and any
federal, state and local income tax, employment tax, and excise tax upon
the payment provided for by this Subsection 9(b)(ii), shall be equal to
the Total Payments. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax and
employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rate
of taxation in the state and locality of the Executive's domicile for
income tax purposes on the date the Gross-Up Payment is made, net of the
reduction in federal income taxes that may be obtained from the deduction
of such state and local taxes.
(iii) For purposes of this Agreement, the terms "excess parachute
payment" and "parachute payments" shall have the meanings assigned to them
in Section 280G of the Code (or any successor provision) and such
"parachute payments"
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shall be valued as provided therein. Present value for purposes of this
Agreement shall be calculated in accordance with Section 1274(b)(2) of the
Code (or any successor provision). Promptly following delivery of the
Notice of Termination or notice by the Company to the Executive of its
belief that there is a payment or benefit due the Executive which will
result in an excess parachute payment as defined in Section 280G of the
Code, the Executive and the Company, at the Company's expense, shall
obtain the opinion (which need not be unqualified) of nationally
recognized tax counsel ("National Tax Counsel") selected by the Company's
independent auditors and acceptable to the Executive, which opinion sets
forth (i) the amount of the Base Period Income, (ii) the amount and
present value of Total Payments, (iii) the amount and present value of any
excess parachute payments, and (iv) the amount of any Gross-Up Payment. As
used in this Agreement, the term "Base Period Income" means an amount
equal to the Executive's "annualized includible compensation for the base
period" as defined in Sections 280G(d)(1) of the Code. For purposes of
such opinion, the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the Code
(or any successor provisions), which determination shall be evidenced in a
certificate of such auditors addressed to the Company and the Executive.
The opinion of National Tax Counsel shall be dated as of the Termination
Date and addressed to the Company and the Executive and shall be binding
upon the Company and the Executive. If such National Tax Counsel so
requests in connection with the opinion required by this Subsection 9(b),
the Executive and the Company shall obtain, at the Company's expense, and
the National Tax Counsel may rely on, the advice of a firm of recognized
executive compensation consultants as to the reasonableness of any item of
compensation to be received by the Executive solely with respect to its
status under Section 280G of the Code and the regulations thereunder.
Within five (5) days after the National Tax Counsel's opinion is received
by the Company and the Executive, the Company shall pay (or cause to be
paid) or distribute (or cause to be distributed) to or for the benefit of
the Executive such amounts as are then due to the Executive under
Subsection 9(b)(ii).
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(iv) In the event that upon any audit by the Internal Revenue
Service, or by a state or local taxing authority, of the Total Payments or
Gross-Up Payment, a change is finally determined to be required in the
amount of taxes paid by Executive, appropriate adjustments shall be made
under this Agreement such that the net amount which is payable to the
Executive after taking into account the provisions of Section 4999 of the
Code shall reflect the intent of the parties as expressed in this Section
9, in the manner determined by the National Tax Counsel.
(v) The Company agrees to bear all costs associated with, and to
indemnify and hold harmless, the National Tax Counsel of and from any and
all claims, damages, and expenses resulting from or relating to its
determinations pursuant to this Subsection 9(b), except for claims,
damages or expenses resulting from the gross negligence or willful
misconduct of such firm.
10. Death. (a) Except as provided in Section 10(b) hereof, in the
event of a Covered Termination due to the Executive's death, the
Executive's estate, heirs and beneficiaries shall receive all the
Executive's Accrued Benefits through the Termination Date.
(b) In the event the Executive dies after a Notice of Termination is
given (i) by the Company or (ii) by the Executive for Good Reason, the
Executive's estate, heirs and beneficiaries shall be entitled to the
benefits described in Section 10(a) hereof and, subject to the provisions
of this Agreement, to such Termination Payment as the Executive would have
been entitled to had the Executive lived. For purposes of this Subsection
10(b), the Termination Date shall be the earlier of thirty days following
the giving of the Notice of Termination, subject to extension as
contemplated by the definition of Termination Date, or one day prior to
the end of the Employment Period.
11. Retirement. If, during the Employment Period, the Executive and the
Company shall execute an agreement providing for the early retirement of the
Executive from the Company, or the Executive shall otherwise give notice that he
is voluntarily choosing to retire early from the Company, the Executive shall
receive Accrued Benefits through the Termination Date; provided, that if the
Executive's employment is terminated by the Executive for Good Reason or by the
Company other than by reason of death, disability or
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Cause and the Executive also, in connection with such termination, elects
voluntary early retirement, the Executive shall also be entitled to receive a
Termination Payment pursuant to Section 8(a) hereof.
12. Termination for Disability. If, during the Employment Period, as a
result of the Executive's disability due to physical or mental illness or injury
(regardless of whether such illness or injury is job-related), the Executive
shall have been absent from the Executive's duties hereunder on a full-time
basis for a period of 180 days during any 194-day period and, within thirty days
after the Company notifies the Executive in writing that it intends to terminate
the Executive's employment (which notice shall not constitute the Notice of
Termination contemplated below), the Executive shall not have returned to the
performance of the Executive's duties hereunder on a full-time basis, the
Company may terminate the Executive's employment for purposes of this Agreement
pursuant to a Notice of Termination given in accordance with Section 14 hereof.
If the Executive's employment is terminated on account of the Executive's
disability in accordance with this Section, the Executive shall receive Accrued
Benefits in accordance with Section 9(a) hereof and shall remain eligible for
all benefits provided by any long term disability programs of the Company in
effect at the time of such termination.
13. Stock Options. Following a Change in Control of the Company, all stock
options held by the Executive as of the Effective Date (and not otherwise
exercised) will become exercisable in full notwithstanding any percentage
limitations on the exercise of the options and, notwithstanding any termination
of the Executive's employment, shall remain exercisable for a period of not less
than three months after the date of the Change in Control of the Company;
provided, however, that no option shall be exercisable after the expiration date
specified therefor in the applicable stock option agreement.
14. Termination Notice and Procedure. Any Covered Termination by the
Employer or the Executive (other than a termination of the Executive's
employment referenced in the last sentence of the definition of "Effective
Date") shall be communicated by written Notice of Termination to the Executive,
if such Notice is given by the Company, and
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to the Company, if such Notice is given by the Executive, all in accordance with
the following procedures and those set forth in Section 24 hereof:
(a) If such termination is for disability, Cause or Good Reason, the
Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such termination.
(b) Any Notice of Termination by the Company shall have been approved,
prior to the giving thereof to the Executive, by a resolution duly adopted by a
majority of the directors of the Company (or any successor corporation) then in
office.
(c) The Executive shall have thirty days, or such longer period as the
Company may determine to be appropriate, to cure any conduct or act, if curable,
alleged to provide grounds for termination of the Executive's employment for
Cause under this Agreement pursuant to subparagraph (iii) of the definition of
"Cause."
(d) The recipient of any Notice of Termination shall personally deliver or
mail in accordance with Section 24 hereof written notice of any dispute relating
to such Notice of Termination to the party giving such Notice within fifteen
days after receipt thereof. After the expiration of such fifteen days, the
contents of the Notice of Termination shall become final and not subject to
dispute.
15. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event of any Covered
Termination where the Executive is entitled to Accrued Benefits and the
Termination Payment, the Executive shall not, during the balance of the
Employment Period, without the prior written approval of the Company's Board of
Directors, participate in the management of, be employed by or own any business
enterprise at a location within the United States that engages in substantial
competition with the Company or its subsidiaries, where such enterprise's
revenues from any printing services amount to 10% or more of such enterprise's
net revenues and sales for its most recently completed fiscal year; provided,
however, that nothing in this Section 15(a) shall prohibit the Executive from
owning stock or other securities of a
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competitor amounting to less than five percent of the outstanding capital stock
of such competitor.
(b) Confidentiality. During and following the Executive's employment by
the Employer, the Executive shall hold in confidence and not directly or
indirectly disclose or use or copy or make lists of any confidential information
or proprietary data of the Employer, except to the extent authorized in writing
by the Board of Directors of the Company or required by any court or
administrative agency, other than to an employee of the Employer or a person to
whom disclosure is reasonably necessary or appropriate in connection with the
performance by the Executive of duties as an executive of the Employer.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential by
persons engaged in the same business or a business similar to that of the
Employer. All records, files, documents and materials, or copies thereof,
relating to the business of the Employer which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Employer and shall be promptly returned to the Employer upon termination of
employment with the Employer.
16. Expenses and Interest. If, after the Effective Date, (i) a dispute
arises with respect to the enforcement of the Executive's rights under this
Agreement or (ii) any legal or arbitration proceeding shall be brought to
enforce or interpret any provision contained herein or to recover damages for
breach hereof, in either case so long as the Executive is not acting in bad
faith, the Executive shall recover from the Company any reasonable attorneys'
fees and necessary costs and disbursements incurred as a result of such dispute,
legal or arbitration proceeding ("Expenses"), and prejudgment interest on any
money judgment or arbitration award obtained by the Executive calculated at the
rate of interest announced by Firstar Bank, N.A., Milwaukee, Wisconsin (or any
successor bank thereto) from time to time as its prime or base lending rate from
the date that payments to him should have been made under this Agreement. Within
ten days after the Executive's written request therefor, the Company shall pay
to the Executive, or such other person or entity as the Executive may designate
in writing to the Company, the Executive's reasonable Expenses in advance of the
final disposition or conclusion of any such dispute, legal or arbitration
proceeding.
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17. Payment Obligations Absolute. The Company's obligation during and
after the Employment Period to pay the Executive the amounts and to make the
benefit and other arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. Except as provided in Section
16 of this Agreement, all amounts payable by the Company hereunder shall be paid
without notice or demand. Each and every payment made hereunder by the Company
shall be final, and the Company will not seek to recover all or any part of such
payment from the Executive, or from whomsoever may be entitled thereto, for any
reason whatsoever.
18. Successors. (a) If the Company sells, assigns or transfers all or
substantially all of its business and assets to any Person or if the Company
merges into or consolidates or otherwise combines (where the Company does not
survive such combination) with any Person (any such event, a "Sale of
Business"), then the Company shall assign all of its right, title and interest
in this Agreement as of the date of such event to such Person, and the Company
shall cause such Person, by written agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree to perform from and
after the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. Failure of the Company to obtain
such agreement prior to the effective date of such Sale of Business shall be a
breach of this Agreement constituting "Good Reason" hereunder, except that for
purposes of implementing the foregoing, the date upon which such Sale of
Business becomes effective shall be deemed the Termination Date. In case of such
assignment by the Company and of assumption and agreement by such Person, as
used in this Agreement, "Company" shall thereafter mean such Person which
executes and delivers the agreement provided for in this Section 18 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law, and this Agreement shall inure to the benefit of, and be
enforceable by, such Person. The Executive shall, in his discretion, be entitled
to proceed against any or all of such Persons, any Person which theretofore was
such a successor to the Company (as defined in the first paragraph of this
Agreement) and the Company (as so defined) in any action to enforce any rights
of the Executive hereunder.
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Except as provided in this Subsection, this Agreement shall not be assignable by
the Company. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive under Sections 7, 8, 9, 10, 11, 12 and 16 hereof if the
Executive had lived shall be paid, in the event of the Executive's death, to the
Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Company, as such terms are in effect on the Effective Date, that expressly
govern benefits under such plan in the event of the Executive's death.
19. Severability. The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part hereof are declared invalid
or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
20. Amendment. This Agreement may not be amended or modified at any time
except by written instrument executed by a duly authorized officer of the
Company (other than the Executive) on behalf of the Company and by the
Executive.
21. Withholding. The Company shall be entitled to withhold from amounts to
be paid to the Executive hereunder any federal, state or local withholding or
other taxes or charges which it is from time to time required to withhold;
provided, that the amount so withheld shall not exceed the minimum amount
required to be withheld by law. The Company shall be entitled to rely on an
opinion of nationally recognized tax counsel if any question as to the amount or
requirement of any such withholding shall arise.
22. Certain Rules of Construction. No party shall be considered as being
responsible for the drafting of this Agreement for the purpose of applying any
rule construing ambiguities against the drafter or otherwise. No draft of this
Agreement shall be taken into account in construing this Agreement. Any
provision of this Agreement which requires an
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agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of the Company.
23. Governing Law; Resolution of Disputes. This Agreement and the rights
and obligations hereunder shall be governed by and construed in accordance with
the laws of the State of Wisconsin. Any dispute arising out of this Agreement
shall, at the Executive's election, be determined by arbitration under the rules
of the American Arbitration Association then in effect (in which case both
parties shall be bound by the arbitration award) or by litigation. Whether the
dispute is to be settled by arbitration or litigation, the venue for the
arbitration or litigation shall be Menasha, Wisconsin or, at the Executive's
election, if the Executive does not then reside or work in the Menasha,
Wisconsin metropolitan area, in the judicial district encompassing the city in
which the Executive resides; provided, that, if the Executive is not then
residing in the United States, the election of the Executive with respect to
such venue shall be either Menasha, Wisconsin or in the judicial district
encompassing that city in the United States among the thirty cities having the
largest population (as determined by the most recent United States Census data
available at the Termination Date) which is closest to the Executive's
residence. The parties consent to personal jurisdiction in each trial court in
the selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process in
the manner provided hereunder for the giving of notices.
24. Notice. Notices given pursuant to this Agreement shall be in writing
and, except as otherwise provided by Section 14(c) hereof, shall be deemed given
when actually received by the Executive or actually received by the Company's
Secretary or any officer of the Company other than the Executive. If mailed,
such notices shall be mailed by United States registered or certified mail,
return receipt requested, addressee only, postage prepaid, if to the Company, to
Banta Corporation, Attention: Secretary (or President, if the Executive is then
Secretary), River Place, 225 Main Street, Menasha, WI 54952, or if to the
Executive, at the address set forth below the Executive's signature to this
Agreement, or to such other address as the party to be notified shall have
theretofore given to the other party in writing.
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25. No Waiver. No waiver by either party at any time of any breach by the
other party of, or compliance with, any condition or provision of this Agreement
to be performed by the other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or any prior or subsequent
time.
26. Headings. The headings herein contained are for reference only and
shall not affect the meaning or interpretation of any provision of this
Agreement.
27. Prior Agreement(s). This Agreement shall supersede any and all prior
Key Executive Employment and Severance Agreements among the parties hereto,
which prior agreement(s) shall be of no further force or effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
BANTA CORPORATION
(Corporate Seal)
By:____________________________________
Donald D. Belcher
Chairman, President and
Chief Executive Officer
Attest:_________________________________
Ronald D. Kneezel
Secretary
EXECUTIVE
---------------------------------------
Address:
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Exhibit A
CERTAIN DEFINED TERMS
For the purposes of this Agreement:
(a) Act. The term "Act" means the Securities Exchange Act of 1934, as
amended.
(b) Affiliate and Associate. The terms "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations of the Act.
(c) Beneficial Owner. A Person shall be deemed to be the "Beneficial
Owner" of any securities:
(i) which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, (A) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase, or (B) securities issuable upon exercise of Rights issued
pursuant to the terms of the Company's Rights Agreement with First
Wisconsin Trust Company (n/k/a Firstar Bank, N.A.) dated as of October 29,
1991, as amended from time to time (or any successor to such Rights
Agreement), at any time before the issuance of such securities;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Act), including pursuant to any
agreement, arrangement or
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<PAGE>
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security under this
subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if the agreement, arrangement or
understanding: (A) arises solely from a revocable proxy or consent given
to such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations
under the Act and (B) is not also then reportable on a Schedule 13D under
the Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in subparagraph (c)(ii) above) or disposing of any voting
securities of the Company.
(d) Cause. "Cause" for termination by the Employer of the Executive's
employment after the Effective Date shall, for purposes of this Agreement, be
limited to (i) misappropriation by the Executive of funds of the Employer; (ii)
the Executive personally and secretly obtaining profits from dealings with the
Employer; (iii) the Executive's unreasonable neglect of, or refusal to perform,
his duties or responsibilities (unless significantly changed without the
Executive's consent); and (iv) conviction of a serious crime involving moral
turpitude.
(e) Change in Control of the Company. A "Change in Control of the Company"
shall be deemed to occur if (i) any Person becomes the Beneficial Owner of more
than 30% of the outstanding voting stock of the Company, (A) in whole or in part
by means of an offer made to the holders of any one or more classes of such
voting stock to acquire such shares for cash, securities, other property or any
combination thereof, or (B) by any other means; (ii) the Company sells,
transfers or assigns all or substantially all of its business and assets; (iii)
the Company consolidates with or merges into any other corporation, unless the
Company or a subsidiary of the Company is the continuing or surviving
corporation; (iv) the Company acquires, whether through purchase, merger or
otherwise, all or substantially all of
A-2
<PAGE>
the operating assets or capital stock of another entity and in connection with
such acquisition persons are elected or appointed to the Board of Directors of
the Company who are not directors immediately prior to such acquisition and such
persons constitute a majority of the Board of Directors after such acquisition;
or (v) any Person succeeds in electing two or more directors of the Company in
any one election in opposition to those nominees proposed by management of the
Company.
(f) Code. The term "Code" means the Internal Revenue Code of 1986,
including any amendments thereto or successor tax codes thereof.
(g) Covered Termination. The term "Covered Termination" means any
termination of the Executive's employment during the Employment Period where the
Termination Date is any date on or prior to the end of such Employment Period.
(h) Effective Date. The term "Effective Date" shall mean the first day on
which a Change in Control of the Company occurs. Anything in this Agreement to
the contrary notwithstanding, if a Change in Control of the Company occurs and
if the Executive's employment with the Employer is terminated (whether by the
Employer, the Executive or otherwise) during the period of 180 days prior to the
date on which the Change in Control of the Company occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment (i)
was at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control of the Company or (ii) otherwise arose in connection
with or in anticipation of a Change in Control of the Company, then for all
purposes of this Agreement, the term "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(i) Employment Period. The term "Employment Period" means a period
commencing on the Effective Date, and ending at 11:59 p.m. Central Time on the
earlier of the second anniversary of such date or the Executive's Normal
Retirement Date.
(j) Good Reason. The Executive shall have a "Good Reason" for termination
of employment on or after the Effective Date in the event of:
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<PAGE>
(i) any breach of this Agreement by the Company, including
specifically any breach by the Company of its agreements contained in
Sections 4, 5 or 6 hereof;
(ii) the removal of the Executive from, or any failure to reelect or
reappoint the Executive to, any of the positions held with the Employer at
any time during the 180-day period prior to the Effective Date or any
other positions with the Employer to which the Executive shall thereafter
be elected, appointed or assigned, except in the event that such removal
or failure to reelect or reappoint (A) relates to the termination by the
Employer of the Executive's employment for Cause or by reason of
disability pursuant to Section 12 hereof, or (B) is consented to in
writing by the Executive;
(iii) a good faith determination by the Executive that there has
been a significant adverse change, without the Executive's written
consent, in the Executive's working conditions or status with the Employer
from such working conditions or status in effect during the 180-day period
prior to the Effective Date, including but not limited to (A) a
significant change in the nature or scope of the Executive's authority,
powers, functions, duties or responsibilities, or (B) a significant
reduction in the level of support services, staff, secretarial and other
assistance, office space and accoutrements; or
(iv) failure by the Company to obtain the Agreement referred to in
Section 18(a) hereof as provided therein.
(k) Normal Retirement Date. The term "Normal Retirement Date" means
"Normal Retirement Date" as defined in the Banta Corporation Employees Pension
Plan, or any successor plan, as in effect on the Effective Date.
(l) Notice of Termination. The term "Notice of Termination" means a
written notice as contemplated by Section 14 hereof.
A-4
<PAGE>
(m) Person. The term "Person" shall mean any individual, firm,
partnership, corporation or other entity, including any successor (by merger or
otherwise) of such entity, or a group of any of the foregoing acting in concert.
(n) Termination Date. Except as otherwise provided in Section 10(b) and
Section 18(a) hereof, the term "Termination Date" means (i) if the Executive's
employment is terminated by the Executive's death, the date of death; (ii) if
the Executive's employment is terminated by reason of voluntary early
retirement, as agreed in writing by the Company and the Executive, the date of
such early retirement which is set forth in such written agreement; (iii) if the
Executive's employment is terminated for purposes of this Agreement by reason of
disability pursuant to Section 12 hereof, the earlier of thirty days after the
Notice of Termination is given or one day prior to the end of the Employment
Period; (iv) if the Executive's employment is terminated by the Executive
voluntarily (other than for Good Reason), the date the Notice of Termination is
given; and (v) if the Executive's employment is terminated by the Company (other
than by reason of disability pursuant to Section 12 hereof) or by the Executive
for Good Reason, the earlier of thirty days after the Notice of Termination is
given or one day prior to the end of the Employment Period. Notwithstanding the
foregoing,
(A) If termination is for Cause pursuant to subparagraph (iii) of the
definition of Cause set forth above and if the Executive has cured the conduct
constituting such Cause as described by the Company in its Notice of Termination
within such thirty-day or shorter period, then the Executive's employment
hereunder shall continue as if the Company had not delivered its Notice of
Termination.
(B) If the Company shall give a Notice of Termination for Cause or by
reason of disability and the Executive in good faith notifies the Company that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue his
employment during such dispute and the Termination Date shall be determined
under this paragraph. If the Executive so elects and it is thereafter determined
that Cause or disability (as the case may be) did exist, the Termination Date
shall be the earlier of (1) the date on which the dispute is finally determined,
either (x) by mutual
A-5
<PAGE>
written agreement of the parties or (y) in accordance with
Section 23 hereof, (2) the date of the Executive's death, or (3) one day prior
to the end of the Employment Period. If the Executive so elects and it is
thereafter determined that Cause or disability (as the case may be) did not
exist, then the employment of the Executive hereunder shall continue after such
determination as if the Company had not delivered its Notice of Termination and
there shall be no Termination Date arising out of such Notice. In either case,
this Agreement continues, until the Termination Date, if any, as if the Company
had not delivered the Notice of Termination except that, if it is finally
determined that the Company properly terminated the Executive for the reason
asserted in the Notice of Termination, the Executive shall in no case be
entitled to a Termination Payment (as hereinafter defined) arising out of events
occurring after the Company delivered its Notice of Termination.
(C) If the Executive shall in good faith give a Notice of Termination for
Good Reason and the Company notifies the Executive that a dispute exists
concerning the termination within the fifteen-day period following receipt
thereof, then the Executive may elect to continue his employment during such
dispute and the Termination Date shall be determined under this paragraph. If
the Executive so elects and it is thereafter determined that Good Reason did
exist, the Termination Date shall be the earlier of (1) the date on which the
dispute is finally determined, either (x) by mutual written agreement of the
parties or (y) in accordance with Section 23 hereof, (2) the date of the
Executive's death or (3) one day prior to the end of the Employment Period. If
the Executive so elects and it is thereafter determined that Good Reason did not
exist, then the employment of the Executive hereunder shall continue after such
determination as if the Executive had not delivered the Notice of Termination
asserting Good Reason and there shall be no Termination Date arising out of such
Notice. In either case, this Agreement continues, until the Termination Date, if
any, as if the Executive had not delivered the Notice of Termination except
that, if it is finally determined that Good Reason did exist, the Executive
shall in no case be denied the benefits described in Sections 8(b) and 9 hereof
(including a Termination Payment) based on events occurring after the Executive
delivered his Notice of Termination.
(D) If an opinion is required to be delivered pursuant to Section
9(b)(iii) hereof and such opinion shall not have been delivered, the Termination
Date shall be
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<PAGE>
the earlier of the date on which such opinion is delivered or one day prior to
the end of the Employment Period.
(E) Except as provided in subparagraphs (B) and (C) above, if the party
receiving the Notice of Termination notifies the other party that a dispute
exists concerning the termination within the fifteen-day period following
receipt thereof and it is finally determined that the reason asserted in such
Notice of Termination did not exist, then (1) if such Notice was delivered by
the Executive, the Executive will be deemed to have voluntarily terminated his
employment and (2) if delivered by the Company, the Company will be deemed to
have terminated the Executive other than by reason of death, disability or
Cause.
A-7
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 31st day of December,
1999, by and between Banta Corporation, a Wisconsin corporation (hereinafter
referred to as the "Company"), and Donald D. Belcher (hereinafter referred to as
the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is employed by the Company and/or a subsidiary of
the Company (collectively, the "Employer") in a key executive capacity and the
Executive's services are valuable to the conduct of the business of the Company;
WHEREAS, the Company recognizes that circumstances may arise in which a
change in control of the Company occurs, through acquisition or otherwise,
thereby causing uncertainty about the Executive's future employment with the
Employer without regard to the Executive's competence or past contributions
which uncertainty may result in the loss of valuable services of the Executive
to the detriment of the Company and its shareholders, and the Company and the
Executive wish to provide reasonable security to the Executive against changes
in the Executive's relationship with the Employer in the event of any such
change in control;
WHEREAS, the Company and the Executive are desirous that any proposal for
a change in control or acquisition of the Company will be considered by the
Executive objectively and with reference only to the best interests of the
Company and its shareholders; and
WHEREAS, the Executive will be in a better position to consider the
Company's best interests if the Executive is afforded reasonable security, as
provided in this Agreement, against altered conditions of employment which could
result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
<PAGE>
1. Definitions.
(a) Act. For purposes of this Agreement, the term "Act" means the
Securities Exchange Act of 1934, as amended.
(b) Affiliate and Associate. For purposes of this Agreement, the terms
"Affiliate" and "Associate" shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations of the Act.
(c) Beneficial Owner. For purposes of this Agreement, a Person shall be
deemed to be the "Beneficial Owner" of any securities:
(i) which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, (A) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase, or (B) securities issuable upon exercise of Rights issued
pursuant to the terms of the Company's Rights Agreement with First
Wisconsin Trust Company (n/k/a Firstar Bank, N.A.), dated as of October
29, 1991, as amended from time to time (or any successor to such Rights
Agreement), at any time before the issuance of such securities;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Act), including pursuant to any
agreement, arrangement or understanding; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security under this
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<PAGE>
subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if the agreement, arrangement or
understanding: (A) arises solely from a revocable proxy or consent given
to such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations
under the Act and (B) is not also then reportable on a Schedule 13D under
the Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in Subsection 1(c)(ii) above) or disposing of any voting
securities of the Company.
(d) Cause. "Cause" for termination by the Company of the Executive's
employment after the Effective Date shall, for purposes of this Agreement, be
limited to (i) misappropriation by the Executive of funds of the Company; (ii)
the Executive personally and secretly obtaining profits from dealings with the
Company; (iii) the Executive's unreasonable neglect of, or refusal to perform,
his duties or responsibilities (unless significantly changed without the
Executive's consent); and (iv) conviction of a serious crime involving moral
turpitude.
(e) Change in Control of the Company. For purposes of this Agreement, a
"Change in Control of the Company" shall be deemed to occur if (i) any Person
becomes the Beneficial Owner of more than 30% of the outstanding voting stock of
the Company, (A) in whole or in part by means of an offer made to the holders of
any one or more classes of such voting stock to acquire such shares for cash,
securities, other property or any combination thereof, or (B) by any other
means; (ii) the Company sells, transfers or assigns all or substantially all of
its business and assets; (iii) the Company consolidates with or merges into any
other corporation, unless the Company or a subsidiary of the Company is the
continuing or surviving corporation; (iv) the Company acquires, whether through
purchase, merger or
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<PAGE>
otherwise, all or substantially all of the operating assets or capital stock of
another entity and in connection with such acquisition persons are elected or
appointed to the Board of Directors of the Company who are not directors
immediately prior to such acquisition and such persons constitute a majority of
the Board of Directors after such acquisition; or (v) any Person succeeds in
electing two or more directors of the Company in any one election in opposition
to those nominees proposed by management of the Company.
(f) Code. For purposes of this Agreement, the term "Code" means the
Internal Revenue Code of 1986, including any amendments thereto or successor tax
codes thereof.
(g) Covered Termination. For purposes of this Agreement, the term "Covered
Termination" means any termination of the Executive's employment during the
Employment Period where the Termination Date is any date on or prior to the end
of such Employment Period.
(h) Effective Date. For purposes of this Agreement, the term "Effective
Date" shall mean the first date on which a Change in Control of the Company
occurs. Anything in this Agreement to the contrary notwithstanding, if a Change
in Control of the Company occurs and if the Executive's employment with the
Company or a subsidiary of the Company is terminated (whether by the Company,
the Executive or otherwise) during the period of 180 days prior to the date on
which the Change in Control of the Company occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control of the Company or (ii) otherwise arose in connection with or
in anticipation of a Change in Control of the Company, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination of employment.
(i) Employment Period. For purposes of this Agreement, the term
"Employment Period" means a period commencing on the Effective Date, and ending
at 11:59 p.m. Central Time on the earlier of the third anniversary of such date
or the Executive's Normal Retirement Date.
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<PAGE>
(j) Good Reason. For purposes of this Agreement, the Executive shall have
a "Good Reason" for termination of employment on or after the Effective Date in
the event of:
(i) any breach of this Agreement by the Company, including
specifically any breach by the Company of its agreements contained in
Sections 4, 5 or 6 hereof;
(ii) the removal of the Executive from, or any failure to reelect or
reappoint the Executive to, any of the positions held with the Company at
any time during the 180-day period prior to the Effective Date or any
other positions with the Company to which the Executive shall thereafter
be elected, appointed or assigned, except in the event that such removal
or failure to reelect or reappoint (A) relates to the termination by the
Company of the Executive's employment for Cause or by reason of disability
pursuant to Section 12 hereof, or (B) is consented to in writing by the
Executive;
(iii) a good faith determination by the Executive that there has
been a significant adverse change, without the Executive's written
consent, in the Executive's working conditions or status with the Company
from such working conditions or status in effect during the 180-day period
prior to the Effective Date, including but not limited to (A) a
significant change in the nature or scope of the Executive's authority,
powers, functions, duties or responsibilities, or (B) a significant
reduction in the level of support services, staff, secretarial and other
assistance, office space and accoutrements; or
(iv) failure by the Company to obtain the Agreement referred to in
Section 18(a) hereof as provided therein.
(k) Normal Retirement Date. For purposes of this Agreement, the term
"Normal Retirement Date" means "Normal Retirement Date" as defined in the
Company's Salaried Employees Pension Plan, or any successor plan, as in effect
on the Effective Date.
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<PAGE>
(l) Notice of Termination. For purposes of this Agreement, the term
"Notice of Termination" means a written notice as contemplated by Section 14
hereof.
(m) Person. For purposes of this Agreement, the term "Person" shall mean
any individual, firm, partnership, corporation or other entity, including any
successor (by merger or otherwise) of such entity, or a group of any of the
foregoing acting in concert.
(n) Termination Date. For purposes of this Agreement, except as otherwise
provided in Section 10(b) and Section 18(a) hereof, the term "Termination Date"
means (i) if the Executive's employment is terminated by the Executive's death,
the date of death; (ii) if the Executive's employment is terminated by reason of
voluntary early retirement, as agreed in writing by the Company and the
Executive, the date of such early retirement which is set forth in such written
agreement; (iii) if the Executive's employment is terminated for purposes of
this Agreement by reason of disability pursuant to Section 12 hereof, the
earlier of thirty days after the Notice of Termination is given or one day prior
to the end of the Employment Period; (iv) if the Executive's employment is
terminated by the Executive voluntarily (other than for Good Reason), the date
the Notice of Termination is given; and (v) if the Executive's employment is
terminated by the Company (other than by reason of disability pursuant to
Section 12 hereof) or by the Executive for Good Reason, the earlier of thirty
days after the Notice of Termination is given or one day prior to the end of the
Employment Period. Notwithstanding the foregoing,
(A) If termination is for Cause pursuant to Section 1(d)(iii) of this
Agreement and if the Executive has cured the conduct constituting such Cause as
described by the Company in its Notice of Termination within such thirty-day or
shorter period, then the Executive's employment hereunder shall continue as if
the Company had not delivered its Notice of Termination.
(B) If the Company shall give a Notice of Termination for Cause or by
reason of disability and the Executive in good faith notifies the Company that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue his
employment during such dispute and the Termination Date
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<PAGE>
shall be determined under this paragraph. If the Executive so elects and it is
thereafter determined that Cause or disability (as the case may be) did exist,
the Termination Date shall be the earlier of (1) the date on which the dispute
is finally determined, either (x) by mutual written agreement of the parties or
(y) in accordance with Section 23 hereof, (2) the date of the Executive's death,
or (3) one day prior to the end of the Employment Period. If the Executive so
elects and it is thereafter determined that Cause or disability (as the case may
be) did not exist, then the employment of the Executive hereunder shall continue
after such determination as if the Company had not delivered its Notice of
Termination and there shall be no Termination Date arising out of such Notice.
In either case, this Agreement continues, until the Termination Date, if any, as
if the Company had not delivered the Notice of Termination except that, if it is
finally determined that the Company properly terminated the Executive for the
reason asserted in the Notice of Termination, the Executive shall in no case be
entitled to a Termination Payment (as hereinafter defined) arising out of events
occurring after the Company delivered its Notice of Termination.
(C) If the Executive shall in good faith give a Notice of Termination for
Good Reason and the Company notifies the Executive that a dispute exists
concerning the termination within the fifteen-day period following receipt
thereof, then the Executive may elect to continue his employment during such
dispute and the Termination Date shall be determined under this paragraph. If
the Executive so elects and it is thereafter determined that Good Reason did
exist, the Termination Date shall be the earlier of (1) the date on which the
dispute is finally determined, either (x) by mutual written agreement of the
parties or (y) in accordance with Section 23 hereof, (2) the date of the
Executive's death or (3) one day prior to the end of the Employment Period. If
the Executive so elects and it is thereafter determined that Good Reason did not
exist, then the employment of the Executive hereunder shall continue after such
determination as if the Executive had not delivered the Notice of Termination
asserting Good Reason and there shall be no Termination Date arising out of such
Notice. In either case, this Agreement continues, until the Termination Date, if
any, as if the Executive had not delivered the Notice of Termination except
that, if it is finally determined that Good Reason did exist, the Executive
shall in no case be denied the benefits described in Sections
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8(b) and 9 hereof (including a Termination Payment) based on events occurring
after the Executive delivered his Notice of Termination.
(D) If an opinion is required to be delivered pursuant to Section
9(b)(iii) hereof and such opinion shall not have been delivered, the Termination
Date shall be the earlier of the date on which such opinion is delivered or one
day prior to the end of the Employment Period.
(E) Except as provided in Paragraphs (B) and (C) above, if the party
receiving the Notice of Termination notifies the other party that a dispute
exists concerning the termination within the fifteen-day period following
receipt thereof and it is finally determined that the reason asserted in such
Notice of Termination did not exist, then (1) if such Notice was delivered by
the Executive, the Executive will be deemed to have voluntarily terminated his
employment and (2) if delivered by the Company, the Company will be deemed to
have terminated the Executive other than by reason of death, disability or
Cause.
2. Termination or Cancellation Prior to the Effective Date. The Employer
and the Executive shall each retain the right to terminate the employment of the
Executive at any time prior to the Effective Date. In the event the Executive's
employment is terminated prior to the Effective Date, this Agreement shall be
terminated and cancelled and of no further force and effect and any and all
rights and obligations of the parties hereunder shall cease.
3. Employment Period. If the Executive is employed by the Company or a
subsidiary of the Company on the Effective Date, the Company will, or will cause
the Employer to, continue thereafter to employ the Executive during the
Employment Period, and the Executive will remain in the employ of the Employer,
in accordance with and subject to the terms and provisions of this Agreement.
Any termination of the Executive's employment during the Employment Period which
results in a complete termination of the Executive's employment with the Company
and its subsidiaries, whether by the Company or a subsidiary of the Company,
shall be deemed a termination by the Company for purposes of this Agreement.
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4. Duties. During the Employment Period, the Executive shall, in the most
significant capacities and positions held by the Executive at any time during
the 180-day period preceding the Effective Date or in such other capacities and
positions as may be agreed to by the Company and the Executive in writing,
devote the Executive's best efforts and all of the Executive's business time,
attention and skill to the business and affairs of the Employer, as such
business and affairs now exist and as they may hereafter be conducted. The
services which are to be performed by the Executive hereunder are to be rendered
in the same metropolitan area in which the Executive was principally employed
during the 180-day period prior to the Effective Date, or in such other place or
places as shall be mutually agreed upon in writing by the Executive and the
Company from time to time. Without the Executive's consent the Executive shall
not be required to be absent from such metropolitan area more than 60 days in
any fiscal year of the Company.
5. Compensation. During the Employment Period, the Executive shall be
compensated as follows:
(a) The Executive shall receive, at reasonable intervals (but not less
often than monthly) and in accordance with such standard policies as may be in
effect immediately prior to the Effective Date, an annual base salary in cash
equivalent of not less than twelve times the Executive's highest monthly base
salary for the twelve-month period immediately preceding the month in which the
Effective Date occurs (which base salary shall, unless otherwise agreed in
writing by the Executive, include the current receipt by the Executive of any
amounts which, prior to the Effective Date, the Executive had elected to defer,
whether such compensation is deferred under Section 401(k) of the Code or
otherwise), subject to upward adjustment as provided in Section 6 hereof (such
salary amount as adjusted upward from time to time is hereafter referred to as
the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least equal in value to
those provided for the Executive at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to executives of
the Employer of comparable status and position to the
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Executive. The Executive shall be reimbursed, at such intervals and in
accordance with such standard policies that are most favorable to the Executive
which were in effect at any time during the 180-day period immediately preceding
the Effective Date or, if more favorable to the Executive, those provided
generally at any time after the Effective Date to executives of the Employer of
comparable status and position to the Executive, for any and all monies advanced
in connection with the Executive's employment for reasonable and necessary
expenses incurred by the Executive on behalf of the Employer, including travel
expenses.
(c) The Executive shall be included, to the extent eligible thereunder
(which eligibility shall not be conditioned on the Executive's salary grade or
on any other requirement which excludes persons of comparable status and
position to the Executive unless such exclusion was in effect for such plan or
an equivalent plan immediately prior to the Effective Date), in any and all
plans providing benefits for the Company's salaried employees in general,
including but not limited to group life insurance, hospitalization, medical,
dental, profit sharing and stock bonus plans; provided, that, in no event shall
the aggregate level of benefits under such plans in which the Executive is
included be less than the aggregate level of benefits under plans of the Company
and its subsidiaries of the type referred to in this Section 5(c) in which the
Executive was participating at any time during the 180-day period immediately
preceding the Effective Date.
(d) The Executive shall annually be entitled to not less than the amount
of paid vacation and not fewer than the number of paid holidays to which the
Executive was entitled annually at any time during the 180-day period
immediately preceding the Effective Date or such greater amount of paid vacation
and number of paid holidays as may be made available annually to other
executives of the Company and its subsidiaries of comparable status and position
to the Executive.
(e) The Executive shall be included in all plans providing additional
benefits to executives of the Company of comparable status and position to the
Executive, including but not limited to deferred compensation, split-dollar life
insurance, supplemental retirement, stock option, stock appreciation, stock
bonus, long-term incentive compensation (including, without
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limitation, benefits under the Company's Economic Profit Long-Term Incentive
Compensation Plan or any successor thereto (the "Long-Term EP Plan")) and
similar or comparable plans; provided, that, in no event shall the aggregate
level of benefits under such plans be less than the aggregate level of benefits
under plans of the Company of the type referred to in this Section 5(e) in which
the Executive was participating at any time during the 180-day period
immediately preceding the Effective Date; provided, further, that any financial
or other goals that must be satisfied in order to be eligible for an award under
any such plan shall be attainable with approximately the same degree of
probability as the goals, in the form most favorable to the Executive, under any
comparable plan which was in effect at any time during the 180-day period prior
to the Effective Date and in view of the Company's existing and projected
financial and business circumstances applicable at the time; provided, further,
that in the event the financial or other goals are not achieved such that the
entire amount of incentive compensation is payable, the plan shall provide for
the payment of an amount of incentive compensation equal to a portion of the
maximum payout reasonably related to that portion of the goals that were
achieved; provided, further, that, in the event a Termination Payment (as
defined herein) is otherwise due the Executive and the Executive is not employed
for the entire period for which the incentive compensation is payable, payment
of incentive compensation under each such plan shall be made on a prorated basis
based on the time employed during such period and calculated with the assumption
that the "target" award for which the Executive is eligible has been earned;
provided, further, that payment of incentive compensation shall not be affected
by any circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment; and provided, further, that
the Company's obligation to include the Executive in annual bonus or annual
incentive compensation plans shall be determined by Subsection 5(f) hereof.
(f) To assure that the Executive will have an opportunity to earn
incentive compensation on an annual basis after the Effective Date, the
Executive shall be included in a bonus plan of the Company which shall satisfy
the standards described below (such plan, the "Bonus Plan"). Bonuses under the
Bonus Plan shall be payable with respect to achieving such financial or other
goals reasonably related to the business of the Company as the Company
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shall establish (the "Goals"), all of which Goals shall be attainable, prior to
the end of the Employment Period, with approximately the same degree of
probability as the goals under the Company's Economic Profit Incentive
Compensation Plan, or the successor to such plan, in the form most favorable to
the Executive which was in effect at any time during the 180-day period prior to
the Effective Date (the "EP Plan") and in view of the Company's existing and
projected financial and business circumstances applicable at the time. The
amount of the bonus (the "Bonus Amount") that the Executive is eligible to earn
under the Bonus Plan shall be no less than the amount of the Executive's maximum
award provided in the EP Plan (such bonus amount herein referred to as the
"Target Bonus"), and in the event the Goals are not achieved such that the
entire Target Bonus is not payable, the Bonus Plan shall provide for a payment
of a Bonus Amount equal to a portion of the Target Bonus reasonably related to
that portion of the Goals which were achieved. In the event a Termination
Payment is otherwise due the Executive and the Executive is not employed for the
entire period for which the Bonus Amount is payable, payment of the Bonus Amount
shall be made on a prorated basis based on the time employed during the period
and calculated with the assumption that the "target" bonus for which the
Executive is eligible has been earned. Payment of the Bonus Amount shall not be
affected by any circumstance occurring subsequent to the end of the Employment
Period, including termination of the Executive's employment.
6. Annual Compensation Adjustments. During the Employment Period, the
Board of Directors of the Company (or an appropriate committee thereof) will
consider and appraise, at least annually, the contributions of the Executive to
the Employer, and in accordance with the Company's practice prior to the
Effective Date, due consideration shall be given, at least annually, to the
upward adjustment of the Executive's Annual Base Salary (i) commensurate with
increases generally given to other executives of the Employer of comparable
status and position to the Executive, and (ii) as the scope of the Employer's
operations or the Executive's duties expand.
7. Termination For Cause or Without Good Reason. If there is a Covered
Termination for Cause or due to the Executive's voluntarily terminating his
employment other than for Good Reason (any such terminations to be subject to
the procedures set forth in
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Section 14 hereof), then the Executive shall be entitled to receive only Accrued
Benefits pursuant to Section 9(a) hereof.
8. Termination Giving Rise to a Termination Payment. (a) If there is a
Covered Termination by the Executive for Good Reason, or by the Company other
than by reason of (i) death, (ii) disability pursuant to Section 12 hereof, or
(iii) Cause (any such terminations to be subject to the procedures set forth in
Section 14 hereof), then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in lieu of further base salary
for periods following the Termination Date, as liquidated damages and additional
severance pay and in consideration of the covenant of the Executive set forth in
Section 15(a) hereof, the Termination Payment pursuant to Section 9(b) hereof.
(b) If there is a Covered Termination and the Executive is entitled to
Accrued Benefits and the Termination Payment, then the Executive shall be
entitled to the following additional benefits:
(i) The Executive will be entitled to pension benefits in addition
to the most favorable benefits provided for him under any version of the
Company's Employees Pension Plan and the Company's Supplemental Retirement
Plan (or any successors to such plans) in effect at any time during the
180-day period prior to the Effective Date (the "Retirement Plans"). The
amount of additional pension benefits will be equal to the difference
between the amount the Executive (or in the event of the Executive's
death, the Executive's surviving spouse or other beneficiary) would be
actually entitled to receive upon retirement under the terms and
conditions of the Retirement Plans and the amount the Executive (or such
surviving spouse or beneficiary) would have been entitled to receive under
such terms and conditions if the Executive's benefits under the Retirement
Plans had been fully vested on the Termination Date and he had continued
to work until his 65th birthday at a rate equal to the Executive's Annual
Cash Compensation (as defined herein); provided, however, that in no event
will the assumed period of continued employment extend
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beyond the date on which the Executive elects to begin receiving the
additional pension benefits. The Executive shall be entitled to elect to
receive his additional pension benefits in any form (e.g. joint and
survivor) that would have been available to him ---- under the terms and
conditions of the Retirement Plans and (subject to reduction, if any,
under such terms) at any time after he has attained the age at which early
retirement is permitted. In addition, if the Executive starts to receive
his additional pension benefits before the earliest date on which he is
eligible for unreduced Social Security benefits, the Executive will
receive an amount equal to the difference between his estimated unreduced
Social Security benefit and the actual Social Security benefit to which he
is entitled on the date of such commencement, payable until he attains the
age when he is eligible for unreduced benefits.
(ii) Until the earlier of the end of the Employment Period or such
time as the Executive has obtained new employment and is covered by
benefits which in the aggregate are at least equal in value to the
following benefits, the Executive shall continue to be covered, at the
expense of the Company, by the most favorable life insurance,
hospitalization, medical and dental coverage provided to the Executive and
his family during the 180-day period immediately preceding the Effective
Date or, if more favorable to Executive, the coverage in effect generally
at any time thereafter for executives of the Employer of comparable status
and position to the Executive and their families.
(iii) The Executive shall be entitled to receive at the same time
that the Termination Payment is made all amounts then credited to the
Executive's account in the "Bonus Banks" under both the EP Plan and the
Long-Term EP Plan. Such amounts so paid out shall not be subject to future
forfeiture.
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(iv) The Company shall bear up to $10,000 in the aggregate of fees
and expenses of consultants and/or legal or accounting advisors engaged by
the Executive to advise the Executive as to matters relating to the
computation of benefits due and payable under Section 9(b).
(v) The Executive shall receive, at the expense of the Company,
outplacement services, on an individual basis at a level of service
commensurate with the Executive's status with the Employer immediately
prior to the Effective Date (or, if higher, immediately prior to the
termination of the Executive's employment), provided by a nationally
recognized executive placement firm selected by the Company; provided that
the cost to the Company of such services shall not exceed 15% of the sum
of Executive's Annual Base Salary and most recent annual bonus award
(determined on an annualized basis for any bonus award paid for a period
of less than one year).
9. Payments Upon Termination.
(a) Accrued Benefits. For purposes of this Agreement, the Executive's
"Accrued Benefits" shall include the following amounts, payable as described
herein: (i) all base salary for the time period ending with the Termination
Date; (ii) reimbursement for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Employer for the time period ending with the
Termination Date; (iii) any and all other cash earned through the Termination
Date and deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) a lump sum payment of the bonus or
incentive compensation with respect to the portion of any year or period in
which the termination occurs calculated on a pro rata basis (assuming an award
equal to the average of the awards (determined on an annualized basis for any
award paid for a period of less than one year and excluding any year or period
for which the Executive did not participate in the plan in question) paid to the
Executive for the three immediately preceding fiscal years or periods, but in no
event shall such assumed award level be less than the "target" level for the
then current fiscal year or period) under all bonus or incentive compensation
plan or plans in which the Executive is a participant; and (v) all other
payments and benefits to which the Executive (or in the event of the Executive's
death, the Executive's surviving spouse or other beneficiary) may be entitled as
compensatory fringe benefits or under the terms of any benefit plan of the
Company, including severance payments under the Company's severance policies
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and practices in the form most favorable to the Executive which were in effect
at any time during the 180-day period prior to the Effective Date. Payment of
Accrued Benefits shall be made promptly in accordance with the Company's
prevailing practice with respect to Subsections 9(a)(i), (ii) and (iii) or, with
respect to Subsections 9(a)(iv) and (v), pursuant to the terms of the benefit
plan or practice establishing such benefits.
(b) Termination Payment.
(i) The Termination Payment shall be an amount equal to (A) the
Executive's Annual Base Salary plus (B) an amount equal to the sum of the
highest (x) annual bonus award (determined on an annualized basis for any
bonus award paid for a period of less than one year and excluding any year
for which the Executive did not participate in any bonus plan) and (y)
long-term cash incentives earned with respect to, or, if more favorable to
the Executive, paid to (or deferred by) the Executive in, any one fiscal
year with respect to the three fiscal years preceding the Termination Date
(the aggregate amount set forth in (A) and (B) hereof shall hereafter be
referred to as "Annual Cash Compensation"), times (C) three (3). The
Termination Payment shall be paid to the Executive in cash equivalent ten
(10) business days after the Termination Date. Such lump sum payment shall
not be reduced by any present value or similar factor, and the Executive
shall not be required to mitigate the amount of the Termination Payment by
securing other employment or otherwise, nor will such Termination Payment
be reduced by reason of the Executive securing other employment or for any
other reason. The Termination Payment shall be in addition to any other
severance payments to which the Executive is entitled under the Company's
severance policies and practices in the form most favorable to the
Executive which were in effect at any time during the 180-day period prior
to the Effective Date.
(ii) Notwithstanding any other provision of this Agreement, if any
portion of any payment under this Agreement, or under any other agreement
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with or plan of the Company (in the aggregate "Total Payments"), would
constitute an "excess parachute payment," the Company shall pay the
Executive an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive after deduction of any excise tax imposed
under Section 4999 of the Code, any interest charges or penalties in
respect of the imposition of such excise tax (but not any federal, state
or local income tax, or employment tax) on the Total Payments, and any
federal, state and local income tax, employment tax, and excise tax upon
the payment provided for by this Subsection 9(b)(ii), shall be equal to
the Total Payments. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax and
employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rate
of taxation in the state and locality of the Executive's domicile for
income tax purposes on the date the Gross-Up Payment is made, net of the
reduction in federal income taxes that may be obtained from the deduction
of such state and local taxes.
(iii) For purposes of this Agreement, the terms "excess parachute
payment" and "parachute payments" shall have the meanings assigned to them
in Section 280G of the Code (or any successor provision) and such
"parachute payments" shall be valued as provided therein. Present value
for purposes of this Agreement shall be calculated in accordance with
Section 1274(b)(2) of the Code (or any successor provision). Promptly
following delivery of the Notice of Termination or notice by the Company
to the Executive of its belief that there is a payment or benefit due the
Executive which will result in an excess parachute payment as defined in
Section 280G of the Code, the Executive and the Company, at the Company's
expense, shall obtain the opinion (which need not be unqualified) of
nationally recognized tax counsel ("National Tax Counsel") selected by the
Company's independent auditors and
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acceptable to the Executive, which opinion sets forth (i) the amount of
the Base Period Income, (ii) the amount and present value of Total
Payments, (iii) the amount and present value of any excess parachute
payments, and (iv) the amount of any Gross-Up Payment. As used in this
Agreement, the term "Base Period Income" means an amount equal to the
Executive's "annualized includible compensation for the base period" as
defined in Sections 280G(d)(1) of the Code. For purposes of such opinion,
the value of any noncash benefits or any deferred payment or benefit shall
be determined by the Company's independent auditors in accordance with the
principles of Section 280G(d)(3) and (4) of the Code (or any successor
provisions), which determination shall be evidenced in a certificate of
such auditors addressed to the Company and the Executive. The opinion of
National Tax Counsel shall be dated as of the Termination Date and
addressed to the Company and the Executive and shall be binding upon the
Company and the Executive. If such National Tax Counsel so requests in
connection with the opinion required by this Subsection 9(b), the
Executive and the Company shall obtain, at the Company's expense, and the
National Tax Counsel may rely on, the advice of a firm of recognized
executive compensation consultants as to the reasonableness of any item of
compensation to be received by the Executive solely with respect to its
status under Section 280G of the Code and the regulations thereunder.
Within five (5) days after the National Tax Counsel's opinion is received
by the Company and the Executive, the Company shall pay (or cause to be
paid) or distribute (or cause to be distributed) to or for the benefit of
the Executive such amounts as are then due to the Executive under
Subsection 9(b)(ii).
(iv) In the event that upon any audit by the Internal Revenue
Service, or by a state or local taxing authority, of the Total Payments or
Gross-Up Payment, a change is finally determined to be required in the
amount of taxes paid by Executive, appropriate adjustments shall be made
under this Agreement such that the net amount which is payable to the
Executive after
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taking into account the provisions of Section 4999 of the Code shall
reflect the intent of the parties as expressed in this Section 9, in the
manner determined by the National Tax Counsel.
(v) The Company agrees to bear all costs associated with, and to
indemnify and hold harmless, the National Tax Counsel of and from any and
all claims, damages, and expenses resulting from or relating to its
determinations pursuant to this Subsection 9(b), except for claims,
damages or expenses resulting from the gross negligence or willful
misconduct of such firm.
10. Death. (a) Except as provided in Section 10(b) hereof, in the event of
a Covered Termination due to the Executive's death, the Executive's estate,
heirs and beneficiaries shall receive all the Executive's Accrued Benefits
through the Termination Date.
(b) In the event the Executive dies after a Notice of Termination is given
(i) by the Company or (ii) by the Executive for Good Reason, the Executive's
estate, heirs and beneficiaries shall be entitled to the benefits described in
Section 10(a) hereof and, subject to the provisions of this Agreement, to such
Termination Payment as the Executive would have been entitled to had the
Executive lived. For purposes of this Subsection 10(b), the Termination Date
shall be the earlier of thirty days following the giving of the Notice of
Termination, subject to extension pursuant to Section 1(n) hereof, or one day
prior to the end of the Employment Period.
11. Retirement. If, during the Employment Period, the Executive and the
Company shall execute an agreement providing for the early retirement of the
Executive from the Company, or the Executive shall otherwise give notice that he
is voluntarily choosing to retire early from the Company, the Executive shall
receive Accrued Benefits through the Termination Date; provided, that if the
Executive's employment is terminated by the Executive for Good Reason or by the
Company other than by reason of death, disability or Cause and the Executive
also, in connection with such termination, elects voluntary early retirement,
the Executive shall also be entitled to receive a Termination Payment pursuant
to Section 8(a) hereof.
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12. Termination for Disability. If, during the Employment Period, as a
result of the Executive's disability due to physical or mental illness or injury
(regardless of whether such illness or injury is job-related), the Executive
shall have been absent from the Executive's duties hereunder on a full-time
basis for a period of 180 days during any 194-day period and, within thirty days
after the Company notifies the Executive in writing that it intends to terminate
the Executive's employment (which notice shall not constitute the Notice of
Termination contemplated below), the Executive shall not have returned to the
performance of the Executive's duties hereunder on a full-time basis, the
Company may terminate the Executive's employment for purposes of this Agreement
pursuant to a Notice of Termination given in accordance with Section 14 hereof.
If the Executive's employment is terminated on account of the Executive's
disability in accordance with this Section, the Executive shall receive Accrued
Benefits in accordance with Section 9(a) hereof and shall remain eligible for
all benefits provided by any long term disability programs of the Company in
effect at the time of such termination.
13. Stock Options. Following a Change in Control of the Company, all stock
options held by the Executive as of the Effective Date (and not otherwise
exercised) will become exercisable in full notwithstanding any percentage
limitations on the exercise of the options and, notwithstanding any termination
of the Executive's employment, shall remain exercisable for a period of not less
than three months after the date of the Change in Control of the Company;
provided, however, that no option shall be exercisable after the expiration date
specified therefor in the applicable stock option agreement.
14. Termination Notice and Procedure. Any Covered Termination by the
Employer or the Executive (other than a termination of the Executive's
employment referenced in the last sentence of Section 1(h) hereof) shall be
communicated by written Notice of Termination to the Executive, if such Notice
is given by the Company, and to the Company, if such Notice is given by the
Executive, all in accordance with the following procedures and those set forth
in Section 24 hereof:
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(a) If such termination is for disability, Cause or Good Reason, the
Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such termination.
(b) Any Notice of Termination by the Company shall have been approved,
prior to the giving thereof to the Executive, by a resolution duly adopted by a
majority of the directors of the Company (or any successor corporation) then in
office.
(c) The Executive shall have thirty days, or such longer period as the
Company may determine to be appropriate, to cure any conduct or act, if curable,
alleged to provide grounds for termination of the Executive's employment for
Cause under this Agreement pursuant to Subsection 1(d)(iii) hereof.
(d) The recipient of any Notice of Termination shall personally deliver or
mail in accordance with Section 24 hereof written notice of any dispute relating
to such Notice of Termination to the party giving such Notice within fifteen
days after receipt thereof. After the expiration of such fifteen days, the
contents of the Notice of Termination shall become final and not subject to
dispute.
15. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event of any Covered
Termination where the Executive is entitled to Accrued Benefits and the
Termination Payment, the Executive shall not, during the balance of the
Employment Period, without the prior written approval of the Company's Board of
Directors, participate in the management of, be employed by or own any business
enterprise at a location within the United States that engages in substantial
competition with the Company or its subsidiaries, where such enterprise's
revenues from any printing services amount to 10% or more of such enterprise's
net revenues and sales for its most recently completed fiscal year; provided,
however, that nothing in this Section 15(a) shall prohibit the Executive from
owning stock or other securities of a competitor amounting to less than five
percent of the outstanding capital stock of such competitor.
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(b) Confidentiality. During and following the Executive's employment by
the Employer, the Executive shall hold in confidence and not directly or
indirectly disclose or use or copy or make lists of any confidential information
or proprietary data of the Employer, except to the extent authorized in writing
by the Board of Directors of the Company or required by any court or
administrative agency, other than to an employee of the Employer or a person to
whom disclosure is reasonably necessary or appropriate in connection with the
performance by the Executive of duties as an executive of the Employer.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential by
persons engaged in the same business or a business similar to that of the
Employer. All records, files, documents and materials, or copies thereof,
relating to the business of the Employer which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Employer and shall be promptly returned to the Employer upon termination of
employment with the Employer.
16. Expenses and Interest. If, after the Effective Date, (i) a dispute
arises with respect to the enforcement of the Executive's rights under this
Agreement or (ii) any legal or arbitration proceeding shall be brought to
enforce or interpret any provision contained herein or to recover damages for
breach hereof, in either case so long as the Executive is not acting in bad
faith, the Executive shall recover from the Company any reasonable attorneys'
fees and necessary costs and disbursements incurred as a result of such dispute,
legal or arbitration proceeding ("Expenses"), and prejudgment interest on any
money judgment or arbitration award obtained by the Executive calculated at the
rate of interest announced by Firstar Bank, N.A., Milwaukee, Wisconsin (or any
successor bank thereto) from time to time as its prime or base lending rate from
the date that payments to him should have been made under this Agreement. Within
ten days after the Executive's written request therefor, the Company shall pay
to the Executive, or such other person or entity as the Executive may designate
in writing to the Company, the Executive's reasonable Expenses in advance of the
final disposition or conclusion of any such dispute, legal or arbitration
proceeding.
17. Payment Obligations Absolute. The Company's obligation during and
after the Employment Period to pay the Executive the amounts and to make the
benefit and
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other arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any setoff,
counterclaim, recoupment, defense or other right which the Company may have
against him or anyone else. Except as provided in Section 16 of this Agreement,
all amounts payable by the Company hereunder shall be paid without notice or
demand. Each and every payment made hereunder by the Company shall be final, and
the Company will not seek to recover all or any part of such payment from the
Executive, or from whomsoever may be entitled thereto, for any reason
whatsoever.
18. Successors. (a) If the Company sells, assigns or transfers all or
substantially all of its business and assets to any Person or if the Company
merges into or consolidates or otherwise combines (where the Company does not
survive such combination) with any Person (any such event, a "Sale of
Business"), then the Company shall assign all of its right, title and interest
in this Agreement as of the date of such event to such Person, and the Company
shall cause such Person, by written agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree to perform from and
after the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. Failure of the Company to obtain
such agreement prior to the effective date of such Sale of Business shall be a
breach of this Agreement constituting "Good Reason" hereunder, except that for
purposes of implementing the foregoing, the date upon which such Sale of
Business becomes effective shall be deemed the Termination Date. In case of such
assignment by the Company and of assumption and agreement by such Person, as
used in this Agreement, "Company" shall thereafter mean such Person which
executes and delivers the agreement provided for in this Section 18 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law, and this Agreement shall inure to the benefit of, and be
enforceable by, such Person. The Executive shall, in his discretion, be entitled
to proceed against any or all of such Persons, any Person which theretofore was
such a successor to the Company (as defined in the first paragraph of this
Agreement) and the Company (as so defined) in any action to enforce any rights
of the Executive hereunder. Except as provided in this Subsection, this
Agreement shall not be assignable by the Company.
-23-
<PAGE>
This Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company.
(b) This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive under Sections 7, 8, 9, 10, 11, 12 and 16 hereof if the
Executive had lived shall be paid, in the event of the Executive's death, to the
Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Company, as such terms are in effect on the Effective Date, that expressly
govern benefits under such plan in the event of the Executive's death.
19. Severability. The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part hereof are declared invalid
or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
20. Amendment. This Agreement may not be amended or modified at any time
except by written instrument executed by a duly authorized officer of the
Company (other than the Executive) on behalf of the Company and by the
Executive.
21. Withholding. The Company shall be entitled to withhold from amounts to
be paid to the Executive hereunder any federal, state or local withholding or
other taxes or charges which it is from time to time required to withhold;
provided, that the amount so withheld shall not exceed the minimum amount
required to be withheld by law. The Company shall be entitled to rely on an
opinion of nationally recognized tax counsel if any question as to the amount or
requirement of any such withholding shall arise.
22. Certain Rules of Construction. No party shall be considered as being
responsible for the drafting of this Agreement for the purpose of applying any
rule construing ambiguities against the drafter or otherwise. No draft of this
Agreement shall be taken into account in construing this Agreement. Any
provision of this Agreement which requires an
-24-
<PAGE>
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of the Company.
23. Governing Law; Resolution of Disputes. This Agreement and the rights
and obligations hereunder shall be governed by and construed in accordance with
the laws of the State of Wisconsin. Any dispute arising out of this Agreement
shall, at the Executive's election, be determined by arbitration under the rules
of the American Arbitration Association then in effect (in which case both
parties shall be bound by the arbitration award) or by litigation. Whether the
dispute is to be settled by arbitration or litigation, the venue for the
arbitration or litigation shall be Menasha, Wisconsin or, at the Executive's
election, if the Executive is no longer residing or working in the Menasha,
Wisconsin metropolitan area, in the judicial district encompassing the city in
which the Executive resides; provided, that, if the Executive is not then
residing in the United States, the election of the Executive with respect to
such venue shall be either Menasha, Wisconsin or in the judicial district
encompassing that city in the United States among the thirty cities having the
largest population (as determined by the most recent United States Census data
available at the Termination Date) which is closest to the Executive's
residence. The parties consent to personal jurisdiction in each trial court in
the selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process in
the manner provided hereunder for the giving of notices.
24. Notice. Notices given pursuant to this Agreement shall be in writing
and, except as otherwise provided by Section 14(c) hereof, shall be deemed given
when actually received by the Executive or actually received by the Company's
Secretary or any officer of the Company other than the Executive. If mailed,
such notices shall be mailed by United States registered or certified mail,
return receipt requested, addressee only, postage prepaid, if to the Company, to
Banta Corporation, Attention: Secretary, River Place, 225 Main Street, Menasha,
WI 54952, or if to the Executive, at the address set forth below the Executive's
signature to this Agreement, or to such other address as the party to be
notified shall have theretofore given to the other party in writing.
-25-
<PAGE>
25. No Waiver. No waiver by either party at any time of any breach by the
other party of, or compliance with, any condition or provision of this Agreement
to be performed by the other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or any prior or subsequent
time.
26. Headings. The headings herein contained are for reference only and
shall not affect the meaning or interpretation of any provision of this
Agreement.
27. Prior Agreement(s). This Agreement shall supersede any and all prior
Key Executive Employment and Severance Agreements among the parties hereto,
which prior agreement(s) shall be of no further force or effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
BANTA CORPORATION
By:____________________________________
Gerald A. Henseler
Executive Vice President and Chief
Financial Officer
Attest: _______________________________
Ronald D. Kneezel
Secretary
EXECUTIVE
________________________________ (SEAL)
Donald D. Belcher
-25-
Amendments to the
Banta Corporation Economic Profit (EP) Incentive Compensation Plan
and the
Banta Corporation Economic Profit (EP) Long-Term Incentive Compensation Plan
The Banta Corporation Economic Profit (EP) Incentive Compensation Plan
(the "Incentive Plan") and the Banta Corporation Economic Profit (EP) Long-Term
Incentive Compensation Plan (the "Long-Term Plan") be and they hereby are
amended for bonuses to be earned for service during the year ending December 30,
2000 and thereafter such that EP is only one measure of the bonuses available to
a Participant.
For all Participants in the Long-Term Plan, the aggregate bonus under such
plan will be a combination of (i) Actual EP Bonus and (ii) a bonus derived from
a schedule of targets fixed by the Compensation Committee related to the fully
diluted earnings per average share of common stock of the Company for the
applicable year (the EPS Bonus). If the target bonus in each category were
earned, fifty percent (50%) of the aggregate bonus would be generated by each
component.
For a Participant under the Incentive Plan who is not affiliated with a
specific business unit, the aggregate bonus under such plan will be determined
in the same manner as under the Long-Term Plan (with the caveat that the
applicable term in the Incentive Plan is "Actual Corporate EP Bonus" rather than
"Actual EP Bonus"), with the possible adjustment that the Compensation Committee
may impose additional individual criteria for such Participant.
For a Participant in the Incentive Plan who is affiliated with a specific
business unit, the aggregate bonus under such plan will be a combination of four
basic components, with the possible adjustment that the Compensation Committee
may impose additional individual criteria for such Participant. The four basic
components are (i) Actual Corporate EP Bonus, (ii) the EPS Bonus, (iii) Actual
Unit EP Bonus, and (iv) a bonus derived from a schedule of targets fixed by the
Compensation Committee related to the operating earnings of the Value Center for
the applicable year (the OE Bonus). If the target bonus in each basic component
category were earned and there were no individual criteria imposed, twelve and
one-half percent (12.5%) of the aggregate bonus would be generated by the Actual
Corporate EP Bonus, twelve and one-half percent (12.5%) would be generated by
the EPS Bonus, thirty-seven and one-half percent (37.5%) would be generated by
the Actual Unit EP Bonus, and thirty-seven and one-half percent (37.5%) would be
generated by the OE Bonus.
The concept of the Combined EP Bonus under the Incentive Plan is modified
in that plan and extended to the Long-Term Plan. Under each plan, each component
of a Participant's bonus is separately calculated and the results added together
before application of the maximum positive or negative three hundred percent
(300%) limits. Out-performance or under-performance with respect to one or more
components will affect the calculation of the bonus related to the other
component(s).
Financial Highlights
Dollars in thousands
(except per share data) 1999 1998 % Change
- ------------------------- ---- ---- --------
Net sales $1,278,278 $1,335,796 (4.3)%
Earnings before income taxes:
Before restructuring charge 89,610 86,090 4.1
After restructuring charge 34,610 86,090
Net earnings:
Before restructuring charge 54,510 52,940 3.0
After restructuring charge 16,010 52,940
Return on average shareholders'
investment(1) 14.3% 12.8%
Working capital $ 110,508 $ 158,129 (30.1)%
Plant and equipment at cost 811,800 758,440 7.0
Long-term debt 113,520 120,628 (5.9)
Shareholders' investment 353,775 409,931 (13.7)
Debt to total capitalization(2) 24.3% 22.7%
Diluted earnings:
Before restructuring charge $ 2.01 $ 1.80 11.7%
After restructuring charge .59 1.80
Cash dividends paid .56 .51 9.8
Book value 13.70 14.51 (5.6)
Stock price range 17 1/4-27 21 7/8-34 7/8
- --------------------------
(1) Calculated based on earnings before 1999 restructuring charge.
(2) Long-term debt to long-term debt and shareholders' investment.
<TABLE>
Five-Year Summary of Selected Financial Data
Not Covered by Report of Independent Public Accountants
<CAPTION>
Dollars in thousands (except per share data) 1999 1998 1997 1996 1995
- -------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Summary of Earnings(1)
Net sales $1,278,278 $1,335,796 $1,202,483 $1,083,763 $1,022,650
Net earnings:
Before restructuring charge 54,510 52,940 51,423 50,907 53,550
After restructuring charge 16,010 52,940 43,323 50,907 53,550
Diluted earnings per common share:
Before restructuring charge 2.01 1.80 1.71 1.63 1.75
After restructuring charge .59 1.80 1.44 1.63 1.75
Dividends paid per common share .56 .51 .47 .44 .37
Financial Summary
Working capital 110,508 158,129 165,308 219,630 187,956
Net plant and equipment 327,350 318,635 338,357 319,939 313,718
Total assets 773,344 769,966 781,216 719,218 678,809
Long-term debt 113,520 120,628 130,065 133,696 134,953
Interest expense 12,362 10,825 11,062 10,214 9,891
Shareholders' investment 353,775 409,931 414,103 420,592 387,112
Book value per share of common stock(2) 13.70 14.51 13.90 13.58 12.55
- --------------------------
(1) All years comprised 52 weeks, except 1997, which comprised 53 weeks.
(2) Book values per share of common stock are based on shares outstanding at year-end.
</TABLE>
<PAGE>
Management's Discussion and Analysisof Financial Position and Operations
Highlights
Results for 1999 included the following:
o Positioning Banta as a recognized leader in supply-chain management,
including the award to Banta Global Turnkey of a $600 to $800 million
five-year contract with Compaq Computer for worldwide distribution of hard
drives
o Construction of a state-of-the-art distribution facility for the print and
distribution business to support a 10-year contract with IDG Books
Worldwide
o Record operating earnings, pre-tax earnings and earnings per share, before
restructuring charge
o Improved operating efficiency and cost reduction through second quarter
restructuring initiatives, which included a $55 million charge for asset
impairments and associated costs
o Initial release of Banta's Bomedia(TM) digital content management system
o Expansion into Mexico's print market
o Open market repurchase of 2.6 million shares of stock
Sales for 1999 were $1.28 billion, a 4% decrease from the prior year sales
of $1.34 billion. Sales for 1999 were impacted by a reduction in paper prices,
the closing of three facilities in conjunction with the Corporation's second
quarter restructuring and lower pass-through sales for turnkey services. Gross
earnings were above the prior year and gross margin improved from 19.9% in 1998
to 20.8% in 1999. These improvements primarily resulted from increased facility
utilization, changes in product mix and achieving the targeted objectives of the
Corporation's restructuring initiatives commenced in the second quarter of 1999.
In the second quarter of 1999, the Corporation recorded a $55.0 million
restructuring charge ($38.5 million or $1.40 per diluted share, after tax),
which is discussed in greater detail below. The restructuring primarily involved
the Corporation's print segment and resulted in three facility closings, the
elimination of certain underperforming business assets and a work force
reduction of nearly 9%. Targeted objectives of the restructuring included
earnings growth, increased efficiencies and enhanced shareholder returns. The
Corporation achieved its cost-saving objectives for 1999 and expects substantial
benefits to continue in 2000.
Net earnings of $54.5 million for 1999, before the restructuring charge,
were 3% higher than the prior-year earnings of $52.9 million. Diluted earnings
per share in 1999 reached a record high at $2.01 per share, prior to the
restructuring charge, compared with $1.80 per share in 1998. Giving effect to
the restructuring, the Corporation had net earnings of $16.0 million or $0.59
diluted earnings per share.
During 1999, the Corporation continued its focus on asset management with
its Economic Profit performance measurement system. As employed by the
Corporation, Economic Profit monitors the contribution of asset investments
compared to the cost of capital incurred by the Corporation with respect to such
investments. Expected benefits from using this performance measurement system
include shareholder value creation and working capital reductions. The
Corporation achieved positive Economic Profit in 1999, the second consecutive
year, and significantly improved its Economic Profit over the prior year.
With strong cash flow from operating activities in 1999, Banta continued to
invest in new technologies in its key growth sectors and to support the
Corporation's share repurchase initiative. Capital expenditures during 1999
included a significant investment in equipment and technology for the
Corporation's new facility in Houston, and expenditures to equip and reconfigure
existing European facilities to meet service requirements of a five-year
fulfillment contract entered into with Compaq Computer. Also in 1999, a
250,000-square-foot fulfillment and distribution center was constructed in
Virginia to support the Corporation's 10-year contract with IDG Books Worldwide.
In addition, during 1999 the Corporation continued to invest in the Bomedia
digital content management system that automates customers' production processes
by streamlining information storage and retrieval for print and electronic
distribution. Initial software programs were developed in 1998 with the
enterprisewide software release in December 1999. Also in 1999, the Corporation
expanded into the Mexican print market by acquiring a 50% equity interest in a
newly formed joint venture. The joint venture, Banta G. Imagen, based in
Queretaro, Mexico, provides a variety of products and services for the
commercial print market.
Banta continued to support value for shareholders by using available cash
and borrowing capacity to fund open market share repurchases. The Corporation
repurchased 2.6 million shares for an aggregate price of approximately $58
million in 1999, in addition to the $47 million expended to repurchase shares in
1998. The Corporation currently has authority from the Board of Directors to use
in excess of $100 million to fund future share repurchases. The Corporation
expects to continue its efforts to actively repurchase shares during 2000.
<PAGE>
Net Sales
The Corporation operates in two primary business segments, print and
turnkey services, with other business operations in healthcare products. The
print segment provides comprehensive single-source products, including digital
imaging, and services to publishers of educational and general books and
special-interest magazines, and is a supplier of direct marketing materials and
consumer and business catalogs. The turnkey services segment provides
supply-chain management, product assembly, fulfillment and product localization
services primarily to technology companies in the U.S. and Europe. The
healthcare products group is primarily engaged in the production of disposable
products used in outpatient clinics, dental offices and hospitals. Printing
segment net sales of $960 million for 1999 were $44 million, or 4% lower than
the prior year total of $1.0 billion. The decrease in printing segment net sales
was primarily due to lower paper prices (which are passed through to the
customer) during 1999 compared to the prior year and the closing of three
facilities in conjunction with the Corporation's second quarter restructuring.
The impact on 1999 sales from lower paper prices and the facility closings was
approximately $55 million, which was partially offset by revenue growth in the
core printing operations. Net sales for the printing segment market
classifications, as a percent of total print segment sales, were as follows:
1999 1998 1997
---- ---- ----
Books 29% 29% 30%
Direct Marketing 24 25 25
Catalogs 23 24 23
Magazines 17 16 14
Other 7 6 8
--- --- ---
100% 100% 100%
Sales in the book market were slightly below the prior year primarily due
to reduced paper prices and the closing of the Kent, Washington, facility. Sales
to educational customers increased due to improved market penetration while
general and trade books were lower due to reduced demand. Educational book and
component sales are expected to continue with strong textbook adoption periods
projected for 2000 and 2001.
Sales in the magazine market increased in 1999 from market share gains
through more complete utilization of a recently expanded facility. Sales for
direct marketing materials were slightly below the prior year due to the closure
of the mailing and fulfillment facility in Berkeley, Illinois. Catalog market
sales were approximately 6% lower than the prior year due primarily to lower
paper prices and the business-to-business biennial catalog cycle.
Turnkey services segment sales were $213 million in 1999, a decrease of 6%
from 1998 sales. This decrease was primarily due to lower pass-through sales,
volume reductions from certain customers and the impact of a facility closing in
1998. This decrease was partially offset by improved utilization within the
European facilities and increased sales volume from an existing U.S. turnkey
facility performing work under the new Compaq Computer contract.
Healthcare products' 1999 sales of $105 million were comparable to the
prior year.
In 1998, printing segment net sales were $1 billion compared to $936
million in 1997. Sales within the book market were slightly lower as a result of
fewer textbook adoption programs in 1998. Sales for direct marketing materials
were above 1997 levels due to sales volume added from a 1997 acquisition.
Catalog market sales in 1998 were above the prior year due to increased volume
for business catalogs, however consumer catalog sales volume was lower. Sales
volume grew in the magazine market during 1998 due to the capacity expansion at
the Kansas City, Missouri, facility and a late 1997 acquisition. Sales in the
"other" category were flat compared to the prior year.
Turnkey services sales were $226 million in 1998, an increase of 22% over
1997 sales. The European market for turnkey services achieved strong sales
growth influenced by successful customer product launches and new opportunities
to serve software customers. Sales for the U.S. segment of turnkey services were
comparable to the prior year.
Healthcare products' sales of $106 million in 1998 were significantly
higher than the prior year due to an acquisition in the third quarter of 1997.
Cost of Goods Sold
In 1999, cost of goods sold as a percent of sales was 79.2% compared with
80.1% in 1998 and 80.2% in 1997.
Margins for the Corporation's printing segment were higher in 1999 than
1998 primarily due to margin improvements within the direct marketing materials
and book markets. Actions taken in conjunction with the second quarter
restructuring, including the shutdown of the direct marketing mailing and
fulfillment center, improved margins for direct marketing materials. The
Corporation was able to improve performance and reduce the level of
underutilized capacity, which negatively impacted margins within this market
during 1998. Margins for the magazine and catalog markets were consistent with
the prior year.
Turnkey services margins were higher as a result of product mix changes.
During 1999, the percentage of value-added services to material content was
higher than the prior year, which resulted in margin improvement for the
European operations. Margins for value-added services are higher than material
margins.
<PAGE>
Margins for healthcare products were below the prior year primarily due to
continued integration costs, increased competitive pricing and underutilization
of equipment due to customer consolidation of distribution facilities.
The slightly higher margins in 1998 compared to 1997 resulted from several
factors. Increasingly competitive pricing and underutilization at the direct
marketing mailing and fulfillment center negatively impacted margins for the
Corporation's printing operations. This was offset by improved margins in the
book and magazine markets due to higher levels of utilization.
Turnkey services margins were higher in 1998 compared to 1997 as a result
of increased utilization at both the U.S. and European operations. Successful
customer product launches had a positive impact on margins. In 1997, margins
were negatively impacted by losses incurred at three facilities which were
closed in late 1997 and start-up costs at new facilities opened during the year.
Margins for healthcare products were lower in 1998 compared to the prior
year, primarily as a result of the consolidation and integration efforts related
to an acquisition completed in the fourth quarter of 1997.
Selling and Administrative Expenses
Selling and administrative expenses decreased $4.9 million (2.9%) in 1999
and increased $22.4 million (15.4%) in 1998. The decrease of $4.9 million in
1999 was essentially due to reduced costs associated with lower sales volume in
1999 compared to the prior year and efficiencies resulting from the
restructuring. As a percent of sales, selling and administrative expenses
increased slightly primarily due to changes in product mix.
The 1998 increase is attributable to the acquisitions made late in 1997,
costs required to support the increase in sales volume and continued investment
in the Bomedia digital content management system.
Restructuring Actions
Earnings from operations for 1999 include a second quarter restructuring
charge of $55.0 million ($38.5 million or $1.40 per diluted share, after tax).
The restructuring initiatives primarily involved the Corporation's print segment
and included three facility closings, the elimination of certain underperforming
assets and a significant workforce reduction. These closings and the related
asset writedowns resulted from the Corporation's decision to exit non-strategic
businesses and discontinue activities that management determined were unlikely
to deliver future acceptable profitability and shareholder value.
These initiatives resulted in workforce reductions of approximately 650
employees and the writedown of certain long-lived assets, including goodwill.
The initiatives generated in excess of $7 million in cost savings primarily
during the second half of 1999 and are expected to generate additional annually
savings for the years 2000 and beyond. The cash portion of the charge was
approximately $24.1 million and will be funded by the cost savings from the
restructuring initiatives.
At January 1, 2000, costs of $43.1 million had been charged against the
reserve, comprised of asset writedowns of $30.9 million, employee severance and
termination benefits of $6.6 million, and other costs related to the
restructuring initiatives of $5.6 million. It is expected that the restructuring
actions will be substantially completed by midyear of 2000.
In the third quarter of 1997, the Corporation recorded a restructuring
charge of $13.5 million ($8.1 million after tax or $.27 per common share)
related to the sale, closing and discontinuation of certain businesses. The
restructuring was completed in 1998.
Earnings from Operations
As a percent of sales, earnings from operations, before restructuring
charges, were 8.1%, 7.3% and 7.7% in 1999, 1998 and 1997, respectively.
The increase in the 1999 percentage was due to the aforementioned margin
improvements within the print and turnkey segments, lower material content of
revenue and cost containment efforts related to the 1999 second quarter
restructuring initiatives.
The reduction in the percentage from 1997 to 1998 was due to the increase
in selling and administrative expenses to support the 1997 acquisitions and
investment initiatives. This decrease was partially offset by margin
improvements within the print and turnkey segments.
Interest Expense and Other Income (Expense)
Interest expense was $12.4 million, $10.8 million and $11.1 million in
1999, 1998 and 1997, respectively. Higher interest expense in 1999 resulted from
short-term credit facilities used to finance share repurchases. Average
short-term borrowings during 1999 were $49.8 million compared with $24.5 million
in the prior year. Slightly lower weighted average interest rates partially
offset the impact of the higher average borrowings during 1999. Lower interest
expense in 1998 compared to 1997 was primarily due to the repayment of long-term
obligations during 1997 and 1998.
Other expense was $1.4 million in 1999 compared to $0.6 million in 1998.
The change was primarily due to the gain of $0.9 million on the sale of a
building in 1998.
Pre-tax Earnings and Provision for Income Taxes
As a percent of sales, pretax earnings, before restructuring charges, were
7.0%, 6.4% and 7.0% in 1999, 1998 and 1997, respectively. The increase in 1999
pre-tax earnings as a percent of sales compared to 1998 is due to 1999 margin
improvements and the impact of cost containment efforts offset partially by
higher interest expense.
Effective income tax rates were 53.7%, 38.5% and 38.8% in 1999, 1998 and
1997, respectively. The increase in the effective tax rate in 1999 was primarily
due to nondeductible charges taken in conjunction with the second quarter
restructuring. Without giving effect to the restructuring charge, the effective
income tax rate for 1999 was 39.2%. The effective income tax rate for 2000 is
expected to approximate 39.2%.
<PAGE>
Liquidity and Capital Resources
The Corporation has historically raised long-term debt financing by issuing
unsecured promissory notes to institutional investors on a private placement
basis. No significant long-term borrowings were recorded over the last three
years.
The Corporation generally raises short-term funds by selling commercial
paper. Such borrowings are supported by a credit facility with a total borrowing
capacity of $105 million, which was increased from $70 million during 1999.
Average outstanding short-term borrowings during 1999, 1998 and 1997 were $49.8
million, $24.5 million and $11.6 million, respectively. The increases in 1999
and 1998 resulted primarily from borrowings used to fund the repurchase of
shares of common stock. At January 1, 2000, the Corporation had $16.5 million of
availability under its existing credit facilities. In 2000, the Corporation is
expected to convert a portion of its short-term floating debt into long-term
fixed debt.
Management believes the Corporation's liquidity continues to be strong and
the degree of leverage allows the Corporation to finance, at attractive
borrowing rates, its capital expenditures and share repurchase initiatives, as
well as any other investment opportunities that may arise.
During 1999, working capital decreased $47 million. This reduction
primarily resulted from the increase in short-term borrowings to finance share
repurchases. The Corporation repurchased approximately 2.6 million shares of its
common stock at an aggregate cost of $58.3 million in 1999 and approximately 1.7
million shares at an aggregate cost of $47.0 million in 1998. The share
repurchase program, authorized by the Corporation's Board of Directors during
1998 and expanded during 1999 for the repurchase of an additional $100 million
of common stock, has in excess of $100 million in authority remaining for future
share repurchases. During 2000, the Corporation expects to continue its
repurchase of shares pursuant to this authorization as market conditions
warrant. Any future stock repurchases will be funded by a combination of cash
provided from operations and short-term borrowings.
The Corporation's capital investment program, which resulted in capital
spending of $84 million in 1999, reflects its commitment to maintain modern,
efficient plants and to provide customers with supply-chain management services
and new printing and digital imaging technologies. Significant expenditures
during 1999 included new facilities and equipment to support the Compaq Computer
and IDG Books Worldwide contracts. Preliminary plans for 2000 are for capital
commitments and cash requirements to exceed $110 million, which includes
carry-over commitments from 1999.
Future Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This standard requires that an
entity recognize derivatives as either assets or liabilities on its balance
sheet and measure those instruments at fair value. In June 1999, the FASB issued
SFAS No. 137 which deferred the effective date of adoption of SFAS No. 133 for
one year. The Corporation intends to adopt this standard no later than the first
quarter of 2001. The adoption of this standard is not expected to have a
material effect on the Corporation's financial statements.
Risk Management
The Corporation is exposed to market risk from changes in interest rates
and foreign exchange rates. At January 1, 2000, the Corporation had notes
payable outstanding aggregating $88.5 million against lines of credit with
banks. These notes consist primarily of commercial paper and bear interest at
floating rates. A 100 basis point fluctuation in the interest rate would
increase or decrease interest expense for the Corporation by approximately
$885,000 annually. Since essentially all long-term debt is at fixed interest
rates, exposure to interest rate fluctuations is minimal. Disclosure relating to
the fair value of long-term debt is included in Note 4 to the Consolidated
Financial Statements. Exposure to adverse changes in foreign exchange rates is
considered minimal.
Other Matters
Over the past two years, the Corporation undertook a major review of its
operations and spent approximately $8 million to upgrade and replace its systems
to ensure year-2000 readiness. After an initial evaluation of the manufacturing
and control systems subsequent to January 1, 2000, no significant year-2000
issues arose. Although additional issues could yet arise with respect to
year-2000 compliance, the Corporation currently believes that such matter would
not have a material adverse effect on its results of operations or financial
condition. The Corporation will continue to invest in new technologies and
state-of-art systems to support its core businesses.
Forward Looking Statements
The foregoing Management's Discussion and Analysis includes forward looking
statements. Statements that describe future expectations, plans or strategies
are considered forward looking. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
currently anticipated. Factors that could affect actual results are described on
page 40 of this Annual Report to Shareholders.
<PAGE>
Report of Independent Public Accountants
To the Shareholders of Banta Corporation:
We have audited the accompanying consolidated balance sheets of Banta
Corporation (a Wisconsin corporation) and subsidiaries as of January 1, 2000 and
January 2, 1999, and the related consolidated statements of earnings,
shareholders' investment and cash flows for each of the fiscal years in the
three-year period ended January 1, 2000. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Banta Corporation and
subsidiaries as of January 1, 2000 and January 2, 1999, and the results of their
operations and their cash flows for each of the fiscal years in the three-year
period ended January 1, 2000, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
- --------------------------------
Arthur Andersen LLP
Milwaukee, Wisconsin
January 31, 2000
Responsibility for Financial Statements
The Consolidated Financial Statements and other financial references
appearing in this Annual Report were prepared by management in conformity with
generally accepted accounting principles appropriate for the circumstances.
Where acceptable alternative accounting principles exist, as described in Note 1
of the Notes to the Consolidated Financial Statements, management uses its best
judgment in selecting those principles that reflect fairly the financial
position and results of operations of the Corporation. The accounting records
and systems of internal control are designed to reflect the transactions of the
Corporation in accordance with established policies and procedures. Financial
and operational reviews are undertaken by management to provide assurance that
the books and records properly reflect transactions authorized by the
Corporation.
The Consolidated Financial Statements appearing in this Annual Report have
been audited by Arthur Andersen LLP. Its audits were made in accordance with
generally accepted auditing standards and provide an independent review of those
management responsibilities that relate to the preparation of this Annual
Report.
The Audit Committee of the Board of Directors, comprised of directors who
are not officers or employees, reviews the financial and accounting reports of
the Corporation, including a review and discussion of the principles and
procedures used by management in preparation of the financial statements. The
independent auditors have full and free access to the Audit Committee and meet
with it to review the results of the audit engagement, the preparation of the
Annual Report and to discuss auditing and financial reporting matters.
<PAGE>
Consolidated Balance Sheets
January 1, 2000, and January 2, 1999
- --------------------------------------------------------------------------------
Dollars in thousands 1999 1998
- --------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 27,651 $ 26,584
Receivables, less reserves of $4,927
and $3,835, respectively 218,047 233,200
Inventories 86,094 74,724
Prepaid expenses 7,074 7,887
Deferred income taxes 16,995 12,225
--------- ---------
355,861 354,620
Plant and Equipment:
Land 9,002 8,371
Buildings and improvements 125,445 111,143
Machinery and equipment 677,353 638,926
--------- ---------
811,800 758,440
Less accumulated depreciation (484,450) (439,805)
--------- ---------
327,350 318,635
Other Assets 31,111 20,989
Cost in Excess of Net Assets of
Businesses Acquired 59,022 75,722
--------- ---------
$ 773,344 $ 769,966
========= =========
Liabilities and Shareholders' Investment
Current Liabilities:
Short-term debt $ 88,499 $ 36,140
Accounts payable 96,456 107,649
Accrued salaries and wages 31,848 25,085
Other accrued liabilities 21,435 20,706
Current maturities of long-term debt 7,115 6,911
--------- ---------
245,353 196,491
Non-current Liabilities:
Long-term debt 113,520 120,628
Deferred income taxes 20,382 22,214
Other non-current liabilities 40,314 20,702
--------- ---------
174,216 163,544
Shareholders' Investment:
Common stock - $.10 par value, authorized
75,000,000 shares; 25,825,803 and 28,260,957
shares issued and outstanding, respectively 2,583 2,826
Amount in excess of par value of stock - -
Accumulated other comprehensive loss (6,389) (2,308)
Treasury stock, at cost (42,790) -
Retained earnings 400,371 409,413
--------- ---------
353,775 409,931
--------- ---------
$ 773,344 $ 769,966
========= =========
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
<PAGE>
Consolidated Statements of Earnings
For the Periods Ended January 1, 2000, January 2, 1999, and January 3, 1998
- --------------------------------------------------------------------------------
Dollars in thousands
(except earnings per share) 1999 1998 1997
- --------------------------------------------------------------------------------
Net sales $1,278,278 $1,335,796 $1,202,483
Cost of goods sold 1,011,916 1,070,319 963,920
---------- ---------- ----------
Gross Earnings 266,362 265,477 238,563
Selling and administrative expenses 162,992 167,932 145,519
Restructuring charge 55,000 - 13,500
---------- ---------- ----------
Earnings from Operations 48,370 97,545 79,544
Interest expense (12,362) (10,825) (11,062)
Other (expense) income, net (1,398) (630) 2,341
---------- ---------- ----------
Earnings Before Income Taxes 34,610 86,090 70,823
Provision for income taxes 18,600 33,150 27,500
---------- ---------- ----------
Net Earnings $ 16,010 $ 52,940 $ 43,323
========== ========== ==========
Basic Earnings per Share of
Common Stock $ .59 $ 1.80 $ 1.45
========== ========== ==========
Diluted Earnings per Share
of Common Stock $ .59 $ 1.80 $ 1.44
========== ========== ==========
- ------------------------------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
Consolidated Statements of Cash Flows
For the Periods Ended January 1, 2000, January 2, 1999, and January 3, 1998
- --------------------------------------------------------------------------------
Dollars in thousands 1999 1998 1997
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net earnings $ 16,010 $ 52,940 $ 43,323
Adjustments to reconcile net earnings
to net cash provided by operating
activities, net of acquisitions:
Depreciation and amortization 68,212 66,862 62,107
Deferred income taxes (8,541) 195 (5,128)
Restructuring charge 55,000 - 13,500
Restructuring charges paid (12,151) (3,733) (1,843)
Change in assets and liabilities,
net of effects of acquisitions:
Decrease (increase) in receivables 14,253 (4,077) (2,603)
(Increase) decrease in inventories (7,809) 20,017 (10,931)
Decrease (increase) in other current
assets 813 1,036 (1,806)
(Decrease) increase in accounts
payable and accrued liabilities (3,319) (4,625) 23,843
(Increase) decrease in other
non-current assets (875) 3,462 (832)
Other, net 3,990 3,782 (1,890)
-------- -------- --------
Cash provided by operating activities 125,583 135,859 117,740
Cash Flows from Investing Activities
Capital expenditures (83,952) (55,412) (63,065)
Proceeds from sale of plant and equipment 3,836 6,634 3,571
Cash used for acquisitions, net of
cash acquired (5,750) (7,434) (75,598)
Additions to long-term investments (13,220) (5,741) (1,806)
-------- -------- --------
Cash used for investing activities (99,086) (61,953) (136,898)
Cash Flows from Financing Activities
Short-term debt proceeds, net 52,359 2,260 29,260
Proceeds from issuance of long-term debt - - 1,600
Payments on long-term debt (6,904) (7,712) (5,697)
Proceeds from exercise of stock options 2,774 3,738 3,418
Dividends paid (15,317) (15,018) (14,146)
Repurchase of common stock (58,342) (47,022) (36,262)
-------- -------- --------
Cash used for financing activities (25,430) (63,754) (21,827)
Net increase (decrease) in cash and
cash equivalents 1,067 10,152 (40,985)
Cash and cash equivalents at beginning of year 26,584 16,432 57,417
-------- -------- --------
Cash and cash equivalents at end of year $ 27,651 $ 26,584 $ 16,432
======== ======== ========
Cash payments for:
Interest, net of amount capitalized $ 12,634 $ 12,101 $ 10,818
Income taxes 17,448 33,481 30,583
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Investment
For the Periods Ended January 1, 2000, January 2, 1999, and January 3, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Stock Accumulated
-------------------- Amount in Other
Shares Par Excess of Comprehensive Retained Treasury
Dollars in thousands Outstanding Value Par Value Income Earnings Stock Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 28, 1996 30,969,069 $3,097 $ 66,119 $ 1,473 $349,903 $ $420,592
--------
Net earnings 43,323 43,323
Cumulative translation adjustment (4,971) (4,971)
--------
Comprehensive income 38,352
Cash dividends ($.47 per share) (14,146) (14,146)
Stock options exercised 204,914 20 3,397 3,417
Repurchase of common stock (1,456,900) (146) (36,116) (36,262)
Stock issued for acquisition 75,715 8 2,131 2,139
Other 481 11 11
---------- ------ -------- -------- -------- -------- --------
Balance, January 3, 1998 29,793,279 2,979 35,542 (3,498) 379,080 414,103
--------
Net earnings 52,940 52,940
Cumulative translation adjustment 1,190 1,190
--------
Comprehensive income 54,130
Cash dividends ($.51 per share) (15,018) (15,018)
Stock options exercised 166,578 17 3,721 3,738
Repurchase of common stock (1,698,900) (170) (39,263) (7,589) (47,022)
---------- ------ -------- -------- -------- -------- --------
Balance, January 2, 1999 28,260,957 2,826 - (2,308) 409,413 409,931
--------
Net earnings 16,010 16,010
Cumulative translation adjustment (4,081) (4,081)
--------
Comprehensive income 11,929
Change in accounting principle (Note 1) 2,800 2,800
Cash dividends ($.56 per share) (15,317) (15,317)
Stock options exercised 137,246 14 2,760 2,774
Repurchase of common stock (2,572,400) (257) (2,760) (12,535) (42,790) (58,342)
---------- ------ -------- -------- -------- -------- --------
Balance, January 1, 2000 25,825,803 $2,583 - $ (6,389) $400,371 $(42,790) $353,775
========== ====== ======== ======== ======== ========
- -----------------------------------------
There are 300,000 shares of $10 par value preferred stock authorized, none of which is issued.
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
For the Periods Ended January 1, 2000, January 2, 1999, and January 3, 1998
Note 1: Summary of Accounting Policies
Significant accounting policies followed by the Banta Corporation (the
"Corporation" or "Banta") in maintaining financial records and preparing
financial statements are:
Business The Corporation provides a wide variety of print and print-related
services to publishers of educational and general books, special-interest
magazines, consumer and business catalogs, and direct marketing materials. Banta
also offers supply-chain management services, digital services and single-use
healthcare products. Customers, who are primarily located throughout the United
States and Europe, are granted credit on an unsecured basis. No single customer
accounted for more than 10% of consolidated sales during 1999, 1998 or 1997.
Year-end The Corporation's operating year ends on the Saturday closest to
December 31. Operating years 1999 and 1998 ended on January 1, 2000, and January
2, 1999, respectively, and comprised 52 weeks each. The year 1997 ended on
January 3, 1998, and comprised 53 weeks.
Principles of Consolidation The consolidated financial statements include
the accounts of the Corporation and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Recognition of Sales The Corporation primarily recognizes revenue at the
time the products are shipped or as services are performed. Substantially all
such sales are produced to customer specifications, therefore, the Corporation
has no material amounts of finished goods inventory.
Earnings Per Share of Common Stock Basic earnings per share of common stock
is computed by dividing net earnings by the weighted average number of common
shares outstanding during the period. Diluted earnings per share of common stock
is computed by dividing net earnings by the weighted average number of common
shares and common equivalent shares, which relate entirely to the assumed
exercise of stock options. Average common shares for computation of basic
earnings per share were 27,153,280, 29,334,298, and 29,973,736 in 1999, 1998 and
1997, respectively. Average common and common equivalent shares for computation
of diluted earnings per share were 27,177,205, 29,474,873, and 30,113,098 in
1999, 1998 and 1997, respectively.
The shares outstanding used to compute diluted earnings per share for 1999,
1998 and 1997 excluded outstanding options to purchase 1,391,777, 329,062, and
318,850 shares of common stock, respectively, with weighted-average exercise
prices of $26.20, $26.73, and $27.66, respectively. The options were excluded
because their exercise prices were greater than the average market price of the
common shares and their inclusion in the computation would have been
antidilutive.
Foreign Currency Translation Financial statements of foreign subsidiaries
are translated into United States dollars in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 52. Foreign currency
transaction gains and losses were insignificant in 1999, 1998 and 1997.
Capitalized Interest The Corporation capitalizes interest on major building
and equipment installations and depreciates the amount over the lives of the
related assets. The total interest incurred was $13,100,000 in 1999, $11,756,000
in 1998, and $12,007,000 in 1997 of which $738,000, $931,000, and $945,000 was
capitalized in 1999, 1998 and 1997, respectively.
Cash and Cash Equivalents Short-term investments, with maturities of less
than 90 days at the date of purchase, are considered cash equivalents for
purposes of the accompanying consolidated balance sheets and statements of cash
flows. These investments are stated at cost which approximates market.
Inventories At January 1, 2000, the Corporation's inventories are stated at
the lower of cost or market using the first-in, first-out (FIFO) method.
Effective January 3, 1999, certain operations (comprising approximately one
third of the Corporation's inventories) changed from the last-in, first-out
basis to FIFO. The change in accounting principles was made to provide a better
matching of revenue and expenses. This accounting change was not material to the
financial statements, and accordingly, no retroactive restatement of prior
years' financial statements was made. Inventories include material, labor and
manufacturing overhead.
<PAGE>
Inventory amounts at January 1, 2000, and January 2, 1999, were as follows:
Dollars in thousands 1999 1998
-------------------- ---- ----
Raw materials and supplies $51,425 $35,270
Work-in-process and finished goods 34,669 43,963
------- -------
FIFO value of all inventories 86,094 79,233
LIFO reserve - (4,509)
------- -------
Net inventories $86,094 $74,724
======= =======
Plant and Equipment Plant and equipment (including major renewals and
betterments) are carried at cost and depreciated over the estimated useful life
of the assets. Substantially all depreciation is computed using the
straight-line method for financial reporting purposes. Accelerated depreciation
methods are used for tax purposes. Leasehold improvements are generally
amortized over the term of the leases on a straight-line basis. The general
range of useful lives for financial reporting is 15 to 30 years for buildings
and improvements and 3 to 10 years for machinery and equipment.
Product Development Costs incurred in the development of new products,
prior to establishing technological feasibility, are charged to expense as
incurred. SFAS No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed," requires capitalization of certain software
development costs subsequent to the establishment of technological feasibility.
Based upon the Corporation's product development process, technological
feasibility is established upon completion of a detailed design. Capitalized
software costs will be amortized on a product-by-product basis over a period of
three to five years, depending on the estimated useful life of the software. The
unamortized balance, as included in other assets, was $11,509,000, and
$7,547,000 at January 1, 2000, and January 2, 1999, respectively. The
Corporation believes the capitalized software development costs are realizable
based on the projected undiscounted earnings of the business.
Income Taxes Deferred tax liabilities and assets are determined based on
the difference between the book and the tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse.
Cost in Excess of Net Assets of Businesses Acquired Cost in excess of net
assets of businesses acquired ("goodwill") is amortized and charged against
operations on a straight-line method over periods of 20 to 25 years. The
realizability of goodwill is evaluated annually based upon the undiscounted
earnings of the businesses acquired compared with the unamortized amount of
goodwill. Accumulated amortization of goodwill was $12,155,000, and $10,700,000
as of January 1, 2000, and January 2, 1999, respectively.
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and related disclosures. Actual
results could differ from those estimates.
Derivative Financial Instruments In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard requires that an entity
recognize derivatives as either assets or liabilities on its balance sheet and
measure those instruments at fair value. In June 1999, the FASB issued SFAS No.
137 which deferred the effective date of adoption of SFAS No. 133 for one year.
The Corporation intends to adopt this standard no later than the first quarter
of 2001. The Corporation occasionally utilizes interest rate swaps and foreign
currency forward exchange contracts to hedge specific interest rate and foreign
currency exposures. These derivative financial instruments are not used for
trading purposes. The Corporation was party to no material derivative financial
instrument contracts in 1999, 1998 or 1997.
Note 2: Acquisitions
Groupo Imagen Joint Venture In July 1999, the Corporation acquired a 50
percent equity interest in a newly formed joint venture for approximately $5.8
million. The joint venture, Banta G. Imagen S. de R.L. de C.V., based in
Queretaro, Mexico, provides a variety of products and services for the
commercial print market. The equity method of accounting will be used to account
for this investment prospectively as of the acquisition date.
Other Acquisitions During 1998, the Corporation acquired all the
outstanding capital stock of Type Designs, Inc., which provides a full range of
design and graphic production services. The Corporation also acquired the assets
and assumed certain liabilities of Meadows Information Systems, Inc., which
develops page layout and design software products. These acquisitions were
accounted for as purchases with a combined acquisition price of $4.2 million.
In September of 1997, the Corporation acquired The Omnia Group ("Omnia")
for approximately $50.7 million. Omnia is a supplier of single-use medical and
dental products. The purchase price plus the liabilities assumed exceeded the
fair value of the tangible assets and identified intangible assets by $19.4
million. In October of 1997, the Corporation acquired Greenfield Printing &
Publishing Company ("Greenfield") for $21.3 million. Greenfield is a printer of
special-interest and trade magazines. The purchase price plus the liabilities
assumed exceeded the fair value of the tangible assets and identified intangible
assets by $13.8 million. Both of these acquisitions were accounted for as
purchases.
<PAGE>
Note 3: Short-term Debt
The Corporation generally obtains short-term financing through the issuance
of commercial paper and borrowing against lines of credit with banks. At January
1, 2000, the Corporation had credit facilities totaling $113 million. Of this
total, $105 million represents credit facilities made available by three banks,
which can be used to support both commercial paper and unsecured borrowings. The
remaining $8 million is a secured credit facility denominated in Irish punts,
which is used to finance the Corporation's European operations.
At January 1, 2000, the Corporation had notes payable outstanding
aggregating $88.5 million against the credit facilities, which included $75.7
million in commercial paper with a weighted average interest rate of 6.1%. The
remaining $12.8 million was an outstanding balance on the line of credit with a
weighted average interest rate of 7.5%. At January 2, 1999, the Corporation had
notes payable outstanding aggregating $36.1 million against the credit
facilities, which consisted entirely of commercial paper with a weighted average
interest rate of 5.6%. The maximum outstanding borrowings during 1999 and 1998
were $88.5 and $44.5 million, respectively. The average outstanding borrowings
during 1999 and 1998 were $49.8 and $24.5 million, respectively. The
weighted-average interest rates on such borrowings during 1999 and 1998 were
5.4% and 5.6%, respectively.
Note 4: Long-term Debt
Long-term debt, including amounts payable within one year, consists of the
following:
- --------------------------------------------------------------------------------
Dollars in thousands Maturities 1999 1998
- --------------------------------------------------------------------------------
Promissory Notes:
6.81% 2004-2010 $ 35,000 $ 35,000
7.62% 2000-2009 22,619 25,000
7.98% 2000-2010 25,000 25,000
9.53% 2000-2005 10,909 12,727
7.38% 2005-2015 15,000 15,000
10.11% - - 1,500
Notes Payable and Capital Lease
Obligations, generally fixed
rates of interest, 6.0% to 9.8% 2000-2002 5,400 6,322
Industrial Revenue Bonds:
Floating rates of interest,
approximating 80% of the prime rate 2000-2015 6,307 6,450
Fixed rate of interest at 7.5% 2000-2002 400 540
-------- --------
120,635 127,539
Less current maturities (7,115) (6,911)
-------- --------
Long-term debt $113,520 $120,628
======== ========
Maturities of long-term debt during the next five years are: 2000,
$7,115,000; 2001, $9,327,000; 2002, $12,425,000; 2003, $6,580,000; and 2004,
$6,580,000. Industrial Revenue Bonds aggregating $1,500,000 are secured by
certain real estate and equipment.
The Promissory Note agreements contain various operating and financial
covenants. The more restrictive of these covenants require that working capital
be maintained at a minimum of $40,000,000, current assets be 150% of current
liabilities and consolidated tangible net worth be not less than $125,000,000.
Funded debt of up to 50% of the sum of consolidated tangible net worth and
consolidated funded debt may be incurred without prior consent of the
noteholders. The Corporation may incur short-term debt of up to 25% of
consolidated tangible net worth at any time and is required to be free of all
such obligations in excess of 12.5% of consolidated tangible net worth for 60
consecutive days each year. The agreements also contain limitations on leases
and ratable security on certain types of liens.
One of the Promissory Note agreements contains covenants, which restrict
the payment of dividends. As of January 1, 2000, $89,965,000 of retained
earnings was available for the payment of dividends under the most restrictive
of such covenants.
Based on the borrowing rates currently available to the Corporation for
loans with similar terms and average maturities, the fair value of long-term
debt as of January 1, 2000, including current maturities, was $121,254,000.
<PAGE>
Note 5: Stock Option Plans
At January 1, 2000, the Corporation had options outstanding or available
for grant under two stock option plans - the 1995 Equity Incentive Plan and the
1991 Stock Option Plan. Under the plans, options to purchase common stock are
granted to officers and key employees at prices not less than the fair market
value of the common stock on the date of the grant. Options granted under the
1991 plan may be exercised up to five years after the date of the grant. Options
granted under the 1995 plan may be exercised up to ten years from the date of
the grant. At January 1, 2000, 623,515 shares of the Corporation's common stock
were reserved for future option grants.
The plans permit participants to use option shares for the purpose of
offsetting income tax liabilities incurred upon the exercise of stock options
and allow for grants of either Incentive Stock Options or Nonstatutory Stock
Options. The plans include provisions that authorize options to be granted to
non-employee Directors.
The following table summarizes activity under the stock option plans:
- --------------------------------------------------------------------------------
Weighted
Options Price Range Average Price
- --------------------------------------------------------------------------------
Outstanding at
December 28, 1996 1,779,231 $15 - $29 $22
Granted 402,500 25 - 26 26
Exercised (398,461) 15 - 23 18
Canceled or expired (60,003) 21 - 28 25
Outstanding at
January 3, 1998 1,723,267 18 - 29 24
Granted 575,200 24 - 31 26
Exercised (287,777) 18 - 28 23
Canceled or expired (65,320) 21 - 29 25
Outstanding at
January 2, 1999 1,945,370 20 - 31 25
Granted 691,000 19 - 24 23
Exercised (277,855) 21 - 24 21
Canceled or expired (217,531) 20 - 31 26
Outstanding at
January 1, 2000 2,140,984 $19 - $31 $25
Of the options outstanding at January 1, 2000, 1,014,305 were exercisable
at prices ranging from $21 to $31, and a weighted average of $25. The balance of
the options become exercisable at various times through 2002 at prices ranging
from $19 to $26, and a weighted average of $24.
During 1999, 1998 and 1997, 140,609, 121,199, and 193,547 shares,
respectively, were submitted to the Corporation in partial payment for stock
option exercises and to offset income tax liabilities. The Corporation canceled
these shares.
The Corporation accounts for stock options pursuant to the provisions of
APB Opinion No. 25, which requires no compensation cost to be recognized when
stock options are granted. If the Corporation had charged earnings for the
compensation cost related to its stock option grants determined consistent with
Financial Accounting Standards Board Statement No. 123, its net earnings and
earnings per share would have been reduced to the following pro forma amounts:
- --------------------------------------------------------------------------------
Dollars in thousands,
except per share amounts 1999 1998 1997
- --------------------------------------------------------------------------------
Net Earnings:
As Reported $16,010 $52,940 $43,323
Pro Forma 14,123 50,895 42,032
Earnings per share of common stock:
Basic: As Reported $0.59 $1.80 $1.45
Pro Forma 0.52 1.74 1.40
Diluted: As Reported 0.59 1.80 1.44
Pro Forma 0.52 1.73 1.40
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1999, 1998 and 1997, respectively: risk-free
interest rates of 5.9%, 4.5%, and 6.2%; expected dividend yields of 2.0%, 2.0%,
and 1.7%; expected lives of 6.0, 5.7, and 4.9 years; expected volatility of 33%,
30%, and 25%. The weighted average fair value of the options granted in 1999,
1998 and 1997 was $5.89, $6.73, and $7.65, respectively.
Note 6: Operating Leases
The Corporation leases a variety of assets used in its operations including
manufacturing facilities, warehouses, office space, office equipment,
automobiles and trucks. Annual rentals amounted to $13,819,000, $16,219,000, and
$12,748,000 in 1999, 1998 and 1997, respectively. Minimum rental commitments for
the years 2000 through 2004 aggregate $11,245,000, $10,972,000, $10,259,000,
$9,788,000, and $11,003,000, respectively, and $36,852,000, thereafter.
<PAGE>
Note 7: Restructuring Charge
In the second quarter of 1999, the Corporation recorded a restructuring
charge, including related asset writedowns, of $55.0 million ($38.5 million,
after tax). The restructuring primarily involved the Corporation's print segment
and resulted in three facility closings and the elimination of certain
underperforming business assets. The restructuring also resulted in workforce
reductions of approximately 650 employees (350 employees at the three facilities
closed) and the writedown of certain long-lived assets, including goodwill.
Actions within the print segment resulted in restructuring charges of
approximately $44.8 million and, most significantly, included the closure of the
mailing and fulfillment facility in Berkeley, Illinois, the prepress facility in
Charlotte, North Carolina, and the printing plant in Kent, Washington. These
closings and the related asset writedowns were primarily the result of the
Corporation's decision to exit non-strategic businesses and discontinue
activities that management determined were unlikely to deliver future acceptable
profitability and shareholder value. Initiatives within the turnkey services and
healthcare products business operations resulted in restructuring charges of
$9.0 million and primarily related to the elimination or realignment of
manufacturing capacity to meet future customer sourcing requirements. The
remaining portion of the charge (approximately $1.2 million) related to
severance and other restructuring costs at the corporate headquarters.
The cash and noncash elements of the restructuring charge approximate $24.1
million and $30.9 million, respectively.
Details of the restructuring charge are as follows (in thousands):
- --------------------------------------------------------------------------------
Original
Restructuring Used in Year-End
Dollars in thousands Charge 1999 Balance
- --------------------------------------------------------------------------------
Writedown of intangible assets,
including goodwill $15,600 $(15,600) $ -
Writedown of tangible assets 15,300 (15,300) -
Lease termination payments 11,500 (2,764) 8,736
Employee severance and
termination benefits 8,300 (6,588) 1,712
Other facility exit costs 4,300 (2,799) 1,501
------- -------- -------
Total $55,000 $(43,051) $11,949
======= ======== =======
For facilities to be closed or operations with manufacturing capacity
eliminated, the tangible assets to be disposed of have been written down to
their estimated fair value, less cost of disposal. The fair value for tangible
assets written down approximated $3.4 million and was determined through
internal manufacturing valuation studies. All intangible asset carrying values
associated with the facility closings have been eliminated. As of January 1,
2000, cash outflows have been $12,151,000. It is expected that the restructuring
actions will be substantially completed by midyear of 2000.
In the third quarter of 1997, the Corporation recorded a restructuring
charge of $13.5 million ($8.1 million after tax and $.27 per common share)
related to the sale of its point-of-purchase sign and display business, the
discontinuation of the intaglio print-based security products business and the
interactive video operation, and the closing of three Banta Global Turnkey
facilities. During 1998, the restructuring initiatives were completed.
<PAGE>
Note 8: Employee Benefit Plans
The Corporation and its unions have several pension plans covering
substantially all employees. The plans are non-contributory and benefits are
based on an employee's years of service and earnings. The Corporation makes
contributions to the qualified plans each year, at least equal to the minimum
required contributions as defined by the Employee Retirement Income Security Act
(ERISA) of 1974. The Corporation also maintains a non-qualified supplemental
retirement plan, which is not funded.
The Corporation and its subsidiaries also provide non-contractual limited
healthcare benefits for certain retired employees. The program provides for
defined initial contributions by the Corporation toward the cost of
postretirement healthcare coverage. The balance of the cost is borne by the
retirees. The program provides that increases in the Corporation's contribution
toward coverage will not exceed 4% per year. Due to the terms of the
Corporation's postretirement healthcare program, assumed healthcare cost rate
trends do not affect the Corporation's costs.
Net periodic pension and postretirement benefit costs for the
Corporation-sponsored plans, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
------------------------------ --------------------------
Dollars in thousands 1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefits earned during the year $ 5,794 $ 5,261 $ 3,952 $1,144 $1,011 $ 572
Interest cost on projected benefit obligation 6,442 5,930 5,310 855 781 657
Expected return on plan assets (9,015) (8,001) (6,606) - -
Amortization of prior service cost 443 437 444 26 26 -
Amortization of transition obligation (asset) (394) (395) (400) 255 254 255
Amortization of net (gain) loss (96) (25) (253) - 18 -
------- ------ ------- ------ ------ ------
Net pension and other benefits expense $ 3,174 $3,207 $ 2,447 $2,280 $2,090 $1,484
======= ====== ======= ====== ====== ======
</TABLE>
<PAGE>
Significant assumptions used in determining net pension and postretirement
benefit expense for the Corporation's plans are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
----------------------- -----------------------
1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.00% 7.00% 7.75% 7.00% 7.00% 7.75%
Expected rate of increase in compensation 4.0 4.0 4.0 - - -
Expected long-term rate of return on plan assets 9.5 9.5 9.0 - - -
</TABLE>
All of the Corporation's pension plans, except the supplemental retirement
plan, have assets in excess of the accumulated benefit obligation. The projected
benefit obligation and accumulated benefit obligation for the supplemental
retirement plan were $9,266,000 and $6,044,000 in 1999, respectively, and
$8,792,000 and $6,016,000 in 1998, respectively. Plan assets for the funded
plans include commingled funds, marketable equity securities and corporate and
government debt securities. The following table presents a reconciliation of the
funded status of the plans using an assumed discount rate of 7.75% for 1999 and
7.00% for 1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
--------------------- -------------------
Dollars in thousands 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 94,254 $ 86,382 $12,795 $10,957
Service cost 5,794 5,261 1,144 1,011
Interest cost 6,442 5,930 855 781
Change in assumptions (10,818) 798 (2,108) (387)
Participants' contributions - - 315 279
Acquisitions - - - 176
Plan amendments 85 - - 506
Benefits paid (4,033) (4,117) (448) (528)
-------- -------- ------- -------
91,724 94,254 12,553 12,795
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 105,579 94,069 - -
Actual return on plan assets 12,311 13,307 - -
Employer contributions 1,335 2,320 133 249
Participants' contributions - - 315 279
Benefits paid (4,033) (4,117) (448) (528)
-------- -------- ------- -------
115,192 105,579 - -
-------- -------- ------- -------
Plan assets (in excess of) less than benefit obligation (23,468) (11,325) 12,553 12,795
Unrecognized net gain (loss) 32,835 18,816 680 (1,427)
Unrecognized prior service cost (2,691) (3,049) (454) (481)
Unrecognized net asset (obligation) 947 1,340 (3,309) (3,564)
Adjustment required to recognize minimum liability 446 1,343 - -
-------- -------- ------- -------
Accrued pension cost (included in other non-current liabilities) $ 8,069 $ 7,125 $ 9,470 $ 7,323
======== ======== ======= =======
Intangible asset recognized in Consolidated Balance Sheets $ 446 $ 1,343 $ - $ -
======== ======== ======= =======
</TABLE>
Approximately 33% of the Corporation's non-salaried employees are covered
by multi-employer union-sponsored, collectively bargained defined benefit
pension plans. Pension expense includes $2,628,000, $2,275,000, and $2,284,000
in 1999, 1998 and 1997, respectively, attributable to the multi-employer plans.
These costs are determined in accordance with the provisions of negotiated labor
contacts.
The Corporation has established an Incentive Savings Plan (401K) for
substantially all of its non-bargaining unit employees. Employee contributions
are partially matched by the Corporation in accordance with criteria set forth
in the plan. Matching contributions charged to earnings for 1999, 1998 and 1997
were $2,832,000, $2,624,000, and $2,408,000, respectively.
<PAGE>
Note 9: Capital Stock
Prior to 1997, the Corporation was authorized by the Board of Directors to
purchase up to 1,500,000 shares of outstanding common stock in the open market.
During 1997, 1,158,900 shares of outstanding common stock were repurchased under
this authority for an aggregate cost of $28,713,000. In 1997 the Corporation was
authorized by the Board of Directors to purchase up to an additional 1,500,000
shares of outstanding common stock in the open market. As of January 3, 1998,
298,000 shares of the Corporation's stock had been repurchased under this
authority at an aggregate cost of $7,549,000. During 1998 an additional 125,000
shares were repurchased under this authority for an aggregate cost of
$3,232,000.
In April 1998 the Board of Directors authorized a new program for the
repurchase of $60 million of common stock. This program was expanded in October
1998 for the repurchase of an additional $50 million of common stock. As of
January 2, 1999, 1,573,900 shares of the Corporation's stock had been
repurchased under this authority at an aggregate cost of $43,790,000. During
1999, an additional 2,572,400 shares were repurchased under this authority for
an aggregate cost of $58,342,000. In December 1999 this program was expanded for
the repurchase of an additional $100 million of common stock.
Prior to the second quarter of 1999, all of the repurchased shares were
canceled. Beginning April 4, 1999, the Corporation's repurchases of outstanding
common stock were recorded as treasury stock. At January 1, 2000, the
Corporation held 1,883,300 shares of its common stock in treasury. These shares
may be reissued pursuant to the Corporation's stock option plans or for other
purposes.
Pursuant to the Corporation's Shareholder Rights Plan, one common stock
purchase right is included with each outstanding share of common stock. In the
event the rights become exercisable, each right will initially entitle its
holder to buy one-half of one share of the Corporation's common stock at a price
of $40 per share (equivalent to $20 per one-half share), subject to adjustment.
The rights will become exercisable if a person or group acquires 20% or more of
the Corporation's common stock or announces a tender offer for 20% or more of
the common stock. Upon the occurrence of certain events, including a person, or
group, acquiring 20% or more of the Corporation's common stock, each right will
entitle the holder to purchase, at the right's then-current exercise price,
common stock of the Corporation or, depending on the circumstances, common stock
of the acquiring corporation having a market value of twice such exercise price.
The rights may be redeemed by the Corporation at a price of one cent per right
at any time prior to the rights becoming exercisable or prior to their
expiration in November 2001.
Note 10: Income Taxes
The provision for income taxes consists of the following:
- --------------------------------------------------------------------------------
Dollars in thousands 1999 1998 1997
- --------------------------------------------------------------------------------
Current:
Federal $18,852 $25,525 $25,531
State 5,465 5,958 5,772
Foreign 2,824 1,472 1,325
------- ------- -------
27,141 32,955 32,628
Deferred (8,541) 195 (5,128)
------- ------- -------
Provision for income taxes $18,600 $33,150 $27,500
======= ======= =======
Below is a reconciliation of the statutory federal income tax rate and the
effective income tax rate:
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
Statutory federal tax rate 35.0% 35.0% 35.0%
Subsidiary basis adjustment 7.9 - -
State and local income taxes,
less applicable federal tax benefit 5.6 4.2 3.9
Amortization of nondeductible goodwill 2.3 .6 .1
Other, net 2.9 (1.3) (.2)
---- ---- ----
Effective income tax rate 53.7% 38.5% 38.8%
==== ==== ====
Temporary differences which give rise to the deferred tax assets and
liabilities at January 1, 2000, and January 2, 1999, are as follows:
- --------------------------------------------------------------------------------
Dollars in thousands 1999 1998
- --------------------------------------------------------------------------------
Net current deferred tax assets:
Vacation accrual $ 3,327 $ 3,224
Other accrued liabilities 12,518 5,331
Reserve for uncollectible accounts 1,672 1,359
Other (522) 2,311
-------- --------
$ 16,995 $ 12,225
======== ========
Net long-term deferred tax liabilities:
Accelerated depreciation $(29,215) $(31,639)
Goodwill amortization (753) (1,143)
Accrued pension cost 3,068 2,296
Accrued postretirement benefit cost 3,666 2,958
Deferred compensation 3,695 2,290
Other (843) 3,024
-------- --------
$(20,382) $(22,214)
======== ========
<PAGE>
No United States deferred taxes have been provided on the undistributed
foreign subsidiary earnings which aggregated $7,268,000 at January 1, 2000, and
are considered permanently invested. If undistributed earnings were remitted,
tax credits would substantially offset any resulting domestic tax liability.
The non-United States component of income before income taxes was
$6,730,000, $5,498,000, and $3,886,000 in 1999, 1998, and 1997, respectively.
Note 11: Contingencies
The Corporation is involved in various claims, including those related to
environmental matters, and lawsuits arising in the normal course of business. In
the opinion of management, the ultimate liability, if any, for these claims and
lawsuits beyond any reserves already provided, will not have a material adverse
effect on the consolidated statements of earnings of the Corporation.
Note 12: Segment Information
The Corporation operates in two primary business segments, print and
turnkey services, with other business operations in healthcare products. The
print segment provides products, including digital imaging, and services to
publishers of educational and general books, and special-interest magazines, and
is a supplier of consumer and business catalogs, and direct marketing materials.
Turnkey services provides supply-chain management, product assembly, fulfillment
and product localization services primarily to technology companies in the
United States and Europe. Healthcare products is primarily engaged in the
production of disposable products used in outpatient clinics, dental offices and
hospitals.
These operations are strategic business units that service different
markets and offer different products and services.
The accounting policies of the segments are the same as those described in
the Summary of Accounting Policies. The Corporation evaluates performance based
on earnings from operations. Summarized segment data for 1999, 1998 and 1997 are
as follows:
- --------------------------------------------------------------------------------
Turnkey
Dollars in thousands Printing Services Healthcare Total
- --------------------------------------------------------------------------------
1999
Net sales $ 960,150 $213,397 $104,731 $1,278,278
Intersegment sales 5,265 140 - 5,405
Depreciation and amortization 59,213 3,532 4,370 67,115
Earnings from operations 48,590 4,558 11,792 64,940
Operating earnings before
restructuring charge 93,410 10,308 14,992 118,710
Significant non-recurring items:
Restructuring charge 44,820 5,750 3,200 53,770
Total assets 562,677 114,296 72,160 749,133
Capital expenditures 65,656 13,946 3,595 83,197
1998
Net sales $1,003,913 $226,286 $105,597 $1,335,796
Intersegment sales 6,699 688 - 7,387
Depreciation and amortization 59,274 2,878 2,682 64,834
Earnings from operations 92,764 5,407 16,715 114,886
Total assets 542,508 128,044 76,462 747,014
Capital expenditures 43,420 3,950 5,992 53,362
<PAGE>
- --------------------------------------------------------------------------------
Dollars in thousands Printing All Other(1) Total
- --------------------------------------------------------------------------------
1997
Net sales $936,019 $266,464 $1,202,483
Intersegment sales 7,501 1,215 8,716
Depreciation and amortization 56,241 4,640 60,881
Earnings from operations 81,956 11,541 93,497
Operating earnings before
restructuring charge 91,456 15,541 106,997
Significant non-recurring items:
Restructuring charge 9,500 4,000 13,500
Total assets 568,298 191,793 760,091
Capital expenditures 54,092 7,460 61,552
- ----------------------------
(1) "All Other" includes the operations within turnkey services and healthcare
products which have been aggregated. Separate segment data was impractical
to present.
The following table presents a reconciliation of certain segment
information to the totals contained in the Consolidated Financial Statements:
- --------------------------------------------------------------------------------
Dollars in thousands 1999 1998 1997
- --------------------------------------------------------------------------------
Earnings from operations:
Reportable segment earnings $118,710 $114,886 $106,997
Unallocated corporate expenses (15,340) (17,341) (13,953)
Restructuring charge (55,000) - (13,500)
Interest expense (12,362) (10,825) (11,062)
Other income (expense) (1,398) (630) 2,341
-------- -------- --------
Earnings before income taxes $ 34,610 $ 86,090 $ 70,823
======== ======== ========
Total assets:
Reportable segment assets $749,133 $747,014 $760,091
Intergroup receivable elimination (1,405) (1,219) (2,297)
Other unallocated amounts 25,616 24,171 23,422
-------- -------- --------
Consolidated total assets $773,344 $769,966 $781,216
======== ======== ========
Summarized geographic data for the Corporation's operations for 1999, 1998
and 1997 are as follows (net sales are attributed to countries primarily based
on location of operation):
- --------------------------------------------------------------------------------
Dollars in thousands 1999 1998 1997
- --------------------------------------------------------------------------------
Net sales:
United States $1,116,779 $1,144,741 $1,056,791
Ireland 91,423 127,110 93,798
Other foreign countries 70,076 63,945 51,894
---------- ---------- ----------
$1,278,278 $1,335,796 $1,202,483
========== ========== ==========
Assets:
United States $ 697,814 $ 666,678 $ 703,833
Ireland 48,346 79,712 47,770
Other foreign countries 27,184 23,576 29,613
---------- ---------- ----------
$ 773,344 $ 769,966 $ 781,216
========== ========== ==========
<PAGE>
<TABLE>
Unaudited Quarterly Financial Information
The following table presents financial information by quarter for the years 1999 and 1998.
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
March June September December
- ---------------------------------------------------------------------------------------------------------------------
Dollars in thousands
(except per share data) 1999 1998 1999 1998 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $309,286 $330,810 $299,080 $316,000 $331,572 $343,681 $338,340 $345,305
Gross earnings 61,695 64,814 61,685 66,125 72,248 70,739 70,734 63,799
Net earnings 9,712 11,032 (26,727)* 13,394 17,538 16,230 15,487 12,284
Basic earnings per share .35 .37 (.97)* .45 .65 .55 .59 .43
Diluted earnings per share .35 .37 (.97)* .45 .65 .55 .59 .43
- -----------------------
* Second quarter 1999 results of operations include a restructuring charge of $38.5 million, after tax ($1.40 per
common share).
</TABLE>
Dividend Record and Market Prices
- --------------------------------------------------------------------------------
First Second Third Fourth Entire
Per Share of Common Stock Quarter Quarter Quarter Quarter Year
- --------------------------------------------------------------------------------
1999 dividends paid $.14 $.14 $.14 $.14 $.56
Price range:
High $27 $25 1/4 $25 13/16 $24 1/2 $27
Low 18 1/4 17 1/4 20 3/4 21 1/8 17 1/4
1998 dividends paid $.12 $.13 $.13 $.13 $.51
Price range:
High $32 1/4 $34 7/8 $31 5/8 $28 3/8 $34 7/8
Low 24 7/16 29 7/8 25 11/16 21 7/8 21 7/8
Prior to December 18, 1998, Banta Corporation was included in the Nasdaq
National Market List and the symbol was BNTA. On November 23, 1998, the
Corporation formally received approval for listing its common stock on the New
York Stock Exchange. Banta stock began trading on the New York Stock Exchange on
December 18, 1998, under the new symbol BN. The stock prices listed above are
the high and low trades. As of January 31, 2000, the Corporation had 2,175
shareholders of record.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
This Annual Report to Shareholders includes forward-looking statements.
Statements that describe future expectations, plans or strategies are considered
forward-looking. Such statements are subject to certain risks and uncertainties,
which could cause actual results to differ materially from those currently
anticipated. Factors that could affect actual results include, among others,
changes in customer order patterns or demand for the Corporation's products,
changes in raw material costs and availability, pricing actions by competitors,
success in implementing the Corporation's plan to enhance revenues and margins,
success with operational start ups, and general changes in economic conditions.
These factors should be considered in evaluating the forward-looking statements,
and undue reliance should not be placed on such statements. The forward-looking
statements included herein are made as of the date hereof, and Banta Corporation
undertakes no obligation to update publicly such statements to reflect
subsequent events or circumstances.
EXHIBIT 21
SUBSIDIARIES OF BANTA CORPORATION
OWNERSHIP BY
BANTA CORPORATION STATE OR JURISDICTION
OR ONE OF IT'S OF INCORPORATION
LIST OF SUBSIDIARIES SUBSIDIARIES OR ORGANIZATION
- -------------------- ------------------ ---------------
Banta Direct Marketing, Inc. 100% Minnesota
Banta Europe Corp. 100% Ireland
Banta Healthcare Limited, Inc. 100% Wisconsin
Banta Security Printing, Inc. 100% Wisconsin
Banta Global Turnkey B.V. 100% The Netherlands
Banta Global Turnkey France 100% France
Banta Global Turnkey Limited 100% Ireland
Banta Global Turnkey Limited 100% Scotland
Banta Packaging & Fulfillment, Inc. 100% Wisconsin
Banta Software Services
International, Inc. 100% Minnesota
Banta Specialty Converting, Inc. 100% Wisconsin
Danbury Printing & Litho, Inc. 100% Minnesota
KnowledgeSet Corporation 100% California
Banta Integrated Media -
Cambridge, Inc 100% Massachusetts
One Pass Network, Inc. 100% California
United Graphics Inc. 100% Washington
Wrapper, Inc. 100% Wisconsin
Banta Publications-Greenfield, Inc. 100% Ohio
Cidex International, Inc. 100% Wisconsin
Banta Direct Marketing-Berkeley, Inc. 100% Minnesota
Omnia I, Inc. 100% Delaware
Meadows Information Systems, Inc. 100% Wisconsin
Greenfield Holdings Corp. 100% Delaware
Banta Cayman Islands Corp. 100% Cayman Islands
Type Designs, Inc. 100%` Georgia
Ad Run Around, Inc. 100% Georgia
Banta Ireland Corp. 100% Wisconsin
Turnkey Services Holding Corp. 100% Wisconsin
Banta Holding Corp. 100% Wisconsin
Banta Hong Kong,Ltd. 100% Hong Kong
Banta Integrated Media -
Needham, Inc. 100% Wisconsin
Banta Global Turnkey (Singapore)
Pte. Ltd. 100% Singapore
Banta Canada Ltd. 100% Canada
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports, included and incorporated by reference in this Form 10-K, into Banta
Corporation's previously filed Form S-8 Registration Statement Nos. 33-40036,
33-54576, 33-61683 and 33-01289 and Form S-3 Registration Statement No.
33-55829.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENT OF BANTA CORPORATION AS OF AND FOR THE TWELVE
MONTHS ENDED JANUARY 1, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JAN-01-2000
<CASH> 1,300
<SECURITIES> 26,351
<RECEIVABLES> 222,974
<ALLOWANCES> 4,927
<INVENTORY> 86,094
<CURRENT-ASSETS> 355,861
<PP&E> 811,800
<DEPRECIATION> 484,450
<TOTAL-ASSETS> 773,344
<CURRENT-LIABILITIES> 245,353
<BONDS> 113,520
0
0
<COMMON> 2,583
<OTHER-SE> 351,192
<TOTAL-LIABILITY-AND-EQUITY> 773,344
<SALES> 1,278,278
<TOTAL-REVENUES> 1,278,278
<CGS> 1,011,916
<TOTAL-COSTS> 1,011,916
<OTHER-EXPENSES> 217,992
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,362
<INCOME-PRETAX> 34,610
<INCOME-TAX> 18,600
<INCOME-CONTINUING> 16,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,010
<EPS-BASIC> 0.59<F1>
<EPS-DILUTED> 0.59
<FN>
<F1> THE EPS UNDER THE "EPS - PRIMARY" TAG REPRESENTS BASIC EARNINGS PER SHARE
</FN>
</TABLE>
