UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
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RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
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[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Workflow Management, Inc.
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(Name of Registrant as Specified In Its Charter)
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Notes:
[LOGO]
WORK FLOW MANGEMENT, INC.
August 20, 2001
Dear Fellow Stockholders:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Workflow Management, Inc. (the "Company") to be held on Monday, October 1,
2001, at 9:30 a.m., Eastern Time, at the Palm Beach Gardens Marriott Hotel, 4000
RCA Boulevard, Palm Beach Gardens, Florida 33410. The accompanying Notice and
Proxy Statement describe the items of business to be considered at the Annual
Meeting. Please read these documents carefully.
Specifically, you will be asked to consider and approve two items of
business: (i) the election of nine directors, each of whom will serve a one-
year term and until their successors are duly elected and qualified and (ii)
the ratification of the appointment of PricewaterhouseCoopers LLP as independent
auditors for the 2002 fiscal year. The Board of Directors encourages you to
read carefully the enclosed Proxy Statement and to VOTE FOR all the matters to
be considered at the Annual Meeting.
We hope you can attend the Annual Meeting. Whether or not you plan to
attend, please complete, sign, and date the enclosed Proxy card and return it
promptly in the enclosed envelope. Your vote is important regardless of the
number of shares you own. We look forward to seeing you at the Annual Meeting,
and we appreciate your continued loyalty and support.
Sincerely,
WORKFLOW MANAGEMENT, INC.
/s/ Thomas B. D'Agostino, Sr.
--------------------------------
Thomas B. D'Agostino, Sr.
Chairman of the Board,
President and Chief Executive Officer
WORKFLOW MANAGEMENT, INC.
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 1, 2001
To Our Stockholders:
The 2001 Annual Meeting of Stockholders of Workflow Management, Inc. (the
"Company") will be held at the Palm Beach Gardens Marriott Hotel, 4000 RCA
Boulevard, Palm Beach Gardens, Florida 33410, on Monday, October 1, 2001, at
9:30 a.m., Eastern Time, for the following purposes:
1. To consider and vote upon the election of nine directors to serve a
one-year term and until their successors are duly elected and
qualified.
2. To consider and vote upon the ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors for the 2002
fiscal year.
3. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on August 10, 2001, will be
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. The Board of Directors of the Company unanimously recommends that
stockholders vote FOR approval of each of the items indicated in 1. and 2.
above.
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR THROUGH YOUR PROXY.
By Order of the Board of Directors,
/s/ Michael L. Schmickle
----------------------------------
Michael L. Schmickle
Secretary
August 20, 2001
PROXY STATEMENT
This Proxy Statement and the enclosed proxy card ("Proxy") are furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of Workflow Management, Inc. (the "Company") to be voted at the 2001 Annual
Meeting of Stockholders (the "Annual Meeting") to be held at the Palm Beach
Gardens Marriott Hotel, 4000 RCA Boulevard, Palm Beach Gardens, Florida 33410,
at 9:30 a.m., Eastern Time, on Monday, October 1, 2001, and at any adjournments
of the Annual Meeting, for the purposes set forth in the accompanying Notice of
Meeting.
Only stockholders of record at the close of business on August 10, 2001
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
We intend to mail this Proxy Statement and the accompanying Proxy on or about
August 20, 2001.
REVOCABILITY OF PROXY
Execution of the enclosed Proxy will not affect a stockholder's right to
attend the Annual Meeting and vote in person. If your Proxy is properly signed,
received by the Company and not revoked by you, the shares to which it pertains
will be voted at the Annual Meeting in accordance with your instructions. If a
stockholder does not return a signed Proxy, his or her shares cannot be voted by
proxy.
SOLICITATION OF PROXIES
The cost of soliciting Proxies will be borne by the Company. The Company
has retained D.F. King & Co., Inc., 77 Water Street, New York, New York
10005-4495, to assist in the solicitation of Proxies and the counting of Proxies
for a fee of approximately $4,000 plus out of pocket expenses. In addition to
solicitation by mail, we will request banks, brokers and other custodians,
nominees and fiduciaries to send proxy materials to the beneficial owners of our
common stock ("Common Stock" or "Company Common Stock") and to secure their
voting instructions if necessary. The Company, upon request, will reimburse them
for their expenses in so doing. Officers and regular employees of the Company
may solicit Proxies personally, by telephone or by telegram from some
stockholders if Proxies are not received promptly, for which no additional
compensation will be paid.
VOTING SHARES AND VOTE REQUIRED
On the Record Date, the Company had 13,018,109 shares of Common Stock
outstanding. Each share of Common Stock is entitled to one vote on each matter
presented at the Annual Meeting. Under the laws of Delaware, the Company's state
of incorporation, shares present in person or represented by Proxy and entitled
to vote are determinative of the outcome of the matter subject to vote.
Directors are elected by a plurality of shares of Common Stock present in person
or represented by proxy and entitled to vote at the Annual Meeting. The
affirmative vote of a majority of shares of Common Stock present in person or
represented by proxy and entitled to vote at the Annual Meeting is required to
ratify the appointment of auditors. We will count abstentions, broker non-
votes, and withheld votes in determining whether a quorum exists for the
1
transaction of business at the Annual Meeting. Abstentions and withheld votes
will be, but broker non-votes will not be, considered shares present in person
or represented by proxy based on the Company's understanding of state law
requirements and the Company's Certificate of Incorporation and Bylaws.
All stockholder meeting proxies, ballots and tabulations that identify
individual stockholders are kept secret and no such document shall be available
for examination, nor shall the identity or the vote of any stockholder be
disclosed except as may be necessary to meet legal requirements and the laws of
Delaware. Votes will be counted and certified by the inspectors of election,
Michael L. Schmickle and James E. Hurley, as required under Delaware law.
Unless specified otherwise, Proxies will be voted (i) FOR the election of
the nine nominees to serve as directors of the Company for a one-year term and
until their successors are duly elected and qualified, and (ii) FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as independent
auditors for the 2002 fiscal year. In the discretion of the Proxy holders, the
Proxies will also be voted for or against such other matters as may properly
come before the Annual Meeting. Management is not aware of any other matters to
be presented for action at the Annual Meeting.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of July 17, 2001, relating to
the beneficial ownership of the Company's Common Stock by (i) each of the
Company's director-nominees and named executive officers who own Common Stock,
(ii) all of the Company's director-nominees and executive officers as a group,
and (iii) any other person known by the Company to own beneficially 5% or more
of the Company's Common Stock. For purposes of the table, a named executive
officer is any individual for whom compensation information is provided in the
"Summary Compensation Table" appearing elsewhere in this Proxy Statement,
regardless of whether such person is currently employed by the Company. Except
as otherwise set forth below, the Company is not aware of any person or group of
affiliated persons who owns more than 5% of the Common Stock of the Company. All
of the Company's director-nominees and named executive officers receive mail at
the Company's principal executive offices at 240 Royal Palm Way, Palm Beach,
Florida 33480.
Number of Shares Percent of
Name Beneficially Owned Outstanding Shares(1)
---- ------------------ ---------------------
Thomas B. D'Agostino, Sr. 1,557,081(2) 10.97%
Thomas B. D'Agostino, Jr. 338,840(3) 2.55
Steve R. Gibson 355,607(4) 2.69
Michael L. Schmickle 151,438(5) 1.15
Claudia S. Amlie 207,573(6) 1.58
Richard M. Schlanger 143,249(7) 1.09
Thomas A. Brown, Sr. 97,890(8) o
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Gus J. James, II 86,890(9) o
James J. Maiwurm 67,390(10) o
Peter J. Pakuris 54,337(11) o
Roger J. Pearson 61,354(12) o
F. Craig Wilson 83,890(13) o
Directors and Executive 2,854,717(14) 19.03
Officers as a Group
(10 Persons)
Benson Associates LLC 666,200(15) 5.12
111 SW 5th
Portland, OR 97204
Jonathan J. Ledecky 1,345,495(16) 9.53
1130 Connecticut Ave., N.W.
Suite 700
Washington, D.C. 20036
o Less than 1% ownership
(1) The number of shares of Common Stock deemed outstanding as of July 17, 2001
includes (i) 13,018,109 shares of Common Stock outstanding, (ii) an
aggregate of 36,355 warrants exercisable at a nominal cost, issued in
connection with the repayment of the Company's subordinated debt
("subordinated debt warrants"), and (iii) an aggregate of 3,310,230 shares
issuable pursuant to options held by the respective person or group which
are presently exercisable or which may be exercised within 60 days after
July 17, 2001 (collectively, "presently exercisable options"), as set forth
below. Pursuant to the rules of the Securities and Exchange Commission,
presently exercisable options are deemed to be outstanding and to be
beneficially owned by the person or group holding such options for the
purpose of computing the percentage ownership of such person or group, but
are not treated as outstanding for the purpose of computing the percentage
of ownership of any other person or group.
(2) Includes 324,545 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Executive Stock Loan
Program, options to purchase 1,150,630 shares that are currently
exercisable and 30,606 subordinated debt warrants.
(3) Includes 83,033 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Executive Stock Loan
Program and options to purchase 246,875 shares that are currently
exercisable.
(4) Includes 144,607 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Executive Stock Loan
Program and options to purchase 210,000 shares that are currently
exercisable.
(5) Includes 33,211 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Executive Stock Loan
Program and options to purchase 114,580 shares that are currently
exercisable.
(6) Includes 82,573 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Executive Stock Loan
Program and options to purchase 125,000 shares that are currently
exercisable.
(7) Includes options to purchase 137,500 shares that are currently exercisable
and 5,749 subordinated debt warrants.
(8) Includes 34,741 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Executive Stock Loan
Program and options to purchase 45,000 shares that are currently
exercisable.
(9) Includes 34,741 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Executive Stock Loan
Program and options to purchase 45,000 shares that are currently
exercisable.
(10) Includes 34,741 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Executive Stock Loan
Program and options to purchase 30,000 shares that are currently
exercisable.
(11) Includes 34,741 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Executive Stock Loan
Program and options to purchase 18,750 shares that are currently
exercisable.
(12) Includes options to purchase 45,000 shares that are currently exercisable.
(13) Includes 34,741 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Executive Stock Loan
Program and options to purchase 45,000 shares that are currently
exercisable.
(14) Includes the information in the notes herein, as applicable. Reflects (i)
873,276 shares held of record, (ii) 30,606 subordinated debt warrants, and
(iii) 1,950,835 shares subject to presently exercisable options.
(15) Based on the most recently filed Schedule 13G filed by the beneficial owner
with the Securities and Exchange Commission on February 13, 2001.
(16) Includes options to purchase 1,096,895 shares that are currently
exercisable which were granted to Mr. Ledecky in connection with his
service as a former director and employee of the Company.
3
PROPOSAL 1. ELECTION OF DIRECTORS
All directors are elected for a one-year term and until their successors are
duly elected and qualified. The persons nominated for election were selected by
the Nominating Committee of the Board of Directors, which met one time to
discuss nominees and propose a slate for election at the Annual Meeting. The
Board of Directors recommends that the following nine nominees be elected as
directors: Thomas A. Brown, Sr.; Thomas B. D'Agostino, Sr.; Thomas B.
D'Agostino, Jr.; Steve R. Gibson; Gus J. James, II; James J. Maiwurm; Peter J.
Pakuris; Roger J. Pearson; and F. Craig Wilson. Proxies received will be voted
for the election of such nominees unless marked to the contrary. A stockholder
who desires to withhold voting of the Proxy for all or one or more of the
nominees may so indicate on the Proxy. All of the nominees are currently
members of the Board of Directors and all nominees have consented to be named
and have indicated their intent to serve if elected. If any nominee becomes
unable to serve, an event which is not anticipated, the Proxy will be voted for
a substitute nominee to be designated by the Board of Directors, or the number
of directors will be reduced. For information regarding the Company's Bylaw
provisions that govern stockholder nominations of director candidates, see
"Submission of Proposals and Other Matters Related to 2002 Annual Meeting"
elsewhere in this Proxy Statement.
Names of Nominees and Committee Memberships
The following table sets forth the name, age, date of first election to the
Board of Directors and Committee membership information for each nominee:
Director Audit Compensation Investment Nominating
Name Age Since Committee Committee Committee Committee
---- --- ----- --------- --------- --------- ---------
Thomas A. Brown, Sr. 59 04/29/98 X X
Thomas B. D'Agostino, Sr. 58 04/29/98 X X
Thomas B. D'Agostino, Jr. 34 09/09/99 X
Steve R. Gibson 42 09/09/99 X
Gus J. James, II 62 04/29/98 X X X
James J. Maiwurm 52 09/09/99 X
Peter J. Pakuris 55 07/10/00 X X X
Roger J. Pearson 55 07/28/98 X X
F. Craig Wilson 51 04/29/98 X
The Audit Committee is empowered by the Board of Directors to, among other
things, recommend the firm to be employed by the Company as its independent
auditor and to consult with such auditor regarding audits and the adequacy of
internal accounting controls and financial management practices. The Audit
Committee held four meetings in the Company's fiscal year ended April 30, 2001
("Fiscal 2001"). Mr. Pearson serves as the Chairman of the Audit Committee.
4
The Compensation Committee is empowered by the Board of Directors to (i)
approve the salaries, bonuses and benefits for executive officers, (ii)
determine the persons to whom stock options are granted, the number of shares
subject to options and the appropriate vesting schedule, and (iii) review and
approve employee benefit plans. The Compensation Committee also recommends to
the Company's Board of Directors the compensation to be paid directors. The
Compensation Committee held thirteen meetings in Fiscal 2001 and took certain
actions by written consent. Mr. Brown serves as the Chairman of the
Compensation Committee.
The Investment Committee reviews all of the Company's proposed acquisitions
and is empowered by the Board of Directors to approve acquisitions with a
purchase price of up to $10,000,000. The Investment Committee also reviews and
recommends to the Company's Board of Directors other investments made by the
Company. The Investment Committee held ten meetings in Fiscal 2001. Mr. James
serves as the Chairman of the Investment Committee.
The Nominating Committee nominates persons to serve on the Company's Board
of Directors to be elected by the stockholders at the Annual Meeting. The
Nominating Committee met one time after Fiscal 2001 to discuss the nominees for
the Annual Meeting. The Nominating Committee will consider nominees recommended
by stockholders, subject to the Company's Bylaw provisions that govern
stockholder nominations of Directors. Mr. D'Agostino, Sr. serves as the
Chairman of the Nominating Committee. See "Submission of Proposals and Other
Matters Related to 2002 Annual Meeting" elsewhere in this Proxy Statement.
Background and Experience
The following information relates to the business background of the nine
director-nominees. There is no arrangement or understanding between any
director-nominees and any other person pursuant to which a director-nominee was
selected. Thomas B. D'Agostino, Jr. is the son of Thomas B. D'Agostino, Sr.
There are no other family relationships among any of the other director-
nominees.
Thomas A. Brown, Sr. served as the Vice President-Purchasing/Sourcing/
Logistics of Pfizer, Inc., a large pharmaceutical company, from May 1996 until
January 2001. Mr. Brown has been retired since January 2001. From June 1991
until May 1996, Mr. Brown was Vice President-Procurement of Aetna, Inc., a
national insurance company.
Thomas B. D'Agostino, Sr. has served as Chairman of the Board of the
Company since February 1998. He has simultaneously served as the Company's
President and Chief Executive Officer for the greater part of his tenure as
Chairman of the Board of the Company and he currently serves in this role. Mr.
D'Agostino, Sr. was President of SFI Corp. ("SFI Corp."), an office consumables
distribution company and predecessor of SFI of Delaware, LLC ("SFI"), a
principal subsidiary of the Company, and SFI Corp.'s predecessor company, Forms
& Peripherals, Inc., from 1972 until 1998. He was appointed President of U.S.
Office Products Company's Print Management Division in January 1997 when U.S.
Office Products Company acquired SFI. The Company was spun-off from U.S. Office
Products Company on June 9, 1998.
5
Thomas B. D'Agostino, Jr. has served as President and Chief Operating
Officer of the Company's Workflow Solutions Division since December 1998. He has
also served as President and Chief Executive Officer of the Company's
iGetSmart.com, Inc. subsidiary since August 1999. Mr. D'Agostino, Jr. also
served briefly as the Company's Co-President during Fiscal 2001. He served as
President of SFI from 1998 to December 1999 and as Vice President of Sales of
SFI from 1997 until 1998. From 1995 to 1997, he served as President of Hano
Document Printers, Inc. ("Hano"), a business forms manufacturing company and
former subsidiary of the Company.
Steve R. Gibson was appointed President of the Company's Workflow Printing
Division on May 1, 2001. Prior to his recent appointment, Mr. Gibson had served
the Company at various times since April 1998 in the capacities of President,
Chief Executive Officer, Co-President, Executive Vice President and Chief
Financial Officer. From February 1997 until April 1998, Mr. Gibson was President
of Cortez Financial Services, Inc., an investment banking company. From May 1985
until February 1997, he was employed in various positions at NationsBank
Corporation, a predecessor to Bank of America, ultimately serving as Senior Vice
President. Mr. Gibson is currently a director of Cortez III Service Corporation,
an ESOP-owned government services provider, and serves as Chairman of its
Compensation Committee. See "Compensation Committee Interlocks and Insider
Participation."
Gus J. James, II is the President, Chairman and shareholder of the law firm
of Kaufman & Canoles in Norfolk, Virginia. Mr. James has practiced law with
Kaufman & Canoles since 1967. See "Certain Relationships and Related
Transactions."
James J. Maiwurm is the Managing Partner of the Tysons Corner, Virginia
office of Squire, Sanders & Dempsey L.L.P. From April 1999 to December 2000, Mr.
Maiwurm was President and Chief Executive Officer of Kaiser Group International,
Inc., an international engineering and construction management company
("Kaiser"). Kaiser was reorganized under Chapter 11 of the U.S. Bankruptcy Code
earlier in 2001. He has been Chairman of the Board of Directors of Kaiser and
its successor, Kaiser Group Holdings, Inc., since June 1999. From August 1998
until he was elected as Kaiser's President and Chief Executive Officer, Mr.
Maiwurm was a partner of the law firm of Squire, Sanders & Dempsey L.L.P. in
Washington, D.C. Prior to August 1998, he was a partner of the law firm of
Crowell & Moring LLP in Washington, D.C. Mr. Maiwurm is a member of the Board of
Managers of Kaiser-Hill Company, LLC, Denver, Colorado, a contractor with the
U.S. Department of Energy; a director of Cortez III Service Corporation, an
ESOP-owned government services provider; and a member of the Board of Trustees
of Davis Memorial Goodwill Industries, Washington, D.C., a non-profit entity.
Peter J. Pakuris has served as President of Prescott & Forbes, a
Philadelphia, Pennsylvania based firm specializing in business brokerage,
corporate consulting and investment real estate services, since 1986.
6
Roger J. Pearson has been engaged in the practice of law in Stamford,
Connecticut, since 1978. Mr. Pearson has been an attorney-at-law since 1971.
He is a director of Southern Union Company, a natural gas distribution company,
having served as a past chairman of such company's Audit Committee and presently
serving as chairman of the Human Resources Committee and member of the Long Term
Stock Incentive Plan Committee. Mr. Pearson also served as First Selectman of
the Town of Greenwich, Connecticut from 1983 until 1985.
F. Craig Wilson has served as Chief Executive Officer and Chairman of the
Board of Cortez III Service Corporation ("Cortez III") since March 1997. Cortez
III provides logistics and technical services to various governmental agencies.
Mr. Wilson also serves as President of EC III, Inc., a joint venture of Cortez
III, and EG&G Inc. From 1993 to 1997, Mr. Wilson was Chief Operating Officer of
Cortez III. See "Compensation Committee Interlocks and Insider Participation."
Directors are elected for a one-year term and hold office until their
successors have been elected and qualified or until such director's earlier
resignation or removal.
Board Meetings
The business of the Company is managed under the direction of the Board of
Directors (the "Board"). The Board meets at least quarterly to review
significant developments affecting the Company and to act on matters requiring
approval by the Board. The Board held five meetings in Fiscal 2001. During such
period, each member of the Board participated in at least 75% of all meetings of
the Board and at least 75% of all applicable committee meetings.
EXECUTIVE COMPENSATION
Summary Executive Compensation Table
The following table presents an overview of executive compensation paid by
the Company and its subsidiaries during Fiscal 2001 and the Company's fiscal
years ended April 30, 2000 ("Fiscal 2000") and April 24, 1999 ("Fiscal 1999") to
the Company's Chief Executive Officer and its five other most highly compensated
executive officers (the "Named Executive Officers"). Compensation for certain
Named Executive Officers for a portion of Fiscal 1999 includes compensation paid
by the Company's various subsidiaries to the Named Executive Officers prior to
the spin-off of the Company and its subsidiaries from U.S. Office Products
Company in June 1998.
7
Summary Compensation Table
Long Term All Other
Annual Compensation Compensation Compensation($)
------------------- ------------ ---------------
Fiscal Other Annual Securities Underlying
Name and principal position Year Salary($) Bonus($) Compensation($) Options(#)
- --------------------------- ------ --------- ------- ---------------- ---------------------
Thomas B. D'Agostino, Sr., President, Chairman 2001 $519,231 $500,000 -- -- $ 13,729 (1)
of the Board and Chief Executive Officer 2000 471,154 250,000 -- 200,000 (2) 11,173 (3)
1999 403,846 200,000 -- 1,096,895 297,075 (4)
Thomas B. D'Agostino, Jr., Executive Vice 2001 373,804 250,000 -- -- 7,791 (5)
President and President of the Workflow 2000 250,000 125,000 $75,839(6) -- 4,061 (7)
Solutions Division 1999 199,422 100,000 -- 160,000 277,885 (8)
Steve R. Gibson, Executive Vice President and 2001 337,500 266,000 -- -- 10,280 (9)
President of the Workflow Printing Division 2000 256,911 127,500 -- 235,000 (10) 161,753 (11)
1999 184,231 87,500 -- 175,000 438 (12)
Michael L. Schmickle, Executive Vice 2001 176,538 140,000 -- 50,000 12,989 (13)
President, Chief Financial Officer and 2000 128,461 82,500 -- 50,000 (14) 9,634 (15)
Secretary 1999 98,540 55,000 -- 50,000 133,626 (16)
Claudia S. Amlie, former Executive Vice 2001 145,384 140,000 -- 50,000 12,811 (18)
President, Chief Administrative Officer, 2000 145,385 70,000 -- 50,000 (19) 8,947 (20)
General Counsel and Secretary (17) 1999 108,077 55,000 75,000 245 (21)
Richard M. Schlanger, former President and 2001 215,942 125,000 -- -- 53,906 (23)
Chief Operating Officer of the Workflow 2000 251,868 125,000 -- -- 18,472 (24)
Printing Division (22) 1999 214,995 135,000 -- 137,500 3,014 (25)
_________________
(1) Includes $12,575 of insurance premiums and $1,154 of 401(k) plan
contributions paid by the Company on Mr. D'Agostino, Sr.'s behalf.
(2) These options were canceled effective October 20, 2000.
(3) Includes $10,106 of insurance premiums and $1,067 of 401(k) plan
contributions paid by the Company on Mr. D'Agostino, Sr.'s behalf.
(4) Includes $3,746 of 401(k) plan contributions paid by the Company on Mr.
D'Agostino, Sr.'s behalf. Also includes a one-time relocation payment of
$169,635 and $123,694 of compensation received for stock options tendered
to U.S. Office Products Company in connection with such company's Strategic
Restructuring Plan prior to the Company's spin-off from U.S. Office
Products Company.
(5) Includes $4,827 of insurance premiums and $2,964 of 401(k) plan
contributions paid by the Company on Mr. D'Agostino, Jr.'s behalf.
(6) Represents value of an automobile purchased by the Company for Mr.
D'Agostino, Jr.
(7) Includes $3,340 of insurance premiums and $721 of 401(k) plan contributions
paid by the Company on Mr. D'Agostino, Jr.'s behalf.
(8) Includes $234 of insurance premiums and $240 of 401(k) plan contributions
paid by the Company on Mr. D'Agostino, Jr.'s behalf. Also includes
$277,411 of compensation received for stock options tendered to U.S. Office
Products Company in connection with such company's Strategic Restructuring
Plan prior to the Company's spin-off from U.S. Office Products Company.
(9) Includes $7,451 of insurance premiums and $2,829 of 401(k) plan
contributions paid by the Company on Mr. Gibson's behalf
(10) 200,000 of these options were canceled effective October 20, 2000.
(11) Includes $7,154 of insurance premiums and $1,927 of 401(k) plan
contributions paid by the Company on Mr. Gibson's behalf. Also includes a
one-time relocation payment of $152,672.
8
(12) 401(k) plan contributions paid by the Company on Mr. Gibson's behalf.
(13) Includes $11,299 of insurance premiums and $1,690 of 401(k) plan
contributions paid by the Company on Mr. Schmickle's behalf.
(14) These options were canceled effective January 5, 2001.
(15) Includes $9,005 of insurance premiums and $629 of 401(k) plan contributions
paid by the Company on Mr. Schmickle's behalf.
(16) Includes $7,771 of insurance premiums and $2,103 of 401(k) plan
contributions paid by the Company on Mr. Schmickle's behalf. Also includes
a one-time relocation payment of $31,015 and $92,737 of compensation
received for stock options tendered to U.S. Office Products Company in
connection with such company's Strategic Restructuring Plan prior to the
Company's spin-off from U.S. Office Products Company.
(17) Ms. Amlie resigned from the Company effective April 30, 2001.
(18) Includes $11,761 of insurance premiums and $1,050 of 401(k) plan
contributions paid by the Company on Ms. Amlie's behalf.
(19) These options were canceled effective January 5, 2001.
(20) Includes $8,301 of insurance premiums and $646 of 401(k) plan contributions
paid by the Company on Ms. Amlie's behalf.
(21) 401(k) plan contributions paid by the Company on Ms. Amlie's behalf.
(22) Mr. Schlanger resigned from the Company effective January 16, 2001.
(23) Includes $11,718 of insurance premiums and $1,803 of 401(k) plan
contributions paid by the Company on Mr. Schlanger's behalf. Also includes
$40,385 in severance payments.
(24) Includes $16,384 of insurance premiums and $2,088 of 401(k) plan
contributions paid by the Company on Mr. Schlanger's behalf.
(25) 401(k) plan contributions paid by the Company on Mr. Schlanger's behalf.
Stock Incentive Plan and Stock Option Awards
The Workflow Management, Inc. 1998 Stock Incentive Plan (the "Incentive
Plan") was adopted on June 8, 1998 by U.S. Office Products Company ("USOP"), the
Company's sole stockholder at the time, prior to USOP's distribution to its
stockholders of all of USOP's shares of the Company's Common Stock on June 9,
1998 (the "Distribution"). The Incentive Plan provides for the issuance of
stock options, stock appreciation rights, restricted stock and other stock-based
awards to non-employee directors, consultants and key employees of the Company
and its subsidiaries. The purpose of the Incentive Plan is to promote the long-
term growth and profitability of the Company by providing employees and non-
employee directors with incentives to improve stockholder value and contribute
to the growth and financial success of the Company, and by enabling the Company
to attract, retain and reward highly motivated and qualified employees. The
maximum number of shares of Company Common Stock that may be issued with respect
to awards granted under the Incentive Plan is 4,392,894, which equaled 30% of
the outstanding Common Stock following the Distribution. The maximum number of
shares that may be issued with respect to awards granted under the Incentive
Plan to an individual in a calendar year may not exceed 1,500,000 shares.
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors. The Incentive Plan authorizes the Compensation Committee to
make all awards. The Compensation Committee determines the prices, vesting
schedules, expiration dates and other material conditions under which such
awards may be exercised.
No restricted stock, stock appreciation rights or stock-based awards other
than stock option grants were awarded to any of the Named Executive Officers
during Fiscal 2001 pursuant to the Incentive Plan. The following table sets
forth information about stock option grants made to the Named Executive Officers
during Fiscal 2001.
9
Option Grants In Last Fiscal Year
Potential Realizable Value
At Assumed Annual Rates of
Stock Price Appreciation
Individual Grants For Option Term (1)
----------------- -------------------
Percentage of
Total
Number of Options
Shares Granted to
Underlying Employees in Exercise Price
Name Options Granted Fiscal Year Per Share Expiration Date 5% 10%
- ---- --------------- ----------- --------- --------------- -- --
Michael L. Schmickle 50,000(2) 8.83% $11.313 05-24-10 $355,734 $901,500
Claudia S. Amlie 50,000(3) 8.83 11.313 11-25-02 $ 73,783 $153,477
___________
(1) In accordance with the rules of the Securities and Exchange Commission, the
potential realizable values for such options shown in the table are based
on assumed rates of stock price appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. These assumed rates do not represent the Company's
estimate or projection of the appreciation of shares of Common Stock of the
Company.
(2) These options vest and become exercisable with respect to 33% of the
underlying shares on each of the first three anniversaries of the date of
grant.
(3) These options are fully vested and exercisable pursuant to Ms. Amlie's
Severance Agreement as described herein.
The table below sets forth information for each Named Executive Officer
concerning the value of unexercised stock options at the end of Fiscal 2001. No
Named Executive Officer exercised any stock options in Fiscal 2001.
Fiscal Year End Options Table
Number of Securities
Underlying Unexercised Options Value of Unexercised In-The-Money
At Fiscal Year-End (#) Options At Fiscal Year-End ($)(1)
--------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Thomas B. D'Agostino, Sr. 1,150,630 -- -- --
Thomas B. D'Agostino, Jr. 246,875 -- 991(2) --
Steve R. Gibson 210,000 -- -- --
Michael L. Schmickle 81,246 66,668 -- --
Claudia S. Amlie 125,000 -- -- --
Richard M. Schlanger 137,500 -- -- --
10
(1) Amounts were calculated by multiplying the number of unexercised options by
the closing price of the Company's Common Stock on the Nasdaq National
Market System ("Nasdaq") on the last trading day of Fiscal 2001 ($6.84) and
subtracting the aggregate exercise price of the options. Under Securities
and Exchange Commission rules, an option is only considered in-the-money,
for purposes of the chart, if the per share exercise price is less than
$6.84.
(2) Of these options 30,875 are exercisable at $6.808 per share. 216,000
exercisable options were not in-the-money at fiscal year-end.
Retirement Savings Plan
All of the Named Executive Officers and other eligible employees of the
Company are eligible to participate in the Company's 401(k) Plan ("401(k)
Plan"). The 401(k) Plan permits employees to contribute to the 401(k) Plan
through voluntary payroll savings on a pretax basis. These contributions are
matched by the Company in an amount equal to 25% of payroll savings
contributions made by employees, up to 6% of an employee's total compensation.
The Company's matching contributions vest over a period of five years after a
participant's date of hire, at the rate of 25% after two years, 50% after three
years, 75% after four years, and 100% after five years.
Executive Stock Loan Program
During September 1998, pursuant to a program approved by the Board of
Directors, the Company extended loans to certain of its key employees, including
its executive officers, to finance the purchase by such persons of shares of
Company Common Stock on the open market (the "1998 Stock Loan Program"). The
1998 Stock Loan Program loans are evidenced by unsecured, full recourse
promissory notes bearing interest at 6.75% per annum. In Fiscal 2001, the
Company extended additional loans to certain of its key employees, including its
executive officers and certain non-employee Directors, to finance the purchase
by such persons of shares of Company Common Stock on the open market (the "2000
Stock Loan Program"). The 2000 Stock Loan Program loans are evidenced by
unsecured, full recourse promissory notes bearing interest at 8.0% per annum.
The notes in connection with the 1998 Stock Loan Program and the 2000 Stock Loan
Program currently provide for forgiveness of all outstanding principal and
accrued interest in the event of a change of control of the Company prior to
January 2, 2003. All principal and accrued interest under the loans is due and
payable on January 2, 2003. As of April 30, 2001, the aggregate outstanding
balance of principal and accrued interest on the 1998 Stock Loan Program loans
and the 2000 Stock Loan Program loans to the Company's Named Executive Officers
was as follows: Mr. D'Agostino, Sr., $2,042,590; Mr. Gibson, $903,445; Mr.
D'Agostino, Jr., $490,845; Mr. Schmickle, $196,370; Mr. Schlanger, $57,080; and
Ms. Amlie, $526,361.
Compensation of Directors
Directors who are employees of the Company did not receive any extra
compensation for attendance at Board or Committee meetings of the Company.
During Fiscal 2001, the Board of Directors approved the Company's provision of
life-time health insurance coverage for all Board members and their dependents
who elect to accept such coverage (the "Director Health Benefit Program"). In
Fiscal 2001, the Company made payments on behalf of certain Directors in
connection with the Director Health Benefit Program, as follows: Mr. Brown,
$1,844.56; Mr. Pakuris, $1,844.56; and Mr. Pearson, $6,226.26. During the first
11
half of Fiscal 2001, the non-employee Directors of the Company received
compensation for their service on the Board of Directors in the form of a stock
grant of $5,000 worth of Company Common Stock and a cash payment of $2,000 as
reimbursement for income taxes paid or payable in connection with such grant,
for each calendar quarter of service. Thereafter, the non-employee Directors of
the Company were allowed the option to continue receiving the aforementioned
quarterly stock grants and tax reimbursements or to borrow up to $200,000
pursuant to the Company's 2000 Stock Loan Program with all interest accruing on
such loans to be paid by the Company. The majority of the non-employee Directors
chose to participate in the Company's 2000 Stock Loan Program. As of April 30,
2001, the outstanding balance of principal on such loans to the Company's
non-employee Directors was as follows: Mr. Brown, $199,992; Mr. James, $199,992;
Mr. Maiwurm, $199,992; Mr. Pakuris, $199,992; and Mr. Wilson, $199,992. In
addition, 15,000 immediately exercisable options to purchase the Company's
Common Stock were issued to each non-employee Director pursuant to the Incentive
Plan. The exercise price of these options was $6.50 the fair market value of the
Company's Common Stock on the date of grant. The Company plans to continue its
current policy concerning non-employee Director compensation in Fiscal 2002.
Other than the Chairman of each Committee, who will receive an annual fee of
$2,500, Directors did not receive separate compensation for serving on any of
the Board Committees. See "Executive Compensation - Executive Stock Loan
Program."
Executive Officer Employment, Severance and Change-in-Control Agreements
The Company entered into an Employment Agreement with Thomas B. D'Agostino,
Sr., dated April 30, 2000, as amended May 1, 2001, pursuant to which Mr.
D'Agostino, Sr. serves as the President, Chairman of the Board and Chief
Executive Officer of the Company (the "D'Agostino, Sr. Employment Agreement").
The term of the D'Agostino, Sr. Employment Agreement is four years, commencing
April 30, 2000. Under the terms of the D'Agostino, Sr. Employment Agreement,
Mr. D'Agostino, Sr. receives a current annual base salary of $530,000, and he is
eligible to receive up to 100% of his base salary in bonus compensation which is
payable in cash, stock options or other non-cash awards, as determined by the
Compensation Committee based on specified performance criteria. He is also
eligible to receive bonus compensation in excess of 100% of his base salary for
extraordinary performance and exceptional Company results, as determined by the
Compensation Committee, which is payable in cash, stock options or other non-
cash awards. In the event that his employment is terminated without cause, Mr.
D'Agostino, Sr. is entitled to receive his base salary and benefits for the
longer of (i) six months from the date of termination or (ii) the remaining time
under the term of the employment agreement. If Mr. D'Agostino, Sr. terminates
his employment following (a) a material breach by the Company under the
D'Agostino, Sr. Employment Agreement, or (b) his refusal to be relocated to
another geographic location other than his current residence ("Termination for
Good Reason"), he will be entitled to receive his base salary and benefits for
the lesser of (i) six months from the date of termination or (ii) the remaining
time under the term of the employment agreement. Following the expiration of
the D'Agostino, Sr. Employment Agreement, a termination without cause or a
Termination for Good Reason, Mr. D'Agostino, Sr. shall have the option to enter
into a five-year consulting agreement with the Company, pursuant to which he
shall render advisory services to the Company's Chief Executive Officer at an
annual salary of $250,000 and continue to be an employee of the Company, subject
to a non-competition covenant. The D'Agostino, Sr. Employment Agreement also
12
contains a non-competition covenant which prohibits Mr. D'Agostino, Sr. from
engaging in certain activities during the term of the employment agreement and
for the longer of (i) a period of one year thereafter or (ii) as long as Mr.
D'Agostino, Sr. continues to receive severance payments from the Company.
Thomas B. D'Agostino, Jr. entered into an Employment Agreement with the
Company and its iGetSmart.com subsidiary, on March 20, 2000, as amended May 1,
2001, pursuant to which Mr. D'Agostino, Jr. serves as the President of the
Company's Workflow Solutions Division and President and Chief Executive Officer
of iGetSmart.com (the "D'Agostino, Jr. Employment Agreement"). Steve R. Gibson
entered into an Employment Agreement with the Company on April 30, 2000, as
amended May 1, 2001, pursuant to which Mr. Gibson serves as the President of the
Company's Workflow Printing Division (the "Gibson Employment Agreement"). The
D'Agostino, Jr. Employment Agreement and the Gibson Employment Agreement each
include: (i) an initial term of four years, commencing March 20, 2000 and April
30, 2000, respectively; (ii) a current annual base salary of $344,500; (iii)
eligibility for up to 100% of base salary in bonus compensation, which is
payable in cash, stock options or other non-cash awards, as determined by the
Compensation Committee based on specified performance criteria; (iv) eligibility
to receive bonus compensation in excess of 100% of base salary for extraordinary
performance and exceptional Company results, as determined by the Compensation
Committee, which is payable in cash, stock options or other non-cash awards; (v)
in the event of a termination by the Company without cause, the right to receive
base salary and benefits under the same terms as the D'Agostino, Sr. Employment
Agreement; (vi) in the event of a Termination for Good Reason, the right to
receive base salary and benefits as provided in the D'Agostino, Sr. Employment
Agreement; and (vii) a non-competition covenant identical to the non-competition
covenant in the D'Agostino, Sr. Employment Agreement.
The Company has also entered into an Employment Agreement with Michael L.
Schmickle, dated May 1, 2001, pursuant to which Mr. Schmickle serves as the
Executive Vice President, Chief Financial Officer and Secretary of the Company
(the "Schmickle Employment Agreement"). The general terms of the Schmickle
Employment Agreement are as follows: (i) an initial term of two years; (ii) a
current base salary of $180,200; (iii) eligibility to receive up to 100% of his
base salary in bonus compensation, payable in cash, stock options or non-cash
awards, as determined by the Compensation Committee based on specified
performance criteria; (iv) eligibility to receive bonus compensation in excess
of 100% of his base salary for extraordinary performance and exceptional Company
results, as determined by the Compensation Committee, which is payable in cash,
stock options or other non-cash awards; (v) a non-competition covenant identical
to the non-competition covenant in the D'Agostino, Sr. Employment Agreement;
(vi) severance payments upon termination without cause under the same terms as
the D'Agostino, Sr. Employment Agreement; and (vii) severance payments upon
Termination for Good Reason under identical terms as the D'Agostino, Sr.
Employment Agreement.
In connection with a restructuring of the Company's management operations,
the Company has also entered into Severance Agreements which terminated the
employment agreements and change-in-control agreements of Richard M. Schlanger,
former President and Chief Operating Officer of the Company's Workflow Printing
Division (the "Schlanger Severance Agreement") and Claudia S. Amlie, former
Executive Vice President, Chief Administrative Officer, General Counsel and
13
Secretary of the Company (the "Amlie Severance Agreement") (the Schlanger
Severance Agreement and the Amlie Severance Agreement collectively, the
"Executive Severance Agreements"). The Executive Severance Agreements have the
following common terms and conditions: (i) waiver and release of the Company
from any and all claims; (ii) non-disclosure of the Company's confidential
information; (iii) agreement to cooperate with the Company after termination;
(iv) negative covenant prohibiting the former executive from making statements
concerning the Company which could harm the Company's business interests; and
(v) survival of key provisions from the terminated employment agreements of each
executive.
The Schlanger Severance Agreement, dated January 16, 2001, contains the
following additional terms: (i) bi-weekly severance payments for a one-year
period, in the aggregate amount of $150,000; (ii) a lump-sum severance payment
equal to $155,700 payable approximately one year after termination; (iii)
continuation of health benefits for 18 months after termination pursuant to
COBRA with reimbursement from the Company for Mr. Schlanger's share of the
premiums; (iv) full vesting of his 137,500 existing options to purchase Company
common stock and an extension of the exercise period until January 16, 2003; (v)
extension of the maturity date on his $56,053 Executive Stock Loan until January
16, 2003 and release of Company's security interest in his 19,300 shares of
Company common stock pledged in connection with such loan; (vi) assignment of
Company's automobile lease and reimbursement for lease payments made by Mr.
Schlanger for such automobile in the amount of $888.28 per month, until January
16, 2003; (vii) right to continued use of his office space at the offices of the
Company's United Envelope, LLC subsidiary in New York, New York, until January
16, 2003; and (viii) the term of Mr. Schlanger's non-compete obligation was
extended until January 16, 2004. Mr. Schlanger continues to provide consulting
services to the Company upon request.
The Amlie Severance Agreement, dated April 30, 2001, contains the following
additional terms: (i) bi-weekly severance payments for a one-year period, in the
aggregate amount of $222,600; (ii) continuation of health and dental benefits
for 18 months after termination pursuant to COBRA with reimbursement from the
Company for Ms. Amlie's share of the premiums; (iii) continuation of life
insurance benefits for 18 months after termination; (iv) full vesting of her
125,000 existing options to purchase Company common stock and an extension of
the exercise period until November 25, 2002; (v) extension of the maturity dates
on Ms. Amlie's $526,361 Executive Stock Loans until February 1, 2003, including
forgiveness of all amounts outstanding in the event of a change-of- control of
the Company on or before May 25, 2002; (vi) transfer to Ms. Amlie of title to a
Company automobile with an estimated value of $30,124; and (vii) agreement that
Ms. Amlie shall provide consulting services to the Company as requested upon
terms and conditions mutually agreed to by Ms. Amlie and the Company.
Each of the Named Executive Officers, excluding Mr. Schlanger and Ms.
Amlie, has also entered into written agreements with the Company which provide
severance payments to such officers in the event of a Change of Control of the
Company (the "Executive Severance Agreements"). A "Change of Control" is defined
as follows: (a) the acquisition by a third party of more than 50% of the
Company's outstanding Common Stock, (b) individuals who are current Board
members cease for any reason to constitute at least a majority of the Board, (c)
approval by the stockholders of the Company of a reorganization, merger or
consolidation of the Company, or (d) approval by the stockholders of the Company
of a liquidation, dissolution or sale of all or substantially all of the assets
14
of the Company. For a period of three years after a Change of Control, an
employee is entitled to receive a lump sum payment equal to three times such
employee's annual salary and bonus, which bonus shall be equal to at least the
highest annual bonus paid to such employee in the three fiscal years preceding
the Change of Control (the "Severance Payment"), upon either of the following
events: (i) termination of the employee without cause, and (ii) termination by
the employee due to (x) a reduction in authority and duties which results in the
diminution of such employee's position, or (y) the Company's failure to pay the
employee's salary at the rate in effect prior to the Change of Control or to
provide pre-existing benefits. The Executive Severance Agreements also provide
that an employee may receive the Severance Payment if such employee voluntarily
terminates his or her employment, for any reason or no reason, during a thirty
day period commencing one year after the Change of Control. If the Severance
Payment is subject to any excise tax or related interest or penalties, the
employee shall also receive a gross-up payment from the Company. Any amounts due
to an employee under his or her employment agreement are credited to amounts due
under the Executive Severance Agreement. All rights and obligations that survive
the termination or expiration of an employee's employment agreement, such as
non-competition and confidentiality covenants of the employee, would continue to
survive in accordance with their terms if the Executive Severance Agreements
became effective upon a Change of Control.
Compensation Committee Interlocks and Insider Participation
Mr. Thomas A. Brown, Sr. and Mr. James J. Maiwurm served as members of the
Compensation Committee of the Company's Board of Directors during all of Fiscal
2001. Mr. Peter J. Pakuris was appointed as a member of the Compensation
Committee on September 27, 2000 and served for the remainder of Fiscal 2001.
None of such persons is an officer or employee, or former officer or employee,
of the Company or any of its subsidiaries.
During Fiscal 2001, an interlocking relationship existed and continues to
exist, between a member of the Company's Board of Directors and the compensation
committee of Cortez III Service Corporation, a New Mexico Corporation ("Cortez
III"). F. Craig Wilson, a Director of the Company, is President, Chief Executive
Officer and a member of the Board of Directors of Cortez III. The interlocking
relationship has existed since July 20, 2000, when Steve R. Gibson, a Director
and executive officer of the Company, was appointed to the Cortez III Board of
Directors and elected Chairman of its Compensation Committee, in connection with
a cash investment by the Company in Cortez III in return for Cortez III common
stock. James J. Maiwurm, a Director of the Company, has also served on the
Cortez III Board of Directors since July 20, 2000.
On January 2, 2001, Craig Wilson purchased the outstanding common stock of
Cortez III owned by the Company in exchange for a five-year promissory note in
the principal amount of $1,789,000. The promissory note accrues interest at a
rate of 18% per annum and is secured by a pledge of the Cortez III common stock
purchased. The Company purchased the Cortez III common stock on April 21, 2000,
for $1,550,000 in cash. The terms and conditions of the sale of the Cortez III
shares are, in management's opinion, no less favorable than the terms and
conditions that would have been available in an arm's length transaction with an
unaffiliated third party.
15
Compensation Committee Report on Executive Compensation
This report describes the Company's executive officer compensation
strategy, the components of the compensation program and the manner in which the
compensation determinations for Fiscal 2001 were made for the Company's
President and Chief Executive Officer, Thomas B. D'Agostino, Sr., and the
Company's other executive officers (collectively, the "Executive Officers").
In addition to the information set forth above under "Executive
Compensation," the Compensation Committee (the "Committee") is required to
provide stockholders a report explaining the rationale and considerations that
led to the fundamental executive compensation decisions affecting the Company's
Executive Officers. In fulfillment of this requirement, the Compensation
Committee, at the direction of the Company's Board of Directors, has prepared
the following report for inclusion in this Proxy Statement. None of the members
of the Compensation Committee are executive officers or employees of the
Company.
Compensation Philosophy
The compensation of the Company's Executive Officers is designed to
attract, retain, motivate and reward qualified, dedicated executives, and to
directly link compensation with (i) the Executive Officer's previous and
anticipated performance, (ii) the contributions and responsibilities of the
Executive Officer to the Company and (iii) the Company's cash flow and
profitability, taking into account market conditions and the performance of
competitors. None of these three factors is given more relative consideration
than any other. The principal components of an Executive Officer's compensation
package in Fiscal 2001 were (i) a base salary at a stated annual rate, together
with certain other benefits as may be provided from time to time, (ii)
discretionary cash bonuses, and (iii) stock option awards under the Company's
1998 Stock Incentive Plan. See " - Bonus Program" below.
Employment Agreements
The Compensation Committee believes that written employment agreements are
necessary to attract and retain a quality management team and are consistent
with the Company's compensation philosophy. In connection with stock option
awards to certain Executive Officers for such employees' performance, new
employment agreements on substantially the same terms and conditions as then
existing employment agreements were entered into on May 1, 2001. The Company
also amended the employment agreements of certain Executive Officers on May 1,
2001. These new employment agreements and the amendments to certain existing
employment agreements, had the effect of increasing certain benefits of key
members of management. Further, separate severance agreements protecting key
employees from the uncertainties that may arise in a change of control of the
Company were already in existence. The principal terms of these employment and
severance agreements are described under "- Executive Officer Employment and
Change in Control Agreements" above.
16
Bonus Program
In Fiscal 2001, the Company awarded cash bonuses to Executive Officers
based upon individual performance and financial performance of the Company. The
Compensation Committee expects that such bonuses will continue to be awarded in
the future. Several of the financial performance factors considered by the
Committee include growth of net earnings per share of the Company (with and
without extraordinary items), improvement in the Company's operating margin, and
increase in the Company's revenues. These factors, among others, are set forth
in each Executive Officer's employment agreement as criteria for bonuses. The
Committee considered other factors, such as the current economic environment,
the Company's financial accomplishments compared to its industry competitors and
significant non-financial accomplishments of the Company. The Committee also
reviewed the Executive Officers' individual contributions to the Company's
acquisition and internal growth strategies, as well as such officers'
performance in view of his or her duties and responsibilities.
1998 Stock Incentive Plan
The Board and the Compensation Committee strive to compensate key employees
of the Company in a manner that aligns closely the interests of such key
employees with the interests of the Company's stockholders. In furtherance of
this goal, the Compensation Committee has awarded stock options to the Executive
Officers under the Company's Stock Incentive Plan. The purpose of the Incentive
Plan is to support the business goals of the Company and to attract, retain and
motivate management officials of high caliber by providing incentives that will,
through the award of options to acquire the Company's Common Stock, associate
more closely the interests of Executive Officers and key employees of the
Company with the interests of the Company's stockholders. See "Stock Incentive
Plan and Stock Option Awards" above.
Compensation of the Chief Executive Officer
In May 2000, Thomas B. D'Agostino, Sr. received a cash incentive bonus of
$500,000 which was equal to 100% of his base salary then in effect, and in May,
2001, his base salary was increased by $30,000 to $530,000. The Compensation
Committee approved such compensation based on the Company's continued
performance under Mr. D'Agostino, Sr.'s leadership. In particular, the Committee
noted the Company's financial results on both a quarterly and yearly basis,
taking into account market conditions and the performance of industry
competitors, and the Company's consummation of strategic acquisitions. The
Committee also reviewed the salaries of chief executive officers in the
Company's peer group in approving Mr. D'Agostino, Sr.'s cash compensation.
o Thomas A. Brown, Sr.
o James J. Maiwurm
o Peter J. Pakuris
17
THE PRECEDING "COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION" AND
THE STOCK PERFORMANCE GRAPH AND AUDIT COMMITTEE REPORT BELOW SHALL NOT BE DEEMED
TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, OR INCORPORATED BY REFERENCE IN ANY DOCUMENTS
SO FILED.
Company Stock Price Performance
The following graph shows a comparison of cumulative total stockholder
returns for (i) the Company, (ii) the Russell 2000 Index, and (iii) certain SIC
Code Indices pertaining to the Company's commercial printing operations for the
period beginning June 10, 1998 and ending April 30, 2001. Prior to June 10,
1998, there was no public market for the Common Stock. The total stockholder
return assumes $100 invested at the beginning of the period in the Company's
Common Stock, the Russell 2000 Index, and the SIC Code Indices, including
reinvestment of dividends.
Comparison of Cumulative Total Return Among The Company,
Russell 2000 Index and
SIC Code Indices
[GRAPH]
Return Return Return Return Return Return
06/10/98 07/25/98 10/24/98 01/23/99 04/24/99 07/24/99 10/23/99
- -------------------------------------------------------------------------------------------------------------------
Workflow 100.00 69.44 55.56 79.17 120.83 163.89 126.39
Management, Inc.
- -------------------------------------------------------------------------------------------------------------------
Russell 2000 Index 100.00 92.10 83.29 94.00 95.24 97.90 94.36
- -------------------------------------------------------------------------------------------------------------------
SIC Code 2752 Index 100.00 95.57 81.07 106.16 77.07 76.20 60.74
- -------------------------------------------------------------------------------------------------------------------
SIC Code 2761 Index 100.00 82.26 83.44 91.08 89.55 89.60 76.19
- -------------------------------------------------------------------------------------------------------------------
Return Return Return Return Return Return
06/10/98 01/22/00 04/30/00 07/31/00 10/31/00 01/31/01 04/30/01
- -------------------------------------------------------------------------------------------------------------------
Workflow 100.00 312.50 155.56 77.78 65.28 92.37 76.00
Management, Inc.
- -------------------------------------------------------------------------------------------------------------------
Russell 2000 Index 100.00 109.16 111.34 109.95 109.33 111.67 106.61
- -------------------------------------------------------------------------------------------------------------------
SIC Code 2752 Index 100.00 69.42 54.19 58.39 46.18 52.00 52.01
- -------------------------------------------------------------------------------------------------------------------
SIC Code 2761 Index 100.00 68.96 66.52 53.73 58.69 82.86 76.34
- -------------------------------------------------------------------------------------------------------------------
Audit Committee Report
The Audit Committee of the Board of Directors is composed of three non-
employee directors and holds regularly scheduled meetings preceding the first
meeting of the Board each quarter. Under Nasdaq listing standards, the Company's
Audit Committee must have at least three members. Two of the Company's Audit
Committee Members, Roger J. Pearson and Thomas A. Brown, Sr., are "independent"
directors as the term independent is defined by Nasdaq. Gus J. James, II, the
third member of the Audit Committee, is not independent under Nasdaq standards
because of legal fees paid over the last four years by the Company to Kaufman &
Canoles, the Company's outside legal counsel. Mr. James is the President,
Chairman and a shareholder of Kaufman & Canoles. See "Certain Relationships and
Related Transactions" below. Nasdaq standards permit the Company to appoint one
non-independent director to the Audit Committee if the Company's Board, under
exceptional and limited circumstances, determines that membership on the
Committee by a non-independent director is required by the best interests of the
Company and its stockholders. The Company believes that Mr. James' extensive
background in financial, business and accounting matters allows him to provide
valuable advice and counsel to the Audit Committee. The Company's Board
therefore has determined that Mr. James' service on the Audit Committee is in
the best interests of the Company and its stockholders. The Committee held four
meetings during Fiscal 2001. The responsibilities of the Committee are set forth
in its Charter, which is reviewed and amended periodically, as appropriate.
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility of
the financial statements and the reporting process, including the system of
internal controls. In this context, the Committee has met and held discussions
with management and the independent auditors. Management represented to the
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Committee has
reviewed and discussed the consolidated financial statements with management and
the independent auditors. The Committee discussed with the independent auditors
matters required to be discussed by Statement of Auditing Standards No. 61
(Communication With Audit Committees). In addition, the Committee has discussed
with the independent auditors the auditors' independence from the Company and
its management, including the matters in the written disclosures required by the
19
Independence Standards Board Standards No. 1 (Independence Discussions with
Audit Committees). The Committee has also considered whether the provision of
non-audit related services by the independent auditors is compatible with
maintaining the independence of such independent auditors. The Committee
discussed with the Company's internal and independent auditors the overall scope
and specific plans for their respective audits.
The Committee meets with the internal and independent auditors, with and
without management present, to discuss the results of their examinations, the
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting. The meetings also are designed to facilitate any
private communications with the Committee desired by the internal auditors or
independent accountants. In reliance on the reviews and discussions referred to
above, the Committee recommended to the Board of Directors, and the Board has
approved, that the audited financial statements of the Company be included in
the Company's Annual Report on Form 10-K for Fiscal 2001, for filing with the
Securities and Exchange Commission. The Committee and the Board also have
recommended, subject to stockholder approval, the selection of the Company's
independent auditors, PricewaterhouseCoopers LLP.
o Roger J. Pearson
o Thomas A. Brown, Sr.
o Gus J. James, II
Independent Auditor Fees and Other Matters
Audit Fees.
In Fiscal 2001, PricewaterhouseCoopers LLP billed the Company an aggregate
of approximately $386,000 in fees and expenses for professional services
rendered in connection with the audit of the Company's financial statements for
the most recent fiscal year and the reviews of the financial statements included
in each of the Company's Quarterly Reports on Form 10-Q during Fiscal 2001.
Financial Information Systems Design and Implementation Fees.
In Fiscal 2001, PricewaterhouseCoopers LLP did not bill the Company for any
fees and expenses in connection with financial information systems design or
implementation, the operation of its information system or the management of its
local area network.
All Other Fees.
PricewaterhouseCoopers LLP billed the Company an aggregate of approximately
$1,500,000 in fees and expenses for other services rendered to the Company in
Fiscal 2001. A substantial portion of these fees and expenses were for services
traditionally provided by auditors, including work performed in connection with
tax matters, due diligence procedures performed in connection with mergers and
acquisitions, fees associated with the abandoned public offering of the
Company's iGetSmart.com, Inc. subsidiary and other financial consulting
services.
20
Certain Relationships and Related Transactions
The Company has retained the law firm of Kaufman & Canoles in connection
with certain legal representations. Gus J. James II, a Director of the Company,
is the President, Chairman and a shareholder of Kaufman & Canoles.
On January 12, 2001, the Company extended a loan to Richard M. Schlanger,
the Company's former Workflow Printing Division President and Chief Operating
Officer, in the principal amount of $250,000. The loan accrues interest at a
rate of 8% per annum and is payable in full on or before January 12, 2003.
On January 2, 2001, the Company sold 20% of the outstanding common stock of
Cortez III Service Corporation, a New Mexico corporation ("Cortez III") to F.
Craig Wilson, a Director of the Company, in exchange for a promissory note in
the principal amount of $1,789,000. F. Craig Wilson is President, Chief
Executive Officer and a member of the Board of Directors of Cortez III. For a
further description of this transaction, see "Compensation Committee Interlocks
and Insider Participation" above.
On December 19, 2000, the Company extended a loan to Steve R. Gibson, a
Director of the Company and the Company's Workflow Printing Division President,
in the principal amount of $330,000. The loan was non-interest bearing and was
repaid in full on April 4, 2001.
On December 8, 2000, the Company repaid in full all amounts outstanding in
connection with approximately $4.9 million in subordinated unsecured notes with
attached warrants issued January 19, 1999 (the "Subordinated Notes") to certain
members of the Company's management, including Thomas B. D'Agostino, Sr., the
Company's Chairman, President and Chief Executive Officer and Richard M.
Schlanger. The Company had used the proceeds from the Subordinated Notes to
repurchase and retire Company Common Stock. The Subordinated Notes were to
mature on January 18, 2009, and had a stated coupon of 12% payable semi-annually
in arrears. During Fiscal 2001, the Company made semi-annual interest payments
on the Subordinated Notes to Messrs. D'Agostino, Sr. and Schlanger which totaled
$406,608 and $76,368, respectively. As provided under the terms of the
Subordinated Notes, upon repayment in full of such notes, warrants previously
issued to the note holders were returned to the Company and reissued in an
amount sufficient to provide a 15% total annual return to each holder. Such
warrants are exercisable into shares of Company Common Stock at a nominal cost.
During Fiscal 2001, the Company issued 30,606 warrants to Mr. D'Agostino, Sr.
and 5,749 warrants to Mr. Schlanger, in connection with the repayment of the
Subordinated Notes. Based upon an analysis performed by Wachovia Bank, N.A., an
independent lending institution which acted as a financial advisor to the
Company, management believes that the terms and conditions of the Subordinated
Notes were no less favorable than the terms and conditions that would have been
available in an arm's-length transaction with unaffiliated third parties.
On September 30, 2000, the Company extended a loan to Steve R. Gibson in
the principal amount of $225,000. The loan was non-interest bearing and was
repaid in full on April 26, 2001.
21
On October 1, 1999, United Envelope LLC ("United"), one of the Company's
principal subsidiaries, entered into a 7 1/2-year lease with an entity owned and
controlled by Richard M. Schlanger and another member of the Company's
management ("TLG") for office space in New York, New York, which replaced an
existing lease among the same parties for the same office space. On February 28,
1998, Astrid Offset Corp., a subsidiary of United which has since been merged
into United, entered into a 9 1/4-year lease with TLG for other office space
located in the same building as the United office space. Aggregate monthly rent
payments of approximately $117,000 each were made in Fiscal 2001 under the terms
of the two leases described above. The terms and conditions of the leases are
based on the market value of the office space and, in management's opinion, are
comparable to rents that would be charged by parties not affiliated with the
Company. In Fiscal 2001, the Company contributed approximately $101,000 in the
aggregate for repairs and improvements to the office space under both of the
above-described leases.
On January 8, 1999, the Company entered into a ten-year lease, with a
purchase option, for corporate office space in Palm Beach, Florida in a building
partially owned by Thomas B. D'Agostino, Jr., a Director of the Company and the
Company's Workflow Solutions Division President and his brother. The terms and
conditions of the ten-year lease are based on the market value of the office
space and, in management's opinion, are comparable to rents that would be
charged by parties not affiliated with the Company. In connection with such
lease, the Company entered into an agreement with the landlord's lender, Bank of
America, N.A., and the landlord, pursuant to which the Company agreed to
purchase the building at a discount in the event the landlord defaults on its
financing arrangement with the lender. In Fiscal 2001, the Company contributed
$549,948 for repairs and improvements to the office space and building. Monthly
rent payments of $30,833 each were made during Fiscal 2001. In connection with
its restructuring plan, the Company has negotiated an early termination of this
lease, expected to occur on August 31, 2001. The landlord has agreed to
reimburse the Company for tenant improvements made to the premises in the
aggregate amount of $1,200,000. $500,000 of such reimbursement shall be
remitted upon termination of the lease and the remainder shall be disbursed in
increments of $70,000 annually, for a period of ten years thereafter. In
connection with the lease termination, the Company has agreed to remit a broker
fee of $300,000 to the broker responsible for locating the replacement tenant.
On December 21, 1998, SFI, one of the Company's principal subsidiaries,
entered into a ten-year lease with an entity owned in part by Thomas B.
D'Agostino, Jr. and his brother for office space in Norfolk, Virginia. Monthly
rent payments of $22,498 each were made in Fiscal 2001 for the office space. The
terms and conditions of the lease are based on the market value of the office
space and, in management's opinion, are comparable to rents that would be
charged by parties not affiliated with the Company. In Fiscal 2001, the Company
contributed $145,252 for repairs and improvements to the office space.
On November 30, 1998, the Company acquired all of the outstanding
membership interests of Direct Pro LLC, a New York limited liability company,
for an aggregate purchase price of approximately $7,000,000 consisting entirely
of cash. Additional consideration was paid by the Company in the form of an
earn- out over three years following the acquisition based on the earnings of
22
Direct Pro LLC. Prior to its acquisition by the Company, Direct Pro LLC was 66
2/3% owned by an entity owned and controlled by Richard M. Schlanger and another
member of the Company's management. During Fiscal 2001, $658,368 in earn-out
payments was paid by the Company to the sellers. The terms and conditions of the
acquisition of Direct Pro LLC are, in management's opinion, at arm's-length and
comparable to the structure, terms and conditions of other acquisitions
consummated by the Company. As of April 30, 2001, no further obligation exists
in connection with the earn-out payments.
During September 1998 and Fiscal 2001, pursuant to a program approved by
the Board of Directors, the Company extended loans to certain of its key
employees, including its executive officers and non-employee Directors, to
finance the purchase by such persons of shares of Company Common Stock on the
open market. The loans are evidenced by full recourse promissory notes bearing
interest at 6.75% and 8.0% per annum. All principal and accrued interest under
the loans become due and payable on January 2, 2003 and such amounts shall be
forgiven in the event of a change of control of the Company prior to January 2,
2003. See "Executive Compensation - Executive Stock Loan Program." See also
"Executive Compensation - Compensation of Directors."
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, officers and persons who beneficially own more than 10% of a
registered class of equity securities of the Company to file initial reports of
ownership (Forms 3) and reports of changes in beneficial ownership (Forms 4 and
5) with the Securities and Exchange Commission ("SEC") and Nasdaq. Such persons
are also required under the rules and regulations promulgated by the SEC to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of such forms furnished to the Company, the
Company believes that all reporting requirements under Section 16(a) for Fiscal
2001 were met in a timely manner by its directors, officers and greater than 10%
beneficial owners.
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected and approved PricewaterhouseCoopers, LLP
("PWC") as the firm of independent certified public accountants to audit the
financial statements of the Company for the fiscal year ending April 30, 2002,
and the Board of Directors desires that such appointment be ratified by the
Company's stockholders. PWC audited the Company's financial statements for the
fiscal years ended April 25, 1998, April 24, 1999, April 30, 2000 and April 30,
2001. A representative of PWC will be present at the Annual Meeting, will have
the opportunity to make a statement if he or she desires, and will be available
to respond to appropriate questions
23
OTHER MATTERS
The Board of Directors does not know of any matters that will be presented
for action at the Annual Meeting other than those described above or matters
incident to the conduct of the Annual Meeting. If, however, any other matters
not presently known to management should come before the Annual Meeting, it is
intended that the shares represented by the Proxy will be voted on such matters
in accordance with the discretion of the holders of such Proxy.
SUBMISSION OF PROPOSALS AND OTHER MATTERS RELATED TO 2002 ANNUAL MEETING
The next Annual Meeting of Stockholders will be held on or about September
27, 2002. Any stockholder who wishes to submit a proposal for consideration at
that meeting, and who wishes to have such proposal included in the Company's
proxy statement, must comply with SEC Rule 14a-8 and must submit the proposal in
writing no later than April 22, 2002. The deadline for stockholders to notify
the Company of non-Rule 14a-8 matters that may be raised for consideration at
the next Annual Meeting is July 6, 2002. All such proposals and notifications
should be sent to Thomas B. D'Agostino, Sr., President, Chairman of the Board
and Chief Executive Officer, at 240 Royal Palm Way, Palm Beach, Florida 33480.
Under the terms of the Company's amended Bylaws, July 6, 2002 is also the
deadline for stockholders to notify the Company of an intention to nominate
candidates for directors at the next Annual Meeting of Stockholders. Such
nominations must comply with the notice provisions adopted by the Board of
Directors and included in the Company's Bylaws. These notice provisions require
that nominations by stockholders of director candidates set forth the following
information: (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934 and Rule
14a-11 thereunder (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); and (b)
as to the stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial
owner, (ii) the class and number of shares of the Company which are owned
beneficially and of record by such stockholder and such beneficial owner, (iii)
a representation that the stockholder is a holder of record of common stock of
the Company entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice, and (iv) a description of all arrangements or understandings between the
stockholder or beneficial owner and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or nominations
are to be made by the stockholder. Generally, nominations are required to be
delivered to the Company not later than 45 days before the date on which the
Company first mailed its proxy materials for the prior year's annual meeting of
stockholders.
24
GENERAL
The Company's 2001 Annual Report to Stockholders accompanies this Proxy
Statement. The 2001 Annual Report to Stockholders does not form any part of the
material for the solicitation of Proxies. Upon written request, the Company
will provide stockholders with a copy of its Annual Report on Form 10-K for
Fiscal 2001 (the "Form 10-K"), as filed with the SEC, without charge. Please
direct written requests for a copy of the Form 10-K to: Thom Scott, Vice
President of Corporate Marketing, Workflow Management, Inc., 240 Royal Palm Way,
Palm Beach, Florida 33480.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY
By Order of the Board of Directors
August 20, 2001
25
Please mark your 5707
[X] vote as in this
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDER- SIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THE SHARES
WILL BE VOTED FOR PROPOSALS 1 AND 2.
FOR WITHHOLD FOR AGAINST ABSTAIN
1.Election of [ ] [ ] Nominees: 2. To ratify the
Directors 01. Thomas A. Brown, Sr. 05. Gus J. James, II appointment of
02. Thomas B. DAgostino, Sr. 06. James J. Maiwurm Pricewaterhouse
03. Thomas B. DAgostino, Jr. 07. Peter J. Pakuris Coopers LLP as
For, except vote withheld from the following 04. Steve R. Gibson 08. Roger J. Pearson the Companys
nominee(s): 09. F. Craig Wilson independent
auditors for the
- -------------------------------------------------------------------------------------------------------- 2002 fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
If you plan to attend the Annual Meeting, please [ ]
check here.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
THANK YOU.
Signature of Stockholder(s) ____________________________________ Date:__________
Note: Signature should agree with name on stock certificate as printed hereon.
Executors, administrators, trustees and other fiduciaries should so
indicate when signing.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
WORKFLOW MANAGEMENT, INC.
Dear Stockholder:
We encourage you to vote your shares electronically this year either by
telephone or via the Internet. This will eliminate the need to return your proxy
card. You will need your proxy card and Social Security number (where
applicable) when voting your shares electronically. The Voter Control Number
that appears in the box above, just below the perforation, must be used in order
to vote by telephone or via the Internet.
The EquiServe Vote by Telephone and Vote by Internet systems can be accessed
24-hours a day, seven days a week up until the day prior to the meeting.
To Vote by Telephone:
- ---------------------
Using a touch-tone phone call Toll-free: 1-877-PRX-VOTE(1-877-779-8683)
To Vote by Internet:
- --------------------
Log on to the Internet and go to the website: http://www.eproxyvote.com/work
Note: If you vote over the Internet, you may incur costs such as
telecommunication and Internet access charges for which you will be responsible.
THANK YOU FOR VOTING YOUR SHARES.
YOUR VOTE IS IMPORTANT!
Do Not Return this Proxy Card if you are Voting by Telephone or the Internet.
PROXY
WORKFLOW MANAGEMENT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS, OCTOBER 1, 2001
The undersigned hereby appoints Thomas B. D'Agostino, Sr. and Gus J.
James, II and each of them, jointly and severally, with power of
substitution, to vote on all matters which may properly come before the
2001 Annual Meeting of Stockholders of Workflow Management, Inc., or any
adjournment thereof.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
WORKFLOW MANAGEMENT, INC.
October 1, 2001