1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Integrity Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
2
(Integrity Logo)
1000 CODY ROAD
MOBILE, ALABAMA 36695
April 13, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Integrity Incorporated, which will be held at the Radisson Admiral Semmes Hotel,
251 Government Street, Mobile, Alabama 36602, on Thursday, May 17, 2001, at 2:00
p.m. local time.
We look forward to your attendance at the Annual Meeting so that you can
vote your shares in person and become better acquainted with members of
Integrity's Board of Directors and management team. Each of the items of
business, which will be considered and voted upon this year, are explained in
the accompanying Proxy Statement. Even if you are planning to attend the Annual
Meeting, please complete the enclosed proxy card and return it in the enclosed
envelope so that your shares may be voted. You will still be able to vote your
shares in person if you attend the Annual Meeting.
If you have any questions about the Proxy Statement or the 2000 Annual
Report, please contact Donald S. Ellington, Senior Vice President of Finance and
Administration, at (334) 633-9000.
Sincerely,
/s/ P. Michael Coleman
P. MICHAEL COLEMAN
Chairman, President and
Chief Executive Officer
3
INTEGRITY INCORPORATED
1000 CODY ROAD
MOBILE, ALABAMA 36695
NOTICE TO THE HOLDERS OF CLASS A AND CLASS B COMMON STOCK
OF THE 2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2001
Notice is hereby given to the holders of the $.01 par value per share
Class A common stock and the $.01 par value per share Class B common stock of
Integrity Incorporated ("Integrity") that the 2001 Annual Meeting of
Stockholders of Integrity (the "Annual Meeting") will be held at the Radisson
Admiral Semmes Hotel, 251 Government Street, Mobile, Alabama 36602, on Thursday,
May 17, 2001, at 2:00 p.m., local time, for the following purposes:
(i) To elect six directors to serve until the 2002 Annual Meeting of
Stockholders;
(ii) To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors for the fiscal year ending December 31, 2001; and
(iii) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Only those stockholders of record at the close of business on March 23,
2001, are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. The transfer books will not be closed. A complete list of
stockholders entitled to vote at the Annual Meeting will be available at the
Annual Meeting.
By Order of the Board of Directors,
/s/ Donald S. Ellington
DONALD S. ELLINGTON
Senior Vice President of
Finance and Administration
April 13, 2001
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE, SIGN,
DATE, AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENCLOSED BUSINESS REPLY
ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING YOU MAY, IF YOU WISH, WITHDRAW YOUR
PROXY APPOINTMENT AND VOTE YOUR SHARES IN PERSON.
4
INTEGRITY INCORPORATED
1000 CODY ROAD
MOBILE, ALABAMA 36695
APRIL 13, 2001
PROXY STATEMENT
FOR CLASS A COMMON STOCK
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2001
INTRODUCTION
This Proxy Statement is being furnished to holders of the $.01 par value
per share Class A common stock ("Class A Common Stock") of Integrity
Incorporated, a Delaware corporation ("Integrity"), in connection with the
solicitation of proxies by Integrity's Board of Directors from holders of the
outstanding shares of Class A Common Stock for use at the 2001 Annual Meeting of
Stockholders of Integrity to be held at 2:00 p.m. local time at the Radisson
Admiral Semmes Hotel, 251 Government Street, Mobile, Alabama 36602, on Thursday,
May 17, 2001, and at any adjournments thereof (the "Annual Meeting").
The Annual Meeting will be held for the following purposes: (i) to elect
six directors to serve until the 2002 Annual Meeting of Stockholders and until
their successors are elected and qualified; (ii) to ratify the selection of
PricewaterhouseCoopers LLP as independent auditors for the fiscal year ending
December 31, 2001; and (iii) to transact such other business as may properly
come before the Annual Meeting or any adjournments thereof.
Integrity's mailing address and the location of its principal executive
offices is 1000 Cody Road, Mobile, Alabama 36695. This Proxy Statement and the
accompanying proxy card are first being mailed to stockholders of Integrity on
or about April 13, 2001.
STOCKHOLDERS ENTITLED TO VOTE
Only stockholders of record of Integrity at the close of business on March
23, 2001 will be entitled to notice of, and to vote at, the Annual Meeting. On
the record date, there were 2,184,000 shares of the Class A Common Stock issued
and 2,184,000 shares of Class A Common Stock outstanding held by approximately
104 stockholders of record and approximately 1,500 beneficial stockholders. In
addition, there were 3,435,000 shares of Integrity's $.01 par value per share
Class B common stock ("Class B Common Stock") issued and outstanding held by 3
stockholders of record. Integrity's stock transfer books will not be closed and
shares may be transferred subsequent to the record date. However, all votes must
be cast in the names of stockholders of record as of the record date.
Pursuant to Integrity's Certificate of Incorporation, holders of Class A
Common Stock are entitled to one vote per share, and holders of Class B Common
Stock are entitled to ten votes per share. All actions submitted to a vote of
stockholders are voted on by holders of Class A Common Stock and Class B Common
Stock voting together as a single class.
5
QUORUM AND VOTING REQUIREMENTS
Pursuant to Integrity's Bylaws, the holders of shares of the Class A
Common Stock and Class B Common Stock entitled to cast a majority of the votes
on the matters at issue at the Annual Meeting, present in person or by proxy,
shall constitute a quorum. For the purpose of determining the presence of a
quorum, abstentions and votes withheld from any nominee will be considered to be
"votes entitled to be cast" and therefore will be counted as present for
purposes of determining the presence or absence of a quorum. Broker non-votes
will not be considered to be "votes entitled to be cast" and will not be counted
as present for quorum purposes. Broker non-votes are votes that brokers holding
shares of record for their customers are not permitted to cast under applicable
stock exchange rules because the brokers have not received specific instructions
from their customers as to how to vote on certain proposals and as to which the
brokers advised Integrity that they lack voting authority.
Proposal I, the election of six directors, requires the affirmative vote
of a plurality of the votes of the shares of Class A Common Stock and Class B
Common Stock represented and entitled to vote for the election of directors at
the Annual Meeting, provided a quorum is present. With respect to Proposal I,
the election of directors, stockholders may (1) vote "for" all six nominees, (2)
"withhold" authority to vote "for" all such nominees, or (3) "withhold"
authority to vote for any individual nominee or nominees but vote for all other
nominees. Because directors are elected by a plurality, withholding authority to
vote with respect to one or more nominees, broker non-votes and abstentions from
voting will have no effect on the outcome of the election of directors.
Proposal II, the ratification of auditors, requires the affirmative vote
of a majority of the votes of the shares of Class A Common Stock and Class B
Common Stock represented and entitled to vote at the Annual Meeting, provided a
quorum is present. With respect to Proposal II, the ratification of auditors,
stockholders may (1) vote "for," (2) vote "against," or (3) "abstain" from
voting on the proposal. An abstention will have the same effect as a vote
"against," while broker non-votes will not be considered "votes entitled to be
cast" and will have no effect on the outcome of the ratification of auditors.
PROXIES
The proxy card accompanying this Proxy Statement is for use at the Annual
Meeting if a stockholder is unable to attend or is able to attend but does not
wish to vote in person. Stockholders should specify their choices with regard to
each proposal on the enclosed proxy card. All properly executed and dated proxy
cards delivered by stockholders to Integrity in time to be voted at the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
the instructions given thereon. If no specific instructions are given, the
shares represented by a signed and dated proxy card will be voted "for" (i) the
election of all director nominees and (ii) ratification of
PricewaterhouseCoopers LLP as independent auditors for the fiscal year ending
December 31, 2001. If any other matters properly come before the Annual Meeting,
the persons named as proxies will vote on such matters according to their
judgment.
The Board of Directors is not aware of any other business to be presented
for a vote of the stockholders at the Annual Meeting. As permitted by Rule
14a-4(c) under the Securities Exchange Act of 1934, as amended, the persons
named as proxies on the proxy cards will have discretionary authority to vote in
their judgment on any proposals presented by stockholders for consideration at
the Annual Meeting that were submitted to Integrity after February 27, 2001.
Such proxies also will have discretionary authority to vote in their judgment
upon the election of any person as a director if a director nominee is unable to
serve for good cause or will not serve, and on matters incident to the conduct
of the Annual Meeting.
2
6
REVOCATION OF PROXIES
The giving of a proxy does not affect the stockholder's right to vote in
person should the stockholder attend the Annual Meeting. Any stockholder that
has given a proxy has the power to revoke it at any time before it is voted by
giving written notice of revocation to Donald S. Ellington, Integrity's Senior
Vice President of Finance and Administration, at 1000 Cody Road, Mobile, Alabama
36695, by executing and delivering to Donald S. Ellington a proxy card bearing a
later date, or by voting in person at the Annual Meeting. If a stockholder is
not attending the Annual Meeting, any proxy or notice should be returned in time
for receipt no later than the close of business on the date preceding the Annual
Meeting.
PROPOSAL I
ELECTION OF DIRECTORS
Integrity's Bylaws provide that its Board of Directors shall consist of
not less than three, nor more than twelve individuals with the exact number of
directors determined by a resolution of the Board of Directors. Pursuant to
Integrity's Bylaws, its Board of Directors has set the number of directors at
six and has nominated the following individuals for election as directors by the
holders of Class A Common Stock and Class B Common Stock:
P. Michael Coleman
Jean C. Coleman
William A. Jolly
Charles V. Simpson
Heeth Varnedoe III
Jimmy M. Woodward
Each director will be elected to hold office until the earlier of the 2002
Annual Meeting of Stockholders or their death, resignation or removal. The
persons designated as proxies intend to vote the shares represented thereby in
favor of the election to the Board of Directors of the nominees whose names
appear above, unless either authority to vote for any or all of the nominees is
withheld or such proxy has previously been revoked. It is believed that all of
the nominees will be available and able to serve as directors. In the event that
a nominee is unable to serve (which is not anticipated), the persons designated
as proxies will cast votes for the remaining nominees and for such other person
as they may select. It is anticipated that stockholders of Integrity who are
members of management will vote for the election of the nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES
FOR ELECTION AS DIRECTORS. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE
STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE,
THE SHARES WILL BE VOTED FOR THE NOMINEES. THE AFFIRMATIVE VOTE OF A PLURALITY
OF THE VOTES OF THE SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK,
VOTING TOGETHER AS A SINGLE CLASS, REPRESENTED AND ENTITLED TO VOTE IN THE
ELECTION AT THE ANNUAL MEETING AT WHICH A QUORUM IS PRESENT, IS REQUIRED FOR THE
ELECTION OF THE NOMINEES.
3
7
CERTAIN INFORMATION CONCERNING NOMINEES
The following table sets forth the names of the nominees for election as
directors, their ages, the year in which they were first elected as a member of
Integrity's Board of Directors, their positions with Integrity, their principal
occupations and employers for at least the last five years, and any other
directorships held by them in certain other companies. For information
concerning the directors' membership on committees of the Board of Directors,
see "Meetings of the Board of Directors and Committees" below. For information
concerning directors' ownership of shares of Integrity's common stock, see
"Beneficial Owners of More Than Five Percent of Integrity's Common Stock; Shares
Held by Directors and Executive Officers" below.
NAME AND YEAR FIRST POSITIONS WITH INTEGRITY, PRINCIPAL OCCUPATIONS DURING AT
ELECTED DIRECTOR AGE LEAST THE PAST FIVE YEARS, AND OTHER DIRECTORSHIPS
- ------------------- --- ---------------------------------------------------------
P. Michael Coleman 47 Mr. Coleman co-founded Integrity in 1987 when he and a
(1987) partner purchased the music operations of Integrity
Communications, Inc. from Charles Simpson Ministries,
Inc. He has served as Chairman, President and the Chief
Executive Officer of Integrity since 1987. Prior to 1987,
Mr. Coleman served as president of several different
organizations in the Christian communications industry.
In December 1999, Mr. Coleman earned a Master of Business
Administration degree for global executives from Duke
University.
Jean C. Coleman 54 Mrs. Coleman is a full-time homemaker in Mobile, Alabama
(1993) and is the wife of P. Michael Coleman.
William A. Jolly 46 Mr. Jolly has been a partner for Fine Equities, Inc.
(not currently a member of since 1996. Fine Equities, Inc. is a boutique investment
the Board of Directors) bank that specializes in financing consumer product,
biotech and medical device companies, investment advisory
services and corporate restructurings. From 1994-1996 Mr.
Jolly was the Vice President of Worldwide Consumer
Products Asia-Pacific Region for Scott Worldwide, Inc.
Prior to working with Scott Worldwide, Inc., Mr. Jolly
worked for Procter & Gamble, most recently as the
President Director of its operations in Indonesia. Mr.
Jolly received a Masters of Business Administration from
the University of North Carolina at Chapel Hill, North
Carolina and graduated from Duke University with a
Bachelors Degree in Management Sciences and French
Literature.
Charles V. Simpson 63 Mr. Simpson is the retired Senior Pastor of the Covenant
(1987) Church of Mobile where he previously served for more than
five years. Reverend Simpson is Chairman of Charles
Simpson Ministries, which publishes Christian Conquest
magazine, The Covenant and the Kingdom Curriculum and a
monthly pastoral letter.
Heeth Varnedoe III 64 Mr. Varnedoe was President and Chief Operating Officer of
(1993) Flowers Industries Inc., a publicly-traded company which
produces bread and other baked products from 1986 to
1997. Mr. Varnedoe retired from Flowers Industries in
1997.
4
8
NAME AND YEAR FIRST POSITIONS WITH INTEGRITY, PRINCIPAL OCCUPATIONS DURING AT
ELECTED DIRECTOR AGE LEAST THE PAST FIVE YEARS, AND OTHER DIRECTORSHIPS
- ------------------- --- ---------------------------------------------------------
Jimmy M. Woodward 40 Mr. Woodward currently serves as Chief Financial Officer
(1999) of Flowers Industries Inc. and has held that position
since 2000. Prior to holding such position, he was Vice
President and Chief Administrative Officer of Flowers
Industries Inc. since 1997. Mr. Woodward joined Flowers
Industries Inc. in 1985 as Tax Accounting Manager and
served as Assistant Treasurer of Flowers Industries Inc.
from 1990 to 1997. Mr. Woodward has been a director of
Keebler Foods Company since February 1998.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Board of Directors. The property, affairs and business of Integrity are
under the general management of its Board of Directors as provided by the laws
of Delaware and the Bylaws of Integrity. The Board of Directors held four
meetings during 2000. Each director, during the period he or she was a director,
attended at least 75% of the meetings of the Board of Directors. Integrity has
standing Audit and Compensation Committees of its Board of Directors. Integrity
does not have a standing Nominating committee of its Board of Directors.
Audit Committee. The Audit Committee is currently composed of two members
who are independent within the meaning of Nasdaq listing standards and who are
otherwise qualified to serve on the Audit Committee under those standards. The
members of the Audit Committee are Jimmy M. Woodward (Chairman) and Heeth
Varnedoe III.
The Audit Committee oversees management's conduct of the financial
reporting process, the system of financial and administrative controls and the
annual independent audit of Integrity's financial statements. In addition, the
Audit Committee makes recommendations to the Board of Directors regarding
Integrity's employment of independent auditors, reviews the independence of such
auditors, approves the scope of the annual activities of the independent
auditors and reviews audit results. The Audit Committee held three meetings
during 2000. The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is attached to this Proxy Statement as Appendix A.
See also "Audit Committee Report" below.
Compensation Committee. The members of the Compensation Committee are
Heeth Varnedoe III (Chairman) and Jimmy M. Woodward. The function of the
Compensation Committee is to review and approve the compensation of executive
officers and establish targets and incentive awards under Integrity's incentive
compensation plans. The Compensation Committee held five meetings during 2000.
Each member of a committee, during the period he or she was a committee
member, attended at least 75% of the meetings of each committee on which he or
she served.
COMPENSATION OF DIRECTORS
Integrity pays a fee of $1,500 for each Board and committee meeting
attended by its directors who are not employees of Integrity, former employees
of Integrity or members of the immediate family of a current or former employee
of Integrity. Integrity also reimburses the directors for travel expenses
incurred in connection with their activities on behalf of Integrity.
Pursuant to the Integrity Incorporated 1994 Stock Option Plan for Outside
Directors (the "Director Plan"), each director (other than employees, former
employees or immediate family members of current or former employees)
automatically receives on the day following each annual meeting of stockholders
a grant of options to purchase 1,000 shares of Class A Common Stock. Such
options will have an exercise price equal to 100% of the fair market value of
the Class A Common Stock at the date of grant of such option.
5
9
AUDIT COMMITTEE REPORT
Dated February 16, 2001
The Audit Committee is currently composed of two directors who are
independent within the meaning of Nasdaq listing standards and who are otherwise
qualified to serve on the Audit Committee under those standards.
Integrity's management is responsible for the company's internal controls
and financial reporting process. Integrity's independent accountants are
responsible for performing an independent audit of Integrity's consolidated
financial statements in accordance with generally accepted accounting standards
and to issue a report thereon. As described in more detail in the Audit
Committee Charter, the Audit Committee's responsibility is to monitor and
oversee these processes. It is not the duty of the Audit Committee to plan or
conduct audits or to determine that Integrity's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. These are the responsibility of management and the independent
auditors.
In this context, the Audit Committee has met and held discussions with
management and the independent accountants. In particular,
(1) The Audit Committee has reviewed and discussed Integrity's audited
financial statements for the fiscal year ended December 31, 2000 with
management and Integrity's independent auditors,PricewaterhouseCoopers
LLP;
(2) The Audit Committee has discussed with PricewaterhouseCoopers LLP the
matters required to be discussed by Statement on Auditing Standards
No. 61, Communications with Audit Committees, as amended; and
(3) The Audit Committee received written disclosures from
PricewaterhouseCoopers LLP regarding their independence in a form
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as amended, and discussed with
PricewaterhouseCoopers LLP their independence.
The Audit Committee has also considered whether the provision of services
by PricewaterhouseCoopers LLP not related to the audit of Integrity's financial
statements for the fiscal year ended December 31, 2000 or the review of
Integrity's interim financial statements included in Integrity's Forms 10-Q for
the quarters ended March 31, June 30, and September 30, 2000 is compatible with
maintaining PricewaterhouseCoopers LLP's independence.
Based on such review and discussion, the Audit Committee recommended to
the Board of Directors that Integrity's audited financial statements for the
year ended December 31, 2000 be included in its Annual Report on Form 10-K for
the year ended December 31, 2000.
AUDIT COMMITTEE
Jimmy M. Woodward, Chairman
Heeth Varnedoe III
BENEFICIAL OWNERS OF MORE THAN FIVE PERCENT OF INTEGRITY'S COMMON STOCK;
SHARES HELD BY DIRECTORS AND EXECUTIVE OFFICERS
On December 31, 2000, there were 2,184,000 shares of Class A Common Stock
issued and outstanding and 3,435,000 shares of Class B Common Stock issued and
outstanding. The percentages shown in the following table are based on the total
number of shares of Integrity's Class A and Class B Common Stock outstanding as
of this date.
6
10
Based solely upon information made available to Integrity and except where
noted, the following table sets forth certain information with respect to the
beneficial ownership of Class A Common Stock and Class B Common Stock as of
December 31, 2000, by (i) each person who is known by Integrity to beneficially
own more than five percent of either Class A or Class B Common Stock; (ii) each
nominee for director of Integrity; (iii) each of the Named Executive Officers
(as defined under "Executive Compensation" below); and (iv) all officers and
directors as a group.
SHARES OF CLASS A SHARES OF CLASS B
COMMON STOCK COMMON STOCK
-------------------------------- -------------------------------- PERCENTAGE OF
NAME AND ADDRESS SHARES BENEFICIALLY SHARES BENEFICIALLY CLASS A AND CLASS B
OF BENEFICIAL OWNER(1) OWNED(2) PERCENTAGE OWNED(2) PERCENTAGE COMMON STOCK
- ---------------------- ------------------- ---------- ------------------- ---------- -------------------
Financial & Investment 281,708 12.9% -- -- 5.0%
Management Group, Ltd.(3)
417 St. Joseph Street
P.O. Box 40
Suttons Bay, MI 49682
The Coleman Limited -- -- 223,021 6.5% 4.0%
Partnership
c/o Mr. P. Michael Coleman
8561 Dawes Lake Road
Mobile, Alabama 36619
P. Michael Coleman(4) 35,100 1.6% 3,226,367 93.9% 58.0%
Jean C. Coleman -- -- 208,633 6.1% 3.7%
Jimmy M. Woodward(5) 3,000 * -- -- *
Charles V. Simpson(6) 5,500 * -- -- *
Heeth Varnedoe III(6) 5,500 * -- -- *
Jerry W. Weimer(7) 103,000 4.7% -- -- 1.8%
Donald J. Moen(8) 63,232 2.9% -- -- 1.1%
Daniel D. McGuffey(9) 47,000 2.2% -- -- *
Keith J. Manwaring(10) 10,000 * -- -- *
All executive officers and
directors as a group (11
persons)(11) 300,729 13.8% 3,435,000 100.0% 66.5%
- ---------------
* Less than 1% of Integrity's outstanding common stock.
(1) Except as indicated, the address of each executive officer and director
is 1000 Cody Road, Mobile, Alabama 36695.
(2) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Securities Exchange Act. A person is deemed to be the beneficial owner of
shares of common stock if such person has or shares voting or investment
power with respect to such common stock, or has the right to acquire
beneficial ownership at any time within 60 days of the date of the table.
As used herein, "voting power" is the power to vote or direct the voting
of shares and "investment power" is the power to dispose or direct the
disposition of shares.
(3) Based on information from a Schedule 13G dated March 9, 2001. Financial
Investment and Management Group has shared voting and dispositive power
over 281,708 shares owned by its investment advisory clients. The address
for Financial & Investment Management Group is 417 St. Joseph Street,
P.O. Box 40, Suttons Bay, MI 49682.
(4) Includes 35,000 shares of Class A Common Stock held by The Coleman
Charitable Foundation, Inc. over which Mr. Coleman, as Chairman, has
shared voting and dispositive power; and 223,021 shares of Class B Common
Stock held by The Coleman Limited Partnership, over which Mr. Coleman, as
General Partner, has sole voting and dispositive power.
(5) Includes options to purchase 2,000 shares of Class A Common Stock, which
are immediately exercisable.
(6) Includes options to purchase 5,000 shares of Class A Common Stock, which
are immediately exercisable.
(7) Includes options to purchase 100,000 shares of Class A Common Stock,
which are immediately exercisable.
(8) Includes options to purchase 55,832 shares of Class A Common Stock, which
are immediately exercisable.
(9) Includes options to purchase 47,000 shares of Class A Common Stock, which
are immediately exercisable.
(10) Includes options to purchase 10,000 shares of Class A Common Stock, which
are immediately exercisable.
(11) Includes options to purchase 247,632 shares of Class A Common Stock,
which are immediately exercisable.
7
11
EXECUTIVE OFFICERS OF INTEGRITY
Except for Mr. Coleman, who serves as Integrity's Chairman, President and
Chief Executive Officer and who is discussed above, the following table sets
forth the names of the executive officers of Integrity, their ages, their
positions with Integrity and their principal occupations and employers for at
least the last five years. For information concerning executive officers'
ownership of common stock, see "Beneficial Owners of More Than Five Percent of
Integrity's Common Stock; Shares Held by Directors and Executive Officers."
POSITIONS WITH INTEGRITY AND PRINCIPAL
NAME AGE OCCUPATIONS DURING AT LEAST THE PAST FIVE YEARS
- ---- --- -----------------------------------------------
Jerry W. Weimer, Executive 53 Mr. Weimer joined Integrity in March 1996 as
Vice President and Chief Executive Vice President and Chief Operating
Operating Officer Officer. In this position, Mr. Weimer manages and
oversees Integrity's day-to-day operations in all
areas except finance and administration. Mr.
Weimer's previous experience includes more than 15
years in the music industry. From 1992 to 1996, he
held the position of Executive Vice President of
Word, Inc., the former Christian music division of
Thomas Nelson, Inc., and prior to 1991, he was
President of the Gaither Management Group, which is
involved in Christian music publishing.
Donald S. Ellington, Senior 45 Mr. Ellington joined Integrity in May 2000 as Senior
Vice President of Finance Vice President of Finance and Administration and its
and Administration chief financial officer. Mr. Ellington's
responsibilities include management of the
accounting department and all aspects of internal
and external financial reporting. He is also
responsible for the administrative functions of
Integrity, including facilities management, risk
management and human resources. From August 1998 to
May 2000, Mr. Ellington was the Chief Operating
Officer for Ray Wallace and Associates, and from
August 1994 to August 1998, he was Corporate
Controller for Biolab.
Donald J. Moen, Executive 50 Mr. Moen joined Integrity as Creative/Product
Vice President and Creative Director in February 1988 and is currently Executive
Director Vice President and Creative Director. In this
position, Mr. Moen provides creative direction and
oversight to the product creation process. Also, as
an artist and songwriter, Mr. Moen has completed
numerous recordings for Integrity and has been a
worship leader for the Hosanna! Music series. In
1994, Integrity's musical "God With Us," for which
Mr. Moen was the key creative director, won a Dove
Award for best musical. In 1993, he was a Dove Award
nominee for his recording "Worship with Don Moen,"
and in 1992, he was a nominee for his song "God Will
Make a Way."
8
12
POSITIONS WITH INTEGRITY AND PRINCIPAL
NAME AGE OCCUPATIONS DURING AT LEAST THE PAST FIVE YEARS
- ---- --- -----------------------------------------------
Keith J. Manwaring, Senior 54 Mr. Manwaring joined Integrity in November 1990 as
Vice President and Managing the Managing Director of Integrity's Australian
Director of Integrity subsidiary. In February 1992, Mr. Manwaring
International Group transferred to Integrity's headquarters in Mobile,
Alabama where he assumed the position of Vice
President, International, Church Resources and
Special Sales. In September 1995, certain areas of
Integrity were restructured and Mr. Manwaring became
solely responsible for international sales as Senior
Vice President, International. In December 1996, Mr.
Manwaring's title was changed to Senior Vice
President and Managing Director of Integrity
International Group to reflect his management
responsibilities for all international activities
including oversight of all of Integrity's
international subsidiaries.
Daniel D. McGuffey, Senior 47 Mr. McGuffey joined Integrity in December 1996 as
Vice President and Chief Senior Vice President, General Manager of the
Marketing Officer Integrity Label Group. In August 1999, Mr. McGuffey
was promoted to his current position of Chief
Marketing Officer and Senior Vice President. In this
position, he is responsible for U.S. consumer
marketing, sales, creative services and special
markets. Prior to joining Integrity, Mr. McGuffey
was Vice President of Marketing and Sales for Star
Song Communications, a Christian music publisher,
from 1992 to December 1996, where he was
instrumental in the marketing and sales development
of over 30 artists and labels. He also held the
position of Vice President of Marketing and Sales
for Reunion Records from 1991 to 1992 and began his
career in the music industry in 1980 with the
Sparrow Corporation, a Christian music publisher.
Chris E. Thomason, Senior 38 Mr. Thomason joined Integrity in 1992 as an
Vice President of the Assistant Manager of Song Development. He then moved
Creative Group to Assistant Artists and Repertoire ("A&R") Manager
and then to Director of A&R. He was promoted to Vice
President of Creative in 1997. In January 2001, he
was promoted to his current position of Senior Vice
President of the Creative Group where he executive
produces and oversees product development, song
development, studios, music production and all A&R
functions. Prior to joining Integrity, Mr. Thomason
was employed by Gold Mine Studios and co-owned
Duckworth Studios.
9
13
POSITIONS WITH INTEGRITY AND PRINCIPAL
NAME AGE OCCUPATIONS DURING AT LEAST THE PAST FIVE YEARS
- ---- --- -----------------------------------------------
Robert G. Rist, 54 Mr. Rist joined Integrity on March 31, 1997, as Vice
Senior Vice President, President, Church Resources. In January 2001, he was
Church Resources and Music promoted to his current position of Senior Vice
Publishing President, Church Resources and Music Publishing.
The Church Resources division of Integrity
specializes in providing material to be used by
local congregations specifically in the area of
worship. In January 2001, Mr. Rist was promoted to
his current position of Senior Vice President,
Church Resources and Music Publishing. The Music
Publishing division manages Integrity's copyrights
and other intellectual properties, royalties
administration and product administration. Prior to
joining Integrity, Mr. Rist served as President of
Warner Press in Anderson, Indiana, for seven years
and prior to that in various positions at Alexandria
House, Inc., a music distribution company in
Alexandria, Indiana for 14 years.
EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation paid or accrued by Integrity for services rendered in all
capacities during the fiscal years ended December 31, 1998, 1999, and 2000 for
(i) the President and Chief Executive Officer of Integrity; and (ii) the four
other most highly compensated executive officers of Integrity whose total salary
and bonus exceeded $100,000 (determined as of December 31, 2000 and
collectively, the "Named Executive Officers").
10
14
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS
------------------------- -------------------------- PAYOUTS
SECURITIES ----------
NAME AND RESTRICTED UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARDS OPTIONS/SAR PAYOUTS(1) COMPENSATION
- ------------------ ---- -------- ------- ------------ ----------- ---------- ------------
($) ($) (#)
P. Michael Coleman 2000 $315,503 -- -- -- -- $ 4,043(2)
Chairman, President and 1999 300,927 75,232 -- -- -- 19,043
Chief Executive Officer 1998 296,206 73,041 -- -- -- 7,695
Jerry W. Weimer 2000 226,901 -- -- -- -- 3,635(3)
Executive Vice 1999 207,773 71,500 375,000 100,000 -- 18,634
President and 1998 200,000 50,000 -- -- -- 7,219
Chief Operating Officer
Donald J. Moen 2000 167,228 13,760 -- 40,278 $ 35,360 7,439(4)
Executive Vice 1999 139,851 32,916 -- -- -- 7,189
President and 1998 142,299 40,977 -- -- 19,440 6,509
Creative Director
Daniel D. McGuffey 2000 163,699 106,255 -- -- -- 18,946(5)
Senior Vice 1999 133,649 80,190 -- 50,000 -- 18,880
President and 1998 120,386 71,240 -- -- -- 9,878
Chief Marketing Officer
Keith J. Manwaring 2000 112,061 35,507 -- 25,000 $ 30,940 6,248(6)
Senior Vice President 1999 113,609 32,196 -- -- -- 5,850
and Managing Director 1998 102,102 21,829 -- -- 17,010 5,844
of Integrity
International Group
- ---------------------------------------
(1) Comprised of payments made under Integrity's 1995 Cash Incentive Plan. See
"-- Employment Arrangements -- Cash Incentive Plan."
(2) Comprised of (i) contributions made by Integrity to Integrity's 401(k) Plan
and Profit Sharing Plan in the amounts of $15,000 and $3,652 in 1999 and
1998, respectively and (ii) payments made by Integrity on behalf of the
officer for Personal Disability Insurance in the amount of $4,043 in each of
2000, 1999 and 1998.
(3) Comprised of (i) contributions made by Integrity to Integrity's 401(k) Plan
and Profit Sharing Plan in the amounts of $15,000 and $3,585 in 1999 and
1998, respectively and (ii) payments made by Integrity on behalf of the
officer for Personal Disability Insurance in the amounts of $3,635, $3,634
and $3,634 in each of 2000, 1999 and 1998, respectively.
(4) Comprised of (i) contributions made by Integrity to Integrity's 401(k) Plan
and Profit Sharing Plan in the amounts of $5,250, $5,000 and $4,352 in 2000,
1999 and 1998, respectively and (ii) payments made by Integrity on behalf of
the officer for Personal Disability Insurance in the amounts of $2,189,
$2,189 and $2,157 in each of 2000, 1999 and 1998, respectively.
(5) Comprised of (i) contributions made by Integrity to Integrity's 401(k) Plan
and Profit Sharing Plan in the amounts of $5,250, $5,000 and $2,700 in 2000,
1999, and 1998, respectively; (ii) reimbursement by Integrity of living
expenses in the amounts of $11,706, $11,890 and $10,541, in each of 2000,
1999 and 1998, respectively; and (iii) payments made by Integrity on behalf
of the officer for Personal Disability Insurance in the amount of $1,990 in
each of 2000 and 1999.
(6) Comprised of (i) contributions made by Integrity to Integrity's 401(k) Plan
and Profit Sharing Plan in the amounts of $5,250, $4,852 and $4,900 in 2000,
1999 and 1998, respectively and (ii) payments made by Integrity on behalf of
the officer for Personal Disability Insurance in the amounts of $998, $998
and $994 in each of 2000, 1999 and 1998, respectively.
11
15
The following table sets forth information concerning the value as of
December 31, 2000 of options to purchase shares of Class A Common Stock held by
the Named Executive Officers. Integrity does not issue options to purchase
shares of Class B Common Stock.
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------------- -------------- ------------------------- -------------------------
Jerry W. Weimer -- -- 100,000/100,000 $36,488/$9,122
Donald J. Moen -- -- 55,832/44,168 $6,925/$12,171
Daniel D. McGuffey -- -- 47,000/53,000 $42,500/$10,625
Keith J. Manwaring 5,000 $8,125 10,000/35,000 $11,875/$16,562
- ---------------------------------------
(1) Based on the market price of the purchased shares on the exercise date less
the option exercise price paid for such shares.
(2) Represents the fair market value of a share of Class A Common Stock as of
December 31, 2000 of $2.9375, less the option exercise price, multiplied by
the total number of exercisable or unexercisable options; however; the
exercise price of some of the options to purchase shares of Class A Common
Stock was higher than the fair market value of the Class A Common Stock as
of December 31, 2000 and thus such options were "out-the-money" as of such
date.
The following table sets forth information regarding grants of options to
purchase shares of Class A Common Stock during the last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANT POTENTIAL REALIZABLE
--------------------------------------------------------------------- VALUE AT
PERCENT OF TOTAL ASSUMED ANNUAL
OPTIONS RATES OF STOCK
NUMBER OF GRANTED TO PRICE APPRECIATION
SECURITIES EMPLOYEES IN FOR OPTION TERM
UNDERLYING OPTIONS FISCAL EXERCISE OR BASE EXPIRATION --------------------
NAME GRANTED YEAR(1) PRICE DATE 5% 10%
- ---- ------------------ ---------------- ---------------- ---------- -------- ---------
Donald J. Moen 40,278 31.3% $2.75 2010 $69,659 $176,530
Keith J. Manwaring 25,000 19.4% 2.75 2010 43,237 109,570
- ---------------
(1) Based on 128,722 options granted to Integrity's employees in fiscal year
2000.
12
16
The following table sets forth information regarding grants of incentive
awards and restricted stock during the last fiscal year.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
PERFORMANCE OR
NUMBER OF OTHER PERIOD
SHARES, UNITS OR UNTIL MATURATION
NAME OTHER RIGHTS OR PAYOUT
---- ---------------- -----------------
Donald J. Moen 40,278(1) December 21, 2010
Keith J. Manwaring 25,000(2) December 21, 2010
- ---------------
(1) Consists of an award of 40,278 shares of restricted stock that was granted
on December 21, 2000, which vests 20% per year over the next five years if
Mr. Moen is still an employee of Integrity at that time. The award expires
on December 21, 2010.
(2) Consists of an award of 25,000 shares of restricted stock that was granted
on December 21, 2000, which vests 20% per year over the next five years if
Mr. Manwaring is still an employee of Integrity at that time. The award
expires on December 21, 2010.
Employment Arrangements
Employment Agreements. Integrity has entered into an employment agreement
(the "Weimer Employment Agreement") with Mr. Weimer for the position of
Executive Vice President and Chief Operating Officer. The Weimer Employment
Agreement provides Mr. Weimer with an initial base salary of $175,000. Mr.
Weimer's base salary was $226,901 in fiscal year 2000. Mr. Weimer is also
eligible to receive cash bonuses under the executive cash bonus compensation
system established from time to time by Integrity. The term of the Weimer
Employment Agreement began on March 28, 1996 and continues until it is
terminated for death, disability, for cause or upon a mutual written agreement.
The Weimer Employment Agreement also may be terminated after Mr. Weimer has been
employed by Integrity for at least eighteen (18) months, upon six (6) months
prior written notice of termination from Integrity to Mr. Weimer; however,
Integrity, at its sole discretion, may elect to pay Mr. Weimer an amount equal
to his salary for six (6) months in lieu of providing the above-mentioned
notice. The Weimer Employment Agreement contains non-competition,
non-solicitation and confidentiality provisions and expressly incorporates the
Change in Control Agreement agreed to and executed by Mr. Weimer and Integrity.
In addition, Integrity has entered into an employment agreement (the "Moen
Employment Agreement") with Mr. Moen for the position of Executive Vice
President/Creative Director. The Moen Employment Agreement provides Mr. Moen
with a non-refundable, non-recoupable cash signing bonus of $25,000 and a base
salary of $143,581. Mr. Moen's base salary was $167,288 in fiscal year 2000. Mr.
Moen is also eligible to receive cash bonuses under the executive cash bonus
compensation system established from time to time by Integrity. The term of the
Moen Employment Agreement began on October 1, 1998 and continues until October
1, 2001, until it is terminated for death, disability, for cause, or upon a
mutual written agreement. The Moen Employment Agreement contains
non-competition, non-solicitation and confidentiality provisions and expressly
incorporates the 1995 Cash Incentive Plan, Severance Agreement and Change in
Control Agreement agreed to and executed by Mr. Moen and Integrity. Integrity
has recently entered into a new employment agreement with Mr. Moen effective
October 1, 2001, which has substantially the same terms as the Moen Employment
Agreement. The term of the new employment agreement extends until October 1,
2004 and provides Mr. Moen with a non-refundable, non-recoupable cash signing
bonus of $25,000 and an annual base salary of $170,775.
Integrity has also entered into an employment agreement (the "McGuffey
Employment Agreement") with Mr. McGuffey for the position of Senior Vice
President and General Manager,
13
17
Integrity Label Group. The McGuffey Employment Agreement currently provides Mr.
McGuffey with a base annual salary of $116,000, which under the McGuffey
Employment Agreement may be increased for merit or cost of living at Integrity's
discretion. Mr. McGuffey's base salary was $163,699 in fiscal year 2000.
Integrity also agreed to pay Mr. McGuffey those amounts necessary to cover the
commuting and living expenses associated with maintaining two residences, and
Mr. McGuffey is eligible to receive an annual cash bonus of $10,000 plus
additional cash bonuses for meeting certain performance goals as established
from time to time by Integrity. The term of the McGuffey Employment Agreement
began on January 1, 1998, and continues until it is terminated for death,
disability, for cause or upon a mutual written agreement. The McGuffey
Employment Agreement also may be terminated upon six (6) months prior written
notice of termination from Integrity to Mr. McGuffey; however, Integrity, at its
sole discretion, may elect to pay Mr. McGuffey an amount equal to his salary for
six (6) months in lieu of providing such notice. If Mr. McGuffey is terminated
upon six months notice, he will be entitled to receive a severance benefit equal
to the greater of (1) three times his annual base salary less 1/12 of his base
salary for each full month he has been employed following the date of the
McGuffey Employment Agreement, or (2) 1/2 of his base salary. In either case his
severance would be reduced by any amount Integrity paid Mr. McGuffey in lieu of
the six months notice. The McGuffey Employment Agreement contains
non-competition, non-solicitation and confidentiality provisions and expressly
incorporates the Change in Control Agreement agreed to and executed by Mr.
McGuffey and Integrity.
Change in Control Agreements. Integrity has entered into change in
control agreements (the "Change in Control Agreements") with certain Named
Executive Officers as well as other senior officers of Integrity. The Change in
Control Agreements provide that in the event the officer is employed by
Integrity at the time of a Change in Control (as defined in the Change in
Control Agreement), the officer shall be entitled to supplemental employment
benefits should his employment with Integrity terminate within 18 months after
the Change in Control has occurred. The Change in Control Agreements provide
that such termination of employment can be involuntary, other than termination
for cause or the result of death, disability, or retirement age, or voluntary,
following a material change in the nature or location of his position or a
material change in the benefits provided to the officer by Integrity. The
supplemental benefits that are required to be provided to the officer upon such
a termination include a severance payment in an amount equal to one-half of the
officer's annual base salary as well as various other benefits including basic
life insurance, long-term disability insurance, health insurance and other
medical benefits.
Without the consent of the officer, the terms of the Change in Control
Agreement may be terminated or amended by Integrity following the first
anniversary of its execution at any time prior to the first to occur of (i) a
Change in Control, (ii) the public announcement of a proposal for a transaction
that, if consummated, will constitute a Change in Control, or (iii) the Board of
Directors learns of a proposal for a transaction that, if consummated, would
constitute a Change in Control. Upon the occurrence of any of the foregoing
events, the Change in Control Agreements continue in effect at such time without
termination or further change by Integrity until the earlier of (x) 18 months
following any Change in Control, or (y) the final withdrawal or termination of a
proposal under item (ii) or (iii) that, had it been consummated, would have
constituted a Change in Control, at which time the Change in Control Agreement
may, once again, be amended or terminated by Integrity until one of such events
occurs.
A Change in Control, as defined in the Change in Control Agreements,
includes, among other things: a change of control of Integrity such that any
person, other than current affiliates of Integrity, becomes the beneficial owner
of securities of Integrity representing 50% or more of the combined voting power
of Integrity's then outstanding securities; any consolidation, merger or share
exchange involving Integrity in which Integrity is not the continuing or
surviving corporation or pursuant to which shares of Company stock would be
converted into cash, securities or other property; the stockholders of Integrity
approve any plan or proposal for the liquidation or dissolution of Integrity; or
14
18
substantially all of the assets of Integrity are sold or otherwise transferred
to parties that are not within a controlled group of corporations in which
Integrity is a member.
Cash Incentive Plan. Integrity has an Integrity Incorporated 1995 Cash
Incentive Plan (the "Cash Incentive Plan"). Under the Cash Incentive Plan key
employees of Integrity were eligible to be awarded Units which are payable only
in cash. The Units vest in one-fifth increments on each anniversary of the date
of grant until vested in full. Participants in the Cash Incentive Plan received
final payment on January 15, 2001. The value of the Units, and the calculation
of interim and final payments, is determined based on the difference between the
fair market value of a number of shares of the Class A Common Stock of Integrity
equal to the number of Units at the date of determination and the fair market
value of the same number of shares on the date of grant of the Units. The Cash
Incentive Plan expired in January 2001; however, no outstanding award under the
Cash Incentive Plan may be revoked or altered in a manner unfavorable to the
participant without the consent of the participant. In 1995, awards were made
under the Cash Incentive Plan to certain of the Named Executive Officers, as
well as other senior officers of Integrity, which awards, individually,
currently do not have a value in excess of $100,000. In 1996, one award was made
under the Cash Incentive Plan to one of the Named Executive Officers, which
currently does not have a value in excess of $100,000. No further awards were
made under the Cash Incentive Plan.
Severance Agreements. Integrity has entered into severance agreements
(the "Severance Agreements") with certain Named Executive Officers as well as
other senior officers of Integrity. The Severance Agreements provide for the
payment of severance benefits to such persons upon their termination of
employment by Integrity without cause. Such persons are not entitled to
severance benefits under the Severance Agreement if they voluntarily resign,
quit, abandon their job or cannot perform their duties due to death or
disability. In addition, if an officer is entitled to severance benefits upon
termination of employment under the terms of a Change in Control Agreement, as
described above, the officer shall not be entitled to any benefits under the
Severance Agreement.
15
19
STOCKHOLDER RETURN COMPARISON
The line graph below compares cumulative stockholder returns on
Integrity's Class A Common Stock with the cumulative stockholder returns on the
Nasdaq Stock Market (U.S. Companies) and a Peer Index over the period beginning
December 31, 1995 through December 31, 2000 (assuming the investment of $100 on
December 31, 1995, and reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURNS
INTEGRITY INCORPORATED THE NASDAQ STOCK MARKET PEER INDEX
---------------------- ----------------------- ----------
1995 100.000 100.000 100.000
1996 76.471 123.036 113.033
1997 58.824 150.693 169.662
1998 176.471 212.509 176.041
1999 147.059 394.942 224.133
2000 138.235 237.676 192.238
Total return calculations for the Nasdaq Stock Market (U.S. Companies) and
the Peer Index were prepared by the Center for Research in Security Prices, The
University of Chicago. The Peer Index is based upon the companies comprising the
Publishing Index in the Dow Jones Media Industry Group. Specific information
regarding the companies comprising the Peer Index will be provided to any
stockholder upon request to Donald S. Ellington, at Integrity.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
Overview and Philosophy. The Compensation Committee of the Board of
Directors (the "Compensation Committee") is responsible for reviewing and making
decisions under a delegation of authority from the Board with respect to
salaries, wages, bonuses, stock options and other benefits for executive
officers of Integrity.
The objectives of Integrity's executive compensation program are to:
-- Encourage the achievement of company performance by providing
compensation which directly relates to the performance of the
individual and the achievement of internal strategic objectives.
16
20
-- Establish compensation policies and guidelines that will attract and
retain qualified personnel through an overall level of compensation
opportunity that is competitive within Integrity's industry.
-- Promote a direct relationship between compensation and company
performance by facilitating executive officer stock ownership through
stock option awards.
Overall, Integrity's executive officer compensation program is comprised
of base salary, annual cash incentive bonus compensation, long-term incentive
compensation in the form of stock options, and various other benefits, including
a medical plan, which are generally available to all employees of Integrity.
Base Salary. The base salaries for Integrity's executive officers vary
depending on the responsibilities of the officers. While the executive officer
base salary compensation is designed to be competitive with other companies in
Integrity's industry, Integrity believes that bonus compensation described below
better serves the compensation philosophy of Integrity.
2000 Cash Incentive Compensation. In order to maximize the common
interests of Integrity's stockholders and its management, Integrity awards cash
bonuses based on Integrity's operating performance. Integrity's budgeted
financial performance goals are set at the beginning of each fiscal year and
cash bonuses are then awarded in the judgment of the Compensation Committee
based on the achievement of budgeted targets and the individual performance of
the officer. As a result of their performance, five of Integrity's officers
received cash bonuses for fiscal year 2000.
Stock Options and Restricted Stock. The stock option programs of
Integrity are long-term incentive plans for executive officers and employees
intended to relate employee and stockholder long-term interests by creating a
strong and direct link between compensation and stockholder returns. In general,
stock option awards are granted on an annual basis if warranted by Integrity's
growth and profitability. To encourage long-term performance, options generally
vest over a five-year period. The Compensation Committee considers current stock
ownership and option holdings in deciding the number of options to be awarded to
each recipient. In fiscal 2000, Integrity awarded stock options underlying
85,278 shares of Class A Common Stock to its executive officers.
Compensation of Chief Executive Officer. In fiscal 2000, the Chief
Executive Officer of Integrity, Mr. P. Michael Coleman, was compensated pursuant
to an unwritten employment agreement approved by the Board of Directors of
Integrity prior to Integrity's initial public offering in July 1994. Under the
agreement, Mr. Coleman received a base salary of $315,503 during fiscal 2000.
Mr. Coleman did not receive a bonus award in 2000. Integrity did not make any
awards, including stock options or restricted stock, to Mr. Coleman under the
2000 Long-Term Incentive Plan in 2000.
The Compensation Committee has adopted several plans and agreements
designed to assist Integrity in retaining key employees of outstanding ability
when considering various alternatives to enhance stockholder value, including
business transactions with third parties. These plans and agreements are
designed to offer key employees an increased incentive to join or continue in
the service of Integrity and to increase their efforts for its welfare by
participating in the growth of Integrity. Specifically, the Compensation
Committee adopted a form of Change in Control Agreement and a form of Severance
Agreement, which were utilized with various key employees.
Section 162(m) of the Internal Revenue Code (the "Code") adopted as part
of the Revenue Reconciliation Act of 1993, generally limits to $1 million the
deduction that can be claimed by any publicly-held corporation for compensation
paid to any "covered employee" in any taxable year beginning after December 31,
1993. The term covered employee for this purpose is defined generally as the
Chief Executive Officer and the four other highest paid employees of the
corporation. Performance-based compensation is outside the scope of the $1
million limitation, and hence, generally can be deducted by a publicly-held
corporation without regard to amount, provided that,
17
21
among other requirements, such compensation is approved by the stockholders. The
Compensation Committee has not, and, given the current levels of executive
compensation in Integrity, does not foresee the need in the immediate future, to
formulate a policy for Integrity with regard to Section 162(m) and executive
compensation. Generally speaking, the Compensation Committee's executive
compensation policies are performance-based.
COMPENSATION COMMITTEE
Heeth Varnedoe III, Chairman
Jimmy M. Woodward
CERTAIN TRANSACTIONS
Don Moen, who serves as Integrity's Executive Vice President and Creative
Director, is also one of Integrity's exclusive songwriters and artists. In this
capacity, Mr. Moen received payments of approximately $385,000 in royalties
during the fiscal year ended December 31, 2000.
Integrity's Board of Directors has adopted a policy that requires that
transactions between Integrity and its officers, directors or other affiliates
to be on terms no less favorable to Integrity than could be obtained from
unaffiliated third parties on an arm's-length basis and, further, that any such
transaction shall be approved by a majority of Integrity's directors who have no
interest in any such transaction.
PROPOSAL II
APPROVAL OF SELECTION OF AUDITORS
Integrity's Board of Directors, based on the proposal of the Audit
Committee, has selected PricewaterhouseCoopers LLP to conduct the annual audit
of the financial statements of Integrity for the fiscal year ending December 31,
2001. PricewaterhouseCoopers LLP conducted the annual audit of Integrity's
financial statement for the fiscal year ended December 31, 2000.
PricewaterhouseCoopers LLP has no financial interest, direct or indirect, in
Integrity and does not have any relationship with Integrity except in its
professional capacity as an independent auditor.
The ratification by the holders of Class A Common Stock and Class B Common
Stock of the selection of PricewaterhouseCoopers LLP as independent auditors is
not required by law or by the Bylaws of Integrity. The Board of Directors,
consistent with the practice of many publicly held corporations, is nevertheless
submitting this selection to the holders of Class A Common Stock and the Class B
Common Stock. If this selection is not ratified by the stockholders at the
Annual Meeting, the Board of Directors intends to reconsider its selection of
independent auditors for the fiscal year ending December 31, 2001. Even if the
selection is ratified, the Board of Directors in its sole discretion may direct
the appointment of a different independent accounting firm at any time during
the fiscal year if the Board determines that such a change would be in the best
interest of Integrity and its stockholders.
Representatives of PricewaterhouseCoopers LLP will be present at the
Annual Meeting and will have an opportunity to make a statement, if they so
desire, and respond to appropriate questions.
AUDIT FEES
PricewaterhouseCoopers LLP has billed Integrity an aggregate of $190,500,
including out-of-pocket expenses, for professional services rendered for its
audit of Integrity's financial statements for
18
22
the 2000 fiscal year and for its reviews of the financial statements included in
Integrity's Forms 10-Q for the 2000 fiscal year and for services related to
these audit and reviews.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PricewaterhouseCoopers LLP has not billed, nor has it performed, any
services for Integrity that relate to the design and/or implementation of any
financial information systems.
ALL OTHER FEES
PricewaterhouseCoopers LLP has billed Integrity an aggregate of $114,344
for professional services that were not related to the audit and/or review of
Integrity's financial statements.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION
OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INTEGRITY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2001. IF A CHOICE IS SPECIFIED
ON THE PROXY BY THE STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR RATIFICATION. THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES OF THE SHARES OF CLASS A COMMON
STOCK AND CLASS B COMMON STOCK, VOTING TOGETHER AS A SINGLE CLASS, REPRESENTED
AND ENTITLED TO VOTE AT THE ANNUAL MEETING AT WHICH A QUORUM IS PRESENT IS
REQUIRED FOR APPROVAL OF PROPOSAL II.
STOCKHOLDER PROPOSALS
FOR 2002 ANNUAL MEETING OF STOCKHOLDERS
Nominations by stockholders for director elections and other proposals of
stockholders, intended to be presented at the annual meeting of stockholders to
be held in 2002, together with certain related information specified in Rule
14a-8 of the Securities and Exchange Act, should be submitted by certified mail,
return receipt requested, and must be received by Integrity at its executive
offices in Mobile, Alabama on or before December 14, 2001, to be eligible for
inclusion in Integrity's Proxy Statement and Proxy Card relating to that
meeting. Any stockholder proposal must be in writing and must set forth (i) a
description of the business desired to be brought before the meeting and the
reasons for conducting the business at the meeting, (ii) the name and address,
as they appear on Integrity's books, of the stockholder submitting the proposal,
(iii) the class and number of shares that are beneficially owned by such
stockholder, (iv) a statement in support of the proposal and (v) any other
information required by the rules and regulations of the Securities and Exchange
Commission. Nominations and other proposals of stockholders that are submitted
to Integrity after December 14, 2001, may be excluded from Integrity's proxy
materials for the 2002 Annual Meeting of Stockholders and will otherwise be
subject to Rule 14a-8 of the Securities and Exchange Commission.
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Integrity's
officers and directors, and persons who own more than ten percent of a
registered class of Integrity's equity securities to file reports of ownership
and changes in ownership of such securities with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. Integrity's
officers, directors and greater than ten percent beneficial owners are required
by applicable regulations to furnish Integrity with copies of all Section 16(a)
forms they file.
Based solely upon a review of the copies of the forms furnished to
Integrity, or written representations from certain reporting persons that no
other reports were required, Integrity believes
19
23
that during fiscal 2000 all of its officers and directors and greater than ten
percent beneficial owners complied with all applicable filing requirements.
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne by
Integrity. In addition to the use of the mails, proxies may be solicited by
directors, officers or other employees of Integrity, personally, by telephone or
by telegraph. Integrity does not expect to pay any compensation for the
solicitation of proxies, but may reimburse brokers, custodians or other persons
holding stock in their names or in the names of nominees for their expenses in
sending proxy materials to principals and obtaining their instructions.
MISCELLANEOUS
Management does not know of any matters to be brought before the 2001
Annual Meeting other than as described in this Proxy Statement. Should any other
matters properly come before the Annual Meeting, the persons designated as
proxies will vote in accordance with their best judgment on such matters.
AVAILABILITY OF ANNUAL REPORT
ACCOMPANYING THIS PROXY STATEMENT IS A COPY OF INTEGRITY'S ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2000. STOCKHOLDERS WHO WOULD LIKE ADDITIONAL
COPIES OF THE ANNUAL REPORT SHOULD DIRECT THEIR REQUESTS IN WRITING TO:
INTEGRITY INCORPORATED, 1000 CODY ROAD, MOBILE, ALABAMA 36695, ATTENTION: DONALD
S. ELLINGTON.
20
24
APPENDIX A
INTEGRITY INCORPORATED
AUDIT COMMITTEE CHARTER
1. Purpose. The Audit Committee is appointed by the Board of Directors to
assist the Board in fulfilling its oversight responsibilities. The Audit
Committee shall monitor the Corporation's financial reporting and accounting
practices to ascertain that they are within acceptable limits of sound practice
in such matters. In furtherance of this purpose, the Audit Committee shall
maintain direct communication between the Corporation's independent auditors and
the Board of Directors. In discharging its oversight role, the Committee is
empowered to investigate any matter brought to its attention with full access to
all books, records, facilities and personnel of the Corporation and the power to
retain outside counsel, auditors or other experts for this purpose.
The Committee's job is one of oversight and it recognizes that the
Corporation's management is responsible for preparing the Corporation's
financial statements and that the outside auditors are responsible for auditing
those financial statements. Additionally, the Committee recognizes that
financial management, as well as the outside auditors, have more time, knowledge
and more detailed information on the Corporation than do Committee members;
consequently, in carrying out its oversight responsibilities, the Committee is
not providing any expert or special assurance as to the Corporation's financial
statements or any professional certification as to the outside auditor's work.
2. Composition and Term of Office. The membership of the Audit Committee
shall meet the requirements of The Nasdaq Stock Market, Inc. The members of the
Audit Committee shall be nonaffiliated, independent directors, appointed by the
Board of Directors, and shall not be officers or employees of the Corporation.
The Chairman of the Audit Committee shall be designated by the Board of
Directors. In the absence of the Chairman, the members of the Audit Committee
may designate a chairman by majority vote.
3. Duties and Responsibilities. The Audit Committee shall:
(a) Review and reassess the adequacy of this Charter at least annually and
submit the Charter to the Board of Directors for approval.
(b) Study and make recommendations to the Board of Directors with respect
to audit policies and procedures and the scope and extent of audits. In
consultation with corporate management and the independent auditors, consider
the integrity of the Corporation's financial reporting processes and controls.
Discuss significant financial risk exposures and the steps corporate management
has taken to monitor, control, and report such exposures.
(c) Review the independence and performance of the independent auditors
and recommend to the Board of Directors, annually in advance of the annual
meeting of stockholders, the selection of the public accounting firm to be the
Corporation's independent auditor for that year. As part of such annual review,
discuss with the independent auditors all significant relationships they have
with the Corporation that could impair the auditors' independence.
- Review and discuss with the independent auditors the written
disclosures required by Independence Standards Board Standard No. 1
regarding their independence and, where appropriate, recommend that
the Board of Directors take appropriate action in response to the
disclosures to satisfy itself of the independence of the
Corporation's independent auditors.
- Consider whether the provision of services by the independent
auditors not related to the audit of the annual financial
statements and the review of the interim financial
A-1
25
statements included in the Corporation's Forms 10-Q for the year is
compatible with maintaining the auditor's independence.
The independent auditors are ultimately accountable to the Audit Committee
and the Board of Directors.
(d) Review with the independent auditors, at a time when the annual audit
plan is being developed, the plan's timing, scope, staffing, locations,
foreseeable issues, priorities and procedures, the coordination between the
independent auditors and corporate management in executing the plan, the
engagement team, and the proposed budget for audit fees. Approve the fees and
other significant compensation to be paid to the independent auditors.
(e) Review with corporate management and the independent auditors, if
necessary, the unaudited quarterly financial results prior to the release of
earnings and/or the quarterly financial statements prior to filing or
distribution. In discharging this obligation, receive and review, if necessary,
a report from the controller as to any unusual deviations from prior practice
that were included in the preparation of the interim quarterly results. Review
draft press releases of unaudited interim and annual financial results before
public release. Press releases and interim financial statements also will be
reviewed by the independent auditors prior to public release. The Chairman of
the Audit Committee may represent the entire Audit Committee for purposes of
this review.
(f) Review with corporate management all major accounting policy matters
involved in the preparation of interim and annual financial reports and any
deviations from prior practice with the independent auditors.
(g) Review with corporate management, and the independent auditors as
deemed necessary, the audited financial results for the year and the proposed
footnotes to the financial statements as soon after the receipt of the
independent auditor's opinion as possible and prior to filing or distribution.
(h) Review with the independent auditors, on completion of the annual
audit, their experience, any restrictions on their work, cooperation received,
significant disagreements with corporate management, their findings and their
recommendations. Discuss certain matters required to be communicated to audit
committees in accordance with AICPA SAS 61.
(i) Review the application of significant accounting and auditing
policies, including new pronouncements, to the Corporation's financial reports.
(j) Analyze financial reports to understand performance fluctuations
between reporting periods.
(k) Review and assess the adequacy of internal accounting procedures and
controls, including a review with the independent auditors of their evaluation
of the Corporation's internal controls and discuss significant items with
management.
(l) Review annually the programs that the Corporation has instituted to
correct any control deficiencies noted by the independent auditors in their
annual review.
(m) Report annually to the Board of Directors, after the close of each
fiscal year but prior to the Corporation's annual meeting of stockholders, as
well as on any other occasion, whatever it deems appropriate concerning the
activities of the Audit Committee.
(n) Annually prepare a report to stockholders for inclusion in the
Corporation's proxy statement as required by the Securities and Exchange
Commission.
(o) Perform any other activities consistent with this Charter, the
Corporation's bylaws, and governing law, as the Committee or the Board deems
necessary or appropriate.
A-2
26
4. Frequency of Meetings. The Audit Committee shall meet at least two
times per year. Each meeting shall include an executive session with the
independent auditors. The first such meeting shall be held at a time when the
Committee can review and approve the planned scope of the annual audit with the
independent auditors. The second meeting should be held as soon after completion
of the annual audit as possible. At the second meeting, the Audit Committee will
review the "Management Letter" that is supplied to the Corporation by its
independent auditors upon completion of the annual audit effort. Minutes of each
of these meetings shall be kept and the principal financial officer will
function as the management liaison officer to this Committee.
5. Membership. Unless otherwise ordered by the Board of Directors,
Messrs. Jimmy M. Woodward and Heeth Varnedoe III shall constitute the members of
the Audit Committee, with Mr. Woodward designated as Chairman. All such members
are deemed to be independent of management and free from any relationship that,
in the opinion of the Board of Directors, would interfere with the exercise of
independent judgment as a member of the Audit Committee.
A-3
27
PROXY INTEGRITY INCORPORATED
MOBILE, ALABAMA
ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Integrity Incorporated ("Integrity") hereby
constitutes and appoints P. Michael Coleman or Donald S. Ellington, or either
one of them, each with full power of substitution, to vote the number of shares
of Class A Common Stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders to be held at the
Radisson Admiral Semmes Hotel, 251 Government Street, Mobile, Alabama, 36602, on
Thursday, May 17, 2001, at 2:00 p.m., local time, or at any adjournments thereof
(the "Annual Meeting"), upon the proposals described in the Notice of Annual
Meeting of Stockholders and Proxy Statement, both dated April 13, 2001, the
receipt of which is acknowledged, in the manner specified below. The proxies, in
their discretion, are further authorized to vote on any stockholder proposals
subsequently presented for a vote of the stockholders at the Annual Meeting, as
well as on the election of any person as a director if any nominee named herein
is unable to serve or for good cause will not serve, and on matters incident to
the Annual Meeting and any adjournments thereof. At the present time, the Board
of Directors knows of no other business to be presented to a vote of the
stockholders at the Annual Meeting. The Board of Directors recommends that
stockholders vote FOR Proposals 1 and 2.
1. ELECTION OF DIRECTORS. On the proposal to elect the following slate of
directors to serve until the 2002 Annual Meeting of Stockholders of Integrity
and until their successors are elected and qualified:
P. Michael Coleman, Jean C. Coleman, William A. Jolly, Charles V. Simpson, Heeth
Varnedoe III, and Jimmy M. Woodward
FOR [ ] WITHHOLD AUTHORITY [ ]
To withhold authority to vote for any individual nominee(s), write the name of
the nominee(s) in the space provided:
---------------------------------------------------------------------------
2.SELECTION OF AUDITORS. On the proposal to ratify the selection of
PricewaterhouseCoopers LLP as Integrity's independent auditors for the fiscal
year ending December 31, 2001:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2 AND WITH DISCRETIONARY AUTHORITY ON CERTAIN OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.
Please sign exactly as your name appears on your stock certificate and
date. Where shares are held jointly, each stockholder should sign. When signing
as executor, administrator, trustee, or guardian, please give full title as
such. If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Shares Held:
-------------------------
------------------------------
Signature of Shareholder
------------------------------
Signature of Shareholder (If
held jointly)
Dated: ----------------, 2001
Month Day
THIS PROXY IS SOLICITED ON BEHALF OF INTEGRITY'S BOARD OF DIRECTORS AND MAY BE
REVOKED BY THE STOCKHOLDER PRIOR TO ITS EXERCISE AT THE ANNUAL MEETING.