SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
[X] Filed by Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
ENNIS BUSINESS FORMS, INC.
--------------------------------------------------------------------------------
(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:
N/A
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
N/A
-----------------------------------------------------------------------
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.):
N/A
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
N/A
-----------------------------------------------------------------------
5) Total fee paid:
N/A
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
N/A
-----------------------------------------------------------------------
[ ] 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 date of its filing.
1) Amount Previously Paid:
N/A
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
N/A
-----------------------------------------------------------------------
3) Filing Party:
N/A
-----------------------------------------------------------------------
4) Date Filed:
N/A
-----------------------------------------------------------------------
ENNIS BUSINESS FORMS, INC.
NOTICE OF 2004 ANNUAL MEETING OF SHAREHOLDERS
Time 10:00 a.m. on Thursday, June 17, 2004
Place Midlothian Community Center
One Community Circle
Midlothian, Texas 76065
A map can be found at the end of
this document.
Items of Business: o To elect three directors (page 6);
o To approve the 2004 Long-Term Incentive Plan
(pages 22-30);
o To consider and vote on a proposal to amend
the Company's Articles of Incorporation to
change the name of the Company to Ennis,
Inc. (page 30); and
o To transact other business properly coming
before the meeting.
Who Can Vote You can vote if you were a shareholder of
record as of April 15, 2004.
Voting by Proxy Please submit a proxy as soon as possible so
that your shares can be voted at the meeting
in accordance with your instructions. You
may submit your proxy by mail in the
enclosed postage-paid envelope.
For specific instructions, please refer to
the section entitled "About the Annual
Meeting" beginning on page 2 of this proxy
statement and the voting instructions on the
proxy card.
Date of Mailing This notice and the proxy statement are
first being mailed to shareholders on or
about May 17, 2004.
By Order of the Board of Directors
Harve Cathey
Corporate Secretary
About the Annual Meeting Who is soliciting my vote?
The Board of Directors (the Board) of Ennis Business Forms, Inc. (the Company)
is soliciting your vote at the 2004 Annual Meeting of the Company's
shareholders.
What am I voting on?
You are voting on:
o The election of three directors ( see page 6 );
o The approval of our 2004 Long-Term Incentive Plan ( see pages 22-30);
o The proposal to amend the Company's Articles of Incorporation to change the
Company name to Ennis, Inc. ( see page 30 ); and
o Any other business properly coming before the meeting.
How does the Board recommend that I vote my shares?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board. The Board's recommendation can be found with the description of
each item in this proxy statement. In summary, the Board recommends a vote:
o FOR the Director's proposal to elect nominated Directors;
o FOR the Director's proposal to approve our 2004 Long-Term Incentive Plan;
and
o FOR the Director's proposal to amend the Company's Articles of
Incorporation to change the Company's name to Ennis, Inc.
Who is entitled to vote?
You may vote if you were the record owner of the Company's common stock as of
the close of business on April 15, 2004. Each share of common stock is entitled
to one vote. As of April 15, 2004, we had 16,393,157 shares of common stock
outstanding and entitled to vote.
How many votes must be present to hold the meeting?
Your shares are counted as present at the Annual Meeting if you attend the
meeting and vote in person or if you properly return a proxy by mail. In order
for us to hold our meeting, holders of a majority of our outstanding shares of
common stock as of April 15, 2004 must be present in person or by proxy at the
meeting. This is referred to as a quorum. Abstentions and broker non-votes will
be counted for purposes of establishing a quorum at the meeting.
What is a broker non-vote?
If a broker does not have discretion to vote shares held in street name on a
particular proposal and does not receive instructions from the beneficial owner
on how to vote those shares, the broker may return the proxy card without voting
on that proposal. This is known as a broker non-vote. Broker non-votes will have
no effect on the vote for the election of directors. With regard to the proposal
to approve our 2004 Long-Term Incentive Plan and the amendment to the Articles
of Incorporation to change of the name of the Company, broker non-votes will not
be counted as votes for these matters.
2
How many votes are needed to approve each of the proposals?
The nominees for election as directors at the Annual Meeting who receive the
highest number of "FOR" votes will be elected as directors, provided a quorum is
present. This is called plurality voting. Unless you indicate otherwise on your
proxy card, the persons named as your proxies will vote your shares FOR all the
nominees for director named in this proxy statement.
With respect to the election of directors, shareholders have cumulative voting
rights, which means that each shareholder entitled to vote (a) has the number of
votes equal to the number of shares held by such shareholder multiplied by the
number of directors to be elected and (b) may cast all such votes for one
nominee or distribute such shareholder's votes among the nominees as the
shareholder chooses. The right to cumulate votes may not be exercised until a
shareholder has given written notice of the shareholder's intention to vote
cumulatively to the corporate secretary on or before the day preceding the
election. If any shareholder gives such written notice, then all shareholders
entitled to vote may cumulate their votes. Upon such written notice, the persons
named in the accompanying form of proxy may cumulate their votes if additional
persons are nominated at the Annual Meeting for the election of directors. As a
result, the Board also is soliciting discretionary authority to cumulate votes.
In addition, under the rules of the New York Stock Exchange, the holders of more
than 50% of our outstanding common stock must vote on the approval of our 2004
Long-Term Incentive Plan in order for it to be approved. In addition, under
Texas law, the holders of more than 66 2/3% of our outstanding common stock are
required to vote to approve an amendment to the Articles of Incorporation to
change the Company's name to Ennis, Inc.
How do I vote?
You can vote either in person at the meeting or by proxy without attending the
meeting.
To vote by proxy, you must fill out the enclosed proxy card, date and sign it,
and return it in the enclosed postage-paid envelope.
If you hold your Company stock in a brokerage account (that is, in "street
name"), your ability to vote by telephone or over the Internet depends on your
broker's voting process. Please follow the directions on your proxy card or
voter instruction form carefully.
Even if you plan to attend the meeting, we encourage you to vote your shares by
proxy. If you plan to vote in person at the Annual Meeting, and you hold your
Company stock in street name, you must obtain a proxy from your broker and bring
that proxy to the meeting.
How do I vote if I hold my stock through Ennis' employee benefit plans?
If you hold your stock through the Company's employee benefit plans, you will
receive a proxy card with instructions to vote which are the same as any other
shareholder.
Can I change my vote?
Yes. You can change or revoke your vote at any time before the polls close at
the Annual Meeting. You can do this by:
o Signing another proxy card with a later date and returning it to us prior
to the meeting,
o Sending our Corporate Secretary a written document revoking your earlier
proxy,
o Voting again at the meeting.
3
Who counts the votes?
We have hired Computershare Investor Services, our transfer agent, to count the
votes represented by proxies cast by ballot. Employees of Computershare Investor
Services and the Company will act as Inspectors of Election.
Will my shares be voted if I don't provide my proxy and don't attend the Annual
Meeting?
If you do not provide a proxy or vote your shares held in your name, your shares
will not be voted.
If you hold your shares in street name, your broker may be able to vote your
shares for certain "routine" matters even if you do not provide the broker with
voting instructions. The election of directors for 2004 is considered a routine
matter. For matters not considered "routine," if you do not give your broker
instructions on how to vote your shares, the broker may return the proxy card
without voting on that proposal. This is a broker non-vote. The approval of our
2004 Long-Term Incentive Plan and our name change are not considered routine
matters.
If you hold your shares through one of the Company's employee benefit plans and
do not vote your shares, your shares (along with all other shares in the plan
for which votes are not cast) will be voted pro rata by the trustee in
accordance with the votes directed by other participants in the plan who elect
to act as a fiduciary entitled to direct the trustee of the applicable plan on
how to vote the shares.
How are votes counted?
In the election of directors, you may vote "FOR" all of the nominees or your
vote may be "WITHHELD" with respect to one or more of the nominees. Votes that
are withheld will be counted for purposes of determining the presence or absence
of a quorum but will have no other effect on the election of directors. For any
other proposal, you may vote "FOR," "AGAINST," or "ABSTAIN." If you "ABSTAIN,"
it has the same effect as a vote "AGAINST."
What if I return my proxy but don't vote for some of the matters listed on my
proxy card?
If you return a signed proxy card without indicating your vote, your shares will
be voted FOR the nominee directors listed on the card, FOR the approval of the
2004 Long-Term Incentive Plan and FOR the proposed name change.
Could other matters be decided at the Annual Meeting?
We are not aware of any other matters that will be considered at the Annual
Meeting. If any other matters arise at the Annual Meeting, the persons named in
your proxies will vote in accordance with their best judgment.
Who can attend the meeting?
The Annual Meeting is open to all holders of Company common stock. Each
shareholder is permitted to bring one guest.
Do I need a ticket to attend the Annual Meeting?
No.
How can I access the Company's proxy materials and annual report electronically?
This proxy statement and the 2004 annual report are available on our website at
www.Ennis.com.
4
Board of Directors Information
What is the makeup of the Board of Directors and how often are the members
elected?
Our Board currently has nine members. Our Board is classified into three classes
serving staggered three-year terms. Directors for each class are elected at the
Annual Meeting of Shareholders held in the year in which the term for their
class expires.
What if a nominee is unable or unwilling to serve?
That is not expected to occur. If it does, shares represented by proxies will be
voted for a substitute nominated by the Board.
How are directors compensated?
Directors who are Company employees receive no additional compensation for
serving on the Board. Compensation for non-employee directors consists of equity
and cash.
Equity Compensation
Non-employee directors receive a grant of stock options for 10,000 shares upon
election and an annual grant of stock options for 5,000 shares which occurs in
April each year. The options vest 25% per year beginning with the second year
after grant and become fully vested after five years. The grant price is the
current market value as reported by the New York Stock Exchange.
Cash Compensation
All non-employee directors receive $18,000 annual cash compensation (the
retainer) and $2,000 per meeting fee. Non-employee directors serving in
specified committee positions also receive the following additional cash
compensation:
Chair of the Audit and Compliance Committee $ 6,000
Chair of the Executive Compensation and Stock Option Committee $ 6,000
Chair of the Nominating and Corporate Governance Committee $ 6,000
All other Committee members - per meeting fee $ 1,500
All retainers are paid monthly and meeting fees as incurred.
Stock Ownership
Directors are encouraged but not required to own common stock of the Company.
How often did the Board meet in 2004?
The Company's Board met 4 times in 2004. Each director attended 100% of the
Board meetings and the meetings of the committees on which he served except, Mr.
Overstreet who missed one board meeting and the Annual Meeting.
5
Election of Directors and Director Biographies
(Proposal 1 on the Proxy Card)
Who are this year's nominees?
The directors standing for election this year to hold office until the 2007
Annual Meeting of Shareholders and until his or her successor is elected are:
Name Age On Board Since
Harold W. Hartley, Investments. 80 1971
Mr. Hartley retired in December 1985 and since that
time has managed his private investments. Prior to
1985, Mr. Hartley served as Executive Vice
President of Southwestern Life Insurance Company.
Mr. Hartley serves as a director of the 40/86 Fund
Group.
Kenneth G. Pritchett, President of Ken Pritchett Properties, Inc. 66 1999
Ken Pritchett Properties, Inc. is a Commercial and
Residential Development Corporation in the
Dallas/Ft. Worth Metropolitan area since 1968,
specializing in shopping center and exclusive
residential development. Mr. Pritchett is on the
Board of Trustees and Chairman of the Planning
Committee for Charlton Methodist Hospitals. He is a
Life Director for the National Home Builders, and
the Texas Home Builders Association. He serves on
the Executive Committee for the Metropolitan
Homebuilders Association.
James C. Taylor, Principal, The Anderson Group, Inc. 62 1998
The Anderson Group Inc., Bloomfield Hills,
Michigan, is a private investment firm engaged in
the acquisition and management of businesses in a
variety of industries. Mr. Taylor joined The
Anderson Group Inc. in 1989 and served as the
President and Chief Executive Officer of four
businesses affiliated with The Anderson Group Inc.:
Display Technologies, Inc. (January 2001 to the
October 2001); Burwood Products Company, a wall
decor and clock manufacturer (February 1995 to
February 2000); The Bargeman Company, a supplier of
proprietary products to the recreational vehicle
and utility trailer industries (January 1992 to
December 1994); and Advance Stamping Company, a
supplier of metal stampings to the automotive,
electrical and hardware industries (January 1989 to
September 1991). Prior to 1989, Mr. Taylor was with
United Technologies Corporation for 19 years,
primarily in manufacturing operations, including 7
years as a Group Vice President.
What does the Board recommend?
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF
THESE DIRECTORS
6
Who are the directors continuing in office?
Three-year Terms Expiring in 2005
Name & Position Age On Board Since
Keith S. Walters, Chairman of the Board, CEO and President of the Company. 54 1997
Mr. Walters joined the Company in August 1997 as
Vice President-Commercial Printing Operations and
was appointed Vice Chairman of the Board and Chief
Executive Officer in November 1997. Prior to
joining the Company, Mr. Walters was with
Atlas/Soundolier, a division of American Trading
and Production Company, for 8 years, most recently
as Vice President of Manufacturing. Prior to that
time, Mr. Walters was with the Automotive Division
of United Technologies Corporation for 15 years,
primarily in manufacturing and operations.
James B. Gardner, Senior Managing Director of SAMCO Capital Markets. 69 1970
Mr. Gardner has served in his present position with
SAMCO, a financial services firm, since May 1994.
Mr. Gardner has also been a director of Century
Telephone Enterprises, Inc. since 1981 and serves
as a director of NAB Asset Corporation.
Ronald M. Graham, Vice President Administration. 55 2003
Mr. Graham was elected Vice President in June 1998.
The Company employed Mr. Graham in January 1998 as
Director of Human Relations. Prior to joining the
Company, Mr. Graham was with E. V. International,
Inc. (formerly Mark IV Industries, Inc.) for 17
years as Corporate Vice President, Administration.
Prior to that time, Mr. Graham was with
Sheller-Globe for 3 years as Corporate Director of
Human Resources.
Three-year Terms Expiring in 2006
Robert L. Mitchell, Retired President of the Company. 70 1985
Mr. Mitchell retired in December 1989. Prior to
that date, he served as President and Chief
Operating Officer of the Company from April 1985
and was continuously employed by the Company
beginning in 1969.
Thomas R. Price, Owner and President of Price Industries, Inc. 65 1989
Mr. Price has been engaged in his present
occupation since 1975.
Alejandro Quiroz, Chairman of the Board of PRINTER Group. 51 2003
Mr. Quiroz has served in his present position since
1990. Mr. Quiroz, currently a Resident of San
Antonio, Texas, has been engaged in the printing
business in both the United States and Mexico,
primarily in an executive capacity since 1975.
7
What are the Committees of the Board?
Our Board of Directors has the following committees:
Number of
Meetings
Committee Members Principal Functions in 2004
Audit Pritchett o Discusses with management, the independent auditors, 7
Hartley and the internal auditors the integrity of our
Price accounting policies, internal controls, corporate
Gardner* governance, financial statements, financial reporting
practices and significant corporate risk exposures, and
steps management has taken to monitor, control and
report such exposures.
o Monitors the qualifications, independence and
performance of our independent auditors and internal
auditors.
o Monitors our overall direction and compliance with
legal and regulatory requirements and corporate
governance, including our code of business conduct and
ethics.
o Maintains open and direct lines of communication with
the Board and our management, internal auditors and
independent auditors.
Compensation Taylor o Oversees and administers our executive compensation 4
Gardner policies, plans and practices.
Pritchett* o Assists the Board in discharging its responsibilities
relating to the fair and competitive compensation
of our executives and other key employees.
Nominating & Taylor* o Selects and recommends director candidates to the Board 3
Corporate Quiroz to be submitted for election at the Annual Meeting and
Governance Hartley to fill any vacancies on the Board.
Mitchell o Recommends committee assignments to the Board.
o Reviews and recommends to the Board compensation and
benefits policies for our directors.
o Reviews and recommends to the Board appropriate
corporate governance policies and procedures for our
company.
o Conducts an annual assessment of the qualifications and
performance of the Board.
o Annually reviews and reports to the Board on the
performance of management and succession planning for
the Chief Executive Officer.
* Committee Chairperson
Do the committees have written charters?
Yes. The charters for our Audit, Executive Compensation and Stock Option, and
Nominating and Corporate Governance Committees can be found on the Company's
website at www.ennis.com under the "Corporate Governance" caption.
8
Corporate Governance Matters and Communications with the Board
The Nominating and Corporate Governance Committee and our Board have undertaken
a comprehensive review of the Company's governance structure in light of the
Sarbanes-Oxley Act of 2002 and new rules adopted by the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange ("NYSE"). In January 2004,
the Board approved Corporate Governance Guidelines for the Company, which
document many pre-existing policies and practices of the Company and also
address issues responsive to the Sarbanes-Oxley Act and the new SEC and NYSE
rules. The Corporate Governance Guidelines, posted on the Company's website
under the "Corporate Governance" caption, address the following matters, among
others: director qualifications, director responsibilities, Board Committees,
director access to officers, employees and independent advisors, director
compensation, Board performance evaluations, director orientation and continuing
education, CEO evaluation and succession planning. The Corporate Governance
Guidelines also contain categorical standards, which are consistent with the
standards set forth in the NYSE listing standards, to assist the Board in
determining the independence of the Company's directors. The Board has
determined that each non-employee director meets the standards regarding
independence set forth in the Corporate Governance Guidelines of the NYSE and in
compliance with NYSE rules and has no material relationship with the Company. A
copy of our categorical standards is attached to this proxy statement as
Appendix A.
Our Corporate Governance Guidelines provide that non-employee directors will
meet in executive session at each meeting. The Chairmen of the Committees
preside at these meetings on a rotating basis. Each committee chair is
responsible for setting the agenda for executive sessions of non-management
directors and presiding at such meetings when they preside at such meeting.
The Board of Directors maintains a process for shareholders and interested
parties to communicate with the Board. Shareholders may e-mail, call or write to
the Board, as more fully described on the Company's website under the "Corporate
Governance" caption. Communications addressed to individual Board members and
clearly marked as shareholder communications will be forwarded by the Corporate
Secretary unopened to the individual addresses. Any communications addressed to
the Board and clearly marked as shareholder communications will be forwarded by
the Corporate Secretary unopened to Jim Taylor, Chairman of the Nominating and
Corporate Governance Committee.
Recognizing that director attendance at the Company's Annual Meeting can provide
the Company's shareholders with an opportunity to communicate with Board members
about issues affecting the Company, the Company actively encourages its
directors to attend the Annual Meeting of Shareholders. In 2003, eight of the
Company's directors attended the Annual Meeting.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics for Directors and
Employees designed to help Directors and employees resolve ethical issues in an
increasingly complex global business environment. Our Code of Business Conduct
and Ethics applies to all Directors and employees, including the Chief Executive
Officer, the Chief Financial Officer, and all Senior Financial Officers. Our
Code of Business Conduct and Ethics covers topics including, but not limited to,
conflicts of interest, insider trading, competition and fair dealing,
discrimination and harassment, confidentiality, payments to government
personnel, anti-boycott laws, U.S. embargos and sanctions, compliance procedures
and employee complaint procedures. Our Code of Business Conduct and Ethics is
posted on our website under the "Corporate Governance" caption and is attached
as Exhibit G.
Nominating Processes of the Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee (the "Committee") is comprised
of four non-employee directors all of whom are independent under NYSE listing
standards and our Corporate Governance Guidelines. The Committee identifies,
investigates and recommends to the Board director candidates with the goal of
creating balance of knowledge, experience and diversity. Generally, the
9
Committee identifies candidates through the personal, business and
organizational contacts of the directors and management. Potential directors
should possess the highest personal and professional ethics, integrity and
values, and be committed to representing the long-term interests of the
Company's shareholders. In addition to reviewing a candidate's background and
accomplishments, candidates for director nominees are reviewed in the context of
the current composition of the Board and the evolving needs of the Company's
businesses. It is the Board's policy that at all times at least a substantial
majority of its members meets the standards of independence promulgated by the
NYSE and the SEC and as set forth in the Company's Corporate Governance
Guidelines, and that all members reflect a range of talents, ages, skills,
diversity, and expertise, particularly in the areas of accounting and finance,
management, domestic and international markets and leadership sufficient to
provide sound and prudent guidance with respect to the Company's operations and
interests. The Company also requires that its Board members be able to dedicate
the time and resources sufficient to ensure the diligent performance of their
duties on the Company's behalf, including attending all Board and applicable
committee meetings.
The Company's Governance procedures permit shareholders to nominate directors
for election at an annual shareholders meeting under certain conditions. To
nominate a director using this process, the shareholder must follow procedures
set forth in the Company's Governance Guidelines. The notice to the Secretary
should include the following:
o The nominee's name, age and business and residence address;
o The nominee's principal occupation or employment;
o The class and number of shares of the Company, if any, owned by the
nominee;
o The name and address of the shareholder as they appear on the Company's
books;
o The class and number of shares of Company stock owned by the
shareholder as of the record date for the annual meeting (if this date
has been announced) and as of the date of the notice;
o A representation that the shareholder intends to appear in person or by
proxy at the meeting to nominate the candidate specified in the notice;
o A description of all arrangements or understandings between the
shareholder and the nominee; and
o Any other information regarding the nominee or shareholder that would
be required to be included in a proxy statement relating to the
election of directors.
The Committee will consider director candidates recommended by shareholders. If
a shareholder wishes to recommend a director for nomination by the Committee, he
or she should follow the same procedures set forth above for nominations to be
made directly by the shareholder. In addition, the shareholder should provide
such other information as it may deem relevant to the Committee's evaluation.
Candidates recommended by the Company's shareholders are evaluated on the same
basis as candidates recommended by the Company's directors, CEO, other executive
officers, third party search firms or other sources.
Audit Committee Report
The Audit Committee of the Board of Ennis Business Forms, Inc. (the "Audit
Committee") is responsible for providing independent, objective oversight for
the Company's financial reporting functions and internal control systems. The
Audit Committee is currently composed of four non-employee directors. The Board
has determined that the members of the Audit Committee satisfy the requirements
of the New York Stock Exchange as to independence, financial literacy and
expertise. The Board has determined that at least one member, James B. Gardner,
is an audit committee financial expert as defined by the SEC. The
responsibilities of the Audit Committee are as set forth in the written charter
adopted by the Company's Board and last amended on January 13, 2004. A copy of
the amended charter is attached to this proxy statement as Appendix B. One of
the Audit Committee's primary responsibilities is to assist the Board in its
oversight of the integrity of the Company's financial statements. The following
report summarizes certain of the Committee's activities in this regard during
the year 2004.
10
Review with Management. The Audit Committee has reviewed and discussed with
management the Company's audited consolidated financial statements for the year
ended February 29, 2004.
Discussions with Independent Auditing Firm. The Audit Committee has discussed
with Ernst & Young LLP, independent auditors for the Company, the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended. The Audit Committee has
received the written disclosures and the letter from Ernst & Young LLP required
by Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees, as amended, and has discussed with that firm its independence
from the Company.
Recommendation to the Company's Board. Based on its review and discussions noted
above, the Audit Committee recommended to the Board that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended February 29, 2004.
THE ENNIS BUSINESS FORMS, INC. AUDIT COMMITTEE
James B. Gardner, Chairman
Harold Hartley
Tom Price
Kenneth E. Pritchett
Executive Compensation
Executive Compensation and Stock Option Committee Report to Shareholders on
Executive Compensation
The Executive Compensation and Stock Option Committee of the Board of the
Company "Compensation Committee") is charged with administering the Company's
executive compensation programs. The Compensation Committee is composed solely
of independent, outside directors who qualify as non-employee directors under
Rule 16b-3 of the Securities Exchange Act of 1934 and as outside directors under
section 162(m) of the Internal Revenue Code.
The Compensation Committee of the Board of the Company, which is composed
entirely of the three non-employee independent directors listed below, has
furnished the following report on executive compensation. The Compensation
Committee's report documents the components of the Company's executive officer
compensation programs and describes the compensation philosophy on which 2004
compensation determinations were made by the Compensation Committee with respect
to the executive officers of the Company, including the Chief Executive Officer
and the three other executive officers that are named in the compensation tables
who are currently employed by the Company (the "Named Executives"). The
Compensation Committee, prior to implementation, submits its recommendations to
the Board with respect to the compensation of the executive officers.
The Compensation Committee met four times in fiscal 2004 with all members of the
Committee attending. Mr. Ken Pritchett was appointed Chairman of the
Compensation Committee at the beginning of 2004. The Compensation Committee is
responsible for administering the following plans and programs:
o 1998 Option and Restricted Stock Plan
o 2004 Long-Term Incentive Plan submitted to shareholders for approval
o Management Short-Term Incentive Plan
o Deferred Compensation Plan
o Supplemental Executive Retirement Program
11
COMPENSATION PHILOSOPHY
The Compensation Committee reviews the executive compensation program of the
Company annually and it is the philosophy of the Company that executive
compensation is directly linked to continuous improvements in corporate
performance. Specifically, the Compensation Committee has adopted the following
objectives as guidelines for compensation decisions:
o Provide a competitive total executive compensation package that enables the
Company to attract and retain key executives and maintain a competitive
position in the executive marketplace with employers of comparable size and
in similar lines of business.
o Enhance the compensation potential of executives by integrating pay
programs with the Company's annual and long-term business objectives and
strategy, and focus executives on the fulfillment of these objectives.
o Provide variable compensation opportunities that are linked with the
performance of the Company, emphasizing net earnings, return on capital and
revenue growth.
CASH COMPENSATION
Cash compensation includes base salary and the Company's annual incentive plan
awards. Executive officers' salaries are reviewed and approved annually by the
Compensation Committee. The base salary of each of the Company's executive
officers is determined by an evaluation of the responsibilities of that position
and by comparison to the range of salaries paid in the competitive market in
which the Company competes for comparable executive ability and experience.
Factors that determine the salary for each executive officer include level of
experience and job performance. Job performance is judged on both a subjective
and objective basis, the latter measured against objectives agreed upon at the
outset of the year.
The performance of the Chief Executive Officer is reviewed annually by the
Compensation Committee. The Compensation Committee and the Chief Executive
Officer review annually the performance of the other Named Executive Officers
and in the case of the other executive officers, the Compensation Committee
takes into account the Company's operating and financial results for that year,
the contribution of each executive officer to such results, the achievement of
goals established for each such executive officer at the beginning of each year,
and competitive salary levels for persons in those positions in the markets in
which the Company competes. To assist in its deliberations, the Compensation
Committee accesses comparable salary and incentive compensation information for
a number of representative companies in the industry for comparison purposes.
Following its review of the performance of the Company's Named Executive
officers, the Compensation Committee reports its recommendations for salary
increases and incentive awards, if any, to the Board. In 2004, executive
officers salaries were increased in those instances where promotions occurred,
or when comparative data indicated the salary was below market value and
performance warranted such an increase, and the Compensation Committee approved
incentive compensation awards for all of the Named Executives. The Compensation
Committee believed the recommended salary increases and incentive awards for
Named Executives were warranted, are properly aligned to the Board's
compensation philosophy, and consistent with the performance of such executives
during fiscal year 2004 based on the Compensation Committee's evaluation of each
individual's overall contribution to accomplishing the Company's fiscal year
2004 corporate goals and of each individual's achievement of individual goals
during the year.
STOCK OPTIONS
The Compensation Committee believes that it is essential to align the interests
of the Company executives and other management personnel responsible for the
growth of the Company with the interests of the Company's stockholders. The
Compensation Committee believes the long-term alignment of its executives to
shareholders is best accomplished through the provision of stock option grants
or restricted stock grants. During fiscal 2004 there were no options available
for grant to officers under the 1998 Option and
12
Restricted Stock Plan. The Compensation Committee has also recommended, and the
Board has approved for submission to shareholders at this Annual Meeting, the
restatement of the 1998 Option and Restricted Stock Plan as the 2004 Long-Term
Incentive Plan. This Plan will assure the Company's executive officers and other
key employees are appropriately motivated and rewarded based on the long-term
financial progress of the Company and that sufficient shares are available to
accomplish this purpose.
The Compensation Committee determines the eligible employees, the timing of
option and award grants, the number of shares granted, vesting schedules, option
prices and duration and other terms of the stock options and stock awards. None
of the Named Executive officers named in the Summary Compensation Table were
granted stock options or other awards under the 1998 Option and Restricted Stock
Plan in the fiscal year ended February 29, 2004 and all previous stock awards
under the 1998 Option and Restricted Stock Plan are disclosed in the Stock
Option Table, and Summary Compensation Table.
The 1998 Option and Restricted Stock Plan provides that options may be granted
either as incentive stock options or as non-qualified stock options. Options may
be granted for varying periods of from one to ten years. Options generally do
not become exercisable until two years from the date of grant. Thereafter, the
right to exercise options vests either: (a) in accordance with a schedule
established at the time of grant, generally at a rate of 25% per year,
cumulative to the extent not exercised in prior periods; or (b) on a schedule
determined by achievement of specific performance factors. The exercise price
for incentive stock options must be at least 100% of the last sale price on the
exchange on which the stock is trading on the date of grant.
The 2004 Long-Term Incentive Plan, if approved by shareholders, will allocate
another 500,000 shares of stock to be available to management and non-employee
directors in the form of options (either incentive stock options or
non-qualified stock options), restricted stock, stock appreciation rights,
restricted units, phantom stock options and other incentive awards. As in the
1998 Option and Restricted Stock Plan, the Compensation Committee generally will
determine eligible employees, the timing of option and award grants, the number
of shares granted, vesting schedules, option prices and duration and other terms
of the stock options and other awards.
COMPENSATION OF CEO
In determining the compensation of Mr. Keith Walters, the Chairman and Chief
Executive Officer, the Compensation Committee reviewed the Company's operating
and financial results for fiscal year, evaluated his individual performance and
contribution to those results, and considered the compensation range for other
chief executive officers of companies in the industry. Based on that review and
assessment, the Compensation Committee recommended and the Company's Board
ratified that his base annual salary was adjusted to $600,000. A performance
bonus of $432,930 was approved for Mr. Walters based on predetermined
performance criteria on revenue growth, return on capital employed and net
income for the fiscal year ended February 2004.
SUPPLEMENTAL RETIREMENT CONTRIBUTIONS
The Compensation Committee also recommended to the Board, and the Board so
approved, the creation of a Supplemental Executive Retirement Program
("Program") for executive officers. The Program provides for discretionary
contributions, recommended by the Compensation Committee and approved by the
Board, to the Company's Deferred Compensation Plan for the benefit of the
executive officers of the Company. The initial contribution recommended by the
Compensation Committee and approved by the Board was 5% of base compensation for
each of the Named Executives. The Program is a non-qualified defined
contribution plan and annual contributions and percentage calculations are at
the discretion of the Board.
13
SUMMARY
As demonstrated in each of the plans above, compensation in all its forms is
linked directly to objective performance criteria of the Company, business units
where applicable, and the individual executive's performance. By doing so, the
Compensation Committee has created an environment that encourages long-term
decisions that will benefit the Company, its shareholders, customers, and
employees and at the same time allows the executives, managers, and key
contributors within the Company to share in the success of those decisions and
actions. Furthermore, the Compensation Committee believes that the total
compensation program for executive officers of the Company will be competitive
with the compensation programs provided by other corporations with which the
Company competes.
The Compensation Committee believes the actions taken regarding executive
compensation were appropriate in view of individual and corporate performance.
Other Programs
The Company also provides its executives and other employees with health and
welfare benefit plans, including medical, dental, and life insurance; with
pension and compensation deferral programs; and with perquisites and other
benefits which are competitive with market practices.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All of the members of the Compensation Committee are non-employee directors of
the Company and are not former officers of the Company. During fiscal year 2003,
no executive officer of the Company served as a member of the Board of Directors
or on the compensation committee of a corporation where one of whose executive
officers served on the Executive Compensation and Stock Option Committee or on
the Board.
Internal Revenue Code Section 162(m)
The Compensation Committee has taken action, where possible and considered
appropriate, to preserve the deductibility of compensation paid to the Company's
and its subsidiaries' respective executive officers.
The Company generally will be entitled to take tax deductions relating to
compensation that is performance-based, which may include cash incentives, stock
options, restricted stock, restricted stock units, and other performance-based
awards.
The Company's Compensation Committee will continue to review the Company's
executive compensation practices to determine if elements of executive
compensation qualify as "performance-based compensation" under the Internal
Revenue Code and will seek to preserve tax deductions for executive compensation
to the extent consistent with the Compensation Committee's determination of
compensation arrangements necessary and appropriate to foster achievement of
Company's business goals.
THE ENNIS BUSINESS FORMS, INC. EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE
Kenneth Pritchett, Chairman
Jim Taylor
James B. Gardner
14
Compensation Tables
SUMMARY COMPENSATION TABLE
The following table provides information concerning total compensation paid to
the Chief Executive Officer and certain other officers of the Company
(collectively, the "Named Executive Officers"). As set forth in the footnotes,
the data presented in this table and the tables that follow include amounts paid
to the Named Executive Officers in 2004 by the Company or any of its
subsidiaries.
Table 1: SUMMARY COMPENSATION TABLE
Number of
Securities
Underlying Options
Annual Compensation (a) Long-Term
------------------------------------------------ Compensation All Other
Name and Principal Position (b) Year Salary Bonus Other (c) Awards* Compensation
------------------------------- ---- ------ ----- --------- ------- ------------
Keith S. Walters 2004 $ 573,846 432,940 -- -- --
Chairman of the Board, 2003 424,230 127,203 -- -- --
President and Chief 2002 392,308 195,154 -- 25,000 --
Executive Officer
Ronald M. Graham 2004 193,846 96,209 -- -- --
Vice President 2003 155,192 31,709 -- -- --
2002 133,000 40,000 -- -- --
Harve Cathey 2004 171,769 84,183 -- -- --
Vice President-Finance, Chief 2003 107,808 31,270 -- -- --
Financial Officer and Secretary 2002 100,000 20,000 -- -- --
Michael D. Magill 2004 70,000 35,079 -- -- --
Vice President and Treasurer
Kenneth E. Overstreet 2004 82,692 -- -- -- --
Group President 2003 225,000 47,597 52,392(d) -- --
2002 210,576 35,000 52,392(d) -- --
---------
* There were no Restricted Stock Awards or LTIP Payouts during the three most
recent fiscal years.
a. All amounts are for fiscal years ended February 28 or 29.
b. This table includes the Chief Executive Officer and all other executive
officers whose compensation exceeded $100,000 for the most recent fiscal
year.
c. None of the named executive officers has received perquisites the value of
which exceeded $50,000 or 10% of his total salary and bonus. Perquisites
paid include car allowance, supplemental retirement contribution and
compensation payments for personal benefits.
d. Mr. Overstreet was paid a "Transaction Complete Bonus" in conjunction with
the contract to acquire Northstar Computer Forms, Inc. which was payable in
three annual installments beginning in June 2000.
15
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
BY FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities Value of
underlying unexercised
unexercised in-the-money
options/SARs options/SARs
Shares at fiscal at fiscal
aquired year end year end
on Value ----------------------------------------- -------------
Name exercise realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Keith S. Walters -- -- 251,250 93,750 $ 1,941,425 $ 859,375
Ronald M. Graham -- -- 39,750 11,250 $ 314,836 $ 106,744
Harve Cathey -- -- 27,500 7,500 $ 192,669 $ 73,256
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
Number of Securities Weighted average remaining available for
to be issued exercise price future issuance under equity
upon exercise of of outstanding compensation plans
outstanding options, options, warrants (excluding securities
Plan Category warrants and rights and rights reflected in column (a)
------------- ---------------------- ----------------- -----------------------------
Equity compensation
plans approved by
security holders 699,175 $9.23 48,777
Equity compensation
Plans not approved by
security holders -- -- --
------- ----- ------
Total 699,175 $9.23 48,777
======= ===== ======
16
PENSION PLAN TABLE (1)
YEARS OF SERVICE
-----------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------- -- -- -- -- --
$125,000 $ 20,317 $ 27,089 $ 33,861 $ 45,984 $ 53,648
150,000 25,004 33,339 41,673 55,359 64,586
175,000 29,692 39,589 49,486 64,734 75,523
200,000 34,379 45,839 57,298 74,109 86,461
225,000 35,317 47,089 58,861 75,984 88,648
---------
(1) The Company has a noncontributory retirement plan that covers substantially
all of the employees of the Company and certain of its subsidiaries. The
plan provides for retirement benefits on a formula based on the average pay
of the highest five consecutive compensation years during active
employment, integration of certain Social Security benefits, length of
service and a normal retirement age of sixty-five. All forms of
remuneration, including overtime, shift differentials and bonuses, are
covered by the plan. However, due to restrictions imposed by the Internal
Revenue Code, effective January 1, 2002, the maximum annual compensation
covered by the plan is limited to $205,000. Future years' maximum can be
increased for inflation (for 2004, the maximum is $205,000). Prior to this
date, the maximum annual compensation covered by the plan was limited to
$150,000 (indexed for inflation). The tables above sets forth approximate
annual retirement benefits that would be received under the plan, computed
on the basis of the specified average annual earnings and years of service.
The table presents annual benefit amounts for remuneration above the
current dollar maximum since (a) the dollar maximum can increase with
inflation.
The number of full years of continuous service in the plan as of February
29, 2004 for Mr. Walters, Graham and Cathey were 7, 6, and 35,
respectively. Mr. Overstreet is not covered by the plan and Mr. Magill is
not currently eligible for coverage.
17
Stock Performance Graph
This graph shows Company's cumulative total shareholder return over the
five-year period from February 28, 2000, to February 29, 2004. The graph also
shows the cumulative total returns for the same five-year period of the S&P 500
Index and our peer group of companies. The comparison assumes $100 was invested
on February 28, 2000, in the Company's stock in the S&P 500 Index and in the
Company's peer group and assumes that all of the dividends were reinvested.
Five-Year Cumulative Total Stockholder Returns
[GRAPHIC OMITTED]
18
Five Years Ended February 29, 2004
Initial 2000 2001 2002 2003 2004
-------- -------- -------- -------- -------- --------
Ennis Business Forms, Inc. $ 100.0 $ 113.5 $ 140.9 $ 153.0 $ 126.2 $ 176.2
Peer Group $ 100.0 $ 124.1 $ 125.0 $ 116.5 $ 105.9 $ 132.6
S&P 500 $ 100.0 $ 121.0 $ 110.0 $ 96.9 $ 75.5 $ 97.2
Total shareholder returns assume reinvestment of dividends.
(1) The data to prepare this performance chart was obtained from Standard &
Poor's Comustat Services, Inc.
(2) The peer group consists of the following publicly-held business forms
manufacturers: Mail-Well, Inc., The Standard Register Company, New England
Business Services, Inc., Moore-Wallace, Inc. and Ennis Business Forms, Inc.
In prior years, the Peer Group included Moore Corporation, Ltd. and Wallace
Computer Services, Inc. These two companies merged in 2003, and as of
February 2004 the merged company, Moore-Wallace, Inc. was acquired by RR
Donnelley and will not be included in the Peer Group after this year.
Stock Ownership
Holdings of Major Shareholders
The following table sets forth certain information regarding the beneficial
ownership as of February 29, 2004 of shares of the Company's common stock by
each person or entity known to the Company to be a beneficial owner of 5% or
more of the Company's common stock.
MAJOR SHAREHOLDERS TABLE
The following persons have reported to the SEC that they own more than five
percent of the outstanding voting securities of the Company:
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT
TITLE OF CLASS BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
-------------- -------------------------------- ----------------------- --------
Common Stock Royce & Associates, Inc.
1414 Avenue of the Americas
New York, New York 10019 2,106,400 shares 12.9%
NFJ Investment Group 1,147,300 shares 7.0%
2121 San Jacinto St., Suite 1840
Dallas, TX 75201
Barclays Global Fund Advisors 949,603 shares 5.8%
45 Fremont Street
San Francisco, CA 94105
Note - This information was obtained from Schedule 13G filings by Royce &
Associates, Inc. on February 2, 2004, NFJ Investment Group on February 13, 2004
and Barclays Global Fund Advisors on February 17, 2004.
19
Holdings of Officers and Directors
The following table lists, as of the close of business on April 15, 2003, the
Company's common stock beneficially owned by each director, each of the most
highly compensated executive officers, and all directors and executive officers
as a group:
Common Stock Ownership
----------------------------------------------------------------------
Number of Shares
----------------------------------------------------------
Obtainable Percent of
Directly Indirectly Through Stock Outstanding
Name/Group Owned Owned Option Exercise (4) Total Shares
---------- -------- ---------- ------------------- ----- -----------
James B. Gardner (1) 13,125 4,000 17,500 34,625 *
Harold W. Hartley (2) 3,375 26,975 17,500 47,850 *
Robert L. Mitchell 58,081 17,500 75,581 *
Thomas R. Price (1) 51,500 5,000 17,500 74,000 *
Kenneth G. Pritchett (1) & (3) 16,500 3,000 15,000 34,500 *
Ronald M. Graham 3,000 44,750 47,750 *
Alejandro Quiroz
James C. Taylor 21,500 11,250 32,750 *
Keith S. Walters 7,650 307,500 315,150 *
All Directors and Executive
Officers as a group (12) 199,350 38,975 479,750 718,075 4.4%
(1) Indirect shares attributable to Mr. Gardner, Mr. Price and Mr. Pritchett
are held in trust for the benefit of the named directors. Each has voting
power over the shares.
(2) Shares held in trust of which Mr. Hartley is one of two trustees with
shared voting power.
(3) Additional shares held in a plan in which Mr. Pritchett has a beneficial
interest.
(4) Stock options exercisable within 60 days.
* Indicates less than 1%.
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of the Company's common stock with the SEC
and the NYSE, and to furnish the Company with copies of the forms they file. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to it and written representations of our officers and directors,
during the year ended February 29, 2004, all Section 16(a) reports applicable to
its officers and directors were filed on a timely basis, except for Mr. Price.
In March 2004, Mr. Price filed information on a Form 5 reporting a transaction
whereby his wife and sister-in-law had jointly inherited 10,000 shares of common
stock of the Company.
20
Employment Agreements
What are the terms of employment agreements with our executive officers?
The Company has entered into employment agreements with Mr. Walters and Mr.
Graham dated May 1, 2003 and Mr. Magill dated October 7, 2003. Each is an
executive officer of the Company. The agreements provide for base salaries of
$600,000, $200,000 and $175,000 annually for Mr. Walters, Mr. Graham and Mr.
Magill, respectively. These base salaries may be increased during the terms of
the contracts. The agreements provide that for a continuing three-year
employment period plus two 1-year extensions. Each of such employment agreements
provides that if the officer terminates his employment for good reason or during
the two-year period following a change of control of the Company, the Company
will (a) make a lump sum payment to him of salary earned through the date of
termination, (b) make a lump sum severance payment to him of the amount
determined by multiplying his base amount times a multiple per his agreement,
(c) accelerate vesting of all long-term incentives, to include but not limited
to stock options, restricted stock, any other long-term incentive grants, and
(d) continue to provide certain welfare plan and other benefits for a period of
one year or as long as such plan or benefits allow or until the executive is
employed under the benefit plans of another company.
For purposes of the employment agreements, "good reason" includes (i) a change
in the officer's position, authority, duties or responsibilities, (ii) changes
in the office or location at which he is based without his consent (such consent
not to be unreasonably withheld), (iii) certain breaches of the agreement and
(iv) a reduction in base annual salary.
Audit Committee of the Board Appointed Ernst & Young LLP
What services do the independent auditors provide?
Audit services of Ernst & Young for fiscal 2004 included an audit of our
consolidated financial statements and services related to periodic filings made
with the SEC. Additionally, Ernst & Young provided certain services related to
the consolidated quarterly reports and annual and other periodic reports and
other services as described in the next question.
How much were the independent auditors paid for 2004 and 2003?
Ernst & Young's fees for professional services totaled $304,200 for 2004 and
$269,000 for 2003. Ernst & Young's fees for professional services included the
following:
o Audit Services -- fees for audit services, which relate to the fiscal
year consolidated audit, quarterly reviews, registration statements,
comfort letters, statutory and regulatory audits, and accounting
consultations
o Audit-Related Services -- fees for audit-related services, which
consisted of audits in connection with proposed or consummated
dispositions, benefit plan audits, other subsidiary audits, special
reports, and accounting consultations.
o Tax Services -- fees for tax services, consisting of tax compliance
services and advisory services, were.
o Other Services -- fees for other services, which consisted of a
subscription to EY Online in 2004.
21
Fees to Independent Auditors FY 2004 FY 2003
Audit Services $285,000 $224,000
Audit Related Services -- 35,500
Tax Services 17,700 9,500
Other Services 1,500 --
The Audit Committee has considered whether the non-audit services provided to
Company by Ernst & Young impaired the independence of Ernst & Young and
concluded that they did not.
The Audit Committee has adopted a pre-approval policy that provides guidelines
for the audit, audit-related, tax and other non-audit services that may be
provided by Ernst & Young to the Company. The policy (a) identifies the guiding
principles that must be considered by the Audit Committee in approving services
to ensure that Ernst & Young's independence is not impaired; (b) describes the
audit, audit-related, tax and other services that may be provided and the
non-audit services that are prohibited; and (c) sets forth pre-approval
requirements for all permitted services. Under the policy, all services to be
provided by Ernst & Young must be pre-approved by the Audit Committee. The Audit
Committee has delegated to the Chair and one other member of the Committee the
authority to approve permitted services. Such approval must be reported to the
entire Committee at the next scheduled meeting.
Will a representative of Ernst & Young be present at the meeting?
Yes, one or more representatives of Ernst & Young will be present at the
meeting. The representatives will have an opportunity to make a statement if
they desire and will be available to respond to appropriate questions from the
shareholders
Proposal to Approve the 2004 Long-Term Incentive Plan.
What am I voting on?
We are asking you to approve our 2004 Long-Term Incentive Plan (the "Plan"), as
set forth in Appendix C to this proxy statement. The Plan will only become
effective upon approval by shareholders. The Plan was unanimously approved by
our Board on January 13, 2004, and will, among other things, allow the issuance
of up to 500,000 shares of common stock for compensation to our employees and
non-employee directors. The Plan is an amendment and restatement of our existing
1998 Option and Restricted Stock Plan. Additionally, shares currently subject to
awards under the Plan or the 1998 Option and Restricted Stock Plan may become
available from time to time for awards under the Plan to the extent that such
shares are not actually delivered (whether due to forfeiture, withholding for
taxes or any other reason), or to the extent previously issued shares are used
to pay the exercise price or cover withholding obligations or are similarly
reacquired by the Company.
The 500,000 shares available for issuance under the Plan would represent
approximately 3.0 percent of the Company's outstanding shares as of February 29,
2004. This level of dilution is comparable to that of our peer group of
companies and is consistent with the Board's preference for conservative
compensation practices The primary objectives of the Plan are:
o To attract and retain the services of employees and non-employee
directors; and
o To further our interests and our shareholders' interests by providing
incentives in the form of stock-based awards to such persons.
22
In accordance with these objectives, the Plan is designed to enable our
employees and non-employee directors to acquire or increase their ownership of
our common stock. The Plan is designed to compensate employees and non-employee
directors for the creation of shareholder value. The Plan is also designed with
the intent of placing more of executive compensation at risk and in the longer
term. The Plan provides variable long-term compensation to employees and
non-employee directors that is consistent with the philosophy adopted by the
Compensation Committee as set out in its Report on Executive Compensation set
forth on pages 11 through 14 of this proxy statement. This philosophy is based
on the fundamental principles of pay for performance and external
competitiveness, and the Board sees this Proposal 2 as a means of further
aligning the goals of our employees and non-employee directors with those of the
Company's shareholders.
While all of our employees and non-employee directors would be eligible to
participate in the Plan, it is expected that most awards under the Plan would be
made to our key employees, typically senior officers, managers, and technical
and professional personnel. As of April 15, 2004, approximately 42 persons were
eligible to participate in the 1998 Option and Restricted Stock Plan and 42
employees were participating. No awards have been made under the restated Plan.
As of February 29, 2004, the following options and restricted stock awards were
outstanding under the 1998 Option and Restricted Stock Plan:
o Options to purchase approximately 699,175 shares of our common stock at
a weighted average price of $9.23, of which approximately 444,175
shares were subject to vested options; and
o No restricted stock awards have been granted.
The following table sets forth plan benefits awarded by the Compensation
Committee under the 1998 Option and Restricted Stock Plan during the last fiscal
year to (i) the named executive officers, (ii) all current executive officers as
a group, (iii) all current directors who are not executive officers as a group
and (iv) all employees, excluding all executive officers.
Plan Benefits During Last Fiscal Year
1998 Option and Restricted Stock Plan
Name Dollar Value Number of Options
---- ------------ -----------------
Named Executive Officers
Keith S. Walters.......................... -- --
Ronald M. Graham.......................... -- --
Harve Cathey.............................. -- --
Michael D. Magill......................... -- --
Kenneth E. Overstreet..................... -- --
Executive Officers as a Group...................... -- --
Directors Who are Not Executive Officers........... $151,100 40,000
All Employees, Excluding Executive Officers........ -- --
Our Board believes that amending and restating the 1998 Option and Restricted
Stock Plan is the desirable way of adding additional shares and broadening the
scope of awards available to attract and retain quality talent. Our Board
believes that stock incentive plans like the Plan achieve their objectives and
that to continue to carry out the objectives for the next several years, it is
necessary to have an increase in the number of shares of common stock available
for issuance that is greater than the remaining number of shares reserved for
issuance under the 1998 Option and Restricted Stock Plan.
23
Summary of Our 2004 Long-Term Incentive Plan
Purpose. The purposes of the Plan are to assist the Company and is
subsidiaries in attracting and retaining able persons to become employees and to
provide motivation to employees to put forth maximum efforts toward the success
of the Company and its subsidiaries by providing incentives to those persons
through the ownership and performance of common stock of the Company. An
additional purpose is to provide a means through which the Company may attract
able persons to become non-employee directors of the Company and to provide
those individuals with incentive and reward opportunities.
Effectiveness and Term. The Plan will be effective June 17, 2004, the
date of the 2004 annual meeting of shareholders of the Company, provided it is
approved at the meeting. The Plan is unlimited in duration, but incentive
stock options may not be granted on or after the 10th anniversary of the
effective date.
Administration. For grants to employees, the Plan is administered by
the Compensation Committee or another committee designated by the Board.
Compensation Committee members must be "outside directors" under Section 162(m)
of the Internal Revenue Code and "non-employee directors" under Rule 16b-3 of
the Securities Exchange Act of 1934. For grants to outside directors, the Board
administers the Plan. The Compensation Committee may delegate some or all of its
powers to the Chief Executive Officer (or another executive officer) of the
Company. But, the Compensation Committee may not delegate its power related to
the grant of an award to any person who is subject to the rules of Section
162(m) of the Internal Revenue Code or Section 16 of the Securities Exchange Act
of 1934.
Among the powers granted to the Compensation Committee are the
authority to interpret the Plan, establish rules and regulations for its
operation, select eligible persons to receive awards and determine the form,
amount, and other terms and conditions of the awards. The Compensation Committee
also has the authority to accelerate the exercise, vesting or payment of an
award when it would be in the best interests of the Company and grant awards in
replacement of awards previously granted under the Plan, the 1998 Option and
Restricted Stock Plan or any other employee benefit plan of the Company. The
decisions of the Board or the Compensation Committee and their actions in
administering the Plan are conclusive and binding on all participants, their
estates, beneficiaries and legal representatives.
The Plan provides for indemnification of the Compensation Committee
members for personal liability incurred related any action, interpretation, or
determination made in good faith with respect to the Plan and awards made under
the Plan.
Shares Subject to the Plan. The maximum number of shares of common
stock available for the grant of awards under the Plan is limited to (i) 500,000
shares plus (ii) any authorized shares of common stock available for issuance
under the 1998 Option and Restricted Stock Plan on the effective date, plus
(iii) any shares of common stock that become available under the Plan due to
cancellation, forfeiture, payment of exercise price or withholding, etc. The
maximum number of shares of Common Stock for which Options and SARs (stock
appreciation rights) may be granted under the Plan to any one participant during
a calendar year is 50,000.
The Compensation Committee has full discretion to determine the manner
in which shares of common stock available for grant of awards are counted. In
the absence of Compensation Committee action, the Plan sets forth certain rules
for this purpose. For example, the grant of options and restricted stock under
the Plan reduces the number of shares available for grant of awards. Likewise,
the grant of restricted units, phantom options or other incentive award that are
payable either in common stock or in cash or common stock reduces the number of
shares available for grant. The grant of SARs as well as restricted units,
phantom options and other incentive awards payable only in cash does not affect
the number of shares available for grant. In addition, shares of common stock
related to awards that may be paid or settled in common stock that terminate by
expiration, termination or cancellation without the issuance of shares will
again be available for grant under the Plan. In addition, if shares of common
stock are delivered or withheld to pay the exercise price of an award or to pay
withholding taxes payable upon
24
exercise, vesting or payment of an award, the number of shares available for
grant of awards will be increased by the number of shares delivered or withheld
as payment of the exercise price or withholding taxes.
If there is subdivision or a consolidation of the common stock or the
payment of a stock dividend on the common stock, the number of shares and price
of common stock related to outstanding awards will be proportionately adjusted.
If the Company recapitalizes or changes its capital structure, rather than the
number of shares of common stock covered by an award, the participant will be
entitled to receive the number and class of shares of stock or other securities
that the participant would have been entitled to receive if, immediately before
the recapitalization, he or she had held the number of shares of common stock
subject to the award. In the event of changes in the outstanding common stock
because of recapitalization, reorganization, merger, consolidation, combination,
separation (including a spin-off or other distribution of stock or property),
exchange or other relevant change in capitalization, outstanding awards are
subject to adjustment by the Compensation Committee at its discretion as to the
number, price and kind of shares or other consideration subject to the awards.
These changes may result in the aggregate number of shares available for grant
of awards under the Plan being equitably adjusted by the Compensation Committee.
Eligibility. Employees and non-employee directors of the Company and
its subsidiary corporations are eligible to receive awards. No employee or
outside director may receive an award unless the Compensation Committee or the
Board selects him or her.
Awards. The Plan provides for grant of nonqualified stock options,
incentive stock options, phantom options, restricted stock, restricted units,
SARs (stock appreciation rights), and other incentive awards.
Options. An option is the right to purchase a share of the
Company's common stock at a specified price. Options may be granted for
restricted or nonrestricted common stock. Options may be granted to
employees and non-employee directors. Options may be incentive stock
options (which may receive special tax treatment), nonqualified stock
options, or a combination of both. Incentive stock options may be
granted only to employees. The exercise price of an option is payable
either in cash or a cash equivalent or, with the Compensation
Committee's consent, by tendering one or more previously acquired
nonforfeitable, unrestricted shares of Company common stock meeting
certain conditions. Broker assisted cashless exercises are permitted
with the Compensation Committee's consent. Options generally expire 10
years from the date of grant. Unless otherwise provided in the option
agreement, options terminate within a certain period of time following
a participant's termination of employment or service by reason of death
or disability (1 year), cause (immediate termination regardless of
vesting status), or other reasons (3 months). The price at which a
share of common stock may be purchased upon exercise of an option shall
be determined by the Compensation Committee, but such exercise price
may not be less than 85% (in the case of nonqualified stock options) or
100% (in the case of incentive stock options) of the closing price of
the common stock on the NYSE on the date of grant. As of April 28,
2004, the closing price of the common stock on the NYSE was $15.80.
Phantom Options. A phantom option is a fictional option.
Phantom options do not carry dividend rights, rights upon liquidation,
or any other rights of common stock. Phantom options may be granted to
employees and non-employee directors. Upon exercise, each fictional
share subject to a phantom option entitles the participant to receive
the excess of the fair market value as of the date of exercise over the
strike price, payable in cash or a whole number of shares of common
stock as determined by the Compensation Committee. Upon a participant's
termination of employment or service other than for cause, the vested
portion of the phantom option is deemed exercised and the unvested
portion is forfeited. If the participant is terminated for cause, all
phantom options are forfeited regardless of the vested status. The
strike price of a phantom option shall be determined by the
Compensation Committee, but the strike price may not be less than 100%
of the closing price of the common stock on the NYSE on the date of
grant.
Restricted Stock. Restricted stock is common stock, which is
subject to restrictions (generally vesting periods) determined by the
Compensation Committee. Restricted stock
25
constitutes issued and outstanding shares of the Company's common
stock. Restricted stock may be granted to employees and non-employee
directors. A participant who receives restricted stock generally has
the right to receive dividends during the restriction period, to vote
the restricted stock, and to enjoy all other stockholder rights.
Generally, a participant is not required to make payment for restricted
stock awarded under the Plan. Upon expiration of the restriction
period, the participant is entitled to receive shares of the Company's
common stock not subject to restriction.
Restricted Units. Restricted units represent a fictional share
of common stock granted to a participant pursuant to the Plan, which
may be subject to restrictions determined by the Compensation
Committee. Restricted units may be granted to employees and
non-employee directors. Upon the lapse of restrictions, the participant
is entitled to receive one share of common stock or an amount of cash
equal to the fair market value of one share of common stock. An award
of restricted units may include a tandem DER grant. A "DER" (or
dividend equivalent right) is a contingent right, granted in tandem
with a restricted unit that gives the participant the right to receive
an amount in cash equal to the cash distributions made with respect to
a share of common stock during the period the restricted unit is
outstanding. Generally, upon a participant's termination of employment
or service for any reason prior to the lapse of restrictions, the
participant will forfeit any restricted units.
SARs. SARs or stock appreciation rights entitle the
participant to receive the increase in value of a share of common stock
over a period of time. SARs may be granted to employees and
non-employee directors. SARs may be granted in conjunction with an
option either (i) at the time of the initial option grant or (ii) with
respect to a nonqualified stock option, at any time after the initial
option grant while the nonqualified stock option is still outstanding.
Upon exercise of a SAR, the participant is entitled to receive cash
equal to the excess of the aggregate fair market value of the shares of
common stock with respect to which the SAR is then being exercised over
the aggregate purchase price of those shares. SARs are exercisable (i)
only at such time and only to the extent the related option is
exercisable, (ii) only when the fair market value of the shares subject
to the related option exceeds the purchase price of the shares as
provided in the related option, and (iii) only upon surrender of the
related option or any portion for which SARs are being exercised. Upon
exercise of a SAR, the related option is deemed terminated to the
extent the SAR is exercised.
Other Incentive Awards. An other incentive award is an award
(payable in cash, common stock or a combination) that may be granted to
employees and outside directors, the Compensation Committee determines
the terms of any other incentive awards.
Change in Control. Immediately prior to a change in control (as defined
in the Plan), all awards vest and become payable or exercisable in full. The
Compensation Committee has discretion regarding the treatment (as defined in
the Plan) of options, phantom options, and SARs not exercised upon a change
of control.
Transferability. Awards are not subject to execution, attachment or
similar process. No award of incentive stock options or restricted stock during
its restriction period may be sold, transferred, pledged, exchanged,
hypothecated, or disposed of, other than by will or applicable laws of descent
and distribution. An award agreement may provide that all other awards may be
transferred to a permitted transferee.
Amendment & Termination. The Board may suspend, terminate, amend, or
modify the Plan at any time. Certain amendments require shareholder approval.
The Board may amend the terms of any outstanding award granted pursuant to the
Plan, but no amendment may adversely affect the participant's rights under an
outstanding award without the participant's consent.
United States Federal Income Tax Consequences. The following summary is
based upon an analysis of the Internal Revenue Code (the "Code"), as currently
in effect, and existing laws, judicial decisions, administrative rulings,
regulations and proposed regulations, all of which are subject to change.
26
Incentive Stock Options. This tax discussion assumes that incentive
stock options will be exercised for the stock that is not subject to
restrictions. No income will be recognized by an optionee for federal income tax
purposes upon the exercise of an incentive stock option. The basis of shares
transferred to an optionee upon exercise of an incentive stock option is the
price paid for the shares. If the optionee holds the shares for at least one
year after the transfer of the shares to the optionee and two years after the
grant of the option, the optionee will recognize capital gain or loss upon sale
of the shares received upon exercise equal to the difference between the amount
realized on the sale and the basis of the stock. Generally, if the shares are
not held for that period, the optionee will recognize ordinary income upon
disposition in an amount equal to the excess of the fair market value of the
shares on the date of exercise over the amount paid for the shares, or if less
(and if the disposition is a transaction in which loss, if any, will be
recognized), the gain on disposition. Any additional gain realized by the
optionee upon the disposition will be a capital gain. The excess of the fair
market value of shares received upon the exercise of an incentive stock option
over the option price for the shares is an item of adjustment for the optionee
for purposes of the alternative minimum tax. Therefore, although no income is
recognized upon exercise of an incentive stock option, an optionee may be
subject to alternative minimum tax as a result of the exercise.
If an optionee uses already owned shares of common stock to pay the
exercise price for shares under an incentive stock option, the resulting tax
consequences will depend upon whether the already owned shares of common stock
are "statutory option stock," and, if so, whether the statutory option stock has
been held by the optionee for the applicable holding period referred to in
Section 424(c)(3)(A) of the Code. In general, "statutory option stock" (as
defined in Section 424(c)(3)(B) of the Code) is any stock acquired through the
exercise of an incentive stock option or an option granted pursuant to an
employee stock purchase plan, but not stock acquired through the exercise of a
nonqualified stock option. If the stock is statutory option stock with respect
to which the applicable holding period has been satisfied, no income will be
recognized by the optionee upon the transfer of the stock in payment of the
exercise price of an incentive stock option. If the stock is not statutory
option stock, no income will be recognized by the optionee upon the transfer of
the stock. If the stock used to pay the exercise price of an incentive stock
option is statutory option stock with respect to which the applicable holding
period has not been satisfied, the transfer of the stock will be a disqualifying
disposition described in Section 421(b) of the Code which will result in the
recognition of ordinary income by the optionee in an amount equal to the excess
of the fair market value of the statutory option stock at the time the incentive
stock option covering the stock was exercised over the amount paid for the
stock. Under the present provisions of the Code, it is not clear whether all
shares received upon the exercise of an incentive stock option with
already-owned shares will be statutory option stock or how the optionee's basis
will be allocated among the shares.
Nonqualified Stock Options. This tax discussion assumes that options
will be exercised for stock that is not subject to restrictions. No income will
be recognized by an optionee for federal income tax purposes upon the grant of a
nonqualified stock option. Upon exercise of a nonqualified stock option, the
optionee will recognize ordinary income in an amount equal to the excess of the
fair market value of the shares on the date of exercise over the amount paid for
the shares. Income recognized upon the exercise of a nonqualified stock option
will be considered compensation subject to withholding at the time the income is
recognized, and, therefore, the optionee's employer must make the necessary
arrangements with the optionee to ensure that the amount of the tax required to
be withheld is available for payment. Nonqualified stock options are designed to
provide the Company with a deduction equal to the amount of ordinary income
recognized by the optionee at the time of the recognition by the optionee,
subject to the deduction limitations described below.
The basis of shares transferred to an optionee pursuant to exercise of
a nonqualified stock option is the price paid for the shares plus an amount
equal to any income recognized by the optionee as a result of the exercise of
the option. If an optionee thereafter sells shares acquired upon exercise of a
nonqualified stock option, any amount realized over the basis of the shares will
constitute capital gain to the optionee for federal income tax purposes.
If an optionee uses already owned shares of common stock to pay the
exercise price for shares under a nonqualified stock option, the number
of shares received pursuant to the nonqualified stock option which is
equal to the number of shares delivered in payment of the exercise
price will
27
be considered received in a nontaxable exchange, and the fair market
value of the remaining shares received by the optionee upon the
exercise will be taxable to the optionee as ordinary income. If the
already owned shares of common stock are not "statutory option stock"
or are statutory option stock with respect to which the applicable
holding period referred to in Section 424(c)(3)(A) of the Code has been
satisfied, the shares received pursuant to the exercise of the
nonqualified stock option will not be statutory option stock and the
optionee's basis in the number of shares received in exchange for the
shares delivered in payment of the exercise price will be equal to the
basis of the shares delivered in payment. The basis of the remaining
shares received upon the exercise will be equal to the fair market
value of the shares. However, if the already owned shares of common
stock are statutory option stock with respect to which the applicable
holding period has not been satisfied, it is not presently clear
whether the exercise will be considered a disqualifying disposition of
the statutory option stock, whether the shares received upon the
exercise will be statutory option stock or how the optionee's basis
will be allocated among the shares received.
Phantom Options. There will be no federal income tax consequences to
either the participant or the Company upon the grant of phantom options.
Generally, a participant will recognize ordinary income subject to withholding
upon exercise and receipt of payment pursuant to phantom options in an amount
equal to the fair market value of the common stock and the aggregate amount of
cash received. Subject to the deduction limitations described below, The Company
generally will be entitled to a corresponding tax deduction equal to the amount
includible in the participant's income.
Restricted Stock. If the restrictions on an award of shares of
restricted stock are of a nature that the shares are both subject to a
substantial risk of forfeiture and are not freely transferable within the
meaning of Section 83 of the Code, the participant will not recognize income for
federal income tax purposes at the time of the award unless the participant
affirmatively elects to include the fair market value of the shares of
restricted stock on the date of the award, less any amount paid for the shares,
in gross income for the year of the award pursuant to Section 83(b) of the Code.
In the absence of this election, the participant will be required to include in
income for federal income tax purposes in the year in which occurs the date the
shares either become freely transferable or are no longer subject to a
substantial risk of forfeiture within the meaning of Section 83 of the Code, the
fair market value of the shares of restricted stock on the date, less any amount
paid for the shares. The Company will be entitled to a deduction at the time of
income recognition to the participant in an amount equal to the amount the
participant is required to include in income with respect to the shares, subject
to the deduction limitations described below. If a Section 83(b) election is
made within 30 days after the date the restricted stock is received, the
participant will recognize ordinary income at the time of the receipt of the
restricted stock and the Company will be entitled to a corresponding deduction
equal to the fair market value (determined without regard to applicable
restrictions other than nonlapse restrictions) of the shares at the time less
the amount paid, if any, by the participant for the restricted stock. If a
Section 83(b) election is made, no additional income will be recognized by the
participant upon the lapse of restrictions on the restricted stock, but, if the
restricted stock is subsequently forfeited, the participant may not deduct the
income that was recognized pursuant to the Section 83(b) election at the time of
the receipt of the restricted stock.
Dividends paid to a participant holding restricted stock before the
expiration of the restriction period will be additional compensation taxable as
ordinary income to the participant, unless the participant made an election
under Section 83(b). Subject to the deduction limitations described below, the
Company generally will be entitled to a corresponding tax deduction equal to the
dividends includible in the participant's income as compensation. If the
participant has made a Section 83(b) election, the dividends will be dividend
income, rather than additional compensation, to the participant.
If the restrictions on an award of restricted stock are not of a nature
that the shares are both subject to a substantial risk of forfeiture and not
freely transferable, within the meaning of Section 83 of the Code, the
participant will recognize ordinary income for federal income tax purposes at
the time of the award in an amount equal to the fair market value of the shares
of restricted stock on the date of the award, less any amount paid therefor. The
Company will be entitled to a deduction at that time in an amount equal to the
28
amount the participant is required to include in income with respect to the
shares, subject to the deduction limitations described below.
Restricted Units. There will be no federal income tax consequences to
either the participant or the Company upon the grant of restricted units.
Generally, the participant will recognize ordinary income subject to withholding
upon lapse of restrictions or achievement of performance goals pursuant to the
restricted units in an amount equal to the fair market value of the common stock
and the aggregate amount of cash the participant receives or is entitled to
receive on such date. Subject to the deduction limitations described below, the
Company generally will be entitled to a corresponding tax deduction equal to the
amount includible in the participant's income.
There will be no federal income tax consequences to either the
participant or the Company upon the grant of DERs. Generally, a participant will
recognize ordinary income subject to withholding upon the earlier of lapse of
restrictions or achievement of performance goals pursuant to restricted units
related to the DERs in an amount equal to the amount of cash the participant
receives or is entitled to receive on such date. Subject to the deduction
limitations described below, the Company generally will be entitled to a
corresponding tax deduction equal to the amount includable in the participant's
income.
SARs. There will be no federal income tax consequences to either the
participant or the Company upon the grant of SARs. Generally, the participant
will recognize ordinary income subject to withholding upon the receipt of
payment pursuant to SARs in an amount equal to the aggregate amount of cash
received. Subject to the deduction limitations described below, the Company
generally will be entitled to a corresponding tax deduction equal to the amount
includible in the participant's income.
Limitations on the Company's Compensation Deduction. Section 162(m) of
the Code limits the deduction which the Company may take for otherwise
deductible compensation payable to certain executive officers of the Company to
the extent that compensation paid to the officers for the year exceeds $1
million, unless the compensation is performance-based, is approved by the
Company's stockholders and meets certain other criteria. Compensation
attributable to an option or SAR is deemed to satisfy the requirements for
performance-based compensation if (1) the grant or award is made by the
Compensation Committee; (2) the plan under which the option or SAR is granted
states the maximum number of shares with respect to which options or SARs may be
granted during a specified period to any employee; and (3) under the terms of
the option or SAR, the amount of compensation the employee could receive is
based solely on an increase in the value of the stock after the date of the
grant or award. The Plan has been designed to enable awards of options and SARs
granted by the Compensation Committee to qualify as performance-based
compensation for purposes of Section 162(m) of the Code. Other awards are
subject to the Code Section 162(m) deduction limitation unless the award is
structured in a manner that satisfies the performance-based compensation
exception to Section 162(m) of the Code.
In addition, Section 280G of the Code limits the deduction which the
Company may take for otherwise deductible compensation payable to certain
individuals if the compensation constitutes an "excess parachute payment." Very
generally, excess parachute payments arise from certain payments made to
disqualified individuals which are in the nature of compensation and are
contingent on certain changes in ownership or control of the Company.
Disqualified individuals for this purpose include certain employees and
independent contractors who are officers, stockholders or highly-compensated
individuals. Accelerated vesting or payment of awards under the Plan upon a
change in ownership or control of the Company could result in excess parachute
payments. In addition to the deduction limitation applicable to the Company, a
disqualified individual receiving an excess parachute payment is subject to a 20
percent excise tax on the amount thereof.
29
Effect of Other Laws. The above summary relates to U.S. federal income
tax consequences only and applies to U.S. citizens and foreign persons who are
U.S. residents for U.S. federal income tax purposes. The U.S. federal income tax
consequences associated with the issuance of common stock to nonresident aliens
depends upon a number of factors, including whether such issuance is considered
to be U.S. source income and whether the provisions of any treaty are
applicable. The acquisition, ownership or disposition of shares of common stock
may also have tax consequences under various state, local and foreign laws. The
Plan is not subject to the Employee Retirement Income Security Act of 1974, as
amended.
What vote is required to approve this proposal?
Approval of this proposal requires the affirmative vote of a majority of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the proposal. Under the rules of the New York Stock Exchange, votes
representing more than 50% of our outstanding shares of common stock must be
cast at the meeting. Broker non-votes are not considered votes cast for this
purpose. Abstentions will have the effect of a vote against this proposal.
What does the Board recommend?
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF OUR 2004 LONG-TERM INCENTIVE PLAN.
Proposal to Approve the Amendment of the Company's Articles of Incorporation to
Change in the Company's Name to Ennis, Inc.
(Item 3 on the Proxy Card)
What am I voting on?
We are asking you to vote on the proposal to amend the Articles of Incorporation
to change the name of the Company from Ennis Business Forms, Inc. to Ennis, Inc.
The primary objectives of the name change are:
o To more closely align the corporate name with the three business units,
and
o To more properly reflect the migration from the forms business into new
product lines while retaining the equity value of the Ennis name.
In accordance with these objectives, our management believes that changing the
corporate name will enhance meeting these objectives.
What vote is required to approve this proposal?
Approval of this proposal requires the affirmative vote of 66 2/3% of the
Company's outstanding common stock. Broker non-votes are not considered votes
cast for this purpose. Abstentions will have the effect of a vote against this
proposal.
What does the Board recommend?
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF THE PROPOSED NAME CHANGE TO ENNIS, INC.
30
Solicitation by Board; Expenses of Solicitation
Our Board has sent you this proxy statement. Our directors, officers and
employees may solicit proxies by mail, by telephone or in person. Those persons
will receive no additional compensation for any solicitation activities. We will
request banking institutions, brokerage firms, custodians, trustees, nominees
and fiduciaries to forward solicitation materials to the beneficial owners of
common stock held of record by those entities, and we will, upon the request of
those record holders, reimburse reasonable forwarding expenses. We will pay the
costs of preparing, printing, assembling and mailing the proxy materials used in
the solicitation of proxies.
Submission of Future Shareholder Proposals
Under SEC rules, a shareholder who intends to present a proposal, including the
nomination of directors, at the 2005 Annual Meeting of Shareholders and who
wishes the proposal to be included in the proxy statement for that meeting must
submit the proposal in writing to our Corporate Secretary. The proposal must be
received no later than January 19, 2005.
All written proposals should be directed to Harve Cathey, Corporate Secretary,
Ennis, Inc. P.O. Box 403, Midlothian, Texas 76065-0403.
The Nominating and Corporate Governance Committee is responsible for selecting
and recommending director candidates to our Board, and will consider nominees
recommended by shareholders. If you wish to have the Nominating and Corporate
Governance Committee consider a nominee for director, you must send a written
notice to the Company's Corporate Secretary at the address provided above and
include the information required by our By-Laws and discussed on pages 8 through
10 of this proxy statement.
Availability of Form 10-K and Annual Report to Shareholders
SEC rules require us to provide an Annual Report to shareholders who receive
this proxy statement. Additional copies of the Annual Report, along with copies
of our Annual Report on Form 10-K for the fiscal year ended February 29, 2004,
including the financial statements and the financial statement schedules, are
available without charge to shareholders upon written request to Ennis
Shareholder Relations Department, P.O. Box 403, Midlothian, Texas 76065-0403 or
via the Internet at www.Ennis.com . We will furnish the exhibits to our Annual
Report on Form 10-K upon payment of our copying and mailing expenses.
Other Matters
The Board does not intend to present any other items of business other than
those stated in the Notice of Annual Meeting of Shareholders. If other matters
are properly brought before the meeting, the persons named as your proxies will
vote the shares represented by it in accordance with their best judgment.
Discretionary authority to vote on other matters is included in the proxy.
31
APPENDIX A
Categorical Standards
Director Independence
As required by the listing standards of the New York Stock Exchange, a majority
of the members of the Board must be independent. A director is independent if
the Board determines that he or she has no material relationship with the
Company (either directly or as a partner, shareholder or officer of an
organization that has a relationship with the Company), and such director is not
otherwise automatically deemed to be not independent by applicable NYSE listing
standards. The Board has determined that any director meeting the following
categorical standards shall automatically be deemed not to have any material
relationship with the Company, and shall be independent:
o A director who has not received, and whose immediate family members
have not received, for the past three years, more than $100,000 per
year in direct compensation from the Company. Director and committee
fees, pension or other forms of deferred compensation for prior service
(provided such compensation is not contingent in any way on continued
service), and compensation received by an immediate family member for
service as a non-executive employee of the Company are not considered
in making this determination;
o A director who is not, and for the past three years has not been, an
employee of the Company and who does not have an immediate family
member who is, or for the past three years has been, an executive
officer of the Company;
o Until November 4, 2004, a director who is not, and has not for the past
year been, an employee of the Company;
o A director who is not, and has not for the past three years been,
affiliated with or employed by a present or former internal or external
auditor of the Company, and who has no immediate family members who
are, or have during the last three years been affiliated with or
employed in a professional capacity by, a present or former internal or
external auditor of the Company;
o A director who is not, and for the past three years has not been,
employed as an executive officer of another company where any of the
Company's present executives serve on that company's compensation
committee and who has no immediate family members who have been
employed as an executive officer for such company during the past three
years;
o A director who has no personal service contract with the Company, any
subsidiary or affiliate of the Company or any member of senior
management;
o A director who is not, and in the previous three years has not been, an
employee or executive officer of a company that makes payments to, or
receives payments from, the Company for property or services in an
amount which, in any single fiscal year, exceeds the greater of $1
million, or 2% of such other company's consolidated gross revenues;
An immediate family member shall include the director's spouse, parents,
children, siblings, in-laws and anyone who resides in the director's home.
The Nominating and Corporate Governance Committee is responsible for assessing
compliance with these standards on an annual basis. Any director who does not
meet these standards will be referred to the Board, and the Board will review
the relationship or transaction that prevents such director from meeting these
standards and make a determination of whether such relationship or transaction
is a material relationship with the Company.
32
APPENDIX B
Audit Committee Charter
ENNIS BUSINESS FORMS, Inc.
--------------------------
AUDIT COMMITTEE CHARTER
-----------------------
ROLE
----
The Audit Committee of the Board of Directors assists the Board of Directors in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting and reporting practices of the Company, the qualifications and
independence of the public accounting firm engaged to prepare or issue an audit
report on the financial statements of the Company (the "independent auditor"),
performance of the internal auditor and the Company's internal audit function,
and such other duties as directed by the Board. The Committee's role includes
discussing with management the Company's processes to manage financial risk, and
for compliance with significant applicable legal, ethical, and regulatory
requirements. The Committee has sole authority over the appointment and
replacement of the independent auditor and is directly responsible for
compensation, and oversight of the independent auditor. The Committee should
also review any potential conflicts from hiring former employees of the
Company's independent auditor.
MEMBERSHIP
----------
The membership of the Committee consists of at least four directors. Each member
shall meet the experience requirements of the listing standards of The New York
Stock Exchange ("NYSE") and applicable laws and regulations. Each member will be
free of any relationship that, in the opinion of the board, would interfere with
his or her individual exercise of independent judgment. Applicable laws and
regulations will be followed in evaluating a member's independence. Committee
members will not serve simultaneously on the audit committees of more than two
other public companies. The Board appoints the chairperson.
OPERATIONS
----------
The Committee meets at least once each quarter. Additional meetings may occur as
the Committee or its chair deems advisable. The Committee will cause to be kept
adequate minutes of all its proceedings, and will report its actions to the next
meeting of the Board. Committee members will be furnished with copies of the
minutes of each meeting and any action taken by unanimous consent. The Committee
will be governed by the same rules regarding meetings (including meetings by
conference telephone or similar communications equipment), action without
meetings, notice, waiver of notice, and quorum and voting requirements as are
applicable to the Board. The Committee is authorized and empowered to adopt its
own rules of procedure not inconsistent with (a) any provision hereof, (b) any
provision of the Bylaws of the Corporation, or (c) the laws of the state of
Texas.
COMMUNICATIONS/REPORTING
------------------------
The independent auditor reports directly to the Committee. The Committee is
expected to maintain free and open communication with the independent auditor,
the Company's internal auditors, and the Company's management. This
communication will include periodic separate executive sessions with each of
these parties.
EDUCATION
---------
The Company is responsible for providing the Committee with educational
resources related to accounting principles and procedures, current accounting
topics pertinent to the Company and other material as may be requested by the
Committee. The Company will assist the Committee in maintaining appropriate
financial literacy.
AUTHORITY
---------
The Committee will have the resources and authority necessary to discharge its
duties and responsibilities, including the authority to retain outside counsel
or other experts or consultants, as it deems appropriate. Any communications
between the Committee and legal counsel in the course of obtaining legal advice
will be considered privileged communications of the Company, and the Committee
will take all necessary steps to preserve the privileged nature of those
communications.
RESPONSIBILITIES
----------------
The Committee's specific responsibilities in carrying out its oversight role are
delineated in the Audit Committee Responsibilities Calendar. As the compendium
of Committee responsibilities, the most recently updated Responsibilities
Calendar will be considered to be an addendum to this
33
Charter. The Committee will review and reassess the adequacy of this Charter
annually to reflect changes in regulatory requirements, authoritative guidance,
and evolving oversight practices and recommends any proposed changes to the
Board.
The Committee relies on the expertise and knowledge of management, the internal
auditors and the independent auditor in carrying out its oversight
responsibilities. Management of the Company is responsible for determining the
Company's financial statements are complete, accurate and in accordance with
generally accepted accounting principles. The independent auditor is responsible
for auditing the Company's financial statements. It is not the duty of the
Committee to plan or conduct audits, to determine that the financial statements
are complete and accurate and are in accordance with generally accepted
accounting principles, to conduct investigations, or to assure compliance with
laws and regulations or the Company's internal policies, procedures and
controls.
Last Revised: January 13th, 2004
34
APPENDIX C
2004 LONG-TERM INCENTIVE PLAN
OF ENNIS, INC.
(As Established Effective June 17th, 2004)
RECITALS
ARTICLE I. ESTABLISHMENT AND PURPOSE
1.1 Establishment. The Ennis Business Forms, Inc. 1998 Option and
Restricted Stock Plan was originally approved by the Board of Directors of Ennis
Business Forms, Inc., a Texas corporation, on March 2, 1998. In furtherance of
the purposes of said plan and in order to amend said plan in certain respects,
the Ennis Business Forms, Inc. 1998 Option and Restricted Stock Plan is hereby
amended and restated in its entirety and renamed the Ennis, Inc. 2004 Long-Term
Incentive Plan (the "Plan"), as set forth in this document.
1.2 Purpose. The purposes of the Plan are to attract able persons
to enter the employ of the Company, to encourage Employees to remain in the
employ of the Company and to provide motivation to Employees to put forth
maximum efforts toward the continued growth, profitability and success of the
Company, by providing incentives to such persons through the ownership and/or
performance of the Common Stock of Ennis. A further purpose of the Plan is to
provide a means through which the Company may attract able persons to become
directors of Ennis and to encourage such persons to remain directors of Ennis,
by providing such persons with incentive and reward opportunities. Toward these
objectives, Awards may be granted under the Plan to Employees and Outside
Directors on the terms and subject to the conditions set forth in the Plan.
1.3 Effectiveness and Term. This amended and restated Plan shall
become effective as of June 17, 2004, the date of its approval by the holders of
at least a majority of the shares of Common Stock present or represented and
entitled to vote at the 2004 annual meeting of the stockholders of Ennis duly
held in accordance with applicable law. This Plan shall be unlimited in duration
and, in the event of plan termination, shall remain in effect as long as any
Awards under it are outstanding; provided, however, that no Awards of Incentive
Stock Options shall be made after June 16, 2014.
ARTICLE II. DEFINITIONS
2.1 Affiliate. "Affiliate" means a "parent corporation" or a
"subsidiary corporation" of Ennis, as those terms are defined in Section 424(e)
and (f) of the Code.
2.2 Award. "Award" means an award granted to a Participant in the
form of an Option, Phantom Option, Restricted Stock, Restricted Unit, SAR, or
Other Incentive Award, whether granted singly, in combination or in tandem. All
Awards shall be granted by, confirmed by, and subject to the terms of, an Award
Agreement.
2.3 Award Agreement. "Award Agreement" means a written agreement
between Ennis and a Participant that sets forth the terms, conditions,
restrictions and/or limitations applicable to an Award.
2.4 Board. "Board" means the Board of Directors of Ennis.
2.5 Cause. "Cause" means the termination of a Participant's
employment or service by reason of fraud, dishonesty, any unauthorized use or
disclosure by the Participant of any confidential information or trade secrets
of Ennis, or the performance of other acts detrimental to Ennis or an Affiliate,
as determined by the Committee in its absolute discretion.
35
2.6 Change of Control. A "Change of Control" shall be deemed to
have taken place if one or more of the following occurs:
(a) Any person or entity, as that term is used in Section
13(d) and 14(d)(2) of the 1934 Act (other than a qualified benefit plan
of Ennis or an Affiliate) becomes or is discovered to be a beneficial
owner (as defined in Rule 13d-3 under the 1934 Act as in effect on the
Effective Date) directly or indirectly of securities of Ennis
representing 30% or more of the combined voting power of the Ennis'
then outstanding securities (unless such person is already such a
beneficial owner on the Effective Date);
(b) Individuals who, as of the Effective Date, constitute the
Board cease for any reason to constitute at least a majority of the
Board, unless any such change is approved by a unanimous vote of the
Board in office immediately prior to such cessation;
(c) Ennis or its Affiliates shall (in a single transaction or
a series or related transactions) issue shares, sell or purchase
assets, engage in a merger or engage in any other transaction
immediately after which securities of Ennis representing 50% or more of
the combined voting power of the then outstanding securities of Ennis
shall be ultimately owned by person(s) who shall not have owned such
securities prior to such transaction or who shall be a party to such
transaction;
(d) Ennis and its Affiliates shall sell or dispose of (in a
single transaction or series of related transactions) business
operations which generated a majority of the consolidated revenues
(determined on the basis of Ennis' four most recently completed fiscal
quarters for which reports have been filed under the 1934 Act) of Ennis
and its Affiliates immediately prior thereto;
(e) The Board shall approve the distribution to Ennis'
shareholders of all or substantially all of Ennis' net assets or shall
approve the dissolution of Ennis; or
(f) Any other transaction or series of related transactions
occur which have substantially the effect of the transactions specified
in any of the preceding provisions of this subsection.
2.7 Code. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, including regulations thereunder and successor
provisions and regulations thereto.
2.8 Committee. "Committee" means (i) with respect to the
application of this Plan to Employees, the Compensation Committee of the Board
or such other committee of the Board as may be designated by the Board to
administer the Plan, which committee shall consist of two or more non-employee
directors, each of whom is both a "non-employee director" under Rule 16b-3 of
the Exchange Act and an "outside director" under Section 162(m) of the Code, and
(ii) with respect to the application of this Plan to an Outside Director, the
Board. To the extent that no Committee exists that has the authority to
administer the Plan, the functions of the Committee shall be exercised by the
Board. If for any reason the appointed Committee does not meet the requirements
of Rule 16b-3 or Section 162(m) of the Code, such noncompliance with such
requirements shall not affect the validity of Awards, grants, interpretations or
other actions of the Committee.
2.9 Common Stock. "Common Stock" means the common stock, $2.50 par
value per share, of Ennis, or any stock or other securities of Ennis hereafter
issued or issuable in substitution or exchange for the Common Stock.
2.10 Company. "Company" means Ennis and its Affiliates.
36
2.11 DER. "DER" means a contingent right, granted in tandem with a
specific Restricted Unit, to receive an amount in cash equal to the cash
distributions made by the Company with respect to a share of Common Stock during
the period such Restricted Unit is outstanding.
2.12 Effective Date. "Effective Date" means the date this Plan
becomes effective as provided in Section 1.3.
2.13 Ennis. "Ennis" means Ennis, Inc. (formerly known as Ennis
Business Forms, Inc.), a Texas corporation, or any successor thereto.
2.14 Employee. "Employee" means an employee of Ennis or an
Affiliate of Ennis; provided, however, that the term "Employee" does not include
an Outside Director or an individual performing services for Ennis or an
Affiliate who is treated for tax purposes as an independent contractor at the
time of performance of the services.
2.15 Exchange Act. "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
2.16 Fair Market Value. "Fair Market Value" means (a) if the Common
Stock is listed on a national securities exchange, the closing price per share
on a given date; (b) if the Common Stock is traded on an exchange or market in
which prices are reported on a bid and asked price, the average of the mean
between the bid and asked price for a share on a given date; and (c) if the
Common Stock is not publicly traded at the time a determination of fair market
value is required to be made hereunder, the determination of fair market value
shall be made in good faith by the Committee.
2.17 Grant Date. "Grant Date" means the date an Award is granted by
the Committee.
2.18 Incentive Stock Option. "Incentive Stock Option" means an
Option that is intended to meet the requirements of Section 422(b) of the Code.
2.19 Nonqualified Stock Option. "Nonqualified Stock Option" means
an Option that is not an Incentive Stock Option.
2.20 Option. "Option" means an option to purchase shares of Common
Stock granted to a Participant pursuant to Article VII. An Option may be either
an Incentive Stock Option or a Nonqualified Stock Option, as determined by the
Committee.
2.21 Other Incentive Award. "Other Incentive Award" means an
incentive award granted to a Participant pursuant to Article XII.
2.22 Outside Director. "Outside Director" means a "non-employee
director" of the Company, as defined in Rule 16b-3.
2.23 Participant. "Participant" means an Employee or Outside
Director to whom an Award has been granted under the Plan.
2.24 Person. "Person" means an individual or a corporation, limited
liability company, partnership, joint venture, trust, unincorporated
organization, association, government agency or political subdivision thereof or
other entity.
2.25 Phantom Option. "Phantom Option" means a fictional option
granted to a Participant pursuant to Article VIII.
2.26 Plan. "Plan" means this Ennis, Inc. 2004 Long-Term Incentive
Plan, as in effect from time to time.
37
2.27 Restricted Period. "Restricted Period" means the period
established by the Committee with respect to an Award of Restricted Stock or a
Restricted Unit during which the Award remains subject to forfeiture and is not
payable to the Participant.
2.28 Restricted Stock. "Restricted Stock" means a share of Common
Stock granted to a Participant pursuant to Article IX, which is subject to such
restrictions as may be determined by the Committee. Restricted Stock shall
constitute issued and outstanding shares of Common Stock for all corporate
purposes.
2.29 Restricted Unit. "Restricted Unit" means a fictional share of
Common Stock granted to a Participant pursuant to Article X, which is subject to
such restrictions as may be determined by the Committee.
2.30 Rule 16b-3. "Rule 16b-3" means Rule 16b-3 promulgated by the
SEC under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
2.31 SAR. "SAR" means a stock appreciation right granted to a
Participant pursuant to Article XI.
2.32 Superseded Plan. "Superseded Plan" means the Ennis Business
Forms, Inc. 1998 Option and Restricted Stock Plan, as in effect prior to the
Effective Date.
ARTICLE III. PLAN ADMINISTRATION
3.1 Plan Administrator. The Plan shall be administered by the
Committee. The Committee may delegate some or all of its power to the Chief
Executive Officer or such other executive officer of the Company as the
Committee deems appropriate; provided, that (i) the Committee may not delegate
its power with regard to the grant of an Award to any person who is a "covered
employee" within the meaning of Section 162(m) of the Code or who, in the
Committee's judgment, is likely to be a covered employee at any time during the
period an Award to such employee would be outstanding, and (ii) the Committee
may not delegate its power with regard to the selection for participation in the
Plan of an officer or other person subject to Section 16 of the Exchange Act or
decisions concerning the timing, pricing or amount of an Award to such an
officer or other person.
3.2 Authority of Administrator. The Committee shall have total and
exclusive responsibility to control, operate, manage and administer the Plan in
accordance with its terms. The Committee shall have all the authority that may
be necessary or helpful to enable it to discharge its responsibilities with
respect to the Plan. Without limiting the generality of the preceding sentence,
the Committee shall have the exclusive right to: (i) interpret the Plan and the
Award Agreements executed hereunder; (ii) determine eligibility for
participation in the Plan; (iii) decide all questions concerning eligibility
for, and the amount of, Awards granted under the Plan; (iv) construe any
ambiguous provision of the Plan or any Award Agreement; (v) prescribe the form
of the Award Agreements embodying Awards granted under the Plan; (vi) correct
any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award Agreement; (vii) issue administrative guidelines as an aid to
administering the Plan and make changes in such guidelines as the Committee from
time to time deems proper; (viii) make regulations for carrying out the Plan and
make changes in such regulations as the Committee from time to time deems
proper; (ix) determine whether Awards should be granted singly, in combination
or in tandem; (x) to the extent permitted under the Plan, grant waivers of Plan
terms, conditions, restrictions and limitations; (xi) accelerate the exercise,
vesting or payment of an Award when such action or actions would be in the best
interests of the Company; (xii) grant Awards in replacement of Awards previously
granted under the Plan, the Superseded Plan or any other employee benefit plan
of the Company; and (xiii) take any and all other actions the Committee deems
necessary or advisable for the proper operation or administration of the Plan.
38
3.3 Discretionary Authority. The Committee shall have full
discretionary authority in all matters related to the discharge of its
responsibilities and the exercise of its authority under the Plan, including,
without limitation, its construction of the terms of the Plan and its
determination of eligibility for participation and Awards under the Plan. The
decisions of the Committee and its actions with respect to the Plan shall be
final, conclusive and binding on all persons having or claiming to have any
right or interest in or under the Plan, including Participants and their
respective estates, beneficiaries and legal representatives.
3.4 Liability; Indemnification. No member of the Committee nor any
person to whom authority has been delegated, shall be personally liable for any
action, interpretation or determination made in good faith with respect to the
Plan or Awards granted hereunder, and each member of the Committee (or delegatee
of the Committee) shall be fully indemnified and protected by Ennis with respect
to any liability he or she may incur with respect to any such action,
interpretation or determination, to the extent permitted by applicable law.
ARTICLE IV. SHARES SUBJECT TO THE PLAN
4.1 Available Shares. Subject to adjustment as provided in Section
4.2, the maximum number of shares of Common Stock that shall be available for
grant of Awards under the Plan shall not exceed the sum of (i) 500,000 shares of
Common Stock; and (ii) ________, which is the number of authorized shares of
Common Stock available for issuance under the Superseded Plan as of the
Effective Date; and (iii) any shares of Common Stock that become available under
this Plan, including with respect to Awards outstanding under the Superseded
Plan as of the Effective Date, as a result of cancellation, termination,
expiration, forfeiture or lapse of an Award or as otherwise provided in Section
4.3. The maximum number of shares of Common Stock for which Options and SARs may
be granted under the Plan to any one Participant during a calendar year is
50,000. Shares of Common Stock issued pursuant to the Plan may be shares of
original issuance or treasury shares or a combination of the foregoing, as the
Committee, in its absolute discretion, shall from time to time determine.
4.2 Adjustments for Recapitalizations and Reorganizations.
(a) The shares with respect to which Awards may be granted
under the Plan are shares of Common Stock as presently constituted, but
if, and whenever, prior to the expiration or satisfaction of an Award
theretofore granted, Ennis shall effect a subdivision or consolidation
of shares of Common Stock or the payment of a stock dividend on Common
Stock in the form of Ennis Common Stock without receipt of
consideration by Ennis, the number of shares of Common Stock with
respect to which such Award may thereafter be exercised or satisfied,
as applicable, (i) in the event of an increase in the number of
outstanding shares, shall be proportionately increased, and the
exercise price per share shall be proportionately reduced, and (ii) in
the event of a reduction in the number of outstanding shares, shall be
proportionately reduced, and the exercise price per share shall be
proportionately increased.
(b) If Ennis recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise or satisfaction, as applicable,
of an Award theretofore granted the Participant shall be entitled to
(or entitled to purchase, if applicable) under such Award, in lieu of
the number of shares of Common Stock then covered by such Award, the
number and class of shares of stock or other securities to which the
Participant would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization, the
Participant had been the holder of record of the number of shares of
Common Stock then covered by such Award.
(c) In the event of changes in the outstanding Common Stock by
reason of a reorganization, merger, consolidation, combination,
separation (including a spin-off or other distribution of stock or
property), exchange, or other relevant change in capitalization
occurring after the date of grant of any Award and not otherwise
provided for by this Section 4.2, any outstanding Awards and any Award
Agreements evidencing such Awards shall be subject to
39
adjustment by the Committee in its absolute discretion as to the
number, price and kind of shares or other consideration subject to, and
other terms of, such Awards to reflect such changes in the outstanding
Common Stock.
(d) In the event of any changes in the outstanding Common
Stock provided for in this Section 4.2, the aggregate number of shares
available for grant of Awards under the Plan may be equitably adjusted
by the Committee, whose determination shall be conclusive.
4.3 Adjustments for Awards. The Committee shall have full
discretion to determine the manner in which shares of Common Stock available for
grant of Awards under the Plan are counted. Without limiting the discretion of
the Committee under this Section 4.3, unless otherwise determined by the
Committee, the following rules shall apply for the purpose of determining the
number of shares of Common Stock available for grant of Awards under the Plan:
(a) Options and Restricted Stock. The grant of Options and
Restricted Stock shall reduce the number of shares available for grant
of Awards under the Plan by the number of shares subject to such Award.
(b) SARs, Phantom Options and Restricted Units. The grant of
SARs shall not affect the number of shares available for grant of
Awards under the Plan. The grant of Phantom Options or Restricted Units
that may be paid or settled only for cash shall not affect the number
of shares available for grant of Awards under the Plan. The grant of
Phantom Options or Restricted Units that may be paid or settled (i)
only in Common Stock or (ii) in either cash or Common Stock shall
reduce the number of shares available for grant of Awards under the
Plan by the number of shares subject to such an Award.
(c) Other Incentive Awards. The grant of an Other Incentive
Award in the form of Common Stock or that may be paid or settled only
in Common Stock shall reduce the number of shares available for grant
of Awards under the Plan by the number of shares subject to such Award.
The grant of an Other Incentive Award that may be paid or settled only
for cash shall not affect the number of shares available for grant of
Awards under the Plan. The grant of an Other Incentive Award that may
be paid or settled in either Common Stock or cash shall reduce the
number of shares available for grant of Awards under the Plan by the
number of shares subject to such Award.
(d) Termination. If any Award referred to in paragraphs (a),
(b) and (c) above (other than an Award that may be paid or settled only
for cash) is canceled or forfeited, or terminates, expires or lapses,
for any reason (other than the termination of a Related Option (as
defined in Section 11.1) upon exercise of its corresponding SARs), the
shares then subject to such Award shall again be available for grant of
Awards under the Plan.
(e) Payment of Exercise Price and Withholding Taxes. If
previously acquired shares of Common Stock are used to pay the exercise
price of an Award, the number of shares available for grant of Awards
under the Plan (other than Incentive Stock Options) shall be increased
by the number of shares delivered as payment of such exercise price. If
previously acquired shares of Common Stock are used to pay withholding
taxes payable upon exercise, vesting or payment of an Award, or shares
of Common Stock that would be acquired upon exercise, vesting or
payment of an Award are withheld to pay withholding taxes payable upon
exercise, vesting or payment of such Award, the number of shares
available for grant of Awards under the Plan (other than Incentive
Stock Options) shall be increased by the number of shares delivered or
withheld as payment of such withholding taxes.
(f) Fractional Shares. If any such adjustment would result in
a fractional security being (i) available under the Plan, such
fractional security shall be disregarded or (ii) subject to an Award,
Ennis shall pay the holder of such Award, in connection with the first
vesting, exercise or settlement of such Award in whole or in part
occurring after such adjustment, an amount in cash
40
determined by multiplying (x) the fraction of such security (rounded to
the nearest hundredth) by (y) the excess, if any, of the Fair Market
Value on the vesting, exercise or settlement date over the exercise
price, if any, of such Award.
41
APPENDIX D
COMPENSATION COMMITTEE CHARTER
Purpose
The Compensation Committee (the Committee) of the Board of Directors
(the Board) of Ennis Business Forms, Inc. (the Company) shall be charged with
assisting the Board in (i) assessing whether the various compensation programs
of the Company are designed to attract, motivate and retain the senior
management necessary for the Company to deliver consistently superior results
and are performance based, market driven and shareholder aligned, (ii) its
oversight of specific incentive compensation plans adopted by the Company, with
the approval of this Committee, included stock, plans, supplemental executive
retirement plans and short term and long term incentive compensation plans for
members of senior management of the company, (iii) assessing the effectiveness
of succession planning relative to senior management of the Company, (iv) its
approval, review and oversight of benefit plans of the company, and (v) its
oversight of the performance and compensation of the Chief Executive Officer of
the company ("CEO:) and the other members of the Senior Management Team of the
Company.
Furthermore, the Committee will direct the production of all reports
that Securities and Exchange Commission rules require be included in the
company's annual proxy statement.
Membership
The Committee shall consist of at least three persons, all of whom are
members of the Board. Each member of the Committee shall satisfy the
independence requirements set forth in the corporate governance and other
listing standards of the New York Stock Exchange (the "NYSE Standards"). In
addition, each member of the Committee shall be a "non-employee director" as
defined by Rule 16b-3(b)(3) under the Exchange Act.
The Board shall elect the members of the Committee at the Board Meeting
(Annual Board Meeting) that is held immediately after the annual meeting of the
stockholders, and each Committee member shall serve until the date of the next
Annual Board Meeting unless he or she resigns, is removed or replaced or
otherwise ceases to be a director or member of the Committee prior to such date,
in which event the Board shall appoint another director to fill the resulting
vacancy for his or her unexpired term. Further, if for any reason the Board does
not elect the members to the Committee at an Annual Board Meeting, the directors
who then comprise the committee will continue to serve as members of the
Committee until the Board takes action to elect new members of the Committee.
The Board may remove or replace a member of the Committee at any time.
Operation
The Board (or the Committee) shall elect one of the members of the
Committee to act as chairperson of the Committee (the "Chairperson"). Such
member shall act as Chairperson until the next Annual Meeting unless prior
thereto he or she (x) resigns as Chairperson, (y) is removed or replaced by the
Board or (z) ceases to be a director, in which event the Board shall appoint
another member of the Committee to serve as Chairperson for the unexpired term.
The Chairperson shall preside over all meetings of the committee. In addition,
the Chairperson shall periodically report the Committee's findings and
conclusions to the Board.
The majority of the members of the Committee shall constitute a quorum.
The Committee shall meet as often as is appropriate but not less than
two times annually. The Committee shall maintain minutes of its meetings and
written records of its actions.
42
Duties & Responsibilities
To fulfill its purpose as described above, the Committee shall
have the following duties and responsibilities:
The Committee will review and approve for the CEO, for the
other members of the Senior Management team of the Company,
Annual base salary levels, annual incentive opportunity levels
and long-term incentive opportunity levels for each fiscal
year. In this regard, the Committee will review and approve
corporate goals and objectives related to compensation. In
addition, the Committee will take into account whether the
compensation is reasonably related to personal and corporate
performance and whether the goals of each compensation program
are compatible with external peer businesses.
The Committee will review Senior Management compensation
programs on a periodic basis to determine whether they are
properly coordinated and achieving their intended purposes. In
addition, The Committee will consider from time to time
whether to adopt compensation or benefit plans for Senior
Management which address matters relating to severance or
retirement provided that the benefits to be derived from those
programs are appropriately related to the overall benefit of
the Company are reasonable in amount and duration.
The Committee will review on a periodic basis all benefit
plans sponsored by the Company to determine whether they are
properly coordinated and achieving their intended purposes. In
addition, the Committee will consider, from time to time,
amendments to existing benefit plans and proposals for new
benefit plans, and if appropriate, recommend the same for
approval to the Board.
The Committee will review and assess on a periodic basis
succession planning with respect to senior management of the
Company.
The committee will review and assess the adequacy of this
charter annually and recommend any proposed changes to the
Board for approval.
The Committee will make periodic reports to the Board on the
work of the Committee.
The Committee will produce a compensation committee report on
executive compensation as required by the SEC and NYSE to be
included in the Company's annual proxy statement or annual
report on Form 10-K as filed with the SEC.
Annual Performance Evaluation of the Committee.
The Board will conduct an annual performance evaluation of the
Committee. The Board will conduct this evaluation in one or more separate
sessions at which members of the Committee shall not be in attendance. After
completing its annual performance evaluation of the Committee, the Board or a
representative thereof shall review such evaluation or a summary thereof with
the members of the Committee.
43
APPENDIX E
NOMINATING & CORPORATE GOVERNANCE COMMITTEE CHARTER
Nominating & Corporate Governance Committee: The primary responsibilities of the
Nominating & Corporate Governance Committee (the "Committee") are to (a)
determine the slate of director nominees for election to the Company's Board of
Directors, (b) identify and recommend candidates to fill vacancies occurring
between annual shareholder meetings, and (c) review, evaluate, and recommend
changes to the Company's Corporate Governance Guidelines. The Governance and
Nominating Committee's role includes periodic review of the compensation paid to
non-employee directors for annual retainers (including Board and committee
chairs) and meeting fees, if any, and making recommendations to the Board for
any adjustments. The specific responsibilities of the Nominating and Corporate
Governance Committee are delineated in the Nominating & Corporate Governance
Committee Charter. The Nominating & Corporate Governance Committee regularly
reviews the charters of Board committees and, after consultation with the
respective committee chairs, makes recommendations, if necessary, about changes
to the charters. The Committee will consider shareholder recommendations for
candidates for the Board, but only if they have held 5% or more of the
outstanding shares of the Company for more than one year. The name of any
recommended candidate for director, together with a brief biographical sketch, a
document indicating the candidate's willingness to serve, if elected, and
evidence of the nominating person's ownership of 5% or more of Company stock and
the date of acquisition should be sent to the attention of the Chairman of the
Governance & Nominating Committee, in care of the Company's corporate address.
There can be no more than one shareholder nominee on the proxy statement in any
given annual meeting.
MEMBERSHIP
----------
The membership of the Committee consists of at least three directors appointed
annually by the Board of Directors. Each member shall meet the experience
requirements of the listing standards of The New York Stock Exchange and
applicable laws and regulations. Each member will be free of any relationship
that, in the opinion of the Board, would interfere with his or her individual
exercise of independent judgment. Applicable laws and regulations will be
followed in evaluating a member's independence. The Board appoints the
chairperson and may remove any committee member for failure to attend regularly
called meetings or breaches of duty or care.
OPERATIONS
----------
The Committee meets at least two times a year and on as as-needed basis as
determined by the Chair. The Committee will cause to be kept adequate minutes of
all its proceedings, and will report its actions to the next meeting of the
Board. Committee members will be furnished with copies of the minutes of each
meeting and any action taken by unanimous consent. The Committee will be
governed by the same rules regarding meetings (including meetings by conference
telephone or similar communications equipment), action without meetings, notice,
waiver of notice, and quorum and voting requirements as are applicable to the
Board. The Committee is authorized and empowered to adopt its own rules of
procedure not inconsistent with (a) any provision hereof, (b) any provision of
the Bylaws of the Corporation, or (c) the laws of the state of Texas and may
delegate such actions it deems necessary to subcommittees. The Committee is also
empowered to retain or terminate any search firm to used to identify director
candidates, including sole authority to approve the search firm's fees and other
retention terms.
NOMINATING PROCESS
The Committee receives recommendations from management, the board and any
shareholder of prospective nominees as members of the Board, and will consider
each recommendation on an equal basis according to the criteria outlined below.
They can be oral or written recommendations. The Company has not utilized
outside search firms in the past for prospective candidates but the option is
clearly available to the Committee if they so choose to utilize that route for
candidates. The Committee will strive to have at least one or more candidates
screened to fill vacancies that may occur from time to time. The Committee will
request and review the resume of any of the
44
candidates based upon the following minimum qualifications;
1. Knowledge of the Company's industry
2. Proximity to corporate headquarters
3. Business and financial acumen,
4. Financial and personal stability
5. Ability to devote time and energy to regularly scheduled board and
committee meetings in person, and
6. Ability to meet Board requirement for the ownership of shares
The Board also interviews the candidates to ensure that they understand the duty
of loyalty and care required of directors to all shareholders of the Company
under the law of the state of incorporation of the Company. The Board looks for
candidates who are of the highest moral character, strong work ethic and a
commitment to timely attend all scheduled board meetings and committee meetings
in person. The Board deems it important that candidates have strong
interpersonal skills, the ability to understand and/or express complex issues in
a simple manner, and high integrity
The Board also requires that any Director must agree that he or she will tender
a resignation from the Board in the event of a material change in his or her
personal circumstances, including a change in principal job responsibilities
(other than a promotion with the director's current employer). The decision
whether to accept the resignation would be made by the Board, with a
recommendation from this Committee to accept or reject the resignation.
COMMUNICATIONS/REPORTING
------------------------
The Committee is expected to maintain free and open communication with
shareholders, Company employees, and the Company's management. This
communication will include periodic separate executive sessions with management
and employees on an as-needed basis.
Shareholders can communicate to the Committee through the Company's website in
the form of an email to a corporate email address, or through written
communications to the Committee chair in care of the Company's corporate
address. All such communications will be sent directly to the Committee chair
and will not be screened by the Company.
Shareholders wishing to submit the name of a candidate for the board of the
Company must submit a resume of the candidate, proof of ownership of 5% or more
of the Company's stock, and that they have held such stock at a 5% or more level
for more than one year from the date of their proposal. They must also consent
to have their name disclosed in the Proxy Statement. The failure to provide this
information will force the Committee to shelve consideration of the prospective
nominee.
EDUCATION
---------
The Company is responsible for providing the Committee with educational
resources related to current corporate governance issues, current legal topics
pertinent to the Company and other material as may be requested by the
Committee. The Company will assist the Committee in maintaining appropriate
corporate and legal literacy.
AUTHORITY
---------
The Committee will have the resources and authority necessary to discharge its
duties and responsibilities, including the authority to retain outside counsel
or other experts or consultants, as it deems appropriate. Any communications
between the Committee and legal counsel in the course of obtaining legal advice
will be considered privileged communications of the Company, and the Committee
will take all necessary steps to preserve the privileged nature of those
communications.
45
APPENDIX F
CORPORATE GOVERNANCE GUIDELINES
I. Director Qualification Standards: The Board of Directors (the "Board")
of Ennis Business Forms, Inc. ("Ennis") shall meet the following
requirements:
a. A majority of directors shall be independent, and the Audit,
The Compensation and Nominating and Corporate Governance
Committees are all composed entirely of independent directors.
Independence for these purposes shall mean the independence
requirements set forth in the Securities Exchange Act of 1934,
as amended, and the rules adopted by the Securities and
Exchange Commission hereunder and the corporate governance and
other listing standards of the New York Stock Exchange as in
effect from time to time.
b. Directors standing for re-election are reviewed for
performance, attendance, and ability to continue significant
contribution to the Board and committee assignments.
c. The Nominating and Corporate Governance Committee consider the
qualifications of all directors at the time a director is
recommended for election. Ennis seeks directors with the
following minimum qualifications:
1. Knowledge of the Company' industry
2. Proximity to corporate headquarters
3. Business and financial acumen
4. Financial and personal stability
5. Ability to devote time and energy to regularly scheduled
board and committee meeting in person, and
6. Ability to meet Board requirement for the ownership of
shares
Candidates should have the highest personal and professional
character and integrity that have outstanding records of
accomplishment in their chosen business or profession. These
persons should have demonstrated exceptional ability and
judgment and have substantial experience of relevance to the
Company. The Board also requires that candidates must
understand the duty of loyalty and care required of directors
to all shareholders under the law of the state of
incorporation of the Company. Although there is no fixed limit
on the number of other boards on which a director may serve,
board memberships are considered along with other time
commitments a prospective director may have and the effect
this may have on his or her ability to serve effectively on
the Ennis Board of Directors. These factors will also be
considered at the time of the annual performance evaluation of
the Board and Committees referred to below.
d. Each director must agree that he or she will tender a
resignation from the board in the event of a material change
in his or her personal circumstances, including a change in
principal job responsibilities (other than a promotion with
the director's current employer). The decision whether to
accept the resignation would be made by the Board, with a
recommendation from the Nominating and Corporate Governance
Committee.
II. Director Responsibilities: The business of Ennis Business Forms is
managed under the direction of the Board. The Board monitors management on
behalf of the shareholders. Among the Board's major responsibilities are:
a. Selection, compensation and evaluation of the Chief Executive
Officer and oversight of succession planning.
b. Assurance that processes are in place to promote compliance
with law and high standards of business ethics.
c. Oversight of Ennis's strategic planning
d. Approval of all material transactions and financings.
46
e. Understanding Ennis's financial statements and other
disclosures and evaluating and changing where necessary the
process for producing accurate and complete reporting.
f. Using its experience to advisee management on major issues
facing Ennis.
g. Evaluating the performance of the Board and its committees and
making appropriate changes where necessary
Directors are expected to maintain a good attendance record, and
familiarize themselves with any materials distributed prior to each Board or
committee meeting. All directors may place items on agendas for Board meetings.
The chair of the Committee clears agendas for the meeting of committees of the
Board, and committee members may place items on the Agenda.
The independent directors will meet immediately after all Board
meetings without management present. The Company has asked the chairs of each of
the committees to rotate as lead independent director, to preside at such
meetings.
The non-employee directors, through the rotating chair, can set their
own agenda, maintain minutes and report back to the board as a whole. This
meeting does not take the place of the normal board meeting and can serve as a
committee of the whole of non-employee directors. The presiding chair may report
back to the board as a whole on the topics and issues discussed at this meeting.
It is possible that the presiding chair could
>> Make recommendations to the full Board regarding the structure
of Board meetings
>> Recommend matters for consideration by the full Board
>> Place additional items on the future board agenda's in
collaboration with the Chief Executive Officer
>> Recommend additional appropriate materials to be provided to
the directors
>> Recommend tasks to the appropriate committees
>> With the help of the Nominating and Corporate Governance
Committee, oversee the annual evaluation of the Board and its
committees.
III. Director Access to Management and Independent Advisors: All directors
are able to directly contact members of management, including, in the case of
the Audit Committee, direct access to the head of internal audit. Broad
management participation is encouraged in presentations to the Board, and
executive management frequently meet with Board members on an individual basis.
The Board and its Committees are empowered to hire at Company expense their own
financial, legal and other experts to assist them in addressing matters of
importance to the Corporation.
IV. Non-Employee Director Compensation: The amount and type of compensation
for the Company's non-employee directors will now be recommended by the
Nominating and Corporate Governance Committee, which develops its recommendation
from a review of practices at similarly situated companies and the Company's
peer group based upon recent proxy statements. The recommendation would be made
and approved by the Board. Currently each non-employee director of the Company
receives an annual grant of 5,000 shares of stock options and 10,000 stock
option shares when they join the Board. In addition, non-employee directors
received a retainer fee of $18,000 and $2,000 for each meeting attended. Each
Committee Chair receives an annual committee chair retainer of $6,000 and
non-employee directors receive $1,500 for each committee meeting attended.
47
V. Director Orientation and Continuing Education: Directors are provided
extensive material regarding Ennis upon their initial election to the Board,
including a binder containing information regarding Ennis and its policies and
various administrative and legal matters. Other orientation procedures include
meetings with senior executives of the Company is its major business units.
Board meetings are occasionally held outside the corporate office to permit
directors to visit operating locations of Ennis subsidiaries.
VI. Evaluation of the Board and its Committees: The Nominating and
Corporate Governance Committee is establishing an annual evaluation of the
effectiveness of the Board and each Committee, and oversees the composition,
organization (including its Committee structure, membership and leadership)
practices of the Board.
VII. Management Compensation, Evaluation and Succession: The Board provides
annual goals for the Chief Executive Officer and the Compensation Committee
evaluates the CEO's performance, including his or her success in achieving these
goals, in setting compensation. The Board recognizes that the selection of the
CEO and the oversight of succession planning are among the most important duties
of the Board. The Compensation Committee evaluates the form and amount of
compensation of Ennis's senior management, and provides a report thereon
annually in the proxy statement.
VIII. Board Committees: There are three standing committees of the Board, to
wit: the Compensation Committee, the Audit Committee, and the Nominating and
Corporate Governance Committee. Other committees can be created at the
discretion of the Board, including ad hoc committees established for specific
concerns or issues confronting the Board. The Board appoints the Committee
members and Committee Chairs after some consultation among the retiring chair,
the Chairman and other members of the Board. The consultations generally address
the skill-sets needed, desire to serve on a particular committee, and ability to
commit the necessary time for a particular committee as a means of placing the
appropriate directors in their respective committees. The committee members and
committee chairs are appointed in the first directors meeting following the
annual meeting of shareholders.
IX. Evaluation of Corporate Governance Guidelines: Annually, the Nominating
and Corporate Governance Committee reviews these Guidelines and recommends
changes to the Board if appropriate.
X. Stockholder Ratification of Independent Auditors: At the Annual Meeting
each year, the holders of the Company's Common Stock will be given the
opportunity to vote on whether to ratify the selection of independent auditors
for the following fiscal year.
48
APPENDIX G
CODE OF PROFESSIONAL CONDUCT FOR CORPORATE OFFICERS
Ennis Business Forms, Inc.
Code of Professional Conduct for Corporate Officers
Our Commitment: Integrity in All Our Interactions
-------------------------------------------------
Compliance with the Standards of Business Conduct
The Ennis Business Forms Standards of Business Conduct are a general guide to
the company's standards of business practices and regulatory compliance. Its
requirements apply to Ennis Business Forms, to all subsidiaries, or affiliates
in which Ennis Business Forms Corporation directly or indirectly owns more than
50 percent of the voting control ("Controlled Affiliates"), and to all
directors, officers, and employees of each. All references to "Ennis Business
Forms" include Ennis Business Forms and all Controlled Affiliates unless
otherwise specified. All references to "employees" include directors, officers,
and employees of Ennis Business Forms and it subsidiaries or affiliates.
Failure to read and/or acknowledge the Standards of Business Conduct does not
exempt an employee from his/her responsibility to comply with the Standards of
Business Conduct, applicable laws, regulations, and all Ennis Business Forms
policies and guidelines that are related to his/her job.
Ennis Business Forms is a national company, and our business operations are
subject to the laws of many different states. Ennis Business Forms employees
doing business nationally must comply with all applicable laws and regulations
and uphold the Standards of Business Conduct at all times. Cultural differences
or local laws and customs may require a different interpretation of our
Standards. If this situation arises, always consult your manager, Law and
Corporate Affairs, or the Director of Compliance before taking any action.
The Standards are not intended to and do not create an employment contract, and
do not create any contractual rights between Ennis Business Forms and its
employees or create any express or implied promise for specific treatment in
specific situations. Your employment relationship with Ennis Business Forms can
be terminated at any time for any reason with or without cause unless otherwise
required by local laws in other states or a written contract signed by a vice
president.
Our Commitment: Integrity in All Our Interactions
Each day we interact with a variety of individuals and groups--including our
customers, partners, competitors, co-workers, shareholders, vendors, government
and regulatory agencies, and the communities in which we operate. We are
committed to interacting with all of these audiences in a respectful, ethical
manner and in full compliance with all regulatory requirements.
Ennis Business Forms' Standards of Business Conduct
We manage our business in full compliance with all laws and regulatory
requirements.
Regulatory Compliance: We are aware of and strictly obey the laws and
regulations that govern the management of our business. We are responsible for
understanding these laws and regulations as they apply to our jobs and for
preventing, detecting, and reporting instances of non-compliance to a member of
Ennis Business Forms executive management, Human Resources, and/or the Solutions
Group managers.
49
There are no circumstances at Ennis Business Forms that would allow us to
disregard any law or regulatory requirement in the conduct of our business, and
no such activity will be tolerated.
-------------------------------------
We manage our business in full
compliance with all laws and
regulatory requirements.
-------------------------------------
Lobbying: We recognize our right and responsibility to lobby on behalf of issues
that affect our company and business operations. We conduct our lobbying
activities in full compliance with the laws and regulations governing these
activities.
Political Activities and Contributions: Ennis Business Forms employees are
encouraged to exercise their right to participate in political activities. Any
decision to become involved is entirely personal and voluntary. Employees'
political activities are done on their own time and with their own resources. We
do not represent ourselves as acting on behalf of and/or speaking for Ennis
Business Forms without permission from the CEO.
Regulatory Investigations, Inspections, and Inquiries: We are direct, honest,
and truthful in our discussions with regulatory agency representatives and
government officials. During investigations, inspections, and inquiries we work
with Ennis Business Forms' CEO and cooperate by responding to appropriate
requests for information provided that the proper documentation or request for
documentation has been provided by the regulatory agency.
National Business Activities: Ennis Business Forms acknowledges and respects the
diverse cultures, customs, and business practices it encounters in the national
marketplace. Ennis Business Forms will comply with both the applicable U.S. laws
and regulations that govern its operations and local laws wherever it does
business.
Anti-Boycott Requirements: Ennis Business Forms complies with U.S. law that
prohibits participation in international boycotts that are not sanctioned by the
U.S. government.
Fair Competition and Antitrust: As a national business, we encounter laws and
regulations designed to promote fair competition and encourage ethical and legal
behavior among competitors. Antitrust laws and fair competition laws generally
prohibit any activity that restrains free trade and limits competition. We
conduct our business in full compliance with these laws.
We build and maintain the trust and respect of our customers, consumers,
partners, and shareholders.
Responsible Leadership: We manage our business responsibly in order to maintain
the confidence, respect, and trust of our customers, consumers, partners,
shareholders, and other audiences. We are committed to acting with integrity,
investing in new product development, being responsive and accountable to our
customers and partners, and remaining a leader in our field. We understand the
responsibility that comes with being a national leader in financial,
promotional, and printing solutions and accept our unique role in both our
industry and the American business community.
-------------------------------------
We build and maintain the trust
and respect of our customers,
consumers, partners,
and shareholders.
-------------------------------------
Product and Service Quality: Ennis Business Forms' products and solutions are
developed and managed to meet the expectations of our customers, consumers, and
partners for high quality and exceptional service. We continually seek new ways
to improve our products, service, and responsiveness.
50
Communication: We establish and maintain clear, honest, and open communications;
listen carefully; and build our relationships on trust, respect, and mutual
understanding. We are accountable and responsive to the needs of our customers,
consumers, and partners and take our commitments to them seriously. Our
advertising, sales, and promotional literature seeks to be truthful, accurate,
and free from false claims. We provide our shareholders with timely and
appropriate information subject only to competitive and legal constraints.
Obtaining Competitive Information: Ennis Business Forms has an obligation, and
is entitled, to keep up with developments in our industry, including obtaining
information about our competitors. We obtain information about our competitors
through honest, ethical, and legal methods.
Fair Information Practices: Our business is built around providing forms,
promotional and financial solutions through information provided to us by our
customers, and we treat that information with confidentiality and integrity. We
are committed to creating a trustworthy environment for Internet users, and
continually striving to protect their online privacy is at the core of this
commitment. We have adopted privacy practices, developed technological solutions
to empower individuals to help protect their online privacy, and continue to
educate customers about how they can use these tools to manage their personally
identifiable information while they use the Internet.
Vendors: Ennis Business Forms vendors must adhere to the highest standards of
ethical behavior and regulatory compliance and operate in the best interest of
Ennis Business Forms. Vendors are expected to provide high-quality services and
products while maintaining flexibility and cost-effectiveness. All vendors can
access and read the Ennis Business Forms Code of Conduct on our website and,
when appropriate, train their employees and representatives to ensure that they
are aware of Ennis Business Forms' expectations regarding their behavior. We do
not engage in any unethical or illegal conduct with our vendors. We do not allow
our employees to accept incentives such as kickbacks or bribes in return for
conducting business with them.
We are responsible stewards in the use, protection, and management of Ennis
Business Forms' assets.
Financial Integrity: We honestly and accurately record and report all business
information. We comply with all local, state, and federal laws regarding record
completion and accuracy. We require that all financial transactions are executed
in accordance with management's authorization, and are recorded in a proper
manner in order to maintain accountability for Ennis Business Forms' assets. Our
financial information reflects only actual transactions and is in compliance
with Ennis Business Forms and other applicable accounting practices.
-------------------------------------
We are responsible stewards in
the use, protection, and
management of Ennis Business
Forms' assets.
-------------------------------------
Use and Protection of Assets: We wisely use and protect the assets of the
company, including property (both physical and intellectual), supplies,
consumables, and equipment. We use these assets exclusively for Ennis Business
Forms' business purposes.
Fiscal Responsibility: Ennis Business Forms employees exercise good stewardship
over and spend Ennis Business Forms' funds in a responsible manner.
Use of Information Technology: Use of company-provided information technology
and systems and access to its contents are authorized for legitimate Ennis
Business Forms business-related purposes. At all times, we should use good
judgment and common sense; conduct ourselves ethically, lawfully, and
professionally; and strictly follow all authorization protocols while accessing
and using company-provided information technology and its contents. In using
these company assets and systems, we do not create, access, store, print,
solicit, or send any material that is intimidating, harassing, threatening,
abusive, sexually explicit, or otherwise offensive or inappropriate, nor do we
send any false, derogatory, or malicious communications.
51
Intellectual Property: We comply with the laws and regulations that govern the
rights to and protection of our own and others' copyrights, trademarks, patents,
trade secrets, and other forms of intellectual property.
Creation, Retention, and Disposal of Records and Information Assets: We create,
retain, and dispose of our business records and information assets, both written
and electronic, as part of our normal course of business in full compliance with
all Ennis Business Forms policies and guidelines, and all regulatory and legal
requirements.
Confidential and Proprietary Information: We respect our ethical and legal
responsibilities to protect Ennis Business Forms' confidential and proprietary
non-public information and communicate it only as necessary to conduct Ennis
Business Forms' business. We do not use this information for our personal
advantage or for non-Ennis Business Forms business use, and maintain this
confidentiality even after Ennis Business Forms no longer employs us.
Third-Party Software: We use software and other content information only in
accordance with their associated licenses and/or terms of use. We prohibit the
making or using of copies of non-licensed copyrighted material, including
software, documentation, graphics, photographs, clip art, animation, movie/video
clips, sound, and music.
Insider Information and Securities Trading: In the course of doing business for
Ennis Business Forms or in discussions with one of its customers, vendors, or
partners, we may become aware of material non-public information about that
organization. Information is considered "material" if it might be used by an
investor to make a decision to trade in the public securities of the company.
Individuals who have access to this type of information are called "insiders."
We only discuss this information on a limited, strict "need to know" basis
internally, and do not share it with anyone outside Ennis Business Forms. We do
not buy or sell the public securities of a company, including our own, if we
have such information, and we do not share ("tip") this information with others.
Because of the extremely sensitive nature of and severe penalties associated
with "insider trading" and "tipping," contact Ennis Business Forms' CFO before
you buy or sell public securities in situations that could be of this nature.
Conflicts of Interest: Ennis Business Forms employees are expected to act at all
times in Ennis Business Forms' best interests and to exercise sound judgment
unclouded by personal interests or divided loyalties. Both in the performance of
our duties for Ennis Business Forms and our outside activities, we seek to avoid
the appearance of, as well as an actual, conflict of interest.
-------------------------------------
We promote a diverse,
cooperative, and productive
work environment.
-------------------------------------
Gifts and Entertainment: Ennis Business Forms policy and practice encourage the
use of good judgment, discretion, and moderation when giving or accepting gifts
or entertainment in business settings. Gift giving and entertainment practices
may vary in different cultures; however, any gifts and entertainment given or
received must be in compliance with law, must not violate the giver and/or
receiver's policies on the matter, and be consistent with local custom and
practice. We do not solicit gifts, entertainment, or favors of any value on an
individual basis from persons or firms with which Ennis Business Forms actually
or potentially does business. Nor do we act in a manner that would place any
vendor or customer in a position where he/she may feel obligated to make a gift,
provide entertainment, or provide personal favors to individual employees or
officers in order to do business or continue to do business with Ennis Business
Forms.
Purchasing Decisions and Practices: In our purchasing decisions, negotiations,
contract development, and contract administration we comply with the applicable
laws and regulations that govern those relationships.
We promote a cooperative, and productive work environment.
Openness, Honesty, and Respect: In our relationships with each other, we strive
to be open, honest, and respectful in sharing our ideas and thoughts, and in
receiving input.
52
-------------------------------------
We are responsible,
caring members of the
local community.
-------------------------------------
Equal Employment Opportunity: Ennis Business Forms promotes a cooperative and
productive work environment by supporting the cultural and ethnic diversity of
its workforce and is committed to providing equal employment opportunity to all
qualified employees and applicants. We do not unlawfully discriminate on the
basis of race, color, sex, sexual orientation, religion, national origin,
marital status, age, disability, or veteran status in any personnel practice,
including recruitment, hiring, training, promotion, and discipline. We take
allegations of harassment and unlawful discrimination seriously and address all
such concerns that are raised regarding this policy.
Safety and Health: A safe and clean work environment is important to the well
being of all Ennis Business Forms employees. Ennis Business Forms complies with
applicable safety and health regulations and appropriate practices.
We are responsible, caring members of the American community.
Citizenship and Community Service: We have a strong commitment to the
improvement of society as well as the communities we serve and in which we
operate. We encourage the support of charitable, civic, educational, and
cultural causes by our employees. Our contributions could include volunteer
employee and management time, and other forms of assistance.
Respect for the Environment: Ennis Business Forms respects the environment and
protects our natural resources. We comply with all laws and regulations
regarding the use and preservation of our land, air, and water.
53
DIRECTIONS TO ENNIS 2004 ANNUAL MEETING
--------------------------------------------------------------------------------
If traveling from the North on I-35:
If on I-35, travel South to US Hwy 287 (Ft. Worth exit). Take 287 to 14th St. in
Midlothian; turn left on to 14th; continue until it T's into Mt. Zion Rd.; turn
left and go approximately one block to Community Circle Drive; turn left and go
to the second building which is the larger of the two.
If traveling from the North on US Hwy 67:
If using US Hwy 67, travel South to Hwy 287S. Continue on 287 to 14th St. in
Midlothian; turn right and follow 14th St. until it T's into Mt. Zion Rd.; turn
left and go approximately one block to Community Circle Drive; turn left and go
to the second building which is the larger of the two.
If traveling from the East:
If traveling from the East take US Hwy 287 into Midlothian. Turn left on 14th;
continue until it T's into Mt. Zion Rd.; turn left and go approximately one
block to Community Circle Drive; turn left and go to the second building which
is the larger of the two.
If traveling from the West:
If traveling from the West, take US Hwy 287S into Midlothian. Turn right and
follow 14th St. until it T's into Mt. Zion Rd.; turn left and go approximately
one block to Community Circle Drive; turn left and go to the second building
which is the larger of the two.
If traveling from the South:
If traveling from the South, you have the option of I-35E or I-35W. If I-35W,
travel North to US Hwy 67N to US Hwy 287S. Turn right and continue to 14th St.
until it T's into Mt. Zion Rd.; turn left and go approximately one block to
Community Circle Drive; turn left and go to the second building which is the
larger of the two. If I-35E, go North to US Hwy 287N (Ft. Worth Exit) and go to
14th St. in Midlothian; turn left on 14th; continue until it T's into Mt. Zion
Rd.; turn left and go approximately one block to Community Circle Drive; turn
left and go to the second building which is the larger of the two.
[GRAPHIC MAP OMITTED]
--------------------------------------------------------------------------------
Proxy - Ennis Business Forms, Inc.
--------------------------------------------------------------------------------
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Keith S. Walters, Ronald M. Graham and Harve
Cathey, or any one or more of them, as Proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote, as
designated on the reverse side, all the shares of common stock of Ennis Business
Forms, Inc. held of record by the undersigned at the close of business on April
15, 2004 at the Annual Meeting of Shareholders to be held June 17, 2004 or any
adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed and dated on the other side)
--------------------------------------------------------------------------------
Proxy - Ennis Business Forms, Inc.
--------------------------------------------------------------------------------
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Keith S. Walters, Ronald M. Graham and Harve
Cathey, or any one or more of them, as Proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote, as
designated on the reverse side, all the shares of common stock of Ennis Business
Forms, Inc. held of record by the undersigned at the close of business on April
15, 2004 at the Annual Meeting of Shareholders to be held June 17, 2004 or any
adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed and dated on the other side)
Ennis Business Forms, Inc. 000000 0000000000 0 0000
000000000.000 ext
000000000.000 ext
000000000.000 ext
000000000.000 ext
MR A SAMPLE 000000000.000 ext
DESIGNATION (IF ANY) 000000000.000 ext
ADD 1 000000000.000 ext
ADD 2
ADD 3
ADD 4
ADD 5
ADD 6 C 1234567890 J N T
[ ] Mark this box with an X if you have made
changes to your name or address details
above.
--------------------------------------------------------------------------------
Annual Meeting Proxy Card
--------------------------------------------------------------------------------
A Election of Directors for Term Ending in 2007
1. The Board of Directors recommends a vote FOR the listed nominees.
For Against Abstain
01 - Harold W. Hartley [ ] [ ] [ ]
02 - Kenneth G. Pritchett [ ] [ ] [ ]
03 - James C. Taylor [ ] [ ] [ ]
B Issues
The Board of Directors recommends a vote FOR the following proposals.
For Against Abstain
2. To approve the 2004 Long-Term Incentive Plan. [ ] [ ] [ ] This proxy when properly executed will be
voted in the manner directed herein by the
3. To consider and vote on a proposal to amend the [ ] [ ] [ ] undersigned shareholder. If no direction is
Articles of Incorporation to change the name of made, this proxy will be voted for Proposals
the Company to Ennis, Inc. 1, 2, 3 and in the Proxies' discretion on
matters arising under 4. This proxy confers
4. In their discretion, the Proxies are authorized [ ] [ ] [ ]. discretionary authority upon the Proxies to
to vote upon such other business as may properly cumulate votes for the election of the
come before the meeting. nominees for which proxy authority is given if
(a) cumulative voting is then in effect, (b)
additional persons are nominated and (c) such
Proxies determine that such action is
necessary to elect as many of management's
nominees as possible.
C Authorized Signatures - Sign Here - This section must be completed for your instructions to be executed.
Please sign exactly as name appears above. When shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, etc., 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.
Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)
-------------------------------------------------- -------------------------------------------------- ----------------
| | | | | |
| | | | | / / |
| | | | | |
-------------------------------------------------- -------------------------------------------------- ----------------
1 U P X H H H P P P P 003277