SCHEDULE 14A INFORMATION
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Check the appropriate box:
[_] Preliminary Proxy Statement
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COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
WORKFLOW MANAGEMENT, INC.
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[WORKFLOW MANAGEMENT, INC. LOGO]
September 27, 2002
Dear Fellow Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of Stockholders
of Workflow Management, Inc. (the "Company") to be held on Monday, October 28,
2002, at 9:30 a.m., Eastern Time, at the Hilton Palm Beach Airport Hotel, 150
Australian Avenue, West Palm Beach, Florida 33406. The accompanying Notice and
Proxy Statement describe the items of business to be considered at the Annual
Meeting. Please read these documents carefully.
Specifically, you will be asked to consider and approve two items of
business: (i) the election of ten directors, each of whom will serve a one-year
term and until their successors are duly elected and qualified and (ii) the
ratification of the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for the 2003 fiscal year. The Board of Directors encourages
you to read carefully the enclosed Proxy Statement and to VOTE FOR all the
matters to be considered at the Annual Meeting.
We hope you can attend the Annual Meeting. Whether or not you plan to
attend, please complete, sign, and date the enclosed Proxy card and return it
promptly in the enclosed envelope. Your vote is important regardless of the
number of shares you own. We look forward to seeing you at the Annual Meeting,
and we appreciate your continued loyalty and support.
Sincerely,
WORKFLOW MANAGEMENT, INC.
/s/ Thomas B. D'Agostino, Sr.
Thomas B. D'Agostino, Sr.
Chairman of the Board,
President and Chief Executive Officer
WORKFLOW MANAGEMENT, INC.
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 28, 2002
To Our Stockholders:
The 2002 Annual Meeting of Stockholders of Workflow Management, Inc. (the
"Company") will be held on Monday, October 28, 2002, at 9:30 a.m., Eastern Time,
at the Hilton Palm Beach Airport Hotel, 150 Australian Avenue, West Palm Beach,
Florida 33406, for the following purposes:
1. To consider and vote upon the election of ten directors to serve a
one-year term and until their successors are duly elected and
qualified.
2. To consider and vote upon the ratification of the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors
for the 2003 fiscal year.
3. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on September 12, 2002, will
be entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. The Board of Directors of the Company recommends that stockholders vote
FOR approval of each of the items indicated in 1. and 2. above.
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR THROUGH YOUR PROXY.
By Order of the Board of Directors,
/s/ Michael L. Schmickle
Michael L. Schmickle
Secretary
September 27, 2002
PROXY STATEMENT
This Proxy Statement and the enclosed proxy card ("Proxy") are furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of Workflow Management, Inc. (the "Company") to be voted at the 2002 Annual
Meeting of Stockholders (the "Annual Meeting") to be held on Monday, October 28,
2002, at 9:30 a.m., Eastern Time, at the Hilton Palm Beach Airport Hotel, 150
Australian Avenue, West Palm Beach, Florida 33406, and at any adjournments of
the Annual Meeting, for the purposes set forth in the accompanying Notice of
Meeting.
Only stockholders of record at the close of business on September 12, 2002
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
We intend to mail this Proxy Statement and the accompanying Proxy on or about
September 27, 2002.
REVOCABILITY OF PROXY
Execution of the enclosed Proxy will not affect a stockholder's right to
attend the Annual Meeting and vote in person. If your Proxy is properly signed,
received by the Company and not revoked by you, the shares to which it pertains
will be voted at the Annual Meeting in accordance with your instructions. If a
stockholder does not return a signed Proxy, his or her shares cannot be voted by
proxy.
SOLICITATION OF PROXIES
The cost of soliciting Proxies will be borne by the Company. The Company
has retained D.F. King & Co., Inc., 77 Water Street, New York, New York
10005-4495, to assist in the solicitation of Proxies and the counting of Proxies
for a fee of approximately $3,500 plus out of pocket expenses. In addition to
solicitation by mail, we will request banks, brokers and other custodians,
nominees and fiduciaries to send proxy materials to the beneficial owners of our
common stock ("Common Stock" or "Company Common Stock") and to secure their
voting instructions if necessary. The Company, upon request, will reimburse them
for their expenses in so doing. Officers and regular employees of the Company
may solicit Proxies personally, by telephone or by telegram from some
stockholders if Proxies are not received promptly, for which no additional
compensation will be paid.
VOTING SHARES AND VOTE REQUIRED
On the Record Date, the Company had 13,180,489 shares of Common Stock
outstanding. Each share of Common Stock is entitled to one vote on each matter
presented at the Annual Meeting. Under the laws of Delaware, the Company's state
of incorporation, shares present in person or represented by Proxy and entitled
to vote are determinative of the outcome of the matter subject to vote.
Directors are elected by a plurality of shares of Common Stock present in person
or represented by proxy and entitled to vote at the Annual Meeting. The
affirmative vote of a majority of shares of Common Stock present in person or
represented by proxy and entitled to vote at the Annual Meeting is required to
ratify the appointment of auditors. We will count
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abstentions, broker non-votes, and withheld votes in determining whether a
quorum exists for the transaction of business at the Annual Meeting. Abstentions
and withheld votes will be, but broker non-votes will not be, considered shares
present in person or represented by proxy based on the Company's understanding
of state law requirements and the Company's Certificate of Incorporation and
Bylaws.
All stockholder meeting proxies, ballots and tabulations that identify
individual stockholders are kept secret and no such document shall be available
for examination, nor shall the identity or the vote of any stockholder be
disclosed except as may be necessary to meet legal requirements and the laws of
Delaware. Votes will be counted and certified by the inspectors of election,
Michael L. Schmickle and James E. Hurley, as required under Delaware law.
Unless specified otherwise, Proxies will be voted (i) FOR the election of
the ten nominees to serve as directors of the Company for a one-year term and
until their successors are duly elected and qualified and (ii) FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for the 2003 fiscal year. In the discretion of the Proxy
holders, the Proxies will also be voted for or against such other matters as may
properly come before the Annual Meeting. Management is not aware of any other
matters to be presented for action at the Annual Meeting.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of September 12, 2002,
relating to the beneficial ownership of the Company's Common Stock by (i) each
of the Company's director-nominees and named executive officers who own Common
Stock, (ii) all of the Company's director-nominees and executive officers as a
group, and (iii) any other person known by the Company to own beneficially 5% or
more of the Company's Common Stock. For purposes of the table, a named executive
officer is any individual for whom compensation information is provided in the
"Summary Compensation Table" appearing elsewhere in this Proxy Statement,
regardless of whether such person is currently employed by the Company. Except
as otherwise set forth below, the Company is not aware of any person or group of
affiliated persons who owns more than 5% of the Common Stock of the Company. All
of the Company's director-nominees and named executive officers receive mail at
the Company's principal executive offices at 240 Royal Palm Way, Palm Beach,
Florida 33480.
Number of Shares
Name of Beneficial Owner Beneficially Owned(1) Percent of Class(1)
------------------------- ---------------------- -------------------
Directors
Thomas A. Brown, Sr.(2)......... 97,890 * %
Gus J. James, II(3)............. 86,890 *
Gerald F. Mahoney............... 1,000 *
James J. Maiwurm(4)............. 67,390 *
Roger J. Pearson(5)............. 68,556 *
Peter S. Redding................ -- --
F. Craig Wilson(6).............. 83,890 *
4
Executive Officers
Thomas B. D'Agostino, Sr.(7).... 1,557,081 10.84
Thomas B. D'Agostino, Jr.(8).... 338,840 2.52
Steve R. Gibson(9).............. 355,607 2.66
Michael L. Schmickle(10)........ 168,105 1.26
Claudia S. Amlie(11)............ 205,343 1.54
All Directors and Executive
Officers as a Group
(12 people)(12)............... 3,030,592 19.83%
Benson & Associates LLC(13)..... 718,000 5.45
Dimensional Fund Advisors,
Inc.(14)...................... 685,100 5.20
Jonathan J. Ledecky(15)......... 1,345,495 9.42
---------------
* Less than 1% ownership
(1) The number of shares of Common Stock deemed outstanding as of September 12,
2002 includes (i) 13,180,489 shares of Common Stock outstanding, (ii) an
aggregate of 30,606 warrants exercisable at a nominal cost, issued in
connection with the repayment of our subordinated debt, and (iii) an
aggregate of 3,170,647 shares issuable pursuant to options held by the
respective person or group which are presently exercisable or which may be
exercised within 60 days after September 12, 2002, as set forth below.
Pursuant to the rules of the Securities and Exchange Commission, the
subordinated debt warrants and presently exercisable options are deemed to
be outstanding and to be beneficially owned by the person or group holding
such options or warrants for the purpose of computing the percentage
ownership of such person or group, but are not treated as outstanding for
the purpose of computing the percentage of ownership of any other person or
group.
(2) Includes 34,741 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Stock Loan Program
(as defined below) and options to purchase 45,000 shares that are currently
exercisable.
(3) Includes 34,741 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Stock Loan Program
and options to purchase 45,000 shares that are currently exercisable.
(4) Includes options to purchase 30,000 shares that are currently exercisable.
(5) Includes options to purchase 45,000 shares that are currently exercisable.
(6) Includes 34,741 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Stock Loan Program
and options to purchase 45,000 shares that are currently exercisable.
(7) Includes 324,545 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Stock Loan Program,
options to purchase 1,150,630 shares that are currently exercisable and
30,606 subordinated debt warrants.
(8) Includes 83,033 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Stock Loan Program
and options to purchase 246,875 shares that are currently exercisable.
(9) Includes 144,607 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Stock Loan Program
and options to purchase 210,000 shares that are currently exercisable.
(10) Includes 33,211 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Stock Loan Program
and options to purchase 131,247 shares that are currently exercisable.
(11) Includes 80,343 shares purchased with proceeds of an unsecured, full
recourse loan granted by the Company pursuant to the Stock Loan Program
and options to purchase 125,000 shares that are currently exercisable.
(12) Includes the information in the notes herein, as applicable. Reflects (i)
926,234 shares held of record of which 804,703 shares were purchased with
proceeds of unsecured, full recourse loans granted by us pursuant to the
Stock Loan Program, (ii) 30,606 subordinated debt warrants, and (iii)
2,073,752 shares subject to presently exercisable options.
(13) Based on the most recently filed Schedule 13G filed by the beneficial
owner with the Securities and Exchange Commission.
(14) Based on the most recently filed Schedule 13G filed by the beneficial
owner with the Securities and Exchange Commission.
(15) Includes options to purchase 1,096,895 shares that are currently
exercisable which were granted to Mr. Ledecky in connection with his
service as a former director and employee of Workflow.
5
PROPOSAL 1. ELECTION OF DIRECTORS
All directors are elected for a one-year term and until their successors
are duly elected and qualified. The persons nominated for election were selected
by the existing Board of Directors. The Board of Directors recommends that the
following ten nominees be elected as directors: Thomas A. Brown, Sr.; Thomas B.
D'Agostino, Sr.; Thomas B. D'Agostino, Jr.; Steve R. Gibson; Gus J. James, II;
Gerald F. Mahoney, James J. Maiwurm; Roger J. Pearson; Peter S. Redding, and F.
Craig Wilson. Proxies received will be voted for the election of such nominees
unless marked to the contrary. A stockholder who desires to withhold voting of
the Proxy for all or one or more of the nominees may so indicate on the Proxy.
All of the nominees except Messrs. Mahoney and Redding are currently members of
the Board of Directors and all nominees have consented to be named and have
indicated their intent to serve if elected. If any nominee becomes unable to
serve, an event which is not anticipated, the Proxy will be voted for a
substitute nominee to be designated by the Board of Directors, or the number of
directors will be reduced. For information regarding the Company's Bylaw
provisions that govern stockholder nominations of director candidates, see
"Submission of Proposals and Other Matters Related to 2003 Annual Meeting"
elsewhere in this Proxy Statement.
Names of Nominees and Committee Memberships
The following table sets forth the name, age, date of first election to the
Board of Directors and Committee membership information for each nominee:
Director Audit Compensation Investment
Name Age Since Committee Committee Committee
---- --- -------- --------- ------------ -----------
Thomas A. Brown, Sr. 60 04/29/98 X X
Thomas B. D'Agostino, Sr. 59 04/29/98 X
Thomas B. D'Agostino, Jr. 35 09/09/99 X
Steve R. Gibson 43 09/09/99 X
Gus J. James, II 63 04/29/98 X X
Gerald F. Mahoney 59 -
James J. Maiwurm 53 09/09/99 X
Roger J. Pearson 56 07/28/98 X X
Peter S. Redding 64 -
F. Craig Wilson 52 04/29/98 X
The Audit Committee is empowered by the Board of Directors to, among other
things, recommend the firm to be employed by the Company as its independent
auditor and to consult with such auditor regarding audits and the adequacy of
internal accounting controls and financial management practices. The Audit
Committee held three meetings in the Company's fiscal year ended April 30, 2002
("Fiscal 2002"). Mr. Pearson serves as the Chairman of the Audit Committee.
6
The Compensation Committee is empowered by the Board of Directors to (i)
approve the salaries, bonuses, if any, and benefits for executive officers, (ii)
determine the persons to whom stock options are granted, if any, the number of
shares subject to options and the appropriate vesting schedule, and (iii) review
and approve employee benefit plans. The Compensation Committee also recommends
to the Company's Board of Directors the compensation to be paid directors. The
Compensation Committee held three meetings in Fiscal 2002. Mr. Brown serves as
the Chairman of the Compensation Committee.
The Investment Committee reviews all of the Company's proposed acquisitions
and is empowered by the Board of Directors to approve acquisitions with a
purchase price of up to $10,000,000. The Investment Committee also reviews and
recommends to the Company's Board of Directors other investments made by the
Company. The Investment Committee held one meeting in Fiscal 2002. Mr. James
serves as the Chairman of the Investment Committee.
The Nominating Committee may nominate persons to serve on the Company's
Board of Directors to be elected by stockholders at the Annual Meeting. The
Nominating Committee is currently comprised of Messrs. D'Agostino, Sr. and
James. Although the Nominating Committee did meet one time during Fiscal 2002 to
select the director-nominees for the Company's 2001 Annual Meeting, the full
Board of Directors, and not the Nominating Committee met to discuss the
nomination of persons to serve on the Company's Board of Directors to be elected
by the stockholders at the 2002 Annual Meeting. The Nominating Committee will
consider nominees recommended by stockholders, subject to the Company's Bylaw
provisions that govern stockholder nominations of Directors. Mr. D'Agostino, Sr.
serves as the Chairman of the Nominating Committee. See "Submission of Proposals
and Other Matters Related to 2003 Annual Meeting" elsewhere in this Proxy
Statement.
During Fiscal 2002, the Board of Directors formed a Special Committee
comprised of independent members of the Board of Directors. The Special
Committee is empowered to actively consider various restructuring and other
strategic and financial alternatives. The Special Committee met eight times
during Fiscal 2002. Mr. Maiwurm serves as the Chairman of the Special Committee.
Background and Experience
The following information relates to the business background of the ten
director-nominees. There is no arrangement or understanding between any
director-nominees and any other person pursuant to which a director-nominee was
selected. Thomas B. D'Agostino, Jr. is the son of Thomas B. D'Agostino, Sr.
There are no other family relationships among any of the other
director-nominees.
Thomas A. Brown, Sr. served as the Vice
President-Purchasing/Sourcing/Logistics of Pfizer, Inc., a large pharmaceutical
company, from May 1996 until January 2001. Mr. Brown has been retired since
January 2001. From June 1991 until May 1996, Mr. Brown was Vice
President-Procurement of Aetna, Inc., a national insurance company.
7
Thomas B. D'Agostino, Sr. has served as Chairman of the Board of the
Company since February 1998. He has simultaneously served as the Company's
President and Chief Executive Officer for the greater part of his tenure as
Chairman of the Board of the Company and he currently serves in this role. Mr.
D'Agostino, Sr. was President of SFI Corp. ("SFI Corp."), an office consumables
distribution company and predecessor of SFI of Delaware, LLC ("SFI"), a
principal subsidiary of the Company, and SFI Corp.'s predecessor company, Forms
& Peripherals, Inc., from 1972 until 1998. He was appointed President of U.S.
Office Products Company's Print Management Division in January 1997 when U.S.
Office Products Company acquired SFI. The Company was spun-off from U.S. Office
Products Company on June 9, 1998.
Thomas B. D'Agostino, Jr. has served as President and Chief Operating
Officer of the Company's Workflow Solutions Division since December 1998. He has
also served as President and Chief Executive Officer of the Company's
iGetSmart.com, Inc. subsidiary since August 1999. Mr. D'Agostino, Jr. also
served briefly as the Company's Co-President during Fiscal 2001. He served as
President of SFI from 1998 to December 1999 and as Vice President of Sales of
SFI from 1997 until 1998. From 1995 to 1997, he served as President of Hano
Document Printers, Inc. ("Hano"), a business forms manufacturing company and
former subsidiary of the Company.
Steve R. Gibson was appointed President of the Company's Workflow Printing
Division on May 1, 2001. Prior to such appointment, Mr. Gibson had served the
Company at various times since April 1998 in the capacities of President, Chief
Executive Officer, Co-President, Executive Vice President and Chief Financial
Officer. From February 1997 until April 1998, Mr. Gibson was President of Cortez
Financial Services, Inc., an investment banking company. From May 1985 until
February 1997, he was employed in various positions at NationsBank Corporation,
a predecessor to Bank of America, ultimately serving as Senior Vice President.
Mr. Gibson is currently a director of Cortez III Service Corporation, an
ESOP-owned government services provider ("Cortez III"), and serves as Chairman
of its Compensation Committee. See "Compensation Committee Interlocks and
Insider Participation."
Gus J. James, II is the President, Chairman and shareholder of the law firm
of Kaufman & Canoles in Norfolk, Virginia. Mr. James has practiced law with
Kaufman & Canoles since 1967. See "Certain Relationships and Related
Transactions."
Gerald F. Mahoney currently serves as the Chairman of Saddle River Capital,
a private equity investment firm and as Chairman of International Filing Company
a manufacturer of filing products. Mr. Mahoney is a founder, and from 1994 until
2001 served as the Chairman, Chief Executive Officer and as a member of the
board of directors of Mail-Well, Inc., a New York Stock Exchange Company and one
of the largest commercial printers in North America. From 1991 to 1994, Mr.
Mahoney served as the President and Chief Executive Officer of Pavey Envelope, a
predecessor to Mail-Well. Prior to his service with Pavey, Mr. Mahoney served as
a general manager and/or financial officer with a variety of companies including
Saddle River Capital, Transkrit Corporation, Polychrome Corporation and Bairnco
Corporation.
James J. Maiwurm is the Managing Partner - Washington, D.C. Area of Squire,
Sanders & Dempsey L.L.P. From April 1999 to December 2000, Mr. Maiwurm was
President and Chief Executive Officer of Kaiser Group International, Inc., an
international engineering and
8
construction management company ("Kaiser"). Kaiser was reorganized under
Chapter 11 of the U.S. Bankruptcy Code in 2000. He has been Chairman of the
Board of Directors of Kaiser and its successor, Kaiser Group Holdings, Inc.,
since June 1999. From August 1998 until he was elected as Kaiser's President and
Chief Executive Officer, Mr. Maiwurm was a partner of the law firm of Squire,
Sanders & Dempsey L.L.P. in Washington, D.C. Prior to August 1998, he was a
partner of the law firm of Crowell & Moring LLP in Washington, D.C. Mr. Maiwurm
is a member of the Board of Managers of Kaiser-Hill Company, LLC, Denver,
Colorado, a contractor with the U.S. Department of Energy; a director of Cortez
III; and a member of the Board of Trustees of Davis Memorial Goodwill
Industries, Washington, D.C., a non-profit entity.
Roger J. Pearson has been engaged in the practice of law in Stamford,
Connecticut, since 1978. Mr. Pearson has been an attorney-at-law since 1971. He
is a director of Southern Union Company, a natural gas distribution company,
having served as a past chairman of such company's Audit Committee and presently
serving as chairman of the Human Resources Committee and member of the Long Term
Stock Incentive Plan Committee. Mr. Pearson also served as First Selectman of
the Town of Greenwich, Connecticut from 1983 until 1985.
Peter S. Redding retired at the end of 2000 after serving over 38 years
with Standard Register Company, where he held a variety of positions the latest
of which was President and Chief Executive Officer. Mr. Redding currently serves
on the board of directors of Owens and Minor Company in Richmond, Virginia,
where he serves as a member of the Audit, Compensation and Strategic Planning
Committees, and Projects Unlimited, a privately-held company in Dayton, Ohio.
F. Craig Wilson has served as Chief Executive Officer and Chairman of the
Board of Cortez III since March 1997. Cortez III provides logistics and
technical services to various governmental agencies. Mr. Wilson also serves as
President of EC III, Inc., a joint venture of Cortez III, and EG&G Inc. From
1993 to 1997, Mr. Wilson was Chief Operating Officer of Cortez III. See
"Compensation Committee Interlocks and Insider Participation."
Directors are elected for a one-year term and hold office until their
successors have been elected and qualified or until such director's earlier
resignation or removal.
Board Meetings
The business of the Company is managed under the direction of the Board of
Directors (the "Board"). The Board meets at least quarterly to review
significant developments affecting the Company and to act on matters requiring
approval by the Board. The Board held seven meetings in Fiscal 2002. During such
period, each member of the Board participated in at least 75% of all meetings of
the Board and at least 75% of all applicable committee meetings.
9
EXECUTIVE COMPENSATION
Summary Executive Compensation Table
The following table presents an overview of executive compensation paid by
the Company and its subsidiaries during Fiscal 2002 and the Company's fiscal
years ended April 30, 2001 ("Fiscal 2001") and April 30, 2000 ("Fiscal 2000") to
the Company's Chief Executive Officer and its four other most highly compensated
executive officers (the "Named Executive Officers").
Summary Compensation Table
Annual Compensation Long Term Compensation
Fiscal Other Annual Securities All Other
Name and principal position Year Salary ($) Bonus ($) Compensation ($) Underlying Options Compensation ($)
---------------------------
Thomas B. D'Agostino, Sr. 2002 531,154 -- -- -- 15,745(1)
President, Chairman of the Board and 2001 519,231 450,000 -- -- 13,729(2)
Chief Executive Officer 2000 471,154 500,000 -- 200,000(3) 11,173(4)
Thomas B. D'Agostino, Jr. 2002 345,262 -- -- -- 9,530(5)
Executive Vice President and 2001 359,804 292,500 -- -- 7,791(6)
President of Workflow Solutions 2000 250,000 250,000 75,839(7) -- 4,061(8)
Division
Steve R. Gibson 2002 345,250 -- -- -- 12,357(9)
Executive Vice President and 2001 337,500 292,500 -- -- 10,280(10)
President of Workflow Printing 2000 256,911 266,000 -- 235,000(11) 161,753(12)
Division
Michael L. Schmickle 2002 180,592 -- -- -- 16,233(13)
Executive Vice President, Chief 2001 176,538 153,000 -- 50,000 12,989(14)
Financial Officer, Treasurer and 2000 128,461 140,000 -- 50,000(15) 9,634(16)
Secretary
Claudia S. Amlie 2002 17,446 -- -- -- 272,674(17)
former Executive Vice President, 2001 145,384 126,000 -- 50,000 12,811(18)
Chief Administrative Officer, 2000 145,385 140,000 -- 50,000(19) 8,947(20)
General Counsel and Secretary (21)
-----
(1) Includes $14,522 of insurance premiums and $1,223 of 401(k) plan
contributions paid by the Company on Mr. D'Agostino, Sr.'s behalf.
(2) Includes $12,575 of insurance premiums and $1,154 of 401(k) plan
contributions paid by the Company on Mr. D'Agostino, Sr.'s behalf.
(3) These options were canceled effective October 20, 2000.
(4) Includes $10,106 of insurance premiums and $1,067 of 401(k) plan
contributions paid by the Company on Mr. D'Agostino, Sr.'s behalf.
(5) Includes $7,330 of insurance premiums and $2,200 of 401(k) plan
contributions paid by the Company on Mr. D'Agostino, Jr.'s behalf.
(6) Includes $4,827 of insurance premiums and $2,964 of 401(k) plan
contributions paid by the Company on Mr. D'Agostino, Jr.'s behalf.
(7) Represents value of an automobile purchased by the Company for
Mr. D'Agostino, Jr.
(8) Includes $3,340 of insurance premiums and $721 of 401(k) plan contributions
paid by the Company on Mr. D'Agostino, Jr.'s behalf.
(9) Includes $9,642 of insurance premiums and $2,715 of 401(k) plan
contributions paid by the Company on Mr. Gibson's behalf.
10
(10) Includes $7,451 of insurance premiums and $2,829 of 401(k) plan
contributions paid by the Company on Mr. Gibson's behalf.
(11) 200,000 of these options were canceled effective October 20, 2000.
(12) Includes $7,154 of insurance premiums and $1,927 of 401(k) plan
contributions paid by the Company on Mr. Gibson's behalf. Also includes
a one-time relocation payment of $152,672.
(13) Includes $15,084 of insurance premiums and $1,149 of 401(k) plan
contributions paid by the Company on Mr. Schmickle's behalf.
(14) Includes $11,299 of insurance premiums and $1,690 of 401(k) plan
contributions paid by the Company on Mr. Schmickle's behalf.
(15) These options were canceled effective January 5, 2001.
(16) Includes $9,005 of insurance premiums and $629 of 401(k) plan contributions
paid by the Company on Mr. Schmickle's behalf.
(17) Includes $12,589 of insurance premiums and $746 of 401(k) plan
contributions paid by the Company on Ms. Amlie's behalf. Also includes
$229,215 in cash and $30,124 representing the fair market value of an
automobile, both of which were paid by us as severance to Ms. Amlie.
(18) Includes $11,761 of insurance premiums and $1,050 of 401(k) plan
contributions paid by the Company on Ms. Amlie's behalf.
(19) These options were canceled effective January 5, 2001.
(20) Includes $8,301 of insurance premiums and $646 of 401(k) plan contributions
paid by the Company on Ms. Amlie's behalf.
(21) Ms. Amlie resigned from her employment with the Company effective
May 25, 2001.
Stock Incentive Plan and Stock Option Awards
The Workflow Management, Inc. 1998 Stock Incentive Plan (the "Incentive
Plan") was adopted on June 8, 1998 by U.S. Office Products Company ("USOP"), the
Company's sole stockholder at the time, prior to USOP's distribution to its
stockholders of all of USOP's shares of the Company's Common Stock on June 9,
1998 (the "Distribution"). The Incentive Plan provides for the issuance of stock
options, stock appreciation rights, restricted stock and other stock-based
awards to non-employee directors, consultants and key employees of the Company
and its subsidiaries. The purpose of the Incentive Plan is to promote the
long-term growth and profitability of the Company by providing employees and
non-employee directors with incentives to improve stockholder value and
contribute to the growth and financial success of the Company, and by enabling
the Company to attract, retain and reward highly motivated and qualified
employees. The maximum number of shares of Company Common Stock that may be
issued with respect to awards granted under the Incentive Plan is 4,392,894,
which equaled 30% of the outstanding Common Stock following the Distribution.
The maximum number of shares that may be issued with respect to awards granted
under the Incentive Plan to an individual in a calendar year may not exceed
1,500,000 shares.
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors. The Incentive Plan authorizes the Compensation Committee to
make all awards. The Compensation Committee determines the prices, vesting
schedules, expiration dates and other material conditions under which such
awards may be exercised. No stock options, restricted stock, stock appreciation
rights, or other stock-based awards were awarded to any of the Named Executive
Officers during Fiscal 2002.
The table below sets forth information for each Named Executive Officer
concerning the value of unexercised stock options at the end of Fiscal 2002. No
Named Executive Officer exercised any stock options in Fiscal 2002.
11
Value of Options at April 30, 2002
Number of Securities
Underlying Unexercised Options Value of Unexercised In-The-Money
At Fiscal Year-End Options at Fiscal Year-End(1)
------------------------------ ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Thomas B. D'Agostino, Sr 1,150,630 -- -- --
Thomas B. D'Agostino, Jr. 246,875 -- -- --
Steve R. Gibson 210,000 -- -- --
Michael L. Schmickle 114,580 33,334 -- --
Claudia S. Amlie 125,000 -- -- --
-----
(1) Under Securities and Exchange Commission rules, an option is only
considered in-the-money, for purposes of the chart, if the per share
exercise price is less than $3.88, the last reported sales price of our
stock on the Nasdaq National Market on April 30, 2002. None of the
stock options held by the Named Executive Officers are exercisable for
less than $3.88 per share.
Retirement Savings Plan
All of the Named Executive Officers and other eligible employees of the
Company are eligible to participate in the Company's 401(k) Plan ("401(k)
Plan"). The 401(k) Plan permits employees to contribute to the 401(k) Plan
through voluntary payroll savings on a pretax basis. These contributions are
matched by the Company in an amount equal to 25% of payroll savings
contributions made by employees, up to 6% of an employee's total compensation.
The Company's matching contributions vest over a period of five years after a
participant's date of hire, at the rate of 25% after two years, 50% after three
years, 75% after four years, and 100% after five years.
Stock Loan Programs
During September 1998, pursuant to a program approved by the Board of
Directors, the Company extended loans to certain of its key employees, including
its executive officers, to finance the purchase by such persons of shares of
Company Common Stock on the open market (the "1998 Stock Loan Program"). The
1998 Stock Loan Program loans are evidenced by unsecured, full recourse
promissory notes bearing interest at 6.75% per annum. In Fiscal 2001, the
Company extended additional loans to certain of its key employees, including its
executive officers and certain non-employee Directors, to finance the purchase
by such persons of shares of Company Common Stock on the open market (the "2000
Stock Loan Program;" the 2000 Stock Loan Program and 1998 Stock Loan Program
collectively, the "Stock Loan Program"). The 2000 Stock Loan Program loans are
evidenced by unsecured, full recourse promissory notes bearing interest at 8.0%
per annum. Except for the note due from Ms. Amlie, the notes in connection with
the Stock Loan Program currently provide for forgiveness of all outstanding
principal and accrued interest in the event of a change of control of the
Company prior to January 2, 2003. All principal and accrued interest under the
loans is due and payable on January 2, 2003, except for the note due from Ms.
Amlie which is due and payable on February 1, 2003. As of April 30, 2002, the
aggregate outstanding balance of principal and accrued interest on the Stock
Loan Program loans to the Company's Named Executive Officers was as follows: Mr.
D'Agostino, Sr., $2,176,370; Mr. Gibson, $963,586; Mr. D'Agostino, Jr.,
$527,366; Mr. Schmickle, $210,977; and Ms. Amlie, $559,865.
12
Compensation of Directors
Directors who are also employees of the Company do not receive any extra
compensation for attendance at Board or Committee meetings. During Fiscal 2001,
the Board of Directors approved the Company's provision of lifetime health
insurance coverage for all Board members and their dependents who elect to
accept such coverage (the "Director Health Benefit Program"). In Fiscal 2002,
the Company made payments on behalf of certain Directors in connection with the
Director Health Benefit Program, as follows: Mr. Brown, $7,531 and Mr. Pearson,
$12,372. The Company's non-employee Directors are given the option to receive
compensation for their services on the Board of Directors in the form of a stock
grant of $20,000 worth of the Company's Common Stock and a cash payment of
$8,000 as reimbursement for income taxes paid or payable in connection with such
grant for each calendar year of service or, alternatively, they may borrow up to
$200,000 pursuant to the 2000 Stock Loan Program with all interest accruing on
such loans to be paid by the Company. The majority of the Company's non-employee
Directors have elected to participate in the 2000 Stock Loan Program rather than
electing to receive the stock grant and tax reimbursement. As of April 30, 2002,
the outstanding balance of principal on such loans to the Company's non-employee
Directors was as follows: Mr. Brown, $199,992; Mr. James, $199,992; Mr. Maiwurm,
$199,992; and Mr. Wilson, $199,992. In September of 2002, Mr. Maiwurm paid in
full all amounts he owed to the Company pursuant to the 2000 Stock Loan Program.
During Fiscal 2002, cash compensation for the Company's outside directors for
committee service ranged from $2,500 to $26,000.
Executive Officer Employment and Severance Agreements
The Company entered into an Employment Agreement with Thomas B. D'Agostino,
Sr., dated April 30, 2000, as amended May 1, 2001, pursuant to which Mr.
D'Agostino, Sr. serves as the President, Chairman of the Board and Chief
Executive Officer of the Company (the "D'Agostino, Sr. Employment Agreement").
The term of the D'Agostino, Sr. Employment Agreement is four years, commencing
April 30, 2000. Under the terms of the D'Agostino, Sr. Employment Agreement, Mr.
D'Agostino, Sr. receives a current annual base salary of $530,000, and he is
eligible to receive up to 100% of his base salary in bonus compensation which is
payable in cash, stock options or other non-cash awards, as determined by the
Compensation Committee based on specified performance criteria. He is also
eligible to receive bonus compensation in excess of 100% of his base salary for
extraordinary performance and exceptional Company results, as determined by the
Compensation Committee, which is payable in cash, stock options or other
non-cash awards. In the event that his employment is terminated without cause,
Mr. D'Agostino, Sr. is entitled to receive his base salary and benefits for the
longer of (i) six months from the date of termination or (ii) the remaining time
under the term of the employment agreement. If Mr. D'Agostino, Sr. terminates
his employment following (a) a material breach by the Company under the
D'Agostino, Sr. Employment Agreement, or (b) his refusal to be relocated to
another geographic location other than his current residence ("Termination for
Good Reason"), he will be entitled to receive his base salary and benefits for
the lesser of (i) six months from the date of termination or (ii) the remaining
time under the term
13
of the employment agreement. Following the expiration of the D'Agostino, Sr.
Employment Agreement, a termination without cause or a Termination for Good
Reason, Mr. D'Agostino, Sr. shall have the option to enter into a five-year
consulting agreement with the Company, pursuant to which he shall render
advisory services to the Company's Chief Executive Officer at an annual salary
of $250,000 and continue to be an employee of the Company, subject to a
non-competition covenant. The D'Agostino, Sr. Employment Agreement also contains
a non-competition covenant which prohibits Mr. D'Agostino, Sr. from engaging in
certain activities during the term of the employment agreement and for the
longer of (i) a period of one year thereafter or (ii) as long as Mr. D'Agostino,
Sr. continues to receive severance payments from the Company.
Thomas B. D'Agostino, Jr. entered into an Employment Agreement with the
Company and its iGetSmart.com subsidiary, on March 20, 2000, as amended May 1,
2001, pursuant to which Mr. D'Agostino, Jr. serves as the President of the
Company's Workflow Solutions Division and President and Chief Executive Officer
of iGetSmart.com (the "D'Agostino, Jr. Employment Agreement"). Steve R. Gibson
entered into an Employment Agreement with the Company on April 30, 2000, as
amended May 1, 2001, pursuant to which Mr. Gibson serves as the President of the
Company's Workflow Printing Division (the "Gibson Employment Agreement"). The
D'Agostino, Jr. Employment Agreement and the Gibson Employment Agreement each
include: (i) an initial term of four years, commencing March 20, 2000 and April
30, 2000, respectively; (ii) a current annual base salary of $344,500; (iii)
eligibility for up to 100% of base salary in bonus compensation, which is
payable in cash, stock options or other non-cash awards, as determined by the
Compensation Committee based on specified performance criteria; (iv) eligibility
to receive bonus compensation in excess of 100% of base salary for extraordinary
performance and exceptional Company results, as determined by the Compensation
Committee, which is payable in cash, stock options or other non-cash awards; (v)
in the event of a termination by the Company without cause, the right to receive
base salary and benefits under the same terms as the D'Agostino, Sr. Employment
Agreement; (vi) in the event of a Termination for Good Reason, the right to
receive base salary and benefits as provided in the D'Agostino, Sr. Employment
Agreement; and (vii) a non-competition covenant identical to the non-competition
covenant in the D'Agostino, Sr. Employment Agreement.
The Company has also entered into an Employment Agreement with Michael L.
Schmickle, dated May 1, 2001, pursuant to which Mr. Schmickle serves as the
Executive Vice President, Chief Financial Officer and Secretary of the Company
(the "Schmickle Employment Agreement"). The general terms of the Schmickle
Employment Agreement are as follows: (i) an initial term of two years; (ii) a
current base salary of $180,200; (iii) eligibility to receive up to 100% of his
base salary in bonus compensation, payable in cash, stock options or non-cash
awards, as determined by the Compensation Committee based on specified
performance criteria; (iv) eligibility to receive bonus compensation in excess
of 100% of his base salary for extraordinary performance and exceptional Company
results, as determined by the Compensation Committee, which is payable in cash,
stock options or other non-cash awards; (v) a non-competition covenant identical
to the non-competition covenant in the D'Agostino, Sr. Employment Agreement;
(vi) severance payments upon termination without cause under the same terms as
the D'Agostino, Sr. Employment Agreement; and (vii) severance payments upon
Termination for Good Reason under identical terms as the D'Agostino, Sr.
Employment Agreement.
14
In connection with a restructuring of the Company's management operations,
the Company has also entered into a Severance Agreement which terminated the
employment agreement and change-in-control agreement of Claudia S. Amlie, former
Executive Vice President, Chief Administrative Officer, General Counsel and
Secretary of the Company (the "Amlie Severance Agreement"). The Amlie Severance
Agreement, dated April 30, 2001, has the following terms and conditions: (i)
waiver and release of the Company from any and all claims; (ii) non-disclosure
of the Company's confidential information; (iii) agreement to cooperate with the
Company after termination; (iv) negative covenant prohibiting the former
executive from making statements concerning the Company which could harm the
Company's business interests; (v) survival of key provisions from the terminated
employment agreement of Ms. Amlie; (vi) bi-weekly severance payments for a
one-year period, in the aggregate amount of $222,600; (vii) continuation of
health and dental benefits for 18 months after termination pursuant to COBRA
with reimbursement from the Company for Ms. Amlie's share of the premiums;
(viii) continuation of life insurance benefits for 18 months after termination;
(ix) full vesting of her 125,000 existing options to purchase Company common
stock and an extension of the exercise period until November 25, 2002; (x)
extension of the maturity dates on Ms. Amlie's $526,361 Executive Stock Loans
until February 1, 2003, including forgiveness of all amounts outstanding in the
event of a change-of-control of the Company on or before May 25, 2002; (xi)
transfer to Ms. Amlie of title to a Company automobile with an estimated value
of $30,124; and (xii) agreement that Ms. Amlie shall provide consulting services
to the Company as requested upon terms and conditions mutually agreed to by Ms.
Amlie and the Company.
Compensation Committee Interlocks and Insider Participation
Mr. Peter J. Pakuris and Mr. Roger J. Pearson served as members of the
Compensation Committee of the Company's Board of Directors for a portion of
Fiscal 2002, and Mr. Thomas A. Brown, Sr. and Mr. James J. Maiwurm served as
members of this committee during all of Fiscal 2002. None of such persons is an
officer or employee, or former officer or employee, of the Company or any of its
subsidiaries.
During Fiscal 2002, an interlocking relationship existed and continues to
exist, between a member of the Company's Board of Directors and the compensation
committee of Cortez III. F. Craig Wilson, a Director of the Company, is
President, Chief Executive Officer and a member of the Board of Directors of
Cortez III. The interlocking relationship has existed since July 20, 2000, when
Steve R. Gibson, a Director and executive officer of the Company, was appointed
to the Cortez III Board of Directors and elected Chairman of its Compensation
Committee, in connection with a cash investment by the Company in Cortez III in
return for Cortez III common stock. James J. Maiwurm, a Director of the Company,
has also served on the Cortez III Board of Directors since July 20, 2000.
15
Compensation Committee Report on Executive Compensation
This report describes the Company's executive officer compensation
philosophy, the components of the compensation program, and the manner in which
the compensation determinations for Fiscal 2002 were made for the Company's
President and Chief Executive Officer, Thomas B. D'Agostino, Sr., and the
Company's other executive officers (collectively with Mr. D'Agostino, Sr., the
"Executive Officers").
In addition to the information set forth above under "Executive
Compensation," the Compensation Committee (the "Committee") is required to
provide stockholders a report explaining the rationale and considerations that
led to the fundamental executive compensation decisions affecting the Company's
Executive Officers. In fulfillment of this requirement, the Committee, at the
direction of the Company's Board of Directors, has prepared the following report
for inclusion in this Proxy Statement. None of the members of the Committee are
executive officers or employees of the Company.
Compensation Philosophy; Compensation Study
The compensation of the Company's Executive Officers is designed to
attract, retain, motivate and reward qualified, dedicated executives, and to
directly link compensation with (i) the Executive Officer's previous and
anticipated performance, (ii) the contributions and responsibilities of the
Executive Officer to the Company and (iii) the Company's cash flow and
profitability, taking into account market conditions and the performance of
competitors.
For the past several years, the Company's compensation philosophy has been
embedded in employment agreements for Executive Officers that contemplate a base
compensation level and a bonus opportunity based on performance metrics
determined annually. The Company's current executive employment agreements, as
well as aspects of its current management structure, were formulated several
years ago in anticipation of a possible public spin-off of the Company's
iGetSmart operations. Due principally to market conditions, that anticipated
spin-off did not - and is now not likely to - take place. As a result of changed
expectations in this regard, the recent activities of the Special Committee of
the Board, and ongoing discussions concerning the stabilization of the Company's
lending relationships, the Committee is reevaluating the Company's management
structure, compensation philosophy and executive employment agreements.
In connection with this reevaluation, the Committee has retained an
independent executive compensation consulting firm to perform a comprehensive
evaluation of the Company's practices in compensating its Executive Officers and
Directors (the "Compensation Review"). Based on the conclusions and
recommendations contained in the Compensation Review, the Committee will
recommend revision of the compensation practices of the Company in compensating
its Executive Officers.
During Fiscal 2002 the principal components of an Executive Officer's
compensation package were a base salary at a stated annual rate and certain
other benefits. No discretionary
16
cash bonuses or stock option awards under the Company's 1998 Stock Incentive
Plan were awarded to Executive Officers in Fiscal 2002.
The Committee is aware that the Company has a significant existing stock
option "overhang". The Committee has reacted to this situation by not granting
additional Executive Officer or Board stock options since March of 2001.
However, the Committee is concerned that, because nearly all outstanding stock
options are significantly "under water", the outstanding options are not serving
their purpose at a time when it is essential that management interests be
aligned with those of stockholders. It is possible that, as a result of the
Compensation Review referred to above, the Committee will recommend to the Board
that changes be made in the Company's executive compensation structure,
including existing employment agreements, base compensation levels, bonus
criteria and levels, and equity-oriented incentives.
Bonus Program
As noted above, in Fiscal 2002 the Company did not award any cash bonuses
to Executive Officers. In determining cash bonuses in the past, several of the
financial performance factors considered by the Committee have included growth
of net earnings per share of the Company (with and without extraordinary items),
improvement in the Company's operating margin, and increase in the Company's
revenues. These factors, among others, are set forth in each Executive Officer's
employment agreement as criteria for bonuses. The Committee has also considered
other factors, such as the current economic environment, the Company's financial
accomplishments compared to its industry competitors and significant
non-financial accomplishments of the Company. The Committee has also reviewed
the Executive Officer's individual contributions to the Company's acquisition
and internal growth strategies, as well as such officer's performance in view of
his or her duties and responsibilities.
As a result of the Compensation Review referred to above, the Committee
plans to review (and revise as necessary) the criteria under which Executive
Officers may be awarded cash bonuses. Bonus criteria for Fiscal 2003 will not be
established until the Compensation Review is completed. Such criteria may be
affected by the results of the activities of the Special Committee and ongoing
discussions with the Company's lenders.
1998 Stock Incentive Plan
The Board and the Compensation Committee strive to compensate key employees
of the Company in a manner that aligns closely the interests of such key
employees with the interests of the Company's stockholders. In furtherance of
this goal, the Compensation Committee has awarded stock options to the Executive
Officers under the Company's Stock Incentive Plan in prior fiscal years. The
purpose of the Incentive Plan is to support the business goals of the Company
and to attract, retain and motivate management officials of high caliber by
providing incentives that will, through the award of options to acquire the
Company's Common Stock, associate more closely the interests of Executive
Officers and key employees of the Company with the interests of the Company's
stockholders. The Compensation Committee did not award any stock options to
Executive Officers during Fiscal 2002 and has not awarded any stock options to
executives since March of 2001. See "Stock Incentive Plan and Stock Option
17
Awards" above. As explained above, the Committee will review (and revise as
necessary) the criteria under which Executive Officers may be awarded stock
options under the Company's Stock Incentive Plan in the future utilizing the
conclusions and recommendations contained in the Compensation Review.
Compensation of the Chief Executive Officer
In May, 2001, Mr. D'Agostino, Sr.'s base salary was increased by $30,000 to
$530,000. Mr. D'Agostino, Sr. did not receive a cash incentive bonus during
Fiscal 2002 and his salary was not increased for fiscal 2003. The Committee
reviews the salaries of chief executive officers in the Company's peer group in
adjusting Mr. D'Agostino, Sr.'s base compensation under his employment
agreement.
o Thomas A. Brown, Sr.
o James J. Maiwurm
o Roger Pearson
THE PRECEDING "COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION" AND
THE STOCK PERFORMANCE GRAPH AND AUDIT COMMITTEE REPORT BELOW SHALL NOT BE DEEMED
TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, OR INCORPORATED BY REFERENCE IN ANY DOCUMENTS
SO FILED.
Company Stock Price Performance
The following graph shows a comparison of cumulative total stockholder
returns for (i) the Company, (ii) the Russell 2000 Index, and (iii) certain SIC
Code Indices pertaining to the Company's commercial printing operations for the
period beginning June 10, 1998 and ending April 30, 2002. Prior to June 10,
1998, there was no public market for the Common Stock. The total stockholder
return assumes $100 invested at the beginning of the period in the Company's
Common Stock, the Russell 2000 Index, and the SIC Code Indices, including
reinvestment of dividends.
18
COMPARE CUMULATIVE TOTAL RETURN
AMONG WORKFLOW MANAGEMENT, INC.
RUSSELL 2000 INDEX AND SIC CODE INDICES
[Graph appears here]
Return Return Return Return
6/10/98 04/24/99 04/30/00 04/30/01 04/30/02
----------------------------------------------------------------------------
Workflow Management, Inc. 100.00 120.83 155.56 76.00 43.11
------------------------- ------ ------ ------ ------ ------
Russell 2000 Index 100.00 77.07 61.86 60.20 76.63
------------------------- ------ ------ ------ ------ ------
SIC Code 2752 Index 100.00 95.24 111.34 106.61 112.17
------------------------- ------ ------ ------ ------ ------
SIC Code 2761 Index 100.00 89.55 64.47 89.07 160.62
------------------------- ------ ------ ------ ------ ------
Audit Committee Report
The Audit Committee of the Board of Directors is composed of three
non-employee directors and generally holds regularly scheduled meetings
preceding the first meeting of the Board each quarter. Under Nasdaq listing
standards, the Company's Audit Committee must have at least three members. All
of the Company's Audit Committee Members are "independent" directors as the term
independent is defined by Nasdaq. The Committee held three meetings during
Fiscal 2002. The responsibilities of the Committee are set forth in its Charter,
which is reviewed and amended periodically, as appropriate.
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility of
the financial statements and
19
the reporting process, including the system of internal controls. In this
context, the Committee has met and held discussions with management and the
independent auditors. Management represented to the Committee that the Company's
consolidated financial statements were prepared in accordance with generally
accepted accounting principles, and the Committee has reviewed and discussed the
consolidated financial statements with management and the independent auditors.
The Committee discussed with the independent auditors matters required to be
discussed by Statement of Auditing Standards No. 61 (Communication With Audit
Committees). In addition, the Committee has discussed with the independent
auditors the auditors' independence from the Company and its management,
including the matters in the written disclosures required by the Independence
Standards Board Standards No. 1 (Independence Discussions with Audit
Committees). The Committee has also considered whether the provision of
non-audit related services by the independent auditors is compatible with
maintaining the independence of such independent auditors. The Committee
discussed with the Company's internal and independent auditors the overall scope
and specific plans for their respective audits.
The Committee meets with the internal and independent auditors, with and
without management present, to discuss the results of their examinations, the
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting. The meetings also are designed to facilitate any
private communications with the Committee desired by the internal auditors or
independent accountants. In reliance on the reviews and discussions referred to
above, the Committee recommended to the Board of Directors, and the Board has
approved, that the audited financial statements of the Company be included in
the Company's Annual Report on Form 10-K for Fiscal 2002, for filing with the
Securities and Exchange Commission. The Committee and the Board also have
recommended, subject to stockholder approval, the selection of the Company's
independent auditors, PricewaterhouseCoopers LLP.
o Roger J. Pearson
o Thomas A. Brown, Sr.
o Gus J. James, II
Independent Auditor Fees and Other Matters
Audit Fees.
In Fiscal 2002, PricewaterhouseCoopers LLP billed the Company an aggregate
of approximately $459,900 in fees and expenses for professional services
rendered in connection with the audit of the Company's financial statements for
the most recent fiscal year and the reviews of the financial statements included
in each of the Company's Quarterly Reports on Form 10-Q during Fiscal 2002.
Financial Information Systems Design and Implementation Fees.
In Fiscal 2002, PricewaterhouseCoopers LLP did not bill the Company for any
fees and expenses in connection with financial information systems design or
implementation, the operation of its information system or the management of its
local area network.
20
All Other Fees.
PricewaterhouseCoopers LLP billed the Company an aggregate of approximately
$1,397,520 in fees and expenses for other services rendered to the Company in
Fiscal 2002. A substantial portion of these fees and expenses were for services
traditionally provided by auditors, including work performed in connection with
tax matters, due diligence procedures performed in connection with mergers and
acquisitions and other financial consulting services.
Certain Relationships and Related Transactions
The Company has retained the law firm of Kaufman & Canoles in connection
with certain legal representations. Gus J. James II, a Director of the Company,
is the President, Chairman and a shareholder of Kaufman & Canoles.
On April 21, 2000, the Company purchased 20% of the outstanding common
stock of Cortez III, for $1,550,000 in cash. F. Craig Wilson, a Director of the
Company, is President, Chief Executive Officer and a member of the Board of
Directors of Cortez III. Additionally, Steve R. Gibson, an Executive Vice
President for the Company, President of the Workflow Printing Division and a
member of the Company's Board of Directors, and James J. Maiwurm, also a member
of the Company's Board of Directors, each serve on the Board of Directors of
Cortez III. See "Compensation Committee Interlocks and Insider Participation"
above. On January 2, 2001, the Company sold its interest in Cortez III to Mr.
Wilson in exchange for a promissory note in the principal amount of $1,789,000.
On December 20, 2001, the Company sold this promissory note to a third party in
exchange for $1,600,000.
On January 8, 1999, the Company entered into a ten-year lease, with a
purchase option, for corporate office space in Palm Beach, Florida in a building
partially owned by Thomas B. D'Agostino, Jr., a Director of the Company and the
Company's Workflow Solutions Division President and his brother. The terms and
conditions of the ten-year lease were based on the market value of the office
space and, in management's opinion, were comparable to rents that would be
charged by parties not affiliated with the Company. In connection with such
lease, the Company entered into an agreement with the landlord's lender, Bank of
America, N.A., and the landlord, pursuant to which the Company agreed to
purchase the building at a discount in the event the landlord defaults on its
financing arrangement with the lender. In Fiscal 2002, the Company contributed
$10,854 for repairs and improvements to the office space and building. In
connection with its restructuring plan, the Company negotiated an early
termination of this lease, effective August 31, 2001. Monthly rent payments of
$30,833 each were made during the four months of Fiscal 2002 prior to the
termination of this lease. The landlord agreed to reimburse the Company for
tenant improvements made to the premises in the aggregate amount of $1,200,000.
$500,000 of such reimbursement was remitted upon termination of the lease and
the remainder shall be disbursed in increments of $70,000 annually, for a period
of ten years thereafter. In connection with the lease termination, the Company
has remitted a broker fee of $300,000 to the broker responsible for locating the
replacement tenant.
21
On December 21, 1998, SFI, one of the Company's principal subsidiaries,
entered into a ten-year lease with an entity owned in part by Thomas B.
D'Agostino, Jr. and his brother for office space in Norfolk, Virginia. Monthly
rent payments of $22,498 each were made in Fiscal 2002 for the office space. The
terms and conditions of the lease are based on the market value of the office
space and, in management's opinion, are comparable to rents that would be
charged by parties not affiliated with the Company. In Fiscal 2002, the Company
contributed $140,959 for repairs and improvements to the office space.
During September 1998 and Fiscal 2001, pursuant to a program approved by
the Board of Directors, the Company extended loans to certain of its key
employees, including its executive officers and non-employee Directors, to
finance the purchase by such persons of shares of Company Common Stock on the
open market. The loans are evidenced by full recourse promissory notes bearing
interest at 6.75% and 8.0% per annum. All principal and accrued interest under
the loans become due and payable on January 2, 2003 and such amounts shall be
forgiven in the event of a change of control of the Company prior to January 2,
2003, except for the note due from Ms. Amlie which is due and payable on
February 1, 2003 and which will no longer be forgiven upon a change of control.
In September of 2002, Mr. Maiwurm paid in full all amounts he owed to the
Company pursuant to the 2000 Stock Loan Program See "Executive Compensation -
Stock Loan Program." See also "Executive Compensation - Compensation of
Directors."
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, officers and persons who beneficially own more than 10% of a
registered class of equity securities of the Company to file initial reports of
ownership (Forms 3) and reports of changes in beneficial ownership (Forms 4 and
5) with the Securities and Exchange Commission ("SEC") and Nasdaq. Such persons
are also required under the rules and regulations promulgated by the SEC to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of such forms furnished to the Company, the
Company believes that all reporting requirements under Section 16(a) for Fiscal
2002 were met in a timely manner by its directors, officers and greater than 10%
beneficial owners.
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected and approved PricewaterhouseCoopers,
LLP ("PWC") as the firm of independent certified public accountants to audit the
financial statements of the Company for the fiscal year ending April 30, 2003,
and the Board of Directors desires that such appointment be ratified by the
Company's stockholders. PWC audited the Company's financial statements for the
fiscal years ended April 25, 1998, April 24, 1999, April 30, 2000, April 30,
2001 and April 30, 2002. A representative of PWC will be present at the Annual
Meeting, will have the opportunity to make a statement if he or she desires, and
will be available to respond to appropriate questions.
22
OTHER MATTERS
The Board of Directors does not know of any matters that will be presented
for action at the Annual Meeting other than those described above or matters
incident to the conduct of the Annual Meeting. If, however, any other matters
not presently known to management should come before the Annual Meeting, it is
intended that the shares represented by the Proxy will be voted on such matters
in accordance with the discretion of the holders of such Proxy.
SUBMISSION OF PROPOSALS AND OTHER MATTERS RELATED TO 2003 ANNUAL MEETING
The next Annual Meeting of Stockholders will be held on or about September
29, 2003. Any stockholder who wishes to submit a proposal for consideration at
that meeting, and who wishes to have such proposal included in the Company's
proxy statement, must comply with SEC Rule 14a-8 and must submit the proposal in
writing no later than May 31, 2003. The deadline for stockholders to notify the
Company of non-Rule 14a-8 matters that may be raised for consideration at the
next Annual Meeting is August 13, 2003. All such proposals and notifications
should be sent to Thomas B. D'Agostino, Sr., President, Chairman of the Board
and Chief Executive Officer, at 240 Royal Palm Way, Palm Beach, Florida 33480.
Under the terms of the Company's amended Bylaws, August 13, 2003 is also
the deadline for stockholders to notify the Company of an intention to nominate
candidates for directors at the next Annual Meeting of Stockholders. Such
nominations must comply with the notice provisions adopted by the Board of
Directors and included in the Company's Bylaws. These notice provisions require
that nominations by stockholders of director candidates set forth the following
information: (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934 and Rule
14a-11 thereunder (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); and (b)
as to the stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial
owner, (ii) the class and number of shares of the Company which are owned
beneficially and of record by such stockholder and such beneficial owner, (iii)
a representation that the stockholder is a holder of record of common stock of
the Company entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice, and (iv) a description of all arrangements or understandings between the
stockholder or beneficial owner and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or nominations
are to be made by the stockholder. Generally, nominations are required to be
delivered to the Company not later than 45 days before the date on which the
Company first mailed its proxy materials for the prior year's annual meeting of
stockholders.
23
GENERAL
The Company's 2002 Annual Report to Stockholders accompanies this Proxy
Statement. The 2002 Annual Report to Stockholders does not form any part of the
material for the solicitation of Proxies. Upon written request, the Company will
provide stockholders with a copy of its Annual Report on Form 10-K for Fiscal
2002 (the "Form 10-K"), as filed with the SEC, without charge. Please direct
written requests for a copy of the Form 10-K to: Michael L. Schmickle, Chief
Financial Officer, Workflow Management, Inc., 240 Royal Palm Way, Palm Beach,
Florida 33480.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY
By Order of the Board of Directors
September 27, 2002
24
PROXY
P WORKFLOW MANAGEMENT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
R FOR ANNUAL MEETING OF STOCKHOLDERS, OCTOBER 28, 2002
O The undersigned hereby appoints Thomas B. D'Agostino, Sr. and Gus J.
James, II and each of them, jointly and severally, with power of
X substitution, to vote on all matters which may properly come before the
2002 Annual Meeting of Stockholders of Workflow Management, Inc., or
Y any adjournment thereof.
(Continued and to be signed on reverse side.)
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|SEE REVERSE|
| SIDE |
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[] FOLD AND DETACH HERE []
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
WORKFLOW MANAGEMENT, INC.
October 28, 2002
[X] Please mark your
vote as in this
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THE SHARES
WILL BE VOTED FOR PROPOSALS 1 AND 2.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of Nominees: 2. To ratify the
Directors [ ] [ ] 01. Thomas A. Brown, Sr. 06. Gerald F. Mahoney appointment of [ ] [ ] [ ]
02. Thomas B. D'Agostino, Sr. 07. James J. Maiwurm Pricewaterhouse
03. Thomas B. D'Agostino, Jr. 08. Roger J. Pearson Coopers LLP as
For, except vote withheld from 04. Steve R. Gibson 09. Peter S. Redding the Company's
the following nominee(s): 05. Gus J. James, II 10. F. Craig Wilson independent
auditors for the
2003 fiscal year.
_______________________________
If you plan to attend the Annual Meeting, please check here. [ ]
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
THANK YOU.
Signature of Stockholder(s)__________________________________ Date:_____________
Note: Signature should agree with name on stock certificate as printed
hereon. Executors, administrators, trustees and other fiduciaries
should so indicate when signing.
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[] FOLD AND DETACH HERE []
WORKFLOW MANAGEMENT, INC.
Dear Stockholder:
We encourage you to vote your shares electronically this year either by
telephone or via the Internet. This will eliminate the need to return your proxy
card.You will need your proxy card and Social Security number (where applicable)
when voting your shares electronically. The Voter Control Number that appears in
the box above, just below the perforation, must be used in order to vote by
telephone or via the Internet.
The EquiServe Vote by Telephone and Vote by Internet systems can be accessed
24-hours a day, seven days a week up until the day prior to the meeting.
To Vote by Telephone:
---------------------
Using a touch-tone phone call Toll-free: 1-877-PRX-VOTE (1-877-779-8683)
To Vote by Internet:
--------------------
Log on to the Internet and go to the website: http://www.eproxyvote.com/work
Note: If you vote over the Internet, you may incur costs such as
telecommunication and Internet access charges for which you will be responsible.
THANK YOU FOR VOTING YOUR SHARES.
YOUR VOTE IS IMPORTANT!
Do Not Return this Proxy Card if you are Voting by Telephone or the Internet.