-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SBlkfDL7CzLO8ZLcknXmGlXUIbRlmtdJahP3Ro5JKG4gAGU09tL1V3QYyT4bSZ3M tdP27STa9HHxBfw9qzuA4A== 0000912057-96-008196.txt : 19960507 0000912057-96-008196.hdr.sgml : 19960507 ACCESSION NUMBER: 0000912057-96-008196 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960521 FILED AS OF DATE: 19960506 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL CORP CENTRAL INDEX KEY: 0000790406 STANDARD INDUSTRIAL CLASSIFICATION: COMMERCIAL PRINTING [2750] IRS NUMBER: 410946258 STATE OF INCORPORATION: MN FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-14082 FILM NUMBER: 96556780 BUSINESS ADDRESS: STREET 1: ONE MERRILL CIRCLE STREET 2: ENERGY PARK CITY: ST PAUL STATE: MN ZIP: 55108 BUSINESS PHONE: 6126464501 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL CORP/FA DATE OF NAME CHANGE: 19930915 DEF 14A 1 DEF 14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ X ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section240.14a-11(c) or Section240.14a-12 MERRILL CORPORATION - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) MERRILL CORPORATION - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): [ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2). [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: --------------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: --------------------------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: _/ --------------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: --------------------------------------------------------------------- _/ Set forth the amount on which the filing fee is calculated and state how it was determined. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: --------------------------------------------------------------------- 2) Form, Schedule or Registration Statement No.: --------------------------------------------------------------------- 3) Filing Party: --------------------------------------------------------------------- 4) Date Filed: --------------------------------------------------------------------- NOTES: [LOGO] One Merrill Circle St. Paul, Minnesota 55108 May 3, 1996 Dear Shareholder: You are cordially invited to attend the 1996 Annual Meeting of Shareholders of Merrill Corporation. The meeting will be held on Tuesday, May 21, 1996, at 10:00 a.m. local time, at the Bandana Banquet and Conference Centre, Bandana Square, 1021 Bandana Boulevard West, Suite 220, Energy Park, St. Paul, Minnesota. We suggest that you read carefully the enclosed Notice of Annual Meeting and Proxy Statement. We hope you will be able to attend the Annual Meeting. Whether or not you plan to attend, we urge you to complete, sign, date and return the enclosed proxy card in the enclosed envelope in order to make certain that your shares will be represented at the Annual Meeting. Very truly yours, [KENNETH F. MERRILL SIGNATURE] [JOHN W. CASTRO SIGNATURE] KENNETH F. MERRILL JOHN W. CASTRO Chairman of the Board President and Chief Executive Officer MERRILL CORPORATION [LOGO] NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 21, 1996 To the Shareholders of Merrill Corporation: The Annual Meeting of Shareholders of Merrill Corporation will be held on Tuesday, May 21, 1996, at 10:00 a.m. local time, at the Bandana Banquet and Conference Centre, Bandana Square, 1021 Bandana Boulevard, Suite 220, Energy Park, St. Paul, Minnesota, for the following purposes: 1. To elect eight directors to serve for the ensuing year and until their successors are elected and qualified; 2. To consider and act upon a proposal to adopt the Company's 1996 Non-Employee Director Plan; 3. To consider and act upon a proposal to ratify the selection of Coopers & Lybrand L.L.P., as independent accountants for the Company for the fiscal year ending January 31, 1997; and 4. To transact such other business as may properly come before the Annual Meeting or any adjournment thereof. Only shareholders of record at the close of business on April 1, 1996 will be entitled to notice of and to vote at the meeting or at any adjournment thereof. By Order of the Board of Directors, [STEVEN J MACHOV SIGNATURE] Steven J. Machov SECRETARY MERRILL CORPORATION [LOGO] ONE MERRILL CIRCLE ENERGY PARK ST. PAUL, MINNESOTA 55108 ------------------------ PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 21, 1996 ------------------------ INTRODUCTION The Annual Meeting of Shareholders of Merrill Corporation (the "Company") will be held on May 21, 1996 at 10:00 a.m. local time, at the Bandana Banquet and Conference Centre, Bandana Square, 1021 Bandana Boulevard, Suite 220, Energy Park, St. Paul, Minnesota, or at any adjournment thereof, for the purposes set forth in the Notice of Meeting. A proxy card is enclosed for your use. You are solicited on behalf of the Board of Directors to MARK, SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING ENVELOPE. No postage is required if mailed within the United States. The cost of soliciting proxies, including the preparation, assembly and mailing of the proxies and soliciting material, as well as the cost of forwarding such material to the beneficial owners of Common Stock, will be borne by the Company. Directors, officers and regular employees of the Company may, without compensation other than their regular compensation, solicit proxies by telephone, telegraph or personal conversation. The Company may reimburse brokerage firms and others for expenses in forwarding proxy material to the beneficial owners of Common Stock. Any proxy given to this solicitation and received in time for the Annual Meeting will be voted in accordance with the instructions given in such proxy. Any shareholder giving a proxy may revoke it any time prior to its use at the Annual Meeting by giving written notice of such revocation to the Secretary of the Company, by filing a revoking instrument or a duly executed proxy bearing a later date with the Secretary of the Company or by attending the Annual Meeting and voting in person. Proxies that are signed by shareholders but that lack any such specification will be voted in favor of the proposals set forth in the Notice of Meeting and in favor of the election as directors of the nominees listed in this Proxy Statement. THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE PROPOSALS SET FORTH IN THE NOTICE OF MEETING. The Company expects that this Proxy Statement, the Proxy and Notice of Meeting will first be mailed to shareholders on or about May 6, 1996. 1 VOTING OF SHARES The close of business on April 1, 1996 has been fixed by the Board of Directors of the Company as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. On April 1, 1996, the Company had outstanding 7,863,883 shares of Common Stock, $.01 par value (the "Common Stock"), each such share entitling the holder thereof to one vote in person or by proxy on each matter to be voted on at the Annual Meeting, voting together as a single class. Holders of shares of Common Stock are not entitled to cumulative voting rights. The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the meeting (3,931,942 shares as of April 1, 1996) is required for a quorum for the transaction of business. In general, shares of Common Stock represented by a properly signed and returned proxy card will be counted as shares present and entitled to vote at the meeting for purposes of determining a quorum, without regard to whether the card reflects abstentions (or is left blank) or reflects a "broker non-vote" on a matter (i.e., a card returned by a broker on behalf of its beneficial owner customer that is not voted on a particular matter because voting instructions have not been received and the broker has no discretionary authority to vote). The election of a nominee for director and the approval of each of the other proposals described in this Proxy Statement require the approval of a majority of the shares present and entitled to vote in person or by proxy on that matter (and at least a majority of the minimum number of votes necessary for a quorum to transact business at the meeting). Shares represented by a proxy card voted as abstaining on any of the proposals will be treated as shares present and entitled to vote that were not cast in favor of a particular matter, and thus will be counted as votes against that matter. Shares represented by a proxy card including any broker non-vote on a matter will be treated as shares not entitled to vote on that matter, and thus will not be counted either for or against that matter. 2 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of April 12, 1996, certain information with respect to all shareholders known to the Company to have been beneficial owners of more than five percent of its Common Stock, and information with respect to the Company's Common Stock beneficially owned by directors of the Company, the executive officers of the Company included in the Summary Compensation Table set forth under the caption "Executive Compensation" below and all directors and executive officers of the Company as a group.
NAME AND ADDRESS NUMBER OF PERCENT OF BENEFICIAL OWNER SHARES (1)(2) OF CLASS (2) ------------------------------ ------------- ------------ John W. Castro 1,093,996(3) 13.8% One Merrill Circle St. Paul, MN 55108 Charles M. Royce 612,000(4) 7.8% Quest Advisory Corp. and Quest Management Company 1414 Avenue of the Americas New York, NY 10019 Kenneth F. Merrill 488,950(5) 6.2% 10 Coventry Drive Haines City, FL 33844 KPM Investment Management Inc. 484,050(6) 6.2% 10250 Regency Circle Omaha, NE 68114 Robert F. Nienhouse 226,169(7) 2.9% 205 East 4th St. Hinsdale, IL 60521 Rick R. Atterbury 225,723(8) 2.9% Richard G. Lareau 170,400(9) 2.2% Paul G. Miller 42,006 * Ronald N. Hoge 13,000(10) * James R. Campbell 3,000 * Frederick W. Kanner 1,000 * Steven J. Machov 34,741(11) * James G. Sippl 16,545(12) * Roxanne E. Iserman 830 * All directors and executive officers as a group (12 persons) 2,302,082(13) 28.9% - ------------------------ * less than 1% (1) Unless otherwise noted, each person or group identified possesses sole voting and investment power with respect to the shares shown opposite the name of such person or group.
3 (2) Shares not outstanding but deemed beneficially owned by virtue of the right of a person or member of a group to acquire them within 60 days are treated as outstanding only when determining the amount and percent owned by such person or group. (3) Includes 48,000 shares not outstanding but deemed beneficially owned by virtue of the right of Mr. Castro to acquire them within 60 days pursuant to exercisable stock options. Also includes 5,912 shares owned beneficially by Mr. Castro's wife and 1,766 shares owned by Mr. Castro's children, all to which he may be deemed to share voting and investment power, but as to which he disclaims beneficial ownership. (4) Reflects shares beneficially owned as of December 31, 1995 as filed on Schedule 13G. Of the shares shown, 566,200 shares are beneficially owned by Quest Advisory Corp., which possesses sole voting and investment power with respect to these shares, and 45,800 shares are beneficially owned by Quest Management Company, which possesses sole voting and investment power with respect to these shares. As a result of common ownership and control, Mr. Royce may be deemed to be the beneficial owner of all the shares shown. (5) Includes 36,250 shares owned beneficially by Mr. Merrill's wife, all to which he may be deemed to share voting and investment power, but as to which he disclaims beneficial ownership. (6) Reflects shares beneficially owned as of December 31, 1995 as filed on Schedule 13G. As an investment adviser, KPM Management Inc. represents numerous discretionary accounts, for which it possesses sole voting and investment power for all of the shares. (7) Includes 1,656 shares owned beneficially by Mr. Nienhouse's wife, as to which he may be deemed to share voting and investment power, but as to which he disclaims any beneficial interest. (8) Includes 33,000 shares Mr. Atterbury has the right to acquire within 60 days upon the exercise of options. (9) Includes 96,400 shares held in trust for the benefit of certain family members of Mr. Merrill. Mr. Lareau is the trustee for all these trusts, but disclaims beneficial ownership of all such shares. Also includes 7,000 shares owned beneficially by Mr. Lareau's wife, as to which he may be deemed to share voting and investment power, but as to which shares he disclaims beneficial ownership. (10) Includes 8,000 shares Mr. Hoge has the right to acquire within 60 days upon the exercise of options. (11) Includes 17,041 shares owned beneficially by Mr. Machov's wife and 2,700 shares Mr. Machov's wife has the right to acquire within 60 days upon exercise of options, all as to which he may be deemed to share voting and investment power, but as to which he disclaims beneficial ownership. Also includes 3,000 shares Mr. Machov has the right to acquire within 60 days upon exercise of options. (12) Includes 8,000 shares Mr. Sippl has the right to acquire within 60 days upon the exercise of options. (13) Includes: 96,400 shares held in trust for the benefit of certain family members of Kenneth F. Merrill for which Richard G. Lareau, a director of the Company, is the trustee for all these trusts, but disclaims beneficial ownership of all such shares; (ii) 69,625 shares owned beneficially by the spouses or children of members of the group as to which they may be deemed to share voting and investment power; and (iii) 99,950 shares not outstanding but deemed beneficially owned by virtue of the right of members of the group or their spouses to acquire them within 60 days pursuant to exercisable stock options. All persons subject to Section 16 of the Securities Exchange Act of 1934, as amended, filed required reports in a timely manner disclosing transactions involving the Company's stock, except James G. Sippl filed one Form 4 late involving two transactions during the past fiscal year.
4 ELECTION OF DIRECTORS NOMINATION The Bylaws of the Company provide that the Board shall consist of at least three members, or such other number as may be determined from time to time by the Board of Directors. The Board of Directors has determined that there will be eight directors of the Company for the ensuing year. In the absence of other instructions, the proxies will be voted for each of the following individuals, each of whom the Company's Board of Directors proposes for election as a director of the Company. If elected, such individuals will serve until the next Annual Meeting of Shareholders or until their successors are duly elected and qualified. All of the nominees are members of the present Board of Directors, and all were elected at last year's Annual Meeting of Shareholders, except Frederick W. Kanner who was elected to serve on the Board of Directors on January 22, 1996. Kenneth F. Merrill, Chairman, is retiring from the Board of Directors and is not seeking reelection. The election of each nominee requires the affirmative vote of a majority of the shares of Common Stock represented in person or by proxy at the Annual Meeting. The Board recommends a vote FOR the election of each of the nominees listed below. If prior to the Annual Meeting the Board should learn that any nominee will be unable to serve by reason of death, incapacity or other unexpected occurrence, the proxies that would have otherwise been voted for such nominee will be voted for a substitute nominee as selected by the Board. Alternatively, the proxies may, at the Board's discretion, be voted for such fewer number of nominees as results from such death, incapacity or other unexpected occurrence. The Board has no reason to believe that any of the nominees will be unable to serve. INFORMATION ABOUT NOMINEES The following information has been furnished to the Company by the respective nominees for director.
DIRECTOR NAMES OF NOMINEES PRINCIPAL OCCUPATION AGE SINCE - --------------------- ------------------------------------------------------------- --- -------- John W. Castro President and Chief Executive Officer of Merrill Corporation 47 1981 Richard G. Lareau Partner, Oppenheimer Wolff & Donnelly (law firm) 67 1981(1) Paul G. Miller Chairman, Secretary and Treasurer, LSC, Incorporated 73 1985 (proprietary software and systems consulting firm) Robert F. Nienhouse Private Investor 48 1986 Rick R. Atterbury Executive Vice President -- Operations of Merrill Corporation 42 1989 Ronald N. Hoge President, Aerospace Equipment Systems, AlliedSignal, Inc. 50 1991 (advanced systems and equipment manufacturer) James R. Campbell Executive Vice President, Norwest Corporation (bank holding 53 1994 company) Frederick W. Kanner Partner, Dewey Ballantine (law firm) 53 1996 - ------------------------ (1) Mr. Lareau was also the incorporator of the Company and served as its first director before his resignation in October 1968.
5 OTHER INFORMATION ABOUT NOMINEES Except as indicated below, there has been no change in principal occupations or employment during the past five years for the nominees for election as directors. Mr. Castro also serves as a Director of BMC Industries, Inc. Mr. Lareau has been a member of the law firm of Oppenheimer Wolff & Donnelly for over 36 years. Oppenheimer Wolff & Donnelly have provided and are expected to continue to provide legal services to the Company. Mr. Lareau also serves as a Director of Ceridian Corporation, Northern Technologies International Corporation and Nash Finch Company, and as a Trustee of Mesabi Trust. Mr. Miller was also Chairman from 1987 to 1995, and President and Chief Executive Officer from 1993 to 1995 of Supercomputer Systems, Inc. Mr. Nienhouse was a part-time consultant to the Company from May 1989 to January 1993. From July 1989 to January 1993, Mr. Nienhouse managed the Company's California operations. Mr. Hoge was President and Chief Executive Officer of Onan Corporation from June 1986 until August 1993. Mr. Campbell has also served as President and Chief Executive Officer of Norwest Bank Minnesota, N.A. since October 1984. Mr. Kanner has been a partner in the law firm of Dewey Ballantine since 1976. He also serves as a director of National Benefit Life Insurance Company. INFORMATION ABOUT THE BOARD AND ITS COMMITTEES Standing committees of the Board of Directors include the Audit Committee, the Compensation Committee and the Nominating Committee. The Audit Committee provides assistance to the Board in satisfying its responsibilities relating to the accounting, auditing, operating and reporting practices of the Company. The Audit Committee recommends to the Board the retention of independent accountants, reviews the performance of such accountants and considers recommendations concerning improvements in internal accounting control. The members of the Audit Committee are Messrs. Miller (Chairman), Lareau and Hoge. The Audit Committee met on 2 occasions during fiscal 1996. The Compensation Committee reviews general programs of compensation and benefits for all employees of the Company and sets the compensation to be paid to the Company's officers. The Compensation Committee also serves as the disinterested committee administering the Company's Retirement Plan, Incentive Stock Option Plan, 1987 Omnibus Stock Plan and 1993 Stock Incentive Plan. The members of the Compensation Committee are Messrs. Merrill, (Chairman), Campbell and Lareau. The Compensation Committee met or took action by written consent on 5 occasions during fiscal 1996. The Nominating Committee reviews and makes recommendations from time to time to the Board with respect to candidates for directors of the Company and compensation of Board members, and assignment of directors to committees of the Board. The Nominating Committee also reviews, at least annually, the composition of the Board regarding experience, expertise and special knowledge required for effective discharge of responsibilities; Board procedures, its size, and membership; and the structure, membership and charters of the Board's standing and ad hoc committees. The members of 6 the Nominating Committee are Messrs. Nienhouse (Chairman), Castro and Miller. The Nominating Committee met on 2 occasions during fiscal 1996. The Nominating Committee will consider for nomination nominees submitted by other directors and shareholders. Shareholders who wish to recommend persons for election as directors at the 1997 Annual Meeting of Shareholders may do so by submitting to the Secretary of the Company in writing on or before January 15, 1997: (i) the name and address of the person or persons to be nominated; (ii) the name and address of the shareholder who intends to make the nomination and a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons; (iii) a description of all arrangements or understandings between the shareholder 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 shareholder; (iv) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission as then in effect; and (v) the signed consent of each nominee to serve as a director of the Corporation if so elected. The Company's Board of Directors held 4 meetings and took action by written consent on 2 occasions during fiscal 1996. All of the directors attended at least 75% of all of the meetings of the Board of Directors and all committees on which they served during fiscal 1996. DIRECTORS' COMPENSATION Directors who are employees of the Company receive no separate compensation for their services as directors. For fiscal 1996, non-employee directors received a retainer of $10,000 per year ($15,000 for the Chairman of the Board), and fees for attendance at Board and committee meetings of $1,000 per meeting, provided that attendance fees are not paid for participation in meetings the chair of such committee determines are brief meetings. Subject to shareholder approval at this Annual Meeting, the Board has adopted the 1996 Non-Employee Director Plan 1996 (the "Director Plan") that provides for automatic non-qualified option grants to the Company's non-employee directors (the "Options") and payment of one-half of the non-employee directors' annual cash retainer in the form of Common Stock (the "Retainer Stock"). Currently, 200,000 shares of Common Stock are reserved for issuance under the Director Plan. In accordance with the terms of the Director Plan, new non-employee directors of the Company who are first elected or appointed to the Board to fill new directorships or vacancies are automatically granted, on a one-time basis, on the date of their election or appointment, non-qualified options to purchase 10,000 shares of Common Stock at an exercise price equal to the fair market value of the Common Stock on the date of grant (the "Initial Election Grant"). In addition to the Initial Election Grant, commencing with the annual meeting of shareholders of the Company that first occurs following the date that the non-employee director is first elected or appointed to the Board, each non-employee director who is re-elected to the Board at an annual meeting of the Company's shareholders will be granted Options to purchase 3,000 shares of Common Stock at such time, at an exercise price equal to the fair market value on the date of grant. The Options become exercisable, in the case of the Initial Election Grant, on a cumulative basis with respect to 20% of the shares on each anniversary of the date of grant, and, in the case of Options granted in connection with an annual meeting, in full six months following the date of grant. Each Option expires and is no longer exercisable ten (10) years from its date of grant. In addition to the Option grants under the Director Plan, the non-employee directors will receive payment for one-half of their annual cash retainer in the form of Common Stock, commencing with the Annual Meeting and continuing on each succeeding annual 7 meeting of shareholders of the Company. Each non-employee director, as of such dates, will receive such number of shares of Common Stock as equals $6,000 divided by the average of the fair market value of one share of Common Stock for the 10 trading days immediately preceding the date of such annual meeting, and $6,000 in cash. EXECUTIVE COMPENSATION COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee of the Board of Directors administers the Company's executive compensation program. The Compensation Committee consists of three non-employee directors and meets two to four times a year. A more complete description of the functions of the Compensation Committee is set forth above under the caption "Information About the Board and its Committees." COMPENSATION PHILOSOPHY AND OBJECTIVES. The Company's executive compensation philosophy is to pay for performance. The executive compensation program is intended to provide an overall level of compensation opportunity that the Committee believes, based on its own judgment and experience, and on periodic studies by executive compensation consultants, is competitive with other companies within its industry group. The objectives of the Company's executive compensation program are: - To establish annual base salaries and incentives that will attract and retain key executives. - To reward executives for achievement of annual performance and financial goals. - To encourage executive stock ownership and appreciation of long-term shareholder returns. Actual compensation levels are based on annual and long-term Company and individual performance and may be greater or less than compensation levels at other companies. EXECUTIVE COMPENSATION PROGRAM COMPONENTS. The Company's executive compensation program consists of base salary, annual cash bonus incentives and long-term ownership incentives in the form of stock options. BASE SALARY. Base pay levels of executives are determined generally by considering the potential impact of the individual on the Company and its performance, the skills and experiences required by the position, the performance of divisions or departments under the executive's control, the achievement of defined business objectives and personal and corporate development goals, and finally, the overall performance of the Company. Base salaries for executives are maintained at levels that the Compensation Committee believes, based upon its own judgment and experience, are lower than the median for other companies of comparable size and complexity (which are not necessarily the companies included in the performance graph included below in this proxy statement), and the annual cash bonus incentives are designed to offer greater potential compensation than the median in other companies. John W. Castro, the Company's Chief Executive Officer, and Rick R. Atterbury, the Company's Executive Vice President, have employment agreements with the Company entered into in 1989 and 1987, respectively. These agreements provide for automatic renewal from year to year. For the fiscal year ended January 31, 1996 Mr. Castro's base salary was $300,000 per year and Mr. Atterbury's was $225,000 per year. The base salaries of certain other executives were increased during the last fiscal year. Base salary increases were given to executives where it was determined that, based on market 8 study, the base salaries were not sufficiently competitive. Consistent with the Company's executive compensation strategy, executive base salaries continue to be below the median as compared to similar companies. ANNUAL CASH BONUS INCENTIVES. Annual cash incentive bonuses for Mr. Castro and Mr. Atterbury are prescribed by a fixed formula in their employment agreements. For all other executives, the Company's Chief Executive Officer makes a recommendation to the Committee as to the amount of each cash incentive bonus, based on his subjective evaluation, including his perception of the individual's performance. The Committee makes a final bonus award, taking into account the recommendation of the Chief Executive Officer as well as using its own judgment and experience. The Committee places greater emphasis on annual Company performance for determining cash incentive bonuses than for determining individual base salaries. All executives received a smaller cash bonus than in the prior fiscal year, due in part to the Company's performance during fiscal year 1996 and previously mentioned base salary adjustments. Pursuant to their employment agreements, Mr. Castro and Mr. Atterbury receive cash bonuses based on the Company's net income per share. Thus, their overall compensation is directly related to the Company's profit performance for each fiscal year. For each one cent of net income per share up to the prior fiscal year's net income per share, Mr. Castro and Mr. Atterbury receive cash bonuses of $2,000 and $1,200, respectively, and for each additional one cent of net income per share above the prior fiscal year's net income per share, they receive additional cash bonuses of $5,000 and $3,000, respectively. For the fiscal year ended January 31, 1996, Messrs. Castro and Atterbury received cash bonuses of $250,000 and $150,000, respectively, which were $18,000 and $10,000 respectively, less than they were entitled to receive pursuant to their employment agreements. This reduction was recommended by Messrs. Castro and Atterbury and was approved by the Compensation Committee. LONG-TERM OWNERSHIP INCENTIVE. Long-term incentives are provided in the form of stock options that are granted from time to time at or above market value at date of grant and generally become exercisable proportionately over a period of five to seven years. Grants of stock options are made by the Compensation Committee in its discretion based upon the recommendation of the Company's Chief Executive Officer and Vice President -- Human Resources, as well as the Committee's judgment as to the executive's contribution toward Company performance and expected contribution toward meeting the Company's long-term strategic goals and increases in shareholder returns. The value received by the executives from option grants depends completely on increases in the market price of the Company's Common Stock over the option exercise price. Thus, this component of compensation is aligned directly with increases in shareholder value. Kenneth F. Merrill, Chair James R. Campbell Richard G. Lareau MEMBERS OF THE COMPENSATION COMMITTEE 9 SUMMARY COMPENSATION TABLE The following table sets forth the cash and noncash compensation for each of the last three fiscal years awarded to or earned by the Chief Executive Officer of the Company and the four other most highly compensated executive officers of the Company whose salary and bonus exceeded $100,000 in fiscal 1996.
LONG TERM COMPENSATION ------------ ANNUAL COMPENSATION SECURITIES ------------------- UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS COMPENSATION (2) - ----------------------------------------------- ---- -------- -------- ------------ ----------------- John W. Castro 1996 $300,000 $250,000 -0- $ 32,162 President and Chief Executive 1995 $300,000 $300,000 -0- Officer 1994 $150,000 $573,288 -0- Rick R. Atterbury 1996 $225,000 $150,000 -0- $ 22,625 Executive Vice President -- Operations 1995 $225,000 $180,000 -0- 1994 $100,000 $343,973 30,000 James G. Sippl 1996 $144,000 -0- -0- $ 11,170 Vice President 1995 $144,000 $ 6,000 -0- 1994 $144,000 $ 36,000 -0- Steven J. Machov 1996 $125,000 $ 9,167 -0- $ 10,500 Vice President, General 1995 $120,834 $ 15,000 10,000 Counsel and Secretary 1994 $100,000 $ 50,000 -0- Roxanne E. Iserman 1996 $100,000 -0- -0- $ 11,049 Vice President -- Client Services Development 1995 $100,000 10,000 -0- 1994 $100,000 20,000 -0- - ------------------------ (1) Cash bonuses for services rendered have been included as compensation for the year earned, even though all or part of such bonuses were actually calculated and paid in the following year. (2) "All Other Compensation" includes: (i) amount of $10,500 for each named executive officer to be contributed by the Company to its defined contribution retirement plan; and (ii) premium payments under life insurance policies on the lives of the executives at the following incremental costs to the Company: Mr. Castro $614, Mr. Atterbury $417, Mr. Sippl $670, and Ms. Iserman $549, and (iii) contributions by the Company to its Supplemental Retirement Plan: Mr. Castro $21,048, and Mr. Atterbury $11,708. "All Other Compensation" includes only amounts earned for the year ended January 31, 1996.
10 OPTIONS The following table summarizes option exercises during fiscal 1996 by the executive officers named in the Summary Compensation Table above, and the potential realizable value of the options held by such persons at the end of fiscal 1996. There were no option grants during fiscal 1996 to any of the executive officers named in the Summary Compensation Table. AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND VALUE OF OPTIONS AT FISCAL YEAR END 1996
NUMBER OF VALUE OF UNEXERCISED UNEXERCISED OPTIONS AT IN-THE MONEY OPTIONS END OF FISCAL 1996 AT END OF FISCAL 1996 (3) SHARES ACQUIRED VALUE -------------------------- -------------------------- NAME ON EXERCISE (1) REALIZED (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------ ------------------ ----------- ----------- ------------- ----------- ------------- John W. Castro 36,000 24,000 $ 151,200 $ 100,800 Rick R. Atterbury 70,000 $ 890,313 27,000 33,000 $ 94,000 $ 63,000 James G. Sippl 29,000 $ 370,250 6,000 4,000 $ 31,500 $ 21,000 Steven J. Machov 6,000 $ 76,313 1,500 8,500 $ 0 $ 0 Roxanne E. Iserman 4,000 $ 49,740 - ------------------------ (1) Under both the 1987 Omnibus Stock Plan and 1993 Plan, the exercise price may be paid in cash or, in the Compensation Committee's discretion, by delivery of a promissory note or previously acquired shares of the Company's common stock valued at fair market value on the date of exercise or pursuant to a cashless exercise procedure under which the executive provides irrevocable instructions to a brokerage firm to sell the purchased shares and to remit to the Company, out of the sale proceeds, an amount equal to the exercise price plus all applicable withholding taxes. (2) Value calculated as the market value on the date of exercise less the option exercise price. (3) Value calculated as the market value on January 31, 1996 ($15.75) less the option exercise price. Options are in-the-money if the market price of the shares exceeds the option exercise price.
11 COMPARATIVE STOCK PERFORMANCE COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG MERRILL CORPORATION, THE S&P SMALLCAP 600 INDEX AND THE DOW JONES IND & COMM SERVICES -- GENERAL SERVICES INDEX The following graph compares the cumulative total shareholder return of the Company's Common Stock with a cumulative total return, assuming reinvestment of dividends, of the Standard & Poor's 600 Index and the Dow Jones Industrial and Commercial Services -- General Services Index. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MERRILL CORPORATION S & P SMALLCAP 600 DOW JONES INDUSTRIAL & COMMERCIAL SERVICES- GENERAL SVCS 1/91 100 100 100 1/92 295 149 113 1/93 373 172 127 1/94 671 204 139 1/95 330 187 129 1/96 347 247 162
* $100 invested on 1/31/91 in stock or index -- including reinvestment of dividends. Fiscal year ending January 31. Source: Research Data Group 12 EMPLOYMENT AGREEMENTS Effective February 1, 1989, Mr. Castro entered into a one-year employment agreement with the Company under which he serves as its President and Chief Executive Officer, and effective February 1, 1987, Mr. Atterbury entered into a three-year employment agreement with the Company under which he serves as its Vice President -- Operations. Mr. Atterbury's employment agreement was first amended effective February 1, 1990, and Mr. Castro's and Mr. Atterbury's agreements were also amended effective February 1, 1994. Each employment agreement provides for an automatic renewal from year to year for consecutive one year terms unless either the employee or the Company gives the other party 60 days advance written notice of termination. For services performed under their respective agreements, Mr. Castro receives an annual base salary of $300,000 and Mr. Atterbury receives an annual base salary of $225,000. Cash bonuses for Mr. Castro and Mr. Atterbury are based on the Company's net income per share. For each one cent of net income per share up to the prior fiscal year's net income per share, Mr. Castro and Mr. Atterbury receive cash bonuses of $2,000 and $1,200, respectively, and for each additional one cent of net income per share they receive additional cash bonuses of $5,000 and $3,000, respectively. For the fiscal year ended January 31, 1996, Mr. Castro and Mr. Atterbury each agreed to limited their respective bonuses to $250,000 and $150,000, respectively. Mr. Castro and Mr. Atterbury also receive an annual transportation allowance of $12,000 and $7,200, respectively. For a discussion of the "change in control" provisions in these agreements, see "Change in Control Arrangements" below. Upon termination of employment under their amended agreements, each has agreed not to compete with the Company for 18 months if the Company elects to continue paying his base salary during the restrictive period. CHANGE IN CONTROL ARRANGEMENTS Pursuant to two stock-based benefit plans of the Company and employment agreements with two executive officers of the Company named in the Summary Compensation Table above, benefits would be paid or existing non-vested awards would be accelerated in connection with a change in control of the Company. Under the Company's 1993 Stock Incentive Plan (the "1993 Plan"), in the event a "change in control" of the Company occurs, if approved by the committee administering the plan, (a) all outstanding options will become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the participant remains in the employ or service of the Company or any subsidiary, (b) all outstanding restricted stock awards will become immediately fully vested and nonforfeitable, and (c) all outstanding performance units, if any, will vest and/or continue to vest in the manner determined by the committee. In addition, the committee, without the consent of any affected participant, may determine that some or all participants holding outstanding options will receive cash in an amount equal to the excess of the fair market value immediately before the effective date of such change in control over the exercise price per share of the options. For purposes of the 1993 Plan, a "change in control" means (i) the sale or other transfer of substantially all of the Company's assets, (ii) a merger or consolidation involving the Company if less than 80% of the voting stock of the surviving company is held by persons who were shareholders of the Company immediately before the merger or consolidation, (iii) ownership by any person or group of 20% or more of the Company's voting stock, (iv) a change in the composition of the Board such that individuals who constitute the Board on the effective date of the 1993 Plan cease for any reason to constitute at least a majority of the Board (with exceptions for individuals who are nominated or otherwise approved by the current Board), or (v) any change of control that is required to be reported under Section 13 or 15(d) of the Securities Exchange Act of 1934. 13 Under the Company's 1987 Omnibus Stock Plan (the "1987 Plan"), upon the occurrence of a "change in control" of the Company, all outstanding options will become immediately exercisable in full and will remain exercisable during the remaining term thereof, whether or not the participants to whom the options were granted remain employees of the Company or a subsidiary, and all restrictions with respect to outstanding restricted stock awards will immediately lapse. The acceleration of the exercisability of options or the vesting of restricted stock awards under this plan may be limited, however, if the acceleration is subject to an excise tax imposed upon "excess parachute payments." Under this plan, a "change in control" means, absent the approval of the continuity directors of the Company (directors as of the effective date of the 1987 Plan and additional directors nominated by other "continuity directors"), (a) the sale or other transfer of substantially all of the Company's assets, (b) the approval by the Company's shareholders of a plan of liquidation, (c) a change in control that would be required to be reported in a Current Report on Form 8-K, (d) ownership by any person or group of 20% or more of the Company's outstanding voting stock, or (e) the continuity directors ceasing to constitute a majority of the Board of Directors. Under their respective employment agreements with the Company, Messrs. Castro and Atterbury are entitled to receive certain benefits if, following a "change in control" of the Company, either terminates their employment relationship for specified reasons (including by reason of a change in duties, relocation of the Company, certain changes in benefits, failure by any successor of the Company to assume the agreement, purported termination by the Company not expressly authorized by the agreement or any breach of the agreement by the Company). In such a case, the Company will make a lump sum cash payment to the executive in an amount equal to 2.99 times the average annual compensation received by the executive from the Company and includable in the executive's gross income during the five most recent taxable years ending before the change in control (less any amounts received under other plans considered to be "parachute payments" under Section 280G of the Internal Revenue Code) and any legal fees incurred in enforcing the agreement. A "change in control" for purposes of these employment agreements means, unless approved by two-thirds of the continuity directors of the Company (directors as of the date of the employment agreement and additional directors nominated by other "continuity directors"), (a) a merger or consolidation involving the Company if less than 50% of the voting stock of the surviving company is held by persons who were shareholders of the Company immediately before the merger, (b) a change in control that would be required to be reported in response to Schedule 14A under the Securities Exchange Act of 1934, (c) ownership by any person or group of more than 20% of the Company's voting stock, or (d) any person or group becoming, through or pursuant to a "tender offer" as defined in the Securities Exchange Act of 1934, the owner of more than 10% of the Company's voting stock. If a "change in control" of the Company had occurred as of February 1, 1996, Mr. Castro would have been entitled to receive a lump sum payment of approximately $1,745,295 under his employment agreement and Mr. Atterbury would have been entitled to receive a lump sum payment of approximately $1,949,288 under his employment agreement. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation Committee of the Company's Board of Directors are Messrs. Merrill, Campbell and Lareau, all of whom are non-employee directors. Mr. Merrill is an officer of the Company and the Company's Chairman of the Board. Mr. Lareau was formerly a non-employee officer of the Company as Assistant Secretary from 1981 to 1985 and Secretary from 1985 to 1989. 14 PROPOSAL TO ADOPT THE COMPANY'S 1996 NON-EMPLOYEE DIRECTOR PLAN INTRODUCTION Effective April 12, 1996, the Board adopted the 1996 Non-Employee Director Plan (the "Director Plan") that provides for awards of nonqualified options to purchase shares of Common Stock (the "Options") and payment of a non-employee director's annual cash retainer in the form of Common Stock (the "Retainer Stock")(the Options and the Retainer Stock are collectively referred to as the "Incentive Awards") to members of the Board who are not also employees of the Company or any of its subsidiaries ("Eligible Directors"). The purpose of the Director Plan is to advance the interests of the Company and its shareholders by enabling the Company to attract and retain the services of experienced and knowledgeable non-employee directors and to increase the proprietary interests of such non-employee directors in the Company's long-term success and progress and their identification with the interests of the Company's shareholders. The major features of the Director Plan are summarized below, which summary is qualified in its entirety by reference to the actual text of the Director Plan, a copy of which may be obtained from the Company. SUMMARY OF THE DIRECTOR PLAN SHARES RESERVED UNDER THE DIRECTOR PLAN. The Board has reserved a maximum of 200,000 shares of Common Stock for issuance under the Director Plan. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other change in the corporate structure or shares of the Company, the committee administering the Director Plan (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) will make appropriate adjustment to the number and kind of securities available for issuance under the Director Plan and, in order to prevent dilution or enlargement of the rights of Eligible Directors, the number, kind and exercise price of securities subject to outstanding Director Plan Options. OPTIONS. Upon such time as new Eligible Directors are first elected to the Board to fill new directorships or to fill vacancies, the Eligible Director will be granted, on a one-time basis, Options to purchase 10,000 shares of Common Stock (the "Initial Election Grant"). In addition to the Initial Election Grant, commencing with the annual meeting of shareholders of the Company that first occurs following the date that an Eligible Director is first elected or appointed to the Board, each Eligible Director who is re-elected to the Board at an annual meeting of the Company's shareholders will be granted Options to purchase 3,000 shares of Common Stock at such time. Options under the Director Plan have an exercise price equal to 100% of the fair market value of one share of Common Stock on the date of grant. On May 1, 1996, the last sale price of the Common Stock was $22.00 per share, as reported on the Nasdaq National Market. The Options become exercisable, in the case of the Initial Election Grant, on a cumulative basis with respect to 20% of the shares on each anniversary of the date of grant, and, in the case of Options granted in connection with an annual meeting, in full six months following the date of grant. Payment of the exercise price can be 15 made in cash (including check, bank draft or money order), by delivery of previous owned shares that have been held at least six months, or by delivery of a broker exercise notice. Each Option expires and is no longer exercisable ten (10) years from its date of grant. RETAINER STOCK. Eligible Directors will receive payment of one-half of their annual cash retainer in the form of Common Stock, commencing with the Annual Meeting and continuing on each succeeding annual meeting of shareholders of the Company. Each Eligible Director, as of such dates, will receive such number of shares of Common Stock as equals $6,000 divided by the average of the fair market value of one share of Common Stock for the 10 trading days immediately preceding the date of such annual meeting. TERMINATION OF SERVICE. In the event an Eligible Director's service as a director of the Company is terminated by reason of death or disability, all outstanding Options then held by the Eligible Director will become immediately exercisable in full and will remain exercisable for a period of one year thereafter. Upon termination of an Eligible Director's service for any other reason, all outstanding Options then held by the Eligible Director and exercisable at the time of the termination will remain exercisable for a period of three months thereafter (one year in the case of retirement). Notwithstanding the foregoing, in no event will any Options remain exercisable after their expiration. ADMINISTRATION OF DIRECTOR PLAN. The Director Plan will be administered by a committee consisting solely of two or more members of the Board. All questions of interpretation of the Director Plan will be determined by the committee, with each determination, interpretation or other action made or taken by the committee pursuant to the provisions of the Director Plan being conclusive and binding. However, the committee administering the Director Plan will have no power to determine the eligibility of any person to participate in the Director Plan, the number of shares of Common Stock to be subject to Incentive Awards, or the timing, pricing or other terms and conditions of Incentive Awards. It is currently intended that the Director Plan will be administered by the Compensation Committee. AMENDMENT, MODIFICATION AND TERMINATION OF THE DIRECTOR PLAN. The Board may suspend or terminate the Director Plan or any portion thereof at any time, and may amend the Director Plan from time to time in such respects as the Board may deem advisable in order that Incentive Awards granted under the Director Plan will conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company. However, no amendments to the Director Plan will be effective without approval of the shareholders of the Company if shareholder approval of the amendment is then required pursuant to Rule 16b-3 under the Exchange Act or by the rules of the Nasdaq National Market. Except as otherwise prohibited by Rule 16b-3 of the Exchange Act, the Director Plan may not be amended more than once every six months. No termination, suspension or amendment of the Director Plan may adversely affect any outstanding Incentive Award without the consent of the affected Eligible Director except for appropriate adjustments to the number and kind of securities available for issuance under the Director Plan and the number, kind and exercise price of securities subject to outstanding Incentive Award as provided in the Director Plan. NON-TRANSFERABILITY OF OPTIONS. No Option or interest in an Option granted under the Director Plan may be transferred by an Eligible Director for any reason or by any means, except by will or by the laws of descent and distribution. An Eligible Director will, however, be entitled to designate a 16 beneficiary to receive an Option upon such Eligible Director's death, and, in the event of an Eligible Director's death, payment of any amounts due under the Director Plan will be made to, and exercise of any Options may be made by, the Eligible Director's legal representatives, heirs and legatees. TERM OF THE DIRECTOR PLAN. Subject to approval by the shareholders of the Company at the 1996 Annual Meeting, the Director Plan is effective as of May 21, 1996, and will terminate at midnight on May 21, 2001, subject to earlier termination by the Board. No Incentive Awards may be granted after termination of the Director Plan, but Options outstanding upon termination of the Director Plan will continue to be exercisable in accordance with their terms. FEDERAL INCOME TAX CONSEQUENCES The following description of federal income tax consequences is based on current statutes, regulations and interpretations. The description does not include state, local or foreign income tax consequences. In addition, the description is not intended to address specific tax consequences applicable to an individual Eligible Director who receives Option or Retainer Stock. OPTIONS. The Options granted under the Director Plan do not qualify as incentive stock options within the meaning of Section 422 of the Code. Generally, neither the Eligible Director nor the Company incurs any federal income tax consequences as a result of the grant of an Option. Upon exercise of an Option, the Eligible Director will recognize ordinary compensation income in an amount equal to the difference between the fair market value of the shares purchased, determined on the day of exercise, and the consideration paid for the shares. At the time of a subsequent sale or disposition of any shares of Common Stock obtained upon exercise of an Option, any gain or loss will be a capital gain or loss. Such gain or loss will be a long-term capital gain or loss if the sale or disposition occurs more than one year after the date of exercise and short-term capital gain or loss if the sale or disposition occurs one year or less after the date of exercise. In general, the Company will be entitled to a compensation expense deduction in connection with the exercise of an Option for any amounts includable in the taxable income of an Eligible Director as ordinary compensation income. RETAINER STOCK. With respect to shares issued as Retainer Stock, such shares will be deemed to be subject to a risk of forfeiture for six months after the date received due to the six-month holding period of Rule 16b-3 under the Exchange Act. Accordingly, an Eligible Director may file an election under Section 83(b) of the Code within 30 days after receipt to include as ordinary income in the year of receipt an amount equal to the fair market value of the shares received on the date of receipt (determined as if the shares were not subject to any risk of forfeiture). If a Section 83(b) election is made, the Eligible Director will not recognize any additional income when the risk of forfeiture lapses. An Eligible Director who does not make a Section 83(b) election within 30 days of the receipt of the Retainer Stock will recognize ordinary income at the end of such six-month period in an amount equal to the then fair market value of the shares freed of restrictions. The Company will receive a corresponding tax deduction for any amounts includable in the taxable income of a participant as ordinary income. 17 PLAN BENEFITS The following table illustrates the Options and the Retainer Stock that the Eligible Directors of the Company as a group will receive under the Director Plan in fiscal 1997. PLAN BENEFITS 1996 NON-EMPLOYEE DIRECTOR PLAN
NUMBER OF SHARES NUMBER OF SHARES UNDERLYING OF RETAINER STOCK NAME AND POSITION OPTIONS GRANTED (1) GRANTED (1)(2) - --------------------------------------------------------------------------- ------------------- ----------------- Non-Executive Director Group 18,000 1,638
- ------------------------ (1) Assumes no new directors are appointed to the Board during fiscal 1997. (2) The Retainer Stock to be granted in fiscal 1997 is valued at $22.00 per share, the fair market value of the Common Stock on May 1, 1996, although the actual fair market value will be based upon the average of the fair market value for the 10 trading days immediately prior to May 21, 1996. BOARD OF DIRECTORS RECOMMENDATIONS The Board of Directors recommends that the shareholders vote FOR approval and ratification of the proposal to adopt the Director Plan. The affirmative vote of the holders of a majority of shares of Common Stock present in person or by proxy at the Annual Meeting, and at least a majority of the minimum number of votes necessary for a quorum to transact business at the Annual Meeting, is necessary for approval. Unless a contrary choice is specified, proxies solicited by the Board of Directors will be voted FOR approval of the Director Plan. SELECTION OF INDEPENDENT ACCOUNTANTS The Board of Directors has approved the selection of Coopers & Lybrand L.L.P. as independent accountants to make an examination of the accounts of the Company for the fiscal year ending January 31, 1997, and to perform other appropriate accounting services. Coopers & Lybrand L.L.P. has acted as independent accountants of the Company since 1984. Although it is not required to do so, the Board of Directors wishes to submit the selection of Coopers & Lybrand L.L.P. to the shareholders for ratification. The Board recommends a vote FOR ratification of Coopers & Lybrand L.L.P. as independent accountants for the fiscal year ending January 31, 1997. Unless a contrary choice is specified, proxies solicited by the Board will be voted for the ratification of Coopers & Lybrand L.L.P. If the selection of Coopers & Lybrand L.L.P. is not ratified, the Board of Directors will reconsider its selection. The Company has requested and expects a representative of Coopers & Lybrand L.L.P. to be present at the Annual Meeting, to make a statement if he or she so desires and to respond to appropriate questions. PROPOSALS FOR THE NEXT ANNUAL MEETING Shareholder proposals intended to be presented in the proxy material relating to the next Annual Meeting of Shareholders must be received by the Company on or before January 3, 1997. 18 OTHER BUSINESS The Company knows of no business that will be presented for consideration at the Annual Meeting other than that described in this Proxy Statement. As to other business, if any, that may properly come before the Annual Meeting, it is intended that proxies solicited by the Board will be voted in accordance with the judgment of the person or persons voting the proxies. ANNUAL REPORT A copy of the Company's Annual Report to Shareholders for the fiscal year ended January 31, 1996 accompanies this Notice of Annual Meeting and Proxy Statement. The Annual Report describes the financial condition of the Company as of January 31, 1996. THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR ENDED JANUARY 31, 1996 TO EACH PERSON WHO IS A SHAREHOLDER OF THE COMPANY AS OF APRIL 1, 1996, UPON RECEIPT FROM ANY SUCH PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL REPORT ON FORM 10-K. SUCH REQUESTS SHOULD BE SENT TO: MERRILL CORPORATION, ONE MERRILL CIRCLE, ST. PAUL, MINNESOTA 55108, ATTENTION: SECRETARY. BY ORDER OF THE BOARD OF DIRECTORS [STEVEN J. MACHOV SIGNATURE] Steven J. Machov SECRETARY May 3, 1996 St. Paul, Minnesota 19 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints John W. Castro and Richard G. Lareau, and each of them, as Proxies, each with the power to appoint his substitute, and hereby authorizes each of them to represent and to vote, as designated below, all the shares of common MERRILL CORPORATION stock of Merrill Corporation held of record One Merrill Circle Proxy by the undersigned on April 1, 1996, at the Saint Paul, MN Annual Meeting of Shareholders to be held on 55108 May 21, 1996, or any adjournment thereof. - ------------------------------ 1. ELECTION OF / / FOR all nominees / / AGAINST all nominees DIRECTORS listed below listed below (except as marked to the contrary below) (INSTRUCTION: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME.) RICK R. ATTERBURY FREDERICK W. KANNER JAMES B. CAMPBELL RICHARD G. LAREAU JOHN W. CASTRO PAUL G. MILLER RONALD N. HOGE ROBERT F. NIENHOUSE 2. PROPOSAL TO ADOPT THE COMPANY'S 1996 NON-EMPLOYEE DIRECTOR PLAN. / / FOR / / AGAINST / / ABSTAIN 3. PROPOSAL TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE INDEPENDENT ACCOUNTANTS OF THE COMPANY. / / FOR / / AGAINST / / ABSTAIN PLEASE SIGN ON REVERSE SIDE 4. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES NAMED IN ITEM 1 AND TO VOTE FOR THE PROPOSALS LISTED IN ITEMS 2 AND 3 ON THE REVERSE. Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. - -------------------------------------------------------------------------------- Dated: ______________, 1996. ____________________________ Signature ____________________________ Signature if held jointly PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. -----END PRIVACY-ENHANCED MESSAGE-----