P.O. Box 1167 l Dayton, OH 45401

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

OF THE STANDARD REGISTER COMPANY

 

To All Shareholders:

 

The annual meeting of shareholders of The Standard Register Company, an Ohio corporation, will be held at our corporate headquarters located at 600 Albany Street, Dayton, Ohio 45408, on Thursday, April 26, 2007, at 11:00 a.m. Eastern Daylight Savings Time, for the following purposes:

 

(1) To set the number of directors at seven and to elect a board of directors;

 

(2) To amend the Code of Regulations to authorize direct registration of shares;

 

(3) To transact such other business as may properly come before the annual meeting.

 

The board of directors has fixed the close of business on February 26, 2007, as the record date for determining the shareholders of Standard Register entitled to vote at the annual meeting.

 

A copy of Standard Register’s annual report for its fiscal year ended December 31, 2006, is enclosed. Although it is not a part of the official proxy soliciting material, we want each shareholder to have a copy of the annual report. If you have not received a copy of the annual report, please call us at 937.221.1506.

 

Kathryn A. Lamme
Senior Vice President, General Counsel
& Secretary

 

Dayton, Ohio

March 16, 2007

 

 

THE STANDARD REGISTER COMPANY

 

 

PROXY STATEMENT

 

FOR

 

ANNUAL MEETING

 

OF

 

SHAREHOLDERS

 

 

PRINCIPAL EXECUTIVE OFFICES:

600 Albany Street

Dayton, Ohio 45408

(937) 221-1000

 

Mailing Date: March 16, 2007

 

 

We are mailing this proxy statement along with the notice of annual meeting of shareholders of The Standard Register Company, to all holders of our stock as of February 26, 2007, which is the record date for the annual meeting. We had outstanding, on the record date, 24,269,761 shares of common stock (each share having one vote) and 4,725,000 shares of class A stock (each share having five votes). Shareholders as of the close of business on the record date are entitled to receive notice of and to vote at the annual meeting. The annual meeting will be held at our corporate headquarters, 600 Albany Street, Dayton, Ohio 45408, on Thursday, April 26, 2007, at 11:00 a.m. The proxies are solicited on behalf of our board of directors.

 

At the annual meeting, the shareholders will: (1) set the number of directors at seven and elect a board of directors; (2) consider amending the Code of Regulations to authorize direct registration of shares; and (3) transact such other business as may properly come before the annual meeting.

 

VOTING YOUR SHARES

 

Standard Register offers electronic delivery of proxy materials and voting over the Internet to most shareholders. The enclosed proxy card describes how you may vote electronically and register to receive future shareholder communications electronically. You may also vote by completing the proxy card and mailing it in the envelope provided.

 

All shareholder votes, properly cast in person or by proxy, and not revoked, will be counted in voting on the proposals at the annual meeting or any adjournment of the annual meeting. Your proxy will be voted in accordance with your instructions. If you do not specify how you wish your shares to be voted, they will be voted as recommended by the board of directors. Your proxy includes the authority to vote shares cumulatively for the election of directors. Cumulative voting is explained in the section dealing with Proposal 1. Your proxy also includes the authority for the persons serving as proxies to use their best judgment to vote on any other matters that may be properly presented at the annual meeting, including, among other things, a motion to adjourn the meeting to a future time.

 

You may revoke your proxy at any time before its exercise, in two ways: (1) by timely delivery to us of a later-dated proxy, or (2) by notifying us of your revocation of proxy either in writing or in person at the annual meeting. Your presence at the meeting will not, by itself, serve to revoke your proxy.

 

PROPOSALS

 

PROPOSAL 1: Election of Directors

 

The board of directors currently has seven members, and the board recommends maintaining that number of directors.

 

In early December 2006, our long-time Chairman of the Board, Paul H. Granzow, died. Mr. Granzow served as Chairman for over twenty years, providing wise and steady leadership. The entire Standard Register family was saddened by his passing.

 

As a result of Mr. Granzow’s death, the board is currently comprised of seven directors. All current directors are nominated by the board of directors to be elected as directors and to serve until either the next annual election or until their successors are elected and qualified.

 

The board of directors does not expect that any of the nominees will be unavailable for election. However, if any of them is unavailable, the persons voting your proxy will use their best judgment to vote for substitute nominees.

 

Cumulative voting is permitted by the laws of Ohio in voting for the election of directors. In the event a shareholder wishes to vote his or her shares cumulatively, the shareholder must give notice in writing to the President, a Vice President or Secretary of Standard Register not less than 48 hours before the time scheduled for the annual meeting. Once any shareholder has given notice of intent to vote cumulatively, then all shareholders present at the annual meeting and the persons voting the proxies shall have full discretion and authority to cumulate the voting power they possess. This means they can give one candidate as many votes as the number of directors to be elected multiplied by the number of votes which the shareholder or proxy is entitled to cast, or to distribute such votes on the same principle among two or more candidates, as they determine in their judgment.

 

Nominees receiving the highest number of votes cast for the positions to be filled will be elected. Abstentions and shares not voted by brokers and other entities holding shares on behalf of beneficial owners will not be counted and will have no effect on the outcome of the election.

 

The board of directors recommends that you vote FOR setting the number of directors at seven and FOR each of the following named nominees to serve as directors of Standard Register:

 

Nominees

 

All nominees recommended by the board of directors for election were previously elected as directors by the shareholders. Information concerning each nominee follows:

 

 

 

VOTING SECURITIES AND PRINCIPAL HOLDERS

 

Owners of More than 5% of the Common and Class A Stock of Standard Register

 

This table gives information regarding all of the persons known by us to own, in their name or beneficially, 5% or more of the outstanding class A stock and common stock of Standard Register as of December 31, 2006.

 

 

Security Ownership of Directors and Executive Officers

 

Each director and executive officer listed in the Summary Compensation Table and all directors and executive officers as a group own, in their own name or beneficially, class A stock and common stock of Standard Register on December 31, 2006, as follows:

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires directors, executive officers and holders of 10% or more of our common stock to report certain transactions in the common stock to the Securities and Exchange Commission. Based on our records, we believe all Securities and Exchange Commission filings with respect to directors, executive officers and holders of 10% or more of our common stock have been made in a timely manner with the exception of one filing for our Corporate Controller. This filing with respect to an award of restricted stock in December 2006, was filed late due to inadvertence in the Corporate Secretary’s office.

 

CORPORATE GOVERNANCE

 

Corporate Governance Guidelines

 

The board has adopted Corporate Governance Guidelines to provide principles for the company’s governance processes. These Guidelines address, among other topics, director selection and qualifications, director responsibilities, and board and committee structure. The Corporate Governance Guidelines are reviewed periodically and updated as deemed appropriate.

 

Code of Ethics

 

The board has adopted a Code of Ethics and emphasized that directors, and all company employees, including principal executive officers and senior financial officers, are subject to the letter and spirit of the Code. The Code of Ethics covers such topics as conflicts of interest, confidentiality, compliance with legal requirements, and other business ethics subjects. It has been distributed to all employees and is made available on the company’s Web site, www.standardregister.com by clicking on the “About SR” section. Printed copies of the Code of Ethics are available by contacting the Corporate Secretary’s office, The Standard Register Company, 600 Albany Street, Dayton, Ohio 45408.

 

Director Independence

 

The board, assisted by the Corporate Governance and Nominating Committee, annually assesses the independence status of all directors for purposes of board and committee memberships. Using the “Independence Criteria” adopted by the board in conformity with New York Stock Exchange Listing Standards, as amended, the board adopted findings with respect to the independence of each director. Directors Roy W. Begley, Jr., F. David Clarke, III, Sherrill W. Hudson, Ann Scavullo, John J Schiff, Jr., and John W. Sherman, II, were determined to be independent. CEO Dennis L. Rediker was considered not independent since he is an employee of the company. The late Chairman, Paul H. Granzow, who died in December 2006, was also deemed not independent by virtue of the fact he was an employee of the company. All members of the Audit, Compensation, and Corporate Governance and Nominating Committees are independent directors.

 

The Committee and board also considered commercial ordinary-course transactions with respect to several directors as it assessed independence status, and concluded these transactions did not impair director independence. Specifically, the company uses the insurance broker services of Cincinnati Financial. Director John J. Schiff, Jr., is Chairman of the Board of Cincinnati Financial. The amount paid by the company to Cincinnati Financial in 2006 was considerably under the thresholds set in the Independence Criteria with respect to both companies. Additionally, the company sells products and services in the ordinary course of business to KeyBank, and KeyBank is the lead bank in the company’s credit facility. Director Roy W. Begley, Jr., is a Senior Vice President of Key Private Bank group of KeyBank. However, these transactions do not approach the thresholds described in the Independence Criteria for either KeyBank or the company with respect to 2006 revenues or expenditures. The transactions between the company and Director John Q. Sherman, II, disclosed below in the section “Certain Transactions,” were deemed not to impair his independence as the dollar amounts were considerably under the threshold set forth in the Independence Criteria.

 

The Independence Criteria used by the Corporate Governance and Nominating Committee and full board is available on the company’s Web site, www.standardregister.com, by clicking “About SR,” and following the link to Independence Criteria.

 

Related Party Transaction Policy

 

The company is required to report certain related party transactions between the company and certain related parties, including directors, executive officers, nominees for the board, beneficial owners of 5% or more of any class of the company’s voting securities, and any of the foregoing person’s immediate family members. The board, assisted by the Corporate Governance and Nominating Committee, has adopted a written policy which establishes an approval process for related party transactions. The policy prohibits all related party transactions unless the company’s Audit Committee determines in advance of the company entering into any such related party transaction that the transaction is conducted on terms that are fair to the company. In order for the Audit Committee to approve a related party transaction, the Audit Committee must be satisfied that it has been fully informed as to the direct and indirect interests, relationships and conflicts or potential conflicts present in the proposed transaction. The Audit Committee must determine that, being fully apprised of the proposed transaction, it believes that the transaction is fair to the company and, if necessary, the company has developed an appropriate plan to manage any conflicts or potential conflicts of interest. In the event an Audit Committee member or his or her immediate family member is a related person with respect to a transaction presented to the Audit Committee, such Audit Committee member will not participate in the determination whether to approve the transaction.

 

In the event that the company enters into a related party transaction that has not received approval by the Audit Committee, or a transaction that was not originally a related party transaction becomes a related party transaction, the Audit Committee must review such transaction promptly, and may ratify such transaction, provided that, in such case, unless there is otherwise a compelling business or legal reason for the company to continue with the transaction, the Audit Committee may only ratify the transaction if it determines that (i) the transaction is fair to the company, and (ii) any failure to comply with the policy was not due to fraud or deceit. The General Counsel of the company is responsible for ensuring that the Policy is distributed to all officers, directors, nominees for the board, and beneficial owners of 5% or more of any class of the company’s voting securities. Such officers, directors, nominees for the board, and beneficial owners are responsible for informing their immediate family members of the Policy. The General Counsel is also responsible for requiring that any proposed transaction be presented to the Audit Committee for consideration before the company enters into any such transactions.

 

Certain Transactions

 

John Q. Sherman, a director of the company, has represented A. Rifkin Company as an independent manufacturer’s representative since 1985. A. Rifkin Company supplies certain security bag products to the banking industry. One of the customers to which Mr. Sherman represented A. Rifkin Company since 1985 was The Fifth Third Bank (“Fifth Third”). Fifth Third’s trust department holds shares in the company as disclosed in the “Voting Securities and Principal Holders” table. Fifth Third was a customer of A. Rifkin Company for many years prior to 1985, as well. In 2005, A. Rifkin Company’s revenue from Fifth Third was approximately $177,000, on which Mr. Sherman received a sales commission. In 2004, Mr. Sherman also began to directly sell certain transfer cases to Fifth Third, under a written agreement that runs through August 2007. In 2005, these direct sales resulted in approximately $32,600 of gross revenue to Mr. Sherman.

 

In October 2005, the company contracted with Fifth Third to provide a broad range of services to Fifth Third, including purchasing, inventory management, fulfillment, distribution and other services in addition to its traditional role of supplying printed materials. As part of this expanded relationship, the company assumed responsibility for sourcing and purchasing for Fifth Third the products provided by both A. Rifkin Company and Mr. Sherman. In late 2005, therefore, the company began to purchase these items from A. Rifkin Company and Mr. Sherman for resale to Fifth Third.

 

The revenue received by Mr. Sherman in connection with these transactions in 2006 was $164,277. During 2006, Mr. Sherman sold the company $55,302 worth of products on behalf of A. Rifkin.

 

The company sells Fifth Third printed products, banking documents, and services, in the ordinary course of business and on terms and conditions similar to those offered other company customers.

 

In 2006, the Audit Committee and board reviewed the transactions between the company and Director John Q. Sherman, II, and concluded the transactions do not impair Mr. Sherman’s independence.

 

Board Meetings and Director Attendance at Annual Meeting of Shareholders

 

In 2006, the board met seven times. All current directors attended at least 75% of the board meetings, and the meetings of committees on which each director served.

 

Directors all stand for election or reelection at each annual meeting of shareholders. Directors make every effort to attend the annual meetings, and, in fact, all directors have been in attendance at the last three annual meetings of

shareholders. While the board does not have a formal “policy” in this regard, its clear practice is for all directors to be present at the annual meeting of shareholders.

 

Board and Committee Structure

 

The board has three standing committees:  Corporate Governance and Nominating, Compensation, and Audit. In addition, in 2006, as in other years as deemed desirable, the Board authorized formation of an Executive Committee.

 

Corporate Governance and Nominating Committee

 

The Corporate Governance and Nominating Committee met four times in 2006. All members of the Committee attended all Committee meetings held in 2006. The Committee was chaired by Roy W. Begley, Jr., during all its meetings in 2006. Other Committee members are Ann Scavullo and John Q. Sherman, II. All members of the Committee are independent.

 

The board has adopted a Charter for this Committee. It is reviewed annually and updated as appropriate. It is available on the company’s Web site, www.standardregister.com, at “About SR.”

 

The Corporate Governance and Nominating Committee assists the board in defining board roles and developing processes to optimize board functioning. It also studies and recommends adoption by the board of directors of corporate governance processes intended to comply with applicable legal, regulatory and listing standard requirements. In addition, the Committee oversees the company’s succession planning process and director nomination process. The Committee provides leadership to the board of directors and other committees in performing annual self-assessments. These self-assessments give the board and Committees insight into how they are performing their roles in the corporate governance process. The Corporate Governance and Nominating Committee conducted an assessment of its own performance as part of this process.

 

Director Nominating Process

 

The Corporate Governance and Nominating Committee, and the board, in performing their director-nomination function, identify director candidates from a range of sources. Primary among these sources are recommendations from current directors and major shareholders. The Committee and board have not engaged a third party to assist in the director nomination process, and have paid no fees in that regard.

 

Director candidates are evaluated by reference to criteria such as integrity, candor, judgment, skills and experience with respect to the industry in which the company operates, leadership, strategic understanding, and independence. These factors are considered in the context of the current composition of the board. A candidate is evaluated against these criteria regardless of the source of the recommendation. There are no “minimum requirements” as such, although integrity and judgment are considered absolute requirements. Rather, the board examines all capabilities, skills and experience in evaluating director candidates.

 

The policy of the Committee and board is to consider recommendations for director candidates from any interested party, especially shareholders. Shareholders and other interested persons who wish to recommend a director candidate should submit the recommendation in writing addressed to The Standard Register Company Corporate Governance and Nominating Committee, in care of the Corporate Secretary, The Standard Register Company, 600 Albany Street, Dayton, Ohio 45408. The communication should state the name of the candidate, his or her qualifications, and contact information for the shareholder or interested party, and the candidate. Such candidates will be evaluated using the same criteria as candidates proposed from other sources. There have been no material changes to the process by which shareholders and interested parties may recommend nominees to the board.

 

All nominees recommended by the board for election at the 2007 Annual Meeting of Shareholders are standing for re-election.

 

Audit Committee

 

The board has established a separately-designated standing Audit Committee for purposes of overseeing the accounting and financial reporting processes of the company, and audits of its financial statements.

 

The Audit Committee met seven times in 2006. All members of the Committee attended at least 75% of the meetings held in 2006. Sherrill W. Hudson is Chair of the Audit Committee. The others members of the Committee are F. David Clarke, II, Ann Scavullo, and John J. Schiff, Jr. The board has determined that all members of the Committee are independent directors, and meet the financial literacy requirements of the New York Stock Exchange.

 

The board adopted an Audit Committee Charter in April 2000. It is reviewed annually, and updated as appropriate. It is available on the company’s Web site, www.standardregister.com, at “About SR.”

 

The Audit Committee is responsible for monitoring and assuring the integrity of Standard Register’s financial reporting process. It accomplishes this function by assessing the internal accounting and auditing practices of the company, and the independent auditor’s fulfillment of its role in the financial reporting process. The Committee has sole authority for appointing and assessing the independent auditors, and setting their fees. Additionally, the Committee administers compliance with the company’s Code of Ethics. To that end, the Committee has established procedures for the receipt, retention and investigation of complaints regarding accounting, internal accounting controls or auditing matters. Any interested person may contact the Audit Committee directly through the company’s external Web site by clicking on “About SR,” as more fully described in the later section “Contact Information.” Company employees may contact the Audit Committee, anonymously if they wish, through a toll-free telephone number linked to a third party who will record complaints related to accounting and auditing matters and forward such complaints directly to the Audit Committee.

 

The board has determined that independent director Sherrill W. Hudson satisfies the “Audit Committee financial expert” qualifications contained in regulations issued pursuant to the Sarbanes-Oxley Act of 2002. Specifically, the board has concluded that Mr. Hudson’s 37-year career with Deloitte & Touche, a firm of certified public accountants, qualifies him as an “Audit Committee financial expert.” Mr. Hudson’s experience with respect to audits of financial statements of publicly held companies, internal controls, application of generally accepted accounting principles, and audit committee functions, and his independence as a board member, meet the criteria for “Audit Committee financial expert”.

 

Compensation Committee

 

The Compensation Committee met eight times in 2006. All members attended at least 75% of Committee meetings held in 2006. F. David Clarke, II, chaired the Committee for all its meetings in 2006. Other members are Roy W. Begley, Jr., Sherrill W. Hudson, Ann Scavullo and John Q. Sherman, II. All members of the Committee are independent directors.

 

The board has adopted a Charter for the Compensation Committee. It is reviewed annually, and updated as appropriate. It is available on the company’s Web site, www.standardregister.com, at “About SR.”

 

The Compensation Committee has sole responsibility for determining compensation for the Chief Executive Officer, and it recommends compensation for other executive officers to the board for approval. The Committee administers the equity and other compensation plans described in the executive compensation disclosures included in this proxy statement. It is responsible for reviewing and recommending to the board the annual retainer and other fees and grants for directors in connection with service on the board and Committees.

 

The Compensation Committee is authorized to establish and review the compensation strategy of the company in order to align organizational strategies, goals, and performance with appropriate compensation rewards to executive officers and directors. It accomplishes this by evaluating components of total compensation and assessing performance against goals, market competitive data and other appropriate factors. The Committee also has authority to make grants of stock awards to executive officers and senior management. It may recommend to the board, and to shareholders, new equity incentive plans or amendments to existing plans. The Committee has sole authority to select and retain independent experts and consultants in the field of executive compensation, to advise with respect to market data, competitive information, executive compensation trends and other matters as requested.

 

In most years, the Committee has established a discretionary pool of equity awards and delegated to the Chief Executive Officer and General Counsel the granting of such awards for purposes of new hire incentives, spot awards and recognition, and the like. The General Counsel provides the Committee with an accounting of any discretionary grants made during the year. In 2006, the Chief Executive Officer and General Counsel made grants of 20,577 shares. None of these discretionary grants have been to executive officers or directors.

 

The Committee has not delegated any other of its accountabilities to any persons.

 

Executive officers work with the Committee and its independent compensation consultant to propose compensation features that provide appropriate incentives to meet company goals and reward performance. The primary role of executive officers in this regard is to identify and discuss components of the company’s business plan that are critical to execution. Further, executive officers provide context regarding the degree of difficulty in attaining certain goals. Mr. Rediker discusses with the Committee his evaluation of the performance of each executive officer, which the Committee takes into account in recommending compensation for executive officers other than the CEO. Executive officers participate and give input into the work valuation analysis undertaken by the Committee with respect to each executive officer role. In 2006, Mr. Rediker, Chief Executive Officer, recommended that annual bonus targets for executive officers be reduced by half for meeting plan. In past years, and for 2007, he recommended no salary increases for executive officers, other than for the Chief Financial Officer, who’s compensation appeared to be below market according to competitive market data.

 

The Committee has directly retained an independent compensation consultant, Semler Brossy Consulting to assist in its duties. Semler Brossy Consulting is not otherwise engaged to perform work for the company. Semler Brossy is retained for a number of purposes, including: to perform an annual competitive assessment of compensation programs and practices, build and maintain an internal work valuation tool for Committee decision-making, construct an appropriate peer group, provide market competitive compensation data, recommend appropriate mix of compensation elements, assist the Committee in performing the Chief Executive Officer performance evaluation, review and comment on management recommendations such as proposed grants of stock awards to non-officer management, and update the Committee on emerging trends. Semler Brossy’s representative, who has worked with the Committee for three years, attends all Committee meetings.

 

The Compensation Committee of the board is composed solely of independent directors named above, none of whom have any interlocking relationships with the company that are subject to disclosure. No committee member is, or was during 2006, a current or former executive officer or employee of the company.

 

Executive Committee

 

The Executive Committee has the authority to act on behalf of the board of directors during the time between meetings, in all matters except for filling vacancies on the board of directors or any of its committees. The Executive Committee met once in 2006. For the one meeting of this Committee in 2006, Mr. Paul H. Granzow was Chairman, and Messrs. Clarke and Rediker were the other members. Following Mr. Granzow’s death in December 2006, Mr. Clarke was appointed Chairman of the Executive Committee and Mr. Hudson was appointed to the Executive Committee. Mr. Rediker remained on the Committee. The Committee has no separate charter, but its authority is established by resolution of the board of directors. Of the Executive Committee members who served in 2006, Messrs. Clarke and Hudson were considered independent, and Messrs. Granzow and Rediker were not considered independent.

 

Contact Information and Corporate Governance Document Availability

 

The board and its committees have established processes for shareholders and interested parties to contact the Presiding Director, Audit Committee and board. Director John Q. Sherman, II, has been selected to preside at the meetings of non-management directors of the board of directors to be held in 2007.

 

Shareholders and interested parties may communicate with Mr. Sherman and with the Audit Committee through the company’s Web site, www.standardregister.com, at the “About SR” section by clicking on “Corporate Governance.” Communications for the board, the presiding director and the Audit Committee may also be sent to the Corporate Secretary, The Standard Register Company, 600 Albany Street, Dayton, Ohio 45408. All communications to the board, the presiding director and the Audit Committee will be forwarded by the Corporate Secretary to the appropriate director(s).

 

The Charters of all board committees, the Corporate Governance Guidelines, the Code of Ethics, and the Independence Criteria, may be accessed on the company’s Web site www.standardregister.com at the “about SR” section by clicking on “Corporate Governance.” Printed copies of these documents are available upon request by contacting the Corporate Secretary’s office at the address noted above.

 

AUDIT COMMITTEE REPORT

 

During 2006, the Audit Committee reviewed interim quarterly financial statements with management and the independent auditors. This review was conducted prior to filing of the company’s 10-Q reports containing the respective interim quarterly financial statements. In addition, the Committee reviewed and discussed the 2006 year-end audited financial statements with executive management, including the chief financial officer and the independent auditors. This review took place prior to publication of the audited financial statements in the 10-K filing and annual report to shareholders. Each review was conducted with the understanding that management is responsible for preparing the company’s financial statements, and the independent auditors are responsible for examining the statements.

 

In further discharge of its responsibilities, the Audit Committee met with the independent auditors, both in the presence of management and privately. The Committee and independent auditors discussed those matters described in Statement of Auditing Standards No. 61, “Communication with Audit Committee.” These discussions included review of the scope of the audit performed with respect to the company’s financial statements. The company’s internal auditor also met with the Committee, both in the presence of management and privately, in order to review the effectiveness of the company’s internal controls and the internal auditor’s responsibilities in that regard, and other compliance and audit matters. The company has maintained an internal audit function for many years. In addition, the Committee conducted

regular private meetings with General Counsel, and with management, including the chief financial officer and corporate controller.

 

The Audit Committee received and discussed periodic reports of management and the internal auditor, with respect to design and assessment of the company’s internal controls over the financial reporting process. The Committee further received and discussed the report of the independent auditors with respect to their audit of internal controls over financial reporting performed by the independent auditors in conjunction with the audit of the company’s financial statements, as set forth in Public Company Accounting Oversight Board Auditing Standard No. 2.

 

The Audit Committee received the independent auditor’s written statement required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees.” This written statement described any relationships between the independent auditors and the company that may reasonably be thought to bear on independence. Following receipt of this written statement and discussions of the matters described in it, the Committee was satisfied as to the auditor’s independence.

 

Based upon the foregoing, the Audit Committee recommended to the board of directors that the audited financial statements be included in the company’s annual report on Form 10-K, for fiscal year ending December 31, 2006, for filing with the Securities and Exchange Commission.

 

Sherrill W. Hudson, Chair

F. David Clarke, II

Ann Scavullo

John J. Schiff, Jr.

 

Independent Registered Public Accounting Firm Information

 

With respect to the 2006 and 2005 fiscal years, the company paid fees to Battelle & Battelle, LLP, its independent auditors, as follows:

 

 

The Audit Committee has adopted a procedure for pre-approval of all fees charged by Battelle & Battelle. Under the procedure, the Audit Committee approves the engagement letter with respect to audit and review services, and the minimal tax fees noted on the table above. Audit-related, tax fees beyond the minimal amount in the engagement letter, and other fees are subject to pre-approval by the entire Committee, or, in the period between meetings, by a designated member of the Audit Committee. Any such approval by the designated member is disclosed to the entire Audit Committee at the next meeting. All audit-related fees paid to Battelle & Battelle, LLP, with respect to the 2006 audit year were pre-approved by the Audit Committee.

 

The category of audit fees includes the audit of Standard Register’s annual consolidated financial statements, the audit of internal control over financial reporting, the review of financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by Battelle & Battelle, LLP, in connection with statutory and regulatory filings or engagements.

 

Audit-related fees consist of assurance and related services provided by Battelle & Battelle, LLP, that were reasonably related to the performance of the audit or review of our financial statements. It included fees billed in 2006 and 2005 for the audit of our benefit plans and accounting consultation regarding accounting literature. The audit-related fees are for services generally required to be performed by Battelle & Battelle, LLP, because they follow upon and are linked to Battelle & Battelle, LLP’s audit of the company’s consolidated financial statements.

 

Tax fees consist of professional services performed by Battelle & Battelle, LLP for tax consultation in 2005. There were no tax consultation fees in 2006.

 

The Audit Committee has determined that the provision of audit-related services by Battelle & Battelle, LLP, is compatible with maintaining such firm’s independence.

 

EXECUTIVE COMPENSATION

 

Named Executive Officers

 

This section provides information concerning each of the executive officers named in the Summary Compensation Table with the exception of Mr. Rediker, who is a nominee for director. Similar information regarding Mr. Rediker may be found in the section dealing with Proposal 1.

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

The following discussion of our executive compensation policies and practices includes:

 

 

Compensation Committee Overview and General Philosophy

 

Our Compensation Committee is composed solely of independent directors. They have the overall responsibility for establishing and implementing our compensation program for executive officers, including determining specific compensation levels. Our Compensation Committee has the authority under its charter to engage the services of outside advisors, and has engaged an independent consulting firm, Semler Brossy Consulting Group LLC, to advise it on matters related to executive compensation and to assist them in establishing our executive compensation program. Neither our chief executive officer nor any other member of management votes on matters before the Compensation Committee; however, the Compensation Committee may request the views of our chief executive officer on compensation matters, particularly as they relate to compensation of the other named executive officers.

 

As a company, our fundamental objective is to create shareholder value, through both stock price appreciation and dividends to our shareholders. Our executive officer compensation program is designed to serve this objective by aligning management incentives with the interests of our shareholders. The philosophy of our Compensation Committee is that the design of our compensation program should:

 

 

In 2005, our compensation committee used Semler Brossy to help them establish the following guiding principles under which they analyze and establish executive officer compensation and incentives:

 

 

Compensation Components

 

We compensate our executive officers through a mix of base salary, annual cash incentive awards, and long-term equity compensation, designed to be externally competitive, internally fair, and linked to the company’s strategy and financial performance.

 

In 2005, Semler Brossy helped our Compensation Committee design and implement a process to be used in setting executive officer compensation. As independent consultants, they help our Compensation Committee determine the relevant competitive market value for our executive officers, link the appropriate drivers of successful strategy execution to each executive officer role, and set the appropriate compensation levels.

 

Our compensation setting process uses the following multi-step approach in which, working closely with their independent compensation consultant, our Compensation Committee:

 

 

First, for competitive market comparisons, our Compensation Committee benchmarks against the following sources to allow them to make comparisons of market values of executive officer compensation, primarily for base salary and equity based compensation.

 

 

 

The Committee’s practice is to consider both sources in developing competitive values, determining on a position-by-position basis which comparison had the most relevance. Only the general industry data was used in setting compensation for 2007, because consolidation in our industry has resulted in changes in peer incumbents and practices that are contributing to distortions in the primary peer group competitive data. Periodically, our Compensation Committee also evaluates pay practices at divisions of larger competitors and other companies with a low public float, although this was not done in setting compensation for 2006. These evaluations have not led to any material changes.

 

Next, the Committee rates each executive officer role on its strategic value to the company, recognizing the different impact each role has on strategy achievement. For the last three years, ratings have reflected a role’s contribution to: growing revenue, improving return on investment, driving necessary change and innovation, and protecting assets. The

Compensation Committee rates the degree to which a role maintains, enables, or optimizes our ability to meet these strategic objectives and financial goals. Based on this internal assessment, compensation levels for the executive officer roles are targeted between the 35th and 75th percentiles of the competitive market peer group value. The strategic assessments are updated each year and upon appointment of a new officer.

 

The following chart indicates the target compensation levels for the five named executive officer roles in 2006. The target is intended to be reached over time. Currently our CEO is below this level by his own choice. Two vice presidents are currently paid below these levels because the executive officers are relatively new to their positions.

 

 

Note that target can and does vary by component, particularly for the annual cash incentive award, which is set at a uniform level for all executive officers (other than the CEO) to reinforce a team orientation.

 

As a final step, our Chief Executive Officer evaluates each executive officer taking into account the following factors: performance relative to job responsibilities (including compliance in the case of the CFO and General Counsel), key financial achievements, contributions to the leadership team, overall leadership, and retention risk. Our Compensation Committee considers the results of the performance evaluations. The Compensation Committee also evaluates the Chief Executive Officer’s management and leadership, taking into account the following factors: progress versus goals for the year, contributions to strategic planning and execution, financial acumen in running the business, board relations, overall leadership, management development, and management of operations.

 

Allocation of Compensation Components

 

Our Compensation Committee believes that compensation of our senior-most levels of management, the levels of management having the greatest ability to influence our company’s performance, should be primarily performance-based. In making this allocation, they rely in part upon the advice of Semler Brossy and the results of their benchmarking discussed above. As a general guideline, components of compensation for our five named executive officers generally are allocated as follows:

 

 

At present, however, the mix of compensation varies by executive officer and favors short-term performance in several cases due to the following factors:

 

 

Base salary generally provides competitive benefits consistent with our benchmarking. Annual cash incentive compensation, by contrast, is designed to vary significantly with the company’s financial performance and ability to pay. Annual cash incentive thresholds are established to ensure improvement from year to year. Annual and long term incentive goals are generally linked.

 

Long-term incentives are equity-based to reinforce alignment with shareholder interests. Equity compensation is weighted to award more value through performance-based restricted shares than stock options because we believe performance-based restricted stock better reinforces the urgency of achieving financial performance goals over the next few years. In an effort to balance the motivational aspects of the performance-based restricted stock plan with retention,

grantees of restricted stock receive dividends during the vesting period and may vote these shares. Stock options continue to reinforce the importance of increasing stock price over the longer term.

 

Performance-based restricted stock and stock option awards are intended to complement one another. The performance-based restricted stock award builds value in two ways: 1) company performance determines whether the shares are earned or not, and 2) stock price performance determines the ultimate value of the awards. If performance-based restricted stock targets are achieved, and the stock price increases, over time, the stock options will have value.

 

Section 162(m) of the Internal Revenue Code (the “Code”) limits the tax deduction for compensation paid to a company’s chief executive officer and certain other executives. An exception is provided for “performance-based” compensation. Our annual cash incentive awards, stock options and restricted stock awards all qualify as performance-based compensation under the Code.

 

Base Salary

 

Base salary is designed to compensate executive officers for fulfilling their basic job responsibilities and to aid in their attraction and retention. Our chief executive officer is the only executive officer who has a contractual agreement. His agreement, executed in October 2000, set his base salary at no less than $670,000 per year during the term of his employment. For 2006, his base salary was set at $728,000.

 

Our Compensation Committee reviews and approves executive officer’s base salaries annually. For 2005, at executive management’s request, base salaries were frozen, with no increases granted except for Ms. Lamme who received an increase in base salary when she assumed additional responsibility for Human Resources. As business conditions improved during 2005, the base salary of the named executive officers was increased for 2006 as follows:

 

 

Variations in officer increases reflect differences in current compensation versus competitive target compensation and individual performance. No attempt was made to make up for foregone 2005 increases. The base salary for our chief financial officer was increased by $29,000 for 2007 to address a shortfall versus targeted competitive pay levels. The base salaries for all other executive officers will remain the same for 2007 except for the cash perquisite accounts discussed below that were eliminated and added to base salary compensation.

 

Annual Cash Incentive Awards

 

Annual cash incentive award levels are established for each position’s level within the company based on a percentage of base salary (award level). Annual cash incentive award levels for all executive officers other than our CEO, whose award level is 75% of base salary, equal 50% of base salary. Uniform award levels are intended to promote teamwork and therefore are not necessarily benchmarked against our peer group analysis.

 

Our practice is to award annual cash incentive awards to executive officers under the Management Incentive Compensation Plan (Incentive Plan) based upon objective performance goals established by the Compensation Committee. Goals are established each year depending on the relevant business focus of the company for the year. In 2006, the performance goal established was an adjusted pre-tax earnings from continuing operations amount. The calculation begins with pre-tax earnings from continuing operations, excluding payout of the award, and is adjusted to eliminate asset impairments, restructuring charges, and amortization of prior years’ pension losses due to the non-operational nature of these items. Our Compensation Committee can, at their discretion, exclude other items from the calculation, or approve awards in the event that the goal is not achieved. No such discretion was used in 2006.

 

We do not believe that an “all or nothing” approach is appropriate for the short-term annual cash incentive awards. Rather the performance goals are scaled so that the executive officer can receive part of an award in the event that acceptable, but not the desired, results are achieved. As shown in the table below, a threshold level of adjusted pre-tax earnings from continuing operations must be attained in order for executive officers to earn any annual cash incentive award (Minimum). At executive management’s request, 2006 budgeted financial performance would yield slightly less than a 50% payout of the award. The full award is not paid until the adjusted pre-tax earnings from continuing operations amount after payout of the annual cash incentive is sufficient on an after-tax basis to cover the dividend (Target).

Executive officers can earn up to a 150% payout if we exceed the Target which we subjectively concluded was a “stretch” goal. The table below shows the approximate payouts, stated as a percentage of the award level.

 

2006 Annual Cash Incentive Goals

 

 

 

Our Compensation Committee has not considered whether it would adjust or attempt to recover incentive compensation paid to any or all of our executive officers if the performance objectives upon which such compensation were based were to be restated or otherwise adjusted in a manner that would have the effect of reducing the amounts payable or paid. However, in accordance with Section 304 of the Sarbanes-Oxley Act of 2002, if we are required to restate our financial statements due to any material noncompliance with any financial reporting requirement under the federal securities laws, as a result of misconduct, our Chief Executive Officer and Chief Financial Officer are legally required to reimburse us for any bonus or other incentive-based or equity-based compensation he or they receive from us during the 12-month period following the first public issuance or filing with the Securities and Exchange Commission of the financial document embodying such financial reporting requirement, as well as any profits they realize from the sale of our securities during this 12-month period.

 

Equity Compensation

 

Our Compensation Committee also administers the 2002 Equity Incentive Plan (Equity Incentive Plan). Our practice has been to grant equity-based awards to attract, retain, motivate, and reward our executive officers, and to encourage their ownership of an equity interest in the company. The company encourages stock ownership by executives, but does not have any formal stock ownership guidelines.

 

We determine the fair value of restricted stock and exercise price of stock options based on the closing price of our stock on the last trading day prior to the date of Compensation Committee approval (grant date). Beginning in November 2006, fair value will be determined as the closing price for our stock on the date of grant. With the exception of significant promotions, new hires, and other discretionary awards, in recent years grants of restricted stock and stock options for all employees were generally awarded by the Compensation Committee annually at its first meeting of the year in February. This timing allows the Compensation Committee to take into account the availability of audited financial results for the prior year and determine grants to individual employees based in some part on individual performance. As a general rule, this meeting occurs one or two days before the prior year financial results are released to the public, February 22, 2006, for last fiscal year, and February 21, 2007, for this fiscal year. This timing is not designed to take advantage of material inside information. Rather it is a function of the Compensation Committee and board of directors’ meeting schedules, which are determined months in advance, and the availability of fiscal year-end financial results for use in recommending specific grant levels. On occasion, the Compensation Committee makes grants at other times during the year.

 

In prior years, executive officers and other members of management received grants of restricted stock that were service-based. To further focus executive officers’ efforts on our financial results and continue to align executive and shareholder interests, we awarded performance-based restricted stock in early 2005 to executive officers. The grants were part of an incentive plan award for a three-year performance period (2005-2007.) The value of the grants was split 60%/40% between a one-time grant of performance-based restricted stock and annual stock option grants to be awarded between 2005 and 2007, to allow us to adjust for changes in individual performance and contributions. This three-year time period corresponds with our business plans. Ms. Lamme and Mr. Brown received additional performance-based restricted stock awards and stock option grants in 2006 to better align their compensation with an increase in competitive compensation levels. Mr. Furey also received a supplemental grant of performance-based restricted stock in 2006 as a result of his promotion to executive officer.

 

The annualized value of the performance-based grants, taken together with the expected value of the annual stock option awards, was intended to provide each executive officer with a target grant that, consistent with our competitive benchmarking, is based on the assessment of market, internal strategic value, retention risk, individual performance, and individual stage in role. All of these factors influence individual grants, which vary from officer to officer.

 

Vesting of all of the performance-based restricted stock awards is also contingent upon the achievement of an adjusted earnings from continuing operations amount that is similar to the Target amount used for the 2006 annual cash

incentive award, except it includes the payout of the award. The calculation begins with pre-tax earnings from continuing operations, including payout of the award, and is adjusted to eliminate asset impairments, restructuring charges, and amortization of prior years’ pension losses due to the non-operational nature of these items. The adjusted earnings amount equates to $.92 cents per share on an after-tax basis. However, this is an “all or nothing” award. Portions (30%) of an individual’s award would have vested in 2006 if the operating earnings target had been achieved by 2006. Grants will be forfeited if the goal is not met by the end of 2007. Because the three-year performance cycle is nearing an end, our Compensation Committee will decide whether to continue with the current design or pursue a new long-term incentive design beginning in 2008.

 

Perquisites

 

In December 2006, cash perquisite accounts were eliminated and added to base salary compensation for 2007. The only perquisite for officers, including executive officers, in 2006 was $18,000 to be used for car expenses, club memberships, and financial and tax planning. Club memberships foster community and business relations, while the other perquisites provide personal benefits to participants. Executive officers participate in our healthcare and other benefit programs on the same terms as other employees. Our use of perquisites as a component of compensation is limited and largely based on historical practices and policies of our company. Our Compensation Committee endeavors to adhere to a high level of propriety in managing executive benefits and perquisites.

 

Retirement Plans

 

We provide supplemental retirement benefits to our executive officers in order to remain competitive, attract key personnel, and retain existing executive officers. We have a supplemental defined benefit plan designed to supplement retirement benefits from qualified and non-qualified defined benefit plans. However, our underlying qualified defined benefit plan was closed to new employees in 2000. As a result, we had several executive officers who do not participate in defined benefit plans, but who participated in our 401(k) savings plan. Accordingly, in 2006, we adopted a supplemental defined contribution executive plan designed to supplement benefits available under the 401(k) savings plan. This plan is effective January 1, 2007, and only executive officers hired after 2000 may participate in this plan. Of the named executive officers, Joseph P. Morgan, Jr., and Thomas M. Furey will participate in this plan; Craig J. Brown and Kathryn A. Lamme participate in the supplemental and underlying defined benefit plans. Mr. Rediker’s employment contract provides him with a supplemental retirement benefit equal to 50% of his final average base salary, offset by amounts earned under our current plans and payments from a past employer.

 

The new plan also gives the Compensation Committee the flexibility to structure arrangements to attract new hires, for example, by crediting additional years of service. No executive officer, however, has been credited with additional years of service to date. Both supplemental plans focus on rewarding long-service officers, who have made important contributions to the company over time. This is accomplished through a 10-year cliff vesting provision that only rewards those who have remained with the company for that time.

 

We also provide executive officers the ability to defer a portion of their base salary and annual cash incentive awards on a tax-deferred basis. We do not currently provide any matching contribution to this plan.

 

Supplemental retirement and deferred compensation opportunities are also benchmarked to provide provisions generally consistent with industry practices.

 

As discussed in more detail under “Potential Payments upon Termination or Change in Control”, Mr. Rediker’s employment agreement, as well as a number of the retirement plans and other benefit plans provide for payments and/or vesting of benefits under certain circumstances in connection with termination of employment and a change in control. The triggering events for payments and vesting of benefits in the various agreements and plans are relatively common for agreements and plans of this nature, and are designed to provide for fair treatment of the participants under the various circumstances and to reasonably reward the participants for their loyalty and commitment to the company.

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon the review and discussions, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in the company’s proxy statement issued in connection with the 2007 Annual Meeting of Shareholders.

 

The Compensation Committee:

F. David Clarke, III (Chairman through December 7, 2006))

Roy W. Begley, Jr. (Chairman beginning December 7, 2006)

Sherrill W. Hudson

Ann Scavullo

John Q. Sherman, II

 

Summary Compensation Table

 

The following table contains information regarding compensation earned in, or with respect to, fiscal 2006 by:

 

 

We refer to these officers collectively as our named executive officers.

 

 

 

 

 

 

Grants of Plan-Based Awards in 2006

 

The following table contains information related to:

 

 

 

 

 

Mr. Rediker is the only executive officer with an employment agreement. His agreement, executed in October 2000, set Mr. Rediker’s base salary at no less than $670,000 per year during the term of his employment. It also provided an annual cash incentive award for 2000, which could be adjusted up or down in subsequent years. Initial grants of restricted stock and stock options were made in 2000, in lieu of equity-based awards during the years 2000 through 2004.

 

Vesting of the performance-based restricted stock awards is contingent upon the achievement of an adjusted earnings from continuing operations amount as discussed under “Equity Compensation” in the Compensation Discussion and Analysis. Grants will be forfeited if the goal is not met by the end of 2007. The service-based restricted stock received by Mr. Furey in February 2006, prior to his becoming an executive officer, vests 25% each year upon the anniversary of the grant date. Restricted stock awards include the right to receive dividends at the rate paid all shareholders, and the right to vote the stock.

 

Grants of stock options were made to executive officers in February 2006. These options vest 25% each year upon the anniversary of the grant date. The term of these options is 10 years. Other material terms of restricted stock and stock option awards are described in the section “Potential Payments upon Termination and Change in Control.”

 

As reflected in the summary compensation table above, the salary received by each of our named executive officers as a percentage of their total compensation for 2006 was as follows: Mr. Rediker, 54%; Mr. Brown 44.3%; Ms. Lamme 36.6%; Mr. Morgan 57%; and Mr. Furey 66.3%.

Outstanding Equity Awards

 

The following table contains information related to unexercised stock option awards and unvested restricted stock awards held by each of our named executive officers at December 31, 2006.

 

 

 

 

 

 

Option Exercises and Stock Vested

 

In 2006, none of our named executive officers exercised any stock option awards that were granted to them. The following table contains information related to restricted stock awards held by each of our named executive officers that vested during 2006.

 

 

Pension Benefits

 

The following table contains information regarding the present value of the accumulated benefits for our named executive officers under our retirement plans as of December 31, 2006, the same date used for financial reporting purposes. Assumptions used in the calculated amounts include (a) mortality according to the RP2000 mortality table, (b) future compensation increases of 3.5%, (c) a retirement age equal to the earliest time at which the executive could retire without any reduction in benefits and (d) applying a discount rate of 5.75% per annum. For further discussion of assumptions used in calculating accumulated benefits, see Note 13 to our Consolidated Financial Statements included in our Form 1-0K for the year ended December 31, 2006. There were no payments made under these plans during 2006.

 

 

 

 

The Stanreco Retirement Plan (Qualified Plan) is our qualified defined benefit pension plan. The Qualified Plan has two benefit formulas. The traditional formula covers plan participants hired before January 1, 2000, including Mr. Brown and Ms. Lamme. The traditional formula provides a defined benefit calculated as 1.3% of final average pay (average of highest five years of base and annual cash incentive), times years of credited service. Normal retirement age is 65, but unreduced benefits are available at age 62. An early, actuarially-reduced retirement benefit may be taken with 10 years of service at ages 55 to 62. Plan participants can elect payment in the form of a lump sum or annuity.

 

The Qualified Plan also had a pension equity formula applicable to participants hired between January 1, 2000, and December 31, 2004, at which time the formula was frozen. Messrs. Rediker, Morgan, and Furey participated in that formula. Benefits shown in this table for these three executives under the Stanreco Retirement Plan are calculated under the pension equity formula. These participants do not earn any additional benefit credits; however, their lump sum earns 4% interest annually until termination with the company.

 

The Non-Qualified Retirement Plan supplements the Qualified Plan, and is available to all Qualified Plan participants who are affected by limits imposed by the Tax Reform Act of 1986, including executive officers. It provides retirement benefits that would have been payable from the Qualified Plan but for such limits. Benefits are calculated using the same underlying formula, traditional or pension equity, discussed above, and all features of the Non-Qualified Retirement Plan mirror the Qualified Plan.

 

The Officers’ Supplemental Non-Qualified Retirement Plan provides additional retirement benefits based on years of credited service as an executive officer in excess of five years. It is intended to be a competitive benefit to attract and retain talented executive leadership. It provides a defined benefit calculated as 3.05% of final average pay (the average of the highest five years of base and annual incentive), times years of officer service in excess of five years. The plan was amended effective January 1, 2007, to provide that retirement benefits will be paid out to the participant or survivor in 10 annual installments. Prior to this amendment, retirement benefits were paid in the form of a life annuity, 10 years certain. The plan contained a provision that fully vested all participants in benefits earned under the plan, upon amendment, suspension or termination of the plan. Therefore, the plan amendment effective January 1, 2007, had the effect of vesting participants with less than 10 years of officer service. This included Ms. Lamme.

 

The sum of annual benefits payable under these retirement plans cannot exceed more than 50% of the executive officer’s final average pay.

 

We have a Supplemental Retirement Agreement with Mr. Rediker which supplements his benefits under the plans in which he participates. The Supplemental Retirement Agreement ensures that Mr. Rediker will receive annual retirement benefits equal to a percentage of the average of base salary paid to him in his final three years of employment. Mr. Rediker’s length of service as Chief Executive Officer qualifies him for supplemental retirement benefits totaling 50% of his average annual base salary. The Supplemental Retirement Plan provides that retirement benefits which Mr. Rediker receives from prior employment with other companies shall be netted against our obligation to pay 50% of average annual base salary. The amount shown for Mr. Rediker’s Supplemental Retirement Agreement is the result of netting amounts owed from prior employers, and amounts due from us under the other plans listed in the above table in which Mr. Rediker participates.

 

We do not fund or contribute to The Non-Qualified Retirement Plan, The Officers’ Supplemental Non-Qualified Retirement Plan, or the Supplemental Retirement Agreement, but we accrue for projected benefits and pay benefits from general corporate assets.

 

Effective January 1, 2007, we adopted The Supplemental Executive Retirement Plan for executive officers who are not in the traditional formula of the Qualified Plan. Messrs. Morgan and Furey were designated to participate in the new plan, but not in the Supplemental Non-Qualified Retirement Plan. The new plan is further discussed in the Compensation Discussion and Analysis.

 

None of the retirement plans in place at the end of 2006 provide flexibility to enhance the years of service or other components of the formula other than by plan amendment. We have not enhanced years of service or other components of the formulas for any executive officer.

 

Mr. Brown is eligible for early retirement under all three plans in which he participates. These plans provide that a participant may elect to retire upon attaining age fifty-five with 10 years of credited service. The benefit payable upon early retirement is subject to a reduction factor of five percent (5%) for each year the participant is under age 62.

 

Non-qualified Deferred Compensation

 

The following table contains information related to our named executive officers’ participation in our non-qualified Deferred Compensation Plan. There were no contributions or withdrawals by, or distributions to, the named executive officers in 2006.

 

 

 

 

We maintain The Standard Register Company Deferred Compensation Plan (Deferred Plan) for all highly-compensated employees, including executive officers. Mr. Brown and Ms. Lamme are the only named executive officers that participate in this plan. The Deferred Plan permits the executive officer to defer receipt of up to 100% of their annual cash incentive award and up to 75% of base salary on a basis that is not tax-qualified.