<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
UNISOURCE WORLDWIDE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
UNISOURCE WORLDWIDE, INC.
[Logo of Unisource Worldwide Appears Here]
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 27, 1999
----------------
To the Stockholders of Unisource Worldwide, Inc. ("Unisource" or the
"Company"):
You are invited to be present either in person or by proxy at the annual
meeting of stockholders of Unisource to be held on January 27, 1999, at 10:00
a.m. (EST), at the Company's principal executive offices located at 1100
Cassatt Road, Berwyn, Pennsylvania, 19312 to consider and act upon the
following proposals:
1. To elect three Class II directors to serve for a term expiring at
the 2002 annual meeting of stockholders and until their respective
successors are elected and qualified; and
2. To transact such other business as may properly come before the
meeting.
Stockholders of Unisource of record at the close of business on December 1,
1998 are entitled to vote at the annual meeting and any adjournments thereof.
All stockholders are urged to attend the meeting or to vote by proxy.
If you do not expect to attend the meeting in person, please sign and return
the accompanying proxy in the enclosed postage prepaid envelope. If you later
find that you can be present or for any other reason desire to revoke your
proxy, you can do so at any time before the voting by giving notice to the
Secretary of the Company.
Sincerely,
Ray B. Mundt
Chairman and Chief Executive Officer
Berwyn, Pennsylvania
December 8, 1998
<PAGE>
UNISOURCE WORLDWIDE, INC.
1100 Cassatt Road
P.O. Box 3000
Berwyn, Pennsylvania 19312
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Unisource Worldwide, Inc. ("Unisource" or the "Company")
of proxies to be voted at its annual meeting of stockholders on January 27,
1999 (the "Annual Meeting") and all adjournments thereof. This proxy statement
and accompanying proxy card will first be mailed to stockholders on or about
December 14, 1998.
Only holders of record of Unisource common stock ("Common Stock") at the
close of business on December 1, 1998 will be entitled to vote. On that date,
there were 70,227,471 shares of common stock issued and outstanding. Each
share of common stock entitles the holder thereof to one vote.
NOMINEES FOR ELECTION AS DIRECTORS
The Company's Board of Directors currently consists of eight directors. The
Board of Directors is divided into three classes with the terms of office of
the respective classes ending in successive years. There are three directors
in Class I for which the term in office expires at the 2001 annual meeting of
stockholders. There are three directors in Class II for which the term in
office expires at the upcoming Annual Meeting. There are two directors in
Class III for which the term in office expires at the 2000 annual meeting of
stockholders.
The stockholders are being asked to vote on the election of three Class II
directors to serve as directors until the 2002 annual meeting of stockholders
and until their respective successors are duly elected and qualified. The
other five directors shall continue to serve as described above. The Board of
Directors has nominated Messrs. Gary L. Countryman, Paul J. Darling, II and
Dana G. Mead for election as the Class II Directors.
Set forth below are the age and certain other information regarding each
nominee and each director continuing in office, including a description of his
positions and offices with the Company, if any; a brief description of his
principal occupation and business experience during at least the last five
years; and directorship positions presently held by him in certain other
organizations. All of the directors first became members of the Board of
Directors on January 1, 1997, except Messrs. Countryman and Kelly. Mr.
Countryman joined the Board in July, 1998, and Mr. Kelly joined the Board in
November, 1997.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT FOR PAST FIVE
NAME YEARS AGE
---- ------------------------------------------------ ---
<C> <S> <C>
CLASS I DIRECTORS:
James J. Forese... President and Chief Executive Officer, IKON Office 62
Solutions, Inc. (f/k/a Alco Standard Corporation,
hereafter "IKON" or "Alco") (July, 1998-present);
Executive Vice President and President,
International Operations, IKON (1997-June, 1998);
Executive Vice President and Chief Operating
Officer, Alco (1996-1997); General Manager, IBM
Customer Financing, and Chairman, IBM Credit
Corporation (1993-1995); IBM Vice President, Finance
(1990-1993); Also serves as a director of IKON
Office Solutions, Inc., American Management Systems,
Inc. and NUI Corporation.
James P. Kelly . . Chairman and Chief Executive Officer (1997-Present), 55
Vice Chairman (1996-1997), Senior Vice President and
Chief Operating Officer (1992-1996), and Senior Vice
President and National Relations Group Manager
(1988-1992), United Parcel Service (UPS). Also
serves as a director of UPS.
Rogelio G. Sada... Member, Mexican National Congress (1997-Present); 63
Private investor; Mayor, San Pedro, N.L., Mexico
(1992-1994); President and Chief Executive Officer,
VITRO, a glass and glass-related products
manufacturer in Mexico (1972-1985).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT FOR PAST FIVE
NAME YEARS AGE
---- ------------------------------------------------ ---
<C> <S> <C>
CLASS II DIRECTORS:
Gary L. Countryman.. Chairman of the Board, Liberty Mutual Insurance and 59
Liberty Mutual Fire Insurance Company (1998-
Present); Chairman and Chief Executive Officer,
Liberty Mutual Insurance Company and Liberty
Mutual Fire Insurance Company (1992-1998);
Chairman of the Board, President and Chief
Executive Officer, Liberty Mutual Insurance
Company and Liberty Mutual Fire Insurance Company
(1991-1992). Also serves as a director of Bank
Boston Corporation, Boston Edison and Harcourt
General, Inc.
Paul J. Darling, II. Chairman, President and Chief Executive Officer, 60
Corey Steel Company (1984-Present). Also serves as
a director of Liberty Mutual Insurance Company,
Liberty Mutual Fire Insurance Company and Liberty
Financial Companies, Inc.
Dana G. Mead........ Chairman and Chief Executive Officer (1994- 62
Present), President and Chief Operating Officer
(1992-1994), and director (1992-Present), Tenneco,
Inc.; Executive Vice President (1989-1992), Senior
Vice President (1986-1989), International Paper
Company. Also serves as a director of Zurich
Allied, Zurich Insurance Company, Pfizer, Inc.,
Newport News Shipbuilding, Inc., and Textron, Inc.
CLASS III DIRECTORS:
Ray B. Mundt........ Chairman and Chief Executive Officer (1996- 70
Present), Unisource; Director (1971-1996),
Chairman (1986-1995), Chief Executive Officer
(1980-1993) and President (1974-1988), Alco. Also
serves as a director of Liberty Mutual Insurance
Company, Liberty Mutual Fire Insurance Company and
Liberty Financial Companies, Inc.
James W. Stratton... President, Stratton Management Company (1972- 61
Present); Chairman and director (1993-Present),
Stratton Small-Cap Yield Fund; Chairman (1993-
Present) and director (1981-1993), Stratton
Monthly Dividend REIT Shares; Chairman and
director (1972-Present), Stratton Growth Fund; and
Chairman and director (1997-Present), Stratton
Special Value Fund. Also serves as a director of
UGI Corporation, Amerigas Propane and Teleflex.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
During fiscal 1998, there were three standing committees of the Board of
Directors, the Audit Committee, the Human Resources Committee, and the
Investment Committee. The Unisource Board does not currently have a separate
Nominating Committee, because such functions are performed by the Human
Resources Committee.
The Audit Committee (Messrs. Darling (Chairman), Countryman and Forese) met
four times during the fiscal year ended September 30, 1998. The Audit
Committee approves the selection of independent accountants; reviews auditing
and financial accounting and reporting matters, the adequacy of internal
accounting controls and asset security, audit fees and expenses; counsels
regarding auditing, financial, accounting and reporting matters; and oversees
conflicts of interest policy matters.
The Human Resources Committee (Messrs. Mead (Chairman), Kelly, Sada and
Stratton) met four times during the fiscal year ended September 30, 1998. The
Human Resources Committee reviews and recommends compensation of officers and
directors; administers incentive compensation and stock option plans; and
counsels regarding compensation of other key employees, management development
and succession, and major personnel matters.
2
<PAGE>
The Investment Committee (Messrs. Stratton (Chairman) and Forese) met three
times during the fiscal year ended September 30, 1998. The Investment
Committee reviews and establishes the investment policy for the trust funds
under Unisource's defined benefit plans; selects and monitors the performance
of the investment managers for such trust funds; and oversees the investment
and performance of all other funds under Unisource's Retirement Savings Plan,
all of Unisource's other defined contribution plans, and all other plans or
funds maintained by the Company from time to time, such as the Company's Long-
term Disability Plan.
During the fiscal year, the Board of Directors met nine times. Each director
attended at least 75% of the total number of the meetings of the Board of
Directors which were held while he was a member of the Board. Each Director
attended at least 75% of the total number of meetings of all committees on
which he served, except Mr. Forese who attended two of the three meetings of
the Investment Committee.
SECURITY OWNERSHIP OF UNISOURCE COMMON STOCK BY CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS OF UNISOURCE
The table below sets forth the shares of Common Stock of Unisource that were
beneficially owned (as determined by rules of the Securities and Exchange
Commission) by: (i) each director of Unisource; (ii) each executive officer
named in the summary compensation table set forth herein (a "Named Executive
Officer"); and (iii) the directors and executive officers of Unisource, as a
group. There are no persons known to the Company to own beneficially more than
five percent of the outstanding shares of Unisource Common Stock. The
ownership information presented below with respect to all persons is based on
record ownership of Unisource Common Stock at November 16, 1998.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES PERCENTAGE OF
SHARES ACQUIRABLE OUTSTANDING
BENEFICIALLY WITHIN 60 UNISOURCE
OWNED(1) DAYS(2) COMMON STOCK
------------ ---------- -------------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Richard H. Bogan......................... 63,527 10,050 *
Gary L. Countryman....................... 414 1,500 *
Paul J. Darling, II...................... 6,703 11,260 *
Thomas A. Decker......................... 62,906(3) 10,050 *
James J. Forese.......................... 41,153 10,685 *
James P. Kelly........................... 1,675 5,606 *
Dana G. Mead............................. 22,831 11,260 *
Hugh G. Moulton.......................... 204,633(4) 82,608 *
Ray B. Mundt............................. 255,116(5) 44,218 *
Rogelio G. Sada.......................... 15,992 109,711 *
James W. Stratton........................ 10,189 41,784 *
Charles F. White......................... 160,988 95,969 *
All directors and executive officers as a
group (16 persons)...................... 932,161(6) 454,010 1.96%
</TABLE>
- --------
* Less than one percent.
(1) Includes securities (or equivalents thereof) held under the Unisource
Retirement Savings Plan, securities awarded under the Unisource Incentive
Compensation Plan (which are subject to performance-based vesting
conditions), securities purchased with matching contributions under the
Partners' Stock Purchase Plan (which are subject to certain service-based
vesting requirements), securities awarded under the Restricted Stock Plan
for Directors, and where applicable, securities owned by spouses and minor
children of the persons identified herein.
(2) Includes shares which may be acquired within sixty days of November 16,
1998 through the exercise of stock options.
(3) Includes 8,000 shares owned by family members, the beneficial ownership of
which Mr. Decker disclaims.
3
<PAGE>
(4) Includes 6,400 shares owned by family members, the beneficial ownership of
which Mr. Moulton disclaims.
(5) Includes 39,257 shares owned by family members, the beneficial ownership
of which Mr. Mundt disclaims.
(6) Includes 53,657 shares owned by family members of directors and executive
officers, the beneficial ownership of which is disclaimed.
As of September 30, 1998, Unisource employees, through direct ownership or
employee benefit plans, owned approximately 10.15% of the outstanding shares
of Unisource Common Stock.
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table shows, for the fiscal years indicated, the compensation
awarded to, earned by or paid to the Unisource Chief Executive Officer and the
four most highly compensated executive officers of Unisource other than the
Unisource Chief Executive Officer who were serving at September 30, 1998.
During the periods listed below, except as noted in the table footnotes, all
cash compensation was paid by Unisource.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------- -------------------------- --------------
RESTRICTED SECURITIES CANCELLATIONS/ ALL OTHER
NAME AND PRINCIPAL FISCAL STOCK UNDERLYING PAYOUTS COMPENSATION
POSITION (1) YEAR SALARY ($)(2) BONUS($)(3) AWARDS($)(4) OPTIONS(#)(5) ($)(6) ($)(7)
------------------ ------ ------------- ----------- ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ray B. Mundt............ 1998 $ 850,000 $ -- $ -- -- $ -- $ 57,502
Chairman and Chief 1997 850,000 -- -- 205,818 -- 64,252
Executive Officer 1996 141,667 -- -- -- -- 539,916
Charles F. White........ 1998 500,000 396,875 1,000 -- 203,978
President and Chief 1997 400,000 -- 636,875 154,448 (169,688) 37,588
Operating Officer 1996 254,175 -- -- -- 155,760 59,076
Richard H. Bogan........
Senior Vice President 1998 300,000 150,000 158,750 100,250 -- 216,927
and Chief Financial 1997 30,769 -- 186,875 50,000 -- --
Officer 1996 -- -- -- -- -- --
Thomas A. Decker........ 1998 300,000 -- 158,750 100,250 -- 18,605
Senior Vice President, 1997 183,333 91,667 356,563 50,000 (169,688) 5,988
General Counsel and 1996 -- -- -- -- -- --
Secretary
Hugh G. Moulton ........ 1998 250,000 -- 158,750 -- -- 27,608
Executive Vice Presi- 1997 250,000 -- 356,563 192,763 (169,688) 73,748
dent and Chief Adminis- 1996 250,000 250,000 -- -- 453,414 98,211
trative Officer
</TABLE>
- --------
(1) At all times during fiscal 1998, Mr. White was President. He has resigned
as President, but has agreed to remain with the Company through December
31, 1998. At all times during fiscal 1998, Mr. Bogan was the Senior Vice
President and Chief Financial Officer. Effective November 1, 1998, Mr.
Bogan was appointed President and Chief Financial Officer. At all times
during fiscal 1996, Mr. Moulton served as Executive Vice President of
Alco, and continued in that capacity until January 1, 1997, at which time
he assumed the position shown above. Mr. Moulton's cash compensation prior
to January 1, 1997 was paid by Alco.
(2) For Mr. Mundt, the amount reflected for 1996 is salary paid during fiscal
1996. Mr. Mundt assumed his current responsibilities as Chairman and Chief
Executive Officer of Unisource on August 1, 1996. For Mr. Bogan, the
amount reflected for 1997 is salary paid to Mr. Bogan during fiscal 1997,
beginning August 1, 1997, the date on which Mr. Bogan's employment with
Unisource commenced. For Mr. Decker, the amount reflected for 1997 is
salary paid to Mr. Decker during fiscal 1997, beginning January 30, 1997,
the date on which Mr. Decker's employment with Unisource commenced.
(3) Mr. Bogan's bonus for 1998 was based upon the terms of his employment
under which he became entitled to a minimum bonus of 50% of salary paid in
fiscal 1998. Mr. Decker's bonus for 1997 was based upon the terms of his
employment under which he became entitled to a minimum bonus of 50% of
salary paid in fiscal 1997.
4
<PAGE>
(4) Represents the aggregate value as of the date of grant of outstanding
shares awarded under Unisource's Incentive Compensation Plan, which awards
are subject to certain employment and performance-based vesting
conditions. The awards granted in fiscal 1998 are subject to conditions
based upon the Company's performance during the three fiscal year period
of 1998-2000. The awards granted in 1997 are subject to conditions based
upon the Company's performance in fiscal years 1997, 1998, and 1999. For
the awards made in 1997, threshold performance for the fiscal years ended
September 30, 1997 and September 30, 1998 was not achieved and the shares
previously awarded for these plan periods were canceled. The value as of
September 30, 1998 of the remaining awards granted in fiscal 1997 for the
Named Executive Officers is as follows: $165,625 for Mr. White and $66,250
for each of Messrs. Bogan, Decker and Moulton.
(5) Prior to December 31, 1996, Unisource was a wholly-owned subsidiary of
Alco. Effective December 31, 1996, one share of Unisource Common Stock was
distributed to holders of Alco common stock for every two shares of Alco
common stock owned at the established record date (the "Spin-off"). As a
result of the Spin-off, Unisource became a separate public company. For
Messrs. Mundt, White, and Moulton for 1997, amounts include the following
options granted in exchange for Alco options in connection with the Spin-
off: Mr. Mundt, 3,818 shares; Mr. White, 143,948 shares; and Mr. Moulton,
167,763 shares. Messrs. Bogan and Decker were not employed by Unisource
prior to the Spin-off and therefore did not participate in the option
exchange program.
(6) The amounts for 1997 represent the aggregate value as of the date of grant
of the restricted stock awards previously granted in fiscal 1997 (as set
forth in the "Restricted Stock Award" column) which were canceled because
the performance-based vesting conditions were not met. The amounts for
Messrs. White and Moulton for 1996 represent LTIP payouts based upon
Alco's performance for the 1994-1996 plan period that were paid by Alco in
October 1996, in the form of Alco common stock based on fair market value
on September 30, 1996, the last day of the plan period.
(7) Amounts reflected for 1998 and 1997 include Unisource's matching
contributions under the Unisource Retirement Savings Plan and Partners'
Stock Purchase Plan, a portion of which may be subject to certain vesting
requirements, and dividends paid on unvested Partners' Stock Purchase Plan
shares. The amount for Mr. White for 1998 also includes relocation
expenses of $165,868 paid to Mr. White under the terms of his employment.
The amount for Mr. Bogan for 1998 also includes a relocation allowance of
$200,000 paid to Mr. Bogan under the terms of his employment. The amounts
reflected for Messrs. White and Moulton for 1997 also include above-market
interest earned on deferred compensation in the amounts of $4,700 and
$1,917, respectively. The amount reflected for 1996 with respect to Mr.
Mundt includes retirement income paid pursuant to Alco's pension plans
($315,618), consulting income ($200,000) and certain compensation
described in the next sentence. For Messrs. Mundt, White and Moulton
amounts for 1996 include the value of shares of Alco common stock
purchased with matching contributions under Alco's stock purchase plans,
calculated as of the date of purchase, as follows: $24,298, $54,343 and
$71,727; the remaining amounts for Messrs. White and Moulton for 1996
represent above-market interest earned on deferred compensation.
OPTION GRANTS
The following table shows option grants to the Named Executive Officers
during the 1998 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
NUMBER % OF TOTAL
OF OPTIONS
SECURITIES GRANTED TO EXERCISE GRANT
UNDERLYING EMPLOYEES OR BASE DATE
OPTIONS IN FISCAL PRICE EXPIRATION PRESENT
GRANTED(#) YEAR (%) ($) DATE VALUE ($)
---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Charles F. White.......... 1,000 .07 $15.875 11/07/07 $ 3,180(2)
Richard H. Bogan.......... 250 .02 15.75 11/21/07 788(2)
100,000(3) 6.76 9.25 7/31/08 310,000(3)
Thomas A. Decker.......... 250 .02 15.75 11/21/07 788(2)
100,000(3) 6.76 9.25 7/31/08 310,000(3)
</TABLE>
5
<PAGE>
- --------
(1) All stock options were granted at an exercise price equal to the fair
market value of Unisource Common Stock on the date of grant and become
exercisable at the rate of 20% per year from the date of grant.
(2) The option grant present value was calculated using Black-Scholes option
valuation methodology, based on the following assumptions: (a) options
remain outstanding for an average of 5.4 years and become exercisable in
accordance with the relevant option vesting period; (b) 5.9% expected
risk-free rate of return relative to the exercise price; (c) .24 expected
volatility; and (d) 4.18% expected dividend yield.
(3) These options may not be exercised unless the average daily closing price
of Unisource Common Stock on the New York Stock Exchange during any twenty
consecutive trading day period within five years from the grant date
equals or exceeds twenty dollars per share, except that the options may
become exercisable prior to such time upon the occurrence of certain
change of control events. The option grant present value was calculated
using Black-Scholes option valuation methodology, based on the following
assumptions: (a) options remain outstanding for an average of 6 years and
become exercisable in accordance with the relevant option vesting period;
(b) 4.26% expected risk-free rate of return relative to the exercise
price; (c) .406 expected volatility; and (d) 2.99% expected dividend
yield.
OPTION EXERCISES
The following table shows Unisource stock option exercises during fiscal
1998 and the aggregate year-end value of options for the Named Executive
Officers:
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SECURITIES SECURITIES VALUE OF VALUE OF
UNDERLYING UNDERLYING UNEXERCISED UNEXERCISED
UNEXERCISED UNEXERCISED IN-THE-MONEY IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT OPTIONS AT OPTIONS AT
ACQUIRED VALUE FY-END FY-END FY-END FY-END
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($)(1) ($)(1)
---- ----------- -------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Ray B. Mundt............ -- $ -- 44,218 161,600 $ -- $ --
Charles F. White........ 1,588 16,956 94,709 59,151 53,900 --
Richard H. Bogan........ -- -- 10,000 140,250 -- --
Thomas A. Decker........ -- -- 10,000 140,250 -- --
Hugh G. Moulton......... 40,584 338,614 80,844 25,292 -- --
</TABLE>
- --------
(1) Value of options equals fair market value of Unisource Common Stock as of
September 30, 1998 ($6.625), less the exercise price, multiplied by the
number of shares underlying the stock options.
LONG-TERM INCENTIVE COMPENSATION PLAN AWARDS
The following table shows the maximum number of shares in long-term
incentive compensation awards granted to Named Executive Officers under
Unisource's Incentive Compensation Plan during fiscal 1998 and the estimated
maximum number of shares which will become payable under such plan at the end
of the performance period upon attainment of specified threshold, target and
maximum performance levels:
LONG-TERM INCENTIVE COMPENSATION PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER PERIOD ESTIMATED FUTURE PAYOUTS
UNTIL (IN NUMBER OF SHARES)
NUMBER OF MATURATION OR ------------------------
NAME SHARES PAYOUT THRESHOLD TARGET MAXIMUM
---- --------- --------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Charles F. White........... 25,000(1) 10/1/97-9/30/00 -- -- --
Richard H. Bogan........... 10,000 10/1/97-9/30/00 0 5,000 10,000
Thomas A. Decker........... 10,000 10/1/97-9/30/00 0 5,000 10,000
Hugh G. Moulton............ 10,000 10/1/97-9/30/00 0 5,000 10,000
</TABLE>
- --------
(1) These shares will be canceled upon the termination of Mr. White's
employment on December 31, 1998. See note (1) to the Summary Compensation
Table.
6
<PAGE>
PENSION PLAN AND SUPPLEMENTAL RETIREMENT PLAN
The following table shows estimated annual retirement benefits that would be
payable to participants under Unisource's Pension Plan and, if applicable, the
Supplemental Executive Retirement Plan ("SERP"), upon normal retirement at age
65 under various assumptions as to final average annual compensation and years
of credited service and on the assumption that benefits will be paid in the
form of a single life annuity. The benefits are not subject to any reduction
for Social Security benefits.
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
---------------------------------------
FINAL AVERAGE COMPENSATION 5 10 20 30 35
-------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$200,000............................... $10,000 $20,000 $40,000 $60,000 $70,000
250,000................................ 12,500 25,000 50,000 75,000 87,500
300,000................................ 15,000 30,000 60,000 90,000 105,000
400,000................................ 20,000 40,000 80,000 120,000 140,000
500,000 or above....................... 25,000 50,000 100,000 150,000 175,000
</TABLE>
Covered compensation under the Pension Plan and SERP of each of the Named
Executive Officers includes salary and bonus as set forth in the Summary
Compensation Table. The years of credited service as of September 30, 1998 for
the Named Executive Officers is as follows: Mr. Mundt--26.7 years; Mr. White--
33.3 years; Mr. Moulton--27.9 years; Mr. Bogan--1.2 years and Mr. Decker--11.7
years, including 10 years of credited service under the SERP in accordance
with the terms of his employment.
EMPLOYMENT AND TERMINATION ARRANGEMENTS
The Named Executive Officers have the following arrangements concerning
their employment with the Company and the termination of such employment. In
order to benefit from the continued services of Messrs. Mundt and Moulton
following their anticipated retirement after the end of fiscal 1999, the
Company has entered into agreements with Messrs. Mundt and Moulton under which
they will provide consulting services to the Company following their
retirement. Mr. Mundt has agreed to provide consulting services for six years,
and in consideration of such consulting services, the Company will pay Mr.
Mundt the sum of $250,000 per year and provide continued medical coverage
under the Company's medical plans. Mr. Moulton has agreed to provide
consulting services for five years, and in consideration of such consulting
services, the Company will pay him the sum of $50,000 per year and will
provide continued medical coverage under the Company's medical plans. In order
to induce Messrs. Bogan and Decker to remain with the Company during the
implementation of the restructuring plan and the appointment of a new chief
executive officer following Mr. Mundt's retirement, the Company has provided
them with certain incentives. The terms of these incentives provide for a one-
time payment of $600,000 to each of Messrs. Bogan and Decker, the payment of
which is contingent upon continued employment with the Company through
December 31, 1999. These incentives also provide that upon a termination of
employment without cause the Company will continue making payments of salary
for twenty-four months at the annual rate of $350,000. In connection with his
separation from the Company, Mr. White has entered into an arrangement with
the Company, pursuant to which Mr. White will provide consulting services to
the Company from December 31, 1998 through December 31, 2001 and pursuant to
which Mr. White has agreed to be bound by certain covenants restricting his
ability to compete against the Company through January 1, 2001. In
consideration of such consulting services and his non-competition covenants,
the Company will make certain salary and lump sum payments to him during the
period January 1, 1999 through December 31, 2001 in the aggregate amount of
$2,000,000. In addition, the Company has agreed to accelerate the vesting of
stock options granted to Mr. White prior to January 4, 1999 and to accelerate
the vesting of other benefits under certain other
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<PAGE>
Company plans in which Mr. White participates. The Company also has agreed to
continue Mr. White's participation in certain employee benefit plans through
December 31, 2001 and has agreed to reimburse Mr. White for his moving
expenses and any loss on the resale of his home if he moves prior to December
31, 2000.
DIRECTOR COMPENSATION
Each independent director is entitled to receive fees of $30,000 per year
for service on the Board of Directors and committees, and Committee Chairs
also receive $5,000 per committee per year (collectively, "Annual Retainer").
The Company's Directors' Stock Option Plan (the "Directors' Option Plan")
enables directors of Unisource to receive all or a portion of their Annual
Retainer in the form of options to purchase Unisource Common Stock at exercise
prices equal to 25% to 75% (as determined by the Board) of the fair market
value on the date such options are granted. The options are exercisable for
twenty years and will not terminate upon the director's termination as a
director (except in the case of death), but generally may not be exercised
prior to the twelve-month anniversary of the date of grant. An option which is
outstanding on the date of a director's death may be exercised by such
director's legal representative for a twelve-month period following the date
of death.
In addition to the foregoing, each independent director receives an annual
award of 800 shares of restricted stock under the Restricted Stock Plan for
Directors and an annual grant of an option to purchase 3,000 shares of
Unisource's Common Stock pursuant to the Directors' Option Plan. Such options
are granted as of the date of the annual stockholders meeting at exercise
prices equal to the fair market value of Unisource stock on such date.
LOAN PROGRAM
The Company adopted a loan program in order to encourage employees designated
as "partners" to purchase and retain Unisource Common Stock. Such loans
require that the loan be secured by the borrower's pledge of Unisource (or
IKON) Common Stock having a value at the time of the loan of not less than
twice the amount of the loan. Such loans are payable upon demand and bear
interest at an annual rate of 6%. The loan program was terminated as of
September 30, 1998 and all participants under the program have been granted a
reasonable period in which to repay their loans. As of September 30, 1998,
loans were outstanding to 10 Unisource employees in an aggregate amount of
approximately $605,500. From October 1, 1997 to September 30, 1998, the
indebtedness under the Company's loan program for the Named Executive Officers
who participated in this program and the specified group was as follows:
<TABLE>
<CAPTION>
LARGEST AMOUNT AMOUNT OUTSTANDING
OUTSTANDING AT
NAME OR GROUP DURING PERIOD($) SEPTEMBER 30, 1998($)
------------- ---------------- ---------------------
<S> <C> <C>
Hugh G. Moulton......................... $300,000 $ -0-
All Unisource executive officers as a
group.................................. 450,000 67,000
</TABLE>
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Unisource's executive compensation program is administered by the Human
Resources Committee (the "Committee") of the Board of Directors, which has
responsibility for all aspects of the compensation program for the executive
officers of Unisource. The Committee is comprised of the four directors listed
at the end of this report, none of whom is an employee of Unisource and each
of whom qualifies as a disinterested person for the purpose of Rule 16b-3
under the Securities Exchange Act of 1934 and an outside director for purposes
of Section 162(m) of the Internal Revenue Code (the "Code").
The Committee's primary objective is to establish and administer programs
which attract and retain key executives, and to align their compensation with
Unisource's performance, business strategies and growth in
8
<PAGE>
stockholder value. To this end, the Committee has established, and the Board
of Directors has endorsed, an executive compensation philosophy which includes
the following elements:
--A "pay-for-performance" orientation under which compensation reflects
corporate and individual performance;
--An emphasis on stock incentives to closely align the interest of
executives with the long-term interests of stockholders;
--An emphasis on total compensation under which base salaries are generally
set at or near competitive levels but which motivates and rewards executives
with total compensation, including incentive programs, at or above competitive
levels if corporate or individual performance is superior;
--An appropriate balance of short and long-term compensation which
facilitates retention of talented executives, rewards long-term strategic
planning, and encourages Unisource stock ownership; and
--Recognition that as an executive's level of responsibility increases, a
greater portion of the total compensation opportunity should be based on stock
and other performance incentives and less on salary and benefits.
As a matter of policy, the Committee recommends that its executive
compensation plans be structured so that compensation subject to the
$1,000,000 deduction limit of Section 162(m) of the Code is minimized.
The primary components of Unisource's executive compensation program are (a)
base salaries; (b) annual cash bonus opportunities; and (c) long-term
incentive opportunities. The Committee does not consider the market for
determining the compensation of Unisource's executives to be limited to the
companies included in the industry performance graph provided below. The
companies considered to be comparable to Unisource for compensation purposes
include a broad cross-section of companies which are representative of
industry generally.
BASE SALARIES
Base salaries for executive officers are reviewed annually and are subject
to adjustment on the basis of individual, corporate, and business unit
performance, as well as competitive, inflationary and internal equity
considerations. Base salaries are set within a range generally fixed at or
near the 50th percentile of predicted executive salaries paid by comparable
companies based upon survey data compiled by Unisource's compensation
consultant.
ANNUAL BONUS
Annual bonus payments to executive officers are awarded pursuant to the
Unisource Incentive Compensation Plan, and are based on corporate performance
compared to the targets established for the year. These annual bonus payments
are in amounts equal to a percentage of base salary. They generally have
ranged from 0% for threshold, 25-50% for target, and 50-100% for maximum
performance. For the Named Executive Officers, the annual bonus potential (as
a percentage of base salary) for fiscal 1998 was 0% for threshold, 50% for
target and 100% for maximum performance.
Because of the performance of the Company, no bonuses were paid to the Named
Executive Officers in fiscal 1998 other than to Mr. Bogan whose bonus was
based on the terms of his employment under which he was entitled to a minimum
bonus of 50% of salary paid for fiscal 1998.
In order to furnish incentives to maximize performance in the second half of
the fiscal year while the Company implemented its restructuring plan, the
Committee approved a special bonus program for corporate officers (other than
the Named Executive Officers) and operating management for the last six months
of fiscal
9
<PAGE>
1998. The performance targets for the special six month bonus plan were based
upon operating income, cash generation, and asset management during the last
half of the fiscal year. The maximum bonus which could be earned was 50% of
salary for the full fiscal year. Because of corporate performance from April 1
to September 30, 1998, corporate officers (other than the Named Executive
Officers) earned a bonus under this special program of 30% of full year bonus
potential.
LONG-TERM INCENTIVE COMPENSATION
LTIP AWARDS
The long term segment ("LTIP") of Unisource's Incentive Compensation Plan,
which is intended to align the long-term interests of Unisource's executives
with those of Unisource's stockholders, authorizes the Committee to make
awards which motivate and reward growth in stockholder value by granting
awards to eligible executives which vest only if certain performance criteria
are met. The LTIP awards currently consist of shares of Unisource restricted
stock. To the extent that performance targets are achieved, awards vest and
the shares of restricted stock are distributed in three equal annual
installments following the end of the performance period. To the extent that
performance targets are not achieved, the shares are canceled. Participants
are entitled to vote the shares and to receive dividends on the shares of
restricted stock awarded under the LTIP until such time as they are canceled.
For executive officers, the LTIP for the period ended September 30, 1998 was
based on total stockholder return (stock price appreciation and dividends)
compared with the total stockholder return of the Standard & Poor's Mid-Cap
400 Index and a combination of the S&P 500 and S&P Mid-Cap 400 Paper and
Forest Products sub-indices. Since threshold performance was not achieved for
the plan period ended September 30, 1998, awards previously made for executive
officers, including the Named Executive Officers, for such period were
canceled.
STOCK OPTIONS
Stock options are granted under the Company's Stock Option Plan for
employees to motivate performance which maximizes stockholder value. Stock
options are generally granted for ten-year terms and vest over employment
periods of five years. The exercise price of these stock options is the fair
market value of Unisource stock on the date of grant.
In fiscal 1998, as part of their annual compensation, certain executive
officers were awarded stock options. Messrs. Bogan (250 shares), Decker (250
shares) and White (1,000 shares) were the only Named Executive Officers to
receive such awards. In addition, certain executive officers were also awarded
stock options under the Company's Stock Option Plan under a one-time special
program designed to retain and motivate such executive officers during the
implementation of the Company's restructuring plan. The benefits of such stock
options will be realized only if stockholder value is significantly increased.
Except upon the occurrence of certain change of control events, these options
may not be exercised unless the average daily closing price of the Company's
common stock on the New York Stock Exchange during any twenty consecutive
trading day period within five years from the grant date equals or exceeds $20
per share. Messrs. Bogan (100,000 shares) and Decker (100,000 shares) were the
only Named Executive Officers to participate in this special program.
THE HUMAN RESOURCES COMMITTEE OF THE BOARD OF DIRECTORS
Dana G. Mead (Chairman)
James P. Kelly
Rogelio G. Sada
James W. Stratton
10
<PAGE>
GENERAL AND OTHER MATTERS
PERFORMANCE OF UNISOURCE COMMON STOCK
The following graph compares the cumulative total stockholder return of
Unisource's common stock with the cumulative total stockholder return of: (i)
the Standard & Poor's Mid-Cap 400 Stock Index, and (ii) Standard & Poor's Mid-
Cap 400 Paper & Forest Products Group Index. Cumulative total stockholder
return is measured by assuming an investment of $100 (with dividends
reinvested) made on January 1, 1997, the day preceding the date on which
Unisource's common stock began trading as a separate public company on the New
York Stock Exchange.
UNISOURCE VS. S&P MID CAP 400 VS.
PAPER & FOREST PRODUCTS GROUP
[Graph Appears Here]
<TABLE>
<CAPTION> Paper & Forest
Date Unisource S & P MidCap 400 Products Group
<S> <C> <C> <C>
1/1/97 $ 100.00 $ 100.00 $ 100.00
9/30/97 96.85 131.16 126.15
9/30/98 36.31 122.88 99.74
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
For the fiscal year ended September 30, 1998, all reports required to be
filed by Section 16(a) of the Securities Exchange Act of 1934 on behalf of
Unisource's directors and officers with respect to initial ownership of, and
changes in beneficial ownership of, Unisource's securities, were timely filed,
except that Mr. White's purchase of 5,000 shares of Unisource common stock on
March 16, 1998 was not reported until Mr. White filed an amended Form 4 on
April 16, 1998.
PROXY AND OTHER MATTERS
The Board of Directors knows of no matter, other than as referred to in this
proxy statement, which will be presented at the annual meeting of
stockholders. However, if other matters properly come before the meeting or
any of its adjournments, the person or persons voting the proxies will vote
them in accordance with their judgment in such matters. In this regard, the
attached proxy card confers upon the proxies named therein the power to vote
on such matters in accordance with their judgment. The Board of Directors is
not aware that any nominee named herein will be unable or unwilling to accept
nomination or election. Should any nominee for the office of director become
unable to accept nomination or election, the persons named in the proxy will
vote for the election of such other person, if any, as the Board of Directors
may recommend.
11
<PAGE>
THE COMPANY'S INDEPENDENT ACCOUNTANTS
As the independent auditors for Unisource, Ernst & Young LLP audited the
financial statements of Unisource for the fiscal year ended September 30,
1998. The Audit Committee of the Board of Directors has appointed Ernst &
Young LLP as the auditors for Unisource for the 1999 fiscal year.
Representatives of Ernst & Young LLP are expected to be present at the
meeting, and will have the opportunity to make a statement if they desire to
do so and are expected to be available to respond to questions.
SOLICITATIONS AND VOTING
Holders of record of the Company's Common Stock at the close of business on
December 1, 1998 are entitled to vote at the meeting. On that date, the
Company had 70,227,471 shares of common stock outstanding. Each stockholder
has one vote per share on all business of the meeting.
The election of Class II directors at the meeting shall be determined by a
plurality vote, whereas any other matters to properly come before the meeting
shall be determined by a majority of the votes present in person or
represented at the meeting and entitled to vote. A majority of outstanding
common stock will constitute a quorum at the meeting. Under the rules of the
New York Stock Exchange, brokers who hold shares in street name for customers
do not have authority to vote on certain items when they have not received
instructions from beneficial owners ("broker non-votes"). Abstentions and
broker non-votes are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Abstentions may be
specified on all proposals (except for the election of directors) and will be
counted as present and counted in the tabulation of votes cast, whereas broker
non-votes are not counted for purposes of determining whether a proposal has
been approved.
The cost of soliciting proxies will be borne by Unisource. In addition to
solicitation by mail, employees of Unisource may solicit proxies personally or
by telephone. Also, arrangements have been made with ChaseMellon Shareholder
Services to solicit proxies, at an expected cost of $5,000 (plus out-of-pocket
expenses). Votes at the Annual Meeting will be tabulated by National City
Bank, Unisource's transfer agent.
You are urged to sign and return your proxy promptly to make certain your
shares will be voted at the meeting. If you sign and return your proxy, but do
not vote on any director nominee or proposal described on the proxy card, your
shares will be voted in accordance with the recommendation of the Board of
Directors. You may revoke the proxy at any time before it is voted by giving
notice to the Secretary of the Company, and if you attend the meeting, you may
vote your shares in person. For your convenience, a return envelope is
enclosed, requiring no additional postage if mailed in the United States.
2000 ANNUAL MEETING
If a stockholder desires to propose a matter for inclusion in the proxy
material for the annual meeting of stockholders to be held in 2000, or to
recommend nominees for election of Class III directors at the 2000 annual
stockholders meeting, a stockholder must comply with both (i) the Company's
By-laws and (ii) the federal securities laws. The Company's By-laws provide
that in order to bring matters before the annual meetings of stockholders
(including director nominations), stockholders must give notice to the Company
containing the information specified in the By-laws not less than 60 nor more
than 90 days prior to the anniversary date of the previous years annual
meeting (or if the date of the annual meeting is not within 30 days of the
anniversary date of the previous years annual meeting, no earlier than 90 days
prior to such annual meeting and not later than the close of business on the
tenth day following the day on which notice of the date of such meeting was
mailed or the tenth day following the day on which public disclosure of the
date of the meeting of stockholders was made, whichever first occurs). In
order to have a proposal included in the Company's proxy statement and form of
proxy in accordance with the federal securities laws, the Secretary of
Unisource must also receive any such proposal or recommendation no later than
August 10, 1999 at its principal executive offices in Berwyn, Pennsylvania.
12
<PAGE>
If the 2000 annual meeting of stockholders is held on, or within 30 days
before or after, the anniversary of the upcoming Annual Meeting, notice of a
stockholder proposal to be submitted outside of the procedures of Rule 14a-8
of the federal proxy rules, to be timely, must be received not less than 60
nor more than 90 days prior to the anniversary date of the upcoming Annual
Meeting (or if the date of the Annual Meeting is not on or within 30 days of
such anniversary date, then such notice must have been received within a
reasonable time prior to the date on which the Company mails its proxy
materials for the 2000 annual meeting of stockholders).
ANNUAL REPORT ON FORM 10-K
Upon the written request of any stockholder entitled to vote at the upcoming
Annual Meeting, the Company will furnish to such stockholder, without charge,
a copy of the Company's annual report on Form 10-K for the fiscal year ended
September 30, 1998. Such requests should be directed to JoAnn P. Huston,
Director, Investor Relations, Unisource Worldwide, Inc., P.O. Box 3000,
Berwyn, PA 19312.
Thomas A. Decker
Senior Vice President,
General Counsel and Secretary
December 8, 1998
13
<PAGE>
PROMPTLY COMPLETE AND RETURN THE
PROXY/VOTING INSTRUCTION FORM BELOW
IN THE ENVELOPE PROVIDED
Carefully fold & detach along perforation
- --------------------------------------------------------------------------------
PROXY/VOTING INSTRUCTION CARD
UNISOURCE WORLDWIDE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Hugh G. Moulton and Thomas A. Decker, or
either of them, each with power of substitution, as proxies for the undersigned
to vote all shares of Common Stock of Unisource Worldwide, Inc. which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
on January 27, 1999, and any adjournments or postponements thereof, as
hereinafter specified and, in their discretion, upon such other matters as may
properly come before the meeting. The undersigned hereby revokes all other
proxies heretofore given. Except for certain employee shares described below,
shares owned by you will be voted only if you sign and return a proxy, or attend
the meeting and vote by ballot. IF YOU RETURN A PROXY AND FAIL TO SPECIFY A
CHOICE ON ANY MATTER, YOUR SHARES WILL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATION OF THE BOARD OF DIRECTORS.
For employees of Unisource Worldwide, Inc., this proxy also provides voting
instructions for shares held for the account of the undersigned in the Unisource
Worldwide, Inc. Retirement Savings Plan. The trustees for the Plan will vote
these shares as directed provided you sign and return a proxy containing your
voting instructions by January 20, 1999. IF NO VOTING INSTRUCTIONS ARE RECEIVED,
THE TRUSTEES OF THE PLAN MAY VOTE YOUR SHARES IN THEIR DISCRETION (IN THE
ABSENCE OF VOTING INSTRUCTIONS, THE TRUSTEES WILL GENERALLY VOTE YOUR SHARES IN
ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS).
(continued, and to be signed, on other side)
<PAGE>
ADMISSION PASS
UNISOURCE WORLDWIDE, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, JANUARY 27, 1999
10:00 A.M. (EST)
1100 CASSATT ROAD
BERWYN, PENNSYLVANIA 19312
PROMPTLY COMPLETE AND RETURN THE
PROXY/VOTING INSTRUCTION FORM BELOW
IN THE ENVELOPE PROVIDED
Carefully fold & detach along perforation
- --------------------------------------------------------------------------------
(continued from other side)
1. Election of Directors (Mark only one)
[_] Vote FOR all nominees listed below [_] Vote WITHHELD from all
and recommended by the Board of Directors nominees
(except as directed to the contrary below)
Gary L. Countryman, Paul J. Darling, II, Dana G. Mead
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
-------------------------------------------
2. In the proxies' discretion for such other matters as may properly come
before the meeting.
---
|
PLEASE SIGN, DATE,
DETACH AND RETURN
THIS PROXY, USING THE
ENCLOSED POSTAGE
PREPAID REPLY ENVELOPE.
Dated ___________ SIGN HERE ___________________
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If the signer is a corporation, sign the full
corporate name by duly authorized officer.
