<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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 Rule 14a-11(c) or Rule 14a-12.
PACTIV CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
[ ] 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.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(847) 482-2000 [PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
April 4, 2000
To the Shareowners of Pactiv Corporation:
The Annual Meeting of Shareowners of the Company will be held Wednesday,
May 10, 2000, at 10:30 a.m. at the Chicago Botanic Garden, 1000 Lake Cook Road,
Glencoe, Illinois 60022. A notice of the meeting, a proxy card, and a proxy
statement containing information about the matters to be acted upon are
enclosed.
Holders of common stock are entitled to vote at the Annual Meeting on the
basis of one vote for each share held.
A record of the Company's activities for the year 1999 is contained in the
Annual Report to Shareowners. I urge each Shareowner who cannot attend the
Annual Meeting to please assist us in preparing for the meeting by either
completing, executing, and returning your proxy card promptly or using our
telephone or internet voting procedures.
Very truly yours,
/s/ Richard L. Wambold
RICHARD L. WAMBOLD
Chairman, President and
Chief Executive Officer
<PAGE> 3
PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(847) 482-2000 [PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
NOTICE OF
ANNUAL MEETING OF SHAREOWNERS
MAY 10, 2000
The Annual Meeting of Shareowners of Pactiv Corporation will be held at the
Chicago Botanic Garden, 1000 Lake Cook Road, Glencoe, Illinois, 60022, on
Wednesday, May 10, 2000, at 10:30 a.m., local time.
The purposes of the meeting are:
1. To elect directors for a term to expire at the 2001 Annual Meeting of
Shareowners;
2. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the year 2000; and
3. To act upon such other matters as may be properly brought before the
meeting or any adjournment or postponement thereof.
The Board of Directors knows of no other matters at this time that may be
brought before the meeting. Holders of common stock of record at the close of
business on March 17, 2000, are entitled to vote at the meeting. A list of these
Shareowners will be available for inspection for 10 days preceding the meeting
at the corporate headquarters of the Company, 1900 West Field Court, Lake
Forest, Illinois, 60045, and at the Chicago Botanic Garden, and will also be
available for inspection at the Annual Meeting of Shareowners.
Each Shareowner who does not expect to attend the meeting is urged to
either complete, date, and sign the enclosed proxy card and return it to the
Company in the enclosed envelope, which requires no postage if mailed in the
United States, or use our telephone or internet voting procedures.
By Order of the Board of Directors
KARL A. STEWART
Secretary
April 4, 2000
<PAGE> 4
PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(847) 482-2000 [PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
April 4, 2000
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation on
behalf of the Board of Directors of Pactiv Corporation, a Delaware corporation
(the "Company"), of proxies to be voted at the Company's Annual Meeting of
Shareowners on May 10, 2000, or any adjournment or postponement thereof, for the
purposes set forth in the accompanying notice of the meeting. Holders of Common
Stock of record at the close of business on March 17, 2000, will be entitled to
vote at the Annual Meeting. Each share is entitled to one vote. Shares
represented by proxies will be voted at the Annual Meeting. At March 17, 2000,
there were 171,999,451 shares of Common Stock outstanding and entitled to vote.
This proxy statement, the accompanying notice of Annual Meeting of Shareowners,
and the proxy card are first being mailed or delivered to Shareowners on or
about April 4, 2000.
The Company was formerly known as Tenneco Packaging Inc., and was a
wholly-owned subsidiary of Tenneco Inc. which was spun-off to the shareowners of
Tenneco Inc. on November 4, 1999. Unless the context otherwise requires,
references to or information regarding the "Company," for periods prior to the
spin-off, refer to the packaging businesses of Tenneco Inc., and for periods
after the spin-off refer to Pactiv Corporation.
ELECTION OF DIRECTORS
(ITEM 1)
The following seven nominees, each of whom currently serves as a director
of the Company, are proposed to be elected at this Annual Meeting to serve for
an annual term that will expire at the 2001 Annual Meeting of Shareowners and
until their successors are elected and qualified.
The persons named as proxy voters in the accompanying proxy, or their
substitutes, will vote for these nominees for directors, each of whom has been
designated as such by the Board of Directors. If, for any reason not presently
known, any of the nominees is not available for election, another person or
other persons who may be nominated by the Board of Directors will be voted for
at the discretion of the proxy voters. Provided a quorum is present in person or
by proxy, directors are elected by a vote of a plurality of the shares voted.
1
<PAGE> 5
YOU MAY VOTE FOR OR WITHHOLD YOUR VOTE FROM THE DIRECTOR NOMINEES. THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE NOMINEES LISTED
BELOW.
Brief statements setting forth the age (at April 1, 2000), the principal
occupation, employment during the past five years, the year in which first
elected a director, and other information concerning each nominee appears below.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR TERM EXPIRING AT THE 2001 ANNUAL MEETING OF
SHAREOWNERS
<TABLE>
<S> <C>
Mark Andrews has been Chairman of Andrews Associates, Inc.,
[MARK ANDREWS PHOTO] a government consulting firm, since February 1987. From 1963
to 1980, he served in the U.S. House of Representatives, and
from 1980 to 1986 he served in the U.S. Senate. He is also a
director of Tenneco Automotive Inc. Mr. Andrews is 73 years
old and has been a director of the Company since November
1999. He is a member of the Audit Committee and the
Compensation/Nominating/ Governance Committee.
- --------------------------------------------------------------------------------------------
Larry D. Brady became the President and Chief Operating
[LARRY D. BRADY PHOTO] Officer of UNOVA, Inc., an industrial technologies company,
in August 1999, and is a director of UNOVA, Inc. From 1993
to June 1999, Mr. Brady was President of FMC Corporation, a
producer of chemicals and machinery for industry,
agriculture, and government. Before 1993, Mr. Brady served
in various executive capacities with FMC Corporation for
more than five years. Mr. Brady is 57 years old and has been
a director of the Company since November 1999 and is
Chairman of the Compensation/Nominating/Governance Committee
and a member of the Three-year Independent Director
Evaluation Committee.
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
Robert J. Darnall is the retired President and Chief Executive Officer of
[ROBERT J. DARNALL PHOTO] Ispat North America, Inc., serving in such capacities from 1998, when Ispat
North America, Inc. acquired Inland Steel Company from Inland Steel
Industries, Inc., until early 2000. Prior to such acquisition, Mr. Darnall
held various positions at Inland Steel Company over a 36-year career,
including serving as Chairman and Chief Executive Officer of Inland Steel
Industries, Inc., from 1992 to 1998, and as President and a director of
Inland Steel Company from 1986 until 1998. He is also a director of
Household International, Inc., Cummins Engine Company, Inc. and the Federal
Reserve Bank of Chicago. Mr. Darnall is 62 years old, and has been a
director since March 2000.
- -----------------------------------------------------------------------------------------------------------
Mary R. (Nina) Henderson is Corporate Vice President, Global Core Business
[MARY R. HENDERSON PHOTO] Development for Bestfoods, Inc. She previously served as President of
Bestfoods Grocery from 1997 to 1999, and President of Bestfoods Specialty
Markets from 1993 to 1997. Prior to that she held a number of general
management, international and marketing posts since joining Bestfoods'
predecessor, CPC International, in 1972. She is also a director of AXA
Financial, Inc. (formerly, The Equitable Companies Inc.), the Equitable
Life Assurance Society of the United States, and Hunt Corporation. Ms.
Henderson is 49 years old and has been a director of the Company since
January 2000 and is a member of the Audit Committee.
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
Roger B. Porter is director of the Center for Business and Government at
[ROGER B. PORTER PHOTO] Harvard University and is the IBM Professor of Business and Government. Mr.
Porter has served on the faculty at Harvard University since 1977. Mr.
Porter also held senior economic policy positions in the Ford, Reagan and
Bush White Houses, serving as special assistant to the President and
executive secretary of the Economic Policy Board from 1974 to 1977, as
deputy assistant to the President and director of the White House Office of
Policy Development from 1981 to 1985, and as assistant to the President for
economic and domestic policy from 1989 to 1993. He is also a director of
RightCHOICE Managed Care, Inc., National Life Insurance Company, Tenneco
Automotive Inc. and Zions Bancorporation. Mr. Porter is 53 years old and
has been a director of the Company since November 1999 and is Chairman of
the Audit Committee and a member of the Three-year Independent Director
Evaluation Committee.
- -----------------------------------------------------------------------------------------------------------
Paul T. Stecko is the Chief Executive Officer of Packaging Corporation of
[PAUL T. STECKO PHOTO] America, the corporation formed to acquire the Company's containerboard
business in April 1999. From November 1998 to April 1999, Mr. Stecko served
as President and Chief Operating Officer of Tenneco, Inc. From January 1997
to November 1998, Mr. Stecko served as Chief Operating Officer of Tenneco
Inc. From December 1993 through January 1997, Mr. Stecko served as Chief
Executive Officer of the Company. Prior to joining Tenneco, Mr. Stecko
spent 16 years with International Paper Company in various managerial
positions. He is also a director of State Farm Mutual Insurance Company,
Tenneco Automotive Inc., and the Chairman of the Board of Packaging
Corporation of America. Mr. Stecko is 55 years old and has been a director
of the Company since November 1999, and is a member of the Audit Committee,
the Compensation/Nominating/Governance Committee and Chairman of the
Three-year Independent Director Evaluation Committee.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
Richard L. Wambold became the Chief Executive Officer of the Company upon
[RICHARD L. WAMBOLD PHOTO] the spin-off in November 1999, and has been serving as its President since
June 1999. He was appointed to the additional position of Chairman in March
2000. From June 1997 to May 1999, he was Executive Vice President and
General Manager of the Company's specialty packaging and consumer products
units and prior to June 1997 he served as Vice President and General
Manager of such units. Prior to joining the Company in 1994, Mr. Wambold
was Executive Vice President of Case Corporation's construction equipment
and worldwide parts business. Mr. Wambold is 48 years old and has been a
director of the Company since June 1999.
</TABLE>
THE BOARD OF DIRECTORS
The Board of Directors of the Company is currently composed of seven
members, consisting of six members who are not officers of the Company (the
"Outside Directors") and one member who is an officer of the Company (the
"Inside Director"). The Board of Directors believes that the Company's ratio of
Outside Directors to Inside Directors represents a commitment to the
independence of the Board, and a focus on matters of importance to its
Shareowners. The three standing Committees of the Board of Directors are each
comprised solely of Outside Directors. In addition, on an ad hoc basis, the
Board may designate from time to time an Outside Director as the "lead" director
with respect to special matters or discussions affecting the Company.
Following the spin-off of the Company in November 1999, the Board of
Directors held one meeting in 1999. Each director attended more than 75% of the
aggregate of all meetings of the Board of Directors and all meetings of the
committees of the Board on which the director served.
There are three standing committees of the Board of Directors, which have
the following described responsibilities and authority.
The Audit Committee, comprised solely of Outside Directors, has the
responsibility, among other things, to: (i) recommend the selection of the
Company's independent public accountants; (ii) review and approve the scope of
the independent public accountants' audit activity and extent of non-audit
services; (iii) review with management and the independent public accountants
the adequacy of the Company's basic accounting system and the effectiveness of
the Company's internal audit plan and activities; (iv) review with management
and the independent public accountants the Company's certified financial
statements and exercise general oversight of the Company's financial reporting
process; and (v) review with the Company litigation and other legal matters that
may affect the Company's financial condition and monitor compliance with the
Company's business ethics and other policies. One meeting of the Audit Committee
was held in 1999.
5
<PAGE> 9
The Compensation/Nominating/Governance Committee, comprised solely of
Outside Directors, has significant corporate governance and compensation
responsibilities, among other things, to: (i) establish the salary rate of
officers and employees of the Company and its subsidiaries; (ii) examine
periodically the compensation structure of the Company; (iii) supervise the
welfare and pension plans and compensation plans of the Company; (iv) review and
determine the desirable balance of experience, qualifications and expertise
among members of the Board; (v) review possible candidates for membership on the
Board of Directors and recommend a slate of nominees for election as directors
at the Company's Annual Meeting of Shareowners; (vi) review the function and
composition of the other committees of the Board of Directors and recommend
membership on such committees; and (vii) review the qualifications and recommend
candidates for election as officers of the Company. One meeting of the
Compensation/Nominating/Governance Committee was held in 1999.
The Three-year Independent Director Evaluation Committee, comprised solely
of Outside Directors, has the responsibility, among other things, to review the
Company's Qualified Offer Rights Plan (adopted in November 1999) at least every
three years and, if it deems it appropriate, recommend that the full Board
modify or terminate such Plan. No meetings of the Three-year Independent
Director Evaluation Committee were held in 1999.
A Shareowner of the Company may nominate persons for election to the Board
of the Company if the Shareowner submits such nomination, together with certain
related information required by the Company's By-Laws, in writing to the
Secretary of the Company at the Company's principal executive offices not less
than 90 days nor more than 120 days prior to the first anniversary of the
preceding year's Annual Meeting of Shareowners; provided, that if the date of
the Annual Meeting of Shareowners is more than 30 days before or more than 70
days after the date of the first anniversary of the preceding year's Annual
Meeting of Shareowners, notice of the matter must be received not earlier than
the close of business on the 120th day prior to such Annual Meeting of
Shareowners and not later than the close of business on the later of the 90th
day prior to such Annual Meeting of Shareowners or the 10th day following the
date of public disclosure of the meeting date.
6
<PAGE> 10
STOCK OWNERSHIP
MANAGEMENT
The following table sets forth, at March 15, 2000, the number of shares of
Common Stock and Common Stock Equivalents of the Company beneficially owned by:
(i) each director or nominee for director; (ii) each of the executive officers
whose names are set forth on the Summary Compensation Table below; and (iii) all
executive officers, directors, and nominees for director as a group.
<TABLE>
<CAPTION>
SHARES
OF COMMON COMMON STOCK
STOCK OWNED EQUIVALENTS TOTAL SHARES AND
DIRECTORS (1)(2)(3) (4) EQUIVALENTS
--------- ----------- ------------ ----------------
<S> <C> <C> <C>
Mark Andrews............................... 17,477 2,000 19,477
Larry D. Brady............................. 6,423 2,839 9,262
Robert J. Darnall.......................... 5,000 2,000 7,000
Mary R. (Nina) Henderson................... -- 2,350 2,350
Roger B. Porter............................ 5,279 2,839 8,118
Paul T. Stecko............................. 24,862 2,350 27,212
Richard L. Wambold......................... 199,391 0 199,391
EXECUTIVE OFFICERS
------------------
Paul J. Griswold(5)........................ 21,575 0 21,575
Andrew A. Campbell......................... 126,800 0 126,800
James V. Faulkner, Jr...................... 34,855 11,807 46,662
Peter J. Lazaredes......................... 60,835 0 60,835
James D. Morris............................ 35,651 44,239 79,890
All executive officers and directors or
nominees as a group(6)................... 538,148 70,424 608,572
</TABLE>
- ------------
(1) Each director or nominee and executive officer has sole voting and
investment power over the shares beneficially owned (or has the right to
acquire shares as set forth in note (2) below) as set forth in this column,
except for (i) restricted shares that are held for each executive officer
under the Company's Stock Ownership Plan, and (ii) shares that such persons
have the right to acquire pursuant to the Company's Stock Ownership Plan.
(2) Includes (i) 30,238 restricted shares held by Mr. Wambold under the
Company's Stock Ownership Plan, and (ii) shares that are subject to options
which are exercisable at March 15, 2000, or within 60 days of said date, as
follows: for Messrs. Andrews, Brady, Porter, Wambold, Faulkner, Lazaredes,
and Morris, 1,132, 2,266, 1,132 shares, 55,588, 21,874, 10,840 and 16,981
shares, respectively.
(Notes continued on following page)
7
<PAGE> 11
(3) Less than one percent of the outstanding shares of the Company's Common
Stock.
(4) Common Stock Equivalents are rights to shares of common stock which are
distributed in shares of common stock of the Company after a director ceases
to serve as a director of the Company or upon retirement of the officer, as
applicable, except that certain Common Stock Equivalents credited under the
Company's Stock Ownership Plan and common stock equivalent units under the
Company's deferred compensation plan may be distributed in common stock or
cash.
(5) Mr. Griswold resigned from the Company on February 29, 2000.
(6) Includes 109,813 shares that are subject to options that are exercisable
within 60 days of March 15, 2000, by all executive officers and directors of
the Company as a group, and 30,238 restricted shares that are held under the
Company's Stock Ownership Plan, for all executive officers and directors of
the Company as a group.
CERTAIN SHAREOWNERS
The following table sets forth, as of February 29, 2000, the name, address,
and Common Stock ownership for each person known by the Company to be the
beneficial owner of more than five percent of the Company's outstanding Common
Stock (the only class of voting securities of the Company outstanding).
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OF COMMON PERCENT OF COMMON
OF BENEFICIAL OWNER(1) STOCK OWNED(1) STOCK OUTSTANDING(1)
---------------------- ---------------- --------------------
<S> <C> <C>
Barrow, Hanley, Mewhinney & Strauss, Inc. (2)... 18,451,620 10.7%
One McKinney Plaza
3232 McKinney Avenue
15th Floor
Dallas, Texas 75204-2429
Highfields Capital Management L.P. (3).......... 13,076,000 7.6%
200 Clarendon Street
51st Floor
Boston, Massachusetts 02117
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OF COMMON PERCENT OF COMMON
OF BENEFICIAL OWNER(1) STOCK OWNED(1) STOCK OUTSTANDING(1)
---------------------- ---------------- --------------------
<S> <C> <C>
Highfields Capital Ltd. (3)..................... 9,400,160 5.5%
c/o Goldman Sachs (Cayman) Trust, Limited
Harbour Centre, North Church Street,
P.O. Box 896
George Town, Grand Cayman
Cayman Islands
</TABLE>
- ------------
(1) The foregoing information is based on information contained in filings made
with the Securities and Exchange Commission. Except where otherwise
indicated, the identified beneficial owner has indicated that it has sole
voting and sole dispositive power over the identified shares.
(2) Barrow, Hanley, Mewhinney & Strauss, Inc. has indicated that it has sole
voting power over 3,525,420 shares, shared voting power over 14,926,200
shares, and sole dispositive power over 18,451,620 shares. Barrow, Hanley
also advised the Company that it is a registered investment advisor and
these shares are held on behalf of various clients. These shares include
13,588,800 shares (8.11%) held on behalf of the Vanguard Windsor II Fund,
The Vanguard Group, 455 Devon Park Drive, Wayne, Pennsylvania 19087-1815.
(3) Highfields Capital Management LP, Highfields GP LLC, Jonathon S. Jacobson
and Richard L. Grubman have reported that, with respect to common stock of
the Company directly owned by Highfields Capital I LP, and Highfields
Capital II LP and Highfields Capital Ltd., each of such persons has sole
voting and sole dispositive power over 13,076,000 shares, inclusive of the
shares held by Highfields Capital Ltd. Highfields Capital Ltd. reported
ownership of 9,400,160 shares, representing 5.5% of the Company's
outstanding common stock. Neither Highfields Capital I LP nor Highfields
Capital II LP reported ownership of more than 5% of the Company's
outstanding common stock.
9
<PAGE> 13
EXECUTIVE COMPENSATION
The following table sets forth the remuneration paid by the Company: (i) to
the Chief Executive Officer; and (ii) to each of the four most highly
compensated key executive officers of the Company, other than the Chief
Executive Officer, plus an additional executive officer who was hired in late
1999 and who would have been among the four most highly compensated executive
officers had he been employed by the Company for the full year. The table shows
amounts earned by such persons in all capacities in which they served and
includes compensation paid or accrued by Tenneco Inc. or it subsidiaries,
including the Company, prior to the spin-off of the Company which was completed
in November 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- ------------------------------------
AWARDS PAYOUTS
----------------------- ----------
OTHER LONG-TERM
ANNUAL RESTRICTED INCENTIVE ALL OTHER
COMPEN- STOCK PLAN COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS SATION(2) AWARDS(3) OPTIONS(4) PAYOUTS(5) SATION(6)
- --------------------------- ---- --------- ----- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard L. Wambold.............. 1999 $452,501 $350,000 $ 65,450 $397,025 700,000 $295,405 $11,386
Chairman, President and Chief 1998 $355,472 $220,000 $152,685 $187,800 45,000 -- $11,643
Executive Officer
Paul J. Griswold(7)............. 1999 $302,692 $170,000 $ 32,240 $238,218 300,000 $195,976 $10,282
Senior Vice President 1998 $275,500 $125,000 $ 31,164 $187,800 20,000 -- $ 9,812
Protective & Flexible Packaging
Andrew A. Campbell(8)........... 1999 $ 81,252 $100,000 $ 30,000 -- 300,000 -- --
Vice President and Chief 1998 -- -- -- -- -- -- --
Financial Officer
James V. Faulkner, Jr. ......... 1999 $291,016 $200,000 $ 26,570 -- 200,000 $105,193 $18,120
Vice President and General 1998 $266,568 $ 82,000 $ 25,760 -- 10,000 -- $17,674
Counsel
Peter J. Lazaredes.............. 1999 $232,164 $126,000 $ 23,015 -- 200,000 $ 36,025 $12,364
Vice President and General 1998 $182,773 $ 73,000 $ 30,730 $177,800 20,000 -- $12,704
Manager, Foodservice,
Supermarket and Institutional
Packaging
James D. Morris................. 1999 $237,426 $126,000 $ 25,400 -- 200,000 $129,690 $13,594
Vice President and General 1998 $206,004 $115,000 $ 29,405 $187,800 20,000 -- $14,139
Manager, Protective and
Flexible Packaging
</TABLE>
- ------------
(1) Includes base salary plus amounts paid in lieu of matching contributions to
the Thrift Plan.
(2) Includes amounts attributable to: (i) the value of personal benefits
provided by the Company to its executive officers, which have an aggregate
value in excess of the lesser of $50,000 and 10% of the executive's salary
and bonus for the year, such as the personal use of Company-owned property,
membership dues, assistance provided to such persons with regard to
financial, tax and estate planning, and relocation expenses; (ii)
reimbursement for
(Notes continued on following page)
10
<PAGE> 14
taxes; and (iii) amounts paid as dividend equivalents on performance share
equivalent units on Tenneco Inc. common stock ("Dividend Equivalents").
Dividend Equivalents were earned at the same rate as dividends on Tenneco
Inc. common stock. The amount of each such personal benefit that exceeds 25%
of the estimated value of the total personal benefits provided by the
Company, reimbursement for taxes, and amounts paid as Dividend Equivalents
to the listed individuals was as follows: During 1999: $47,000 perquisite
allowance and $18,450 in Dividend Equivalents for Mr. Wambold; $20,000
perquisite allowance and $12,240 in Dividend Equivalents for Mr. Griswold;
$30,000 perquisite allowance for Mr. Campbell; $20,000 perquisite allowance
and $6,570 in Dividend Equivalents for Mr. Faulkner; $20,000 perquisite
allowance and $5,400 in Dividend Equivalents for Mr. Morris; $12,000
perquisite allowance and $2,250 in Dividend Equivalents for Mr. Lazaredes.
During 1998: $58,908 for relocation expenses, $47,171 for reimbursement of
taxes, $15,600 Dividend Equivalents and $30,000 perquisite allowance for Mr.
Wambold; $342 for reimbursement of taxes, $10,320 Dividend Equivalents and
$20,000 perquisite allowance for Mr. Griswold; $5,760 in Dividend
Equivalents and $20,000 perquisite allowance for Mr. Faulkner; $6,600
Dividend Equivalents and $20,000 perquisite allowance for Mr. Morris; and
$17,530 in relocation expenses, $1,200 in Dividend Equivalents and $12,000
perquisite allowance for Mr. Lazaredes.
(3) Includes the dollar value of grants of restricted stock made pursuant to the
Company's Stock Ownership Plan based on the price of the Company's common
stock on the date of grant. At December 31, 1999, Messrs. Wambold and
Griswold held restricted shares and/or performance share equivalent units,
respectively, under such plan. The value at December 31, 1999 (based on a
per share/equivalent unit price of $10.63 on that date) of all restricted
shares/performance share equivalent units held was $321,430 for Mr. Wambold
and $192,860 for Mr. Griswold. Restricted shares and performance share
equivalent units issued in 1998 or earlier all vested in connection with the
spin-off.
(4) The options granted on November 5, 1999 vest on November 5, 2002. For 1999,
the number of options does not include options previously granted by Tenneco
Inc. (the former parent of the Company) to the named individuals. Such
options were replaced at the spin-off by options to purchase shares of the
Company's common stock.
(5) For 1999, the amounts attributed to long-term incentive plan payouts
represent the value of performance share equivalent units for Tenneco Inc.
that were vested and distributed as shares of Tenneco Inc. common stock on
October 28, 1999, pursuant to the spin-off. The value stated is the average
of the high and low trading prices of a share of Tenneco Inc. common stock
on October 28, 1999, the date the performance restrictions were removed.
Messrs. Wambold, Griswold, Faulkner, Lazaredes and Morris received 20,500;
13,600; 7,300; 2,500 and 9,000 shares of Tenneco common stock, respectively
(of such amount,
(Notes continued on following page)
11
<PAGE> 15
certain shares were retained in satisfaction of tax obligations and the
remainder of such shares were issued to the named individual).
(6) Includes amounts attributable during 1999 to benefit plans of the Company as
follows:
(a) The amounts contributed pursuant to the Thrift Plan for the accounts of
Messrs. Wambold, Griswold, Faulkner, Lazaredes and Morris were $10,000,
$8,000, $9,378, $10,000 and $10,000, respectively.
(b) The dollar values paid by the Company for insurance premiums under the
Company's group life insurance plan for Messrs. Wambold, Griswold,
Faulkner, Lazaredes and Morris, were $1,357, $2,243, $8,599, $2,369 and
$3,594 respectively.
(7) Mr. Griswold resigned from the Company effective February 29, 2000. In
connection with his resignation, all of Mr. Griswold's stock options,
performance shares and restricted shares were canceled.
(8) Mr. Campbell joined the Company in October 1999.
OPTIONS GRANTED IN 1999
The following table shows the number of options to purchase common stock
that were granted by the Company during 1999 to the persons named in the Summary
Compensation Table above.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF TOTAL OPTIONS
COMMON STOCK GRANTED TO GRANT DATE
UNDERLYING OPTIONS EMPLOYEES EXERCISE EXPIRATION PRESENT
GRANTED(#)(1) IN 1999(%) PRICE($)(2) DATE VALUE(3)
------------------ ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Mr. Wambold.......... 700,000 16.8 13.44 2009 $3,241,000
Mr. Griswold......... 300,000 7.2 13.44 2009 $1,389,000
Mr. Campbell......... 300,000 7.2 13.44 2009 $1,389,000
Mr. Faulkner......... 200,000 4.8 13.44 2009 $ 926,000
Mr. Morris........... 200,000 4.8 13.44 2009 $ 926,000
Mr. Lazaredes........ 200,000 4.8 13.44 2009 $ 926,000
</TABLE>
- ------------
(1) In connection with the spin-off, Tenneco Inc. stock options held by the
persons listed above were replaced with options to purchase Company common
stock, with the number and exercise price adjusted so that the new Company
options had equivalent economic terms to the old Tenneco Inc. options. Such
replacement options are not shown on this table.
(2) All options were granted with exercise prices equal to 100% of the fair
market value of a share of Company common stock on the date of grant.
(3) Reflects Black-Scholes valuation which was performed using the following
assumptions: 27.4% volatility, 6.0% risk free interest rate, 0.0% expected
dividend rate and 5 year option life.
12
<PAGE> 16
OPTIONS AT YEAR-END 1999 VALUES
The following table sets forth the number of stock options held at December
31, 1999, by the persons named in the Summary Compensation Table. No options to
acquire shares of the Company's Common Stock were exercised during 1999, and
there were no in-the-money options as of December 31, 1999.
<TABLE>
<CAPTION>
TOTAL NO. OF UNEXERCISED
OPTIONS HELD AT
DECEMBER 31, 1999
------------------------------
EXERCISABLE NON-EXERCISABLE
----------- ---------------
<S> <C> <C>
Richard L. Wambold........................................ 55,589 799,411
Paul J. Griswold.......................................... 21,924 354,369
Andrew A. Campbell........................................ -0- 300,000
James V. Faulkner, Jr..................................... 21,874 229,714
Peter J. Lazaredes........................................ 10,840 217,368
James D. Morris........................................... 16,981 245,308
</TABLE>
LONG-TERM INCENTIVE PLANS
PERFORMANCE SHARE EQUIVALENT UNIT AWARDS IN 1999
The following table sets forth information concerning performance-based
awards made during 1999 to the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF OTHER PERIOD NON-STOCK PRICE BASED
SHARES, UNITS UNTIL PLANS(1)
OR OTHER MATURATION OR ------------------------------
NAME RIGHTS(1)(2) PAYOUT THRESHOLD TARGET MAXIMUM
---- ------------- -------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Richard L. Wambold............. 30,000 3 Years 0% 100% 200%
Paul J. Griswold............... 15,000 3 Years 0% 100% 200%
Andrew A. Campbell............. 15,000 3 Years 0% 100% 200%
James V. Faulkner, Jr.......... 10,000 3 Years 0% 100% 200%
Peter J. Lazaredes............. 10,000 3 Years 0% 100% 200%
James D. Morris................ 10,000 3 Years 0% 100% 200%
</TABLE>
- ------------
(1) In November 1999, the persons named in the Summary Compensation Table were
awarded performance share equivalent units under the Stock Ownership Plan.
Performance share equivalent units are granted annually, earned over three
years and can pay out between 0% and 200% of target based upon performance
against a value model which requires improvement in both earnings and the
return on capital employed. The performance targets may be adjusted by the
Compensation/Nominating/Governance Committee of the Board of Directors to
reflect the effects of any corporate restructurings to the extent allowed by
(Notes continued on following page)
13
<PAGE> 17
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations applicable thereto.
(2) Each performance share equivalent unit represents one share of the Company's
Common Stock. The number of performance share equivalent units listed in
this column represents the target number of performance share equivalent
units that may be earned under the award.
PENSION PLAN TABLE
The following table sets forth the aggregate estimated annual benefits
payable upon normal retirement pursuant to the Company's Retirement Plan and
Supplemental Executive Retirement Plan to persons in specified remuneration and
years-of-credited-participation classifications.
<TABLE>
<CAPTION>
YEARS OF CREDITED PARTICIPATION
ANNUAL -------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
- ------------ ------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$ 350,000 $27,500 $ 55,000 $ 82,500 $110,000 $137,500 $165,000 $192,500
$ 400,000 $31,429 $ 62,857 $ 94,286 $125,714 $157,143 $188,571 $220,000
$ 450,000 $35,357 $ 70,714 $106,071 $141,429 $176,786 $212,143 $247.500
$ 500,000 $39,286 $ 78,571 $117,857 $157,143 $196,429 $235,714 $275,000
$ 550,000 $43,214 $ 86,429 $129,643 $172,857 $216,071 $259,286 $302,500
$ 600,000 $47,143 $ 94,286 $141,429 $188,571 $235,714 $282,857 $330,000
$ 650,000 $51,071 $102,143 $153,214 $204,286 $255,357 $306,429 $357,500
$ 700,000 $55,000 $110,000 $165,000 $220,000 $275,000 $330,000 $385,000
$ 750,000 $58,929 $117,857 $176,786 $235,714 $294,643 $353,571 $412,500
$ 800,000 $62,857 $125,714 $188,571 $251,429 $314,286 $377,143 $440,000
$ 850,000 $66,786 $133,571 $200,357 $267,143 $333,929 $400,714 $467,500
$ 900,000 $70,714 $141,429 $212,143 $282,857 $353,571 $424,286 $495,000
$ 950,000 $74,643 $149,286 $223,929 $298,571 $373,214 $447,857 $522,500
$1,000,000 $78,571 $157,143 $235,714 $314,286 $392,857 $471,429 $550,000
</TABLE>
- ------------
Notes:
1. The benefits shown above are computed as a straight-life annuity and are
based on years of credited participation and the employee's average
compensation (salary and bonus). These benefits are not subject to any
deduction for Social Security or other offset amounts. The years of credited
participation for Messrs. Wambold, Griswold, Campbell, Faulkner, Lazaredes
and Morris are 21, 4, 0, 5, 18 and 24, respectively. See the Summary
Compensation Table above for salary and bonus information for these
individuals.
2. If Mr. Wambold completes five years of service in the period commencing
January 1, 1997, he will be entitled to benefits commencing at age 55
determined by multiplying his average salary plus bonus, determined over a
three-year period, by 25% plus 2.5% for each year of service in the period
commencing January 1, 1997 up to a maximum of 50%. Mr. Faulkner is
(Notes continued on following page)
14
<PAGE> 18
entitled to special early retirement benefits and, if he remains with the
Company through December 31, 2002, his benefit will be determined by adding
three years of participation and age to his actual participation and age.
------------------------
COMPENSATION OF DIRECTORS
FEE STRUCTURE. Each Outside Director is paid a retainer fee of $35,000 per
year for service on the Board of Directors, of which a minimum of 60% ($21,000)
is paid in the form of stock-settled Common Stock Equivalents, as described
below, and a maximum of 40% ($14,000) is paid in cash or credited to a deferred
account as described below. Outside Directors receive $1,000 for each meeting of
the Board of Directors attended, and each Outside Director who serves as a
Chairman of the Audit or Compensation/Nominating/Governance Committees is paid a
fee of $7,000 per Chairmanship. Outside Directors who serve as members of such
committees are paid $4,000 per committee membership. Members of the Three-year
Independent Director Evaluation Committee receive $1,000 for each meeting of
that committee attended. Outside Directors also receive reimbursement of their
expenses for attending meetings of the Board of Directors and Committee
meetings.
COMMON STOCK EQUIVALENTS/OPTIONS. For 1999, in payment of 60% of the
retainer fee, Outside Directors received approximately 2,000 Common Stock
Equivalents. Common Stock Equivalents are payable in shares of the Company's
Common Stock after an Outside Director ceases to serve as a director of the
Company. Final distribution of such shares may be made either in a lump sum or
in installments over a period of years. The Common Stock Equivalents are issued
at 100% of the fair market value on the date of the grant. Each Outside Director
also receives an annual grant of options to purchase 3,000 shares of the
Company's common stock as additional incentive compensation for service on the
Board of Directors. These options are granted at 100% of fair market value on
the day the option is granted with a term of ten years and fully vest six months
from the grant date. Once vested, these options are exercisable at any time
during the option term.
DIRECTORS' DEFERRED COMPENSATION PLAN. The Company has a voluntary deferred
compensation plan for Outside Directors. Pursuant to the plan, an Outside
Director may elect, prior to the commencement of the next calendar year, to have
up to 40% ($14,000) of his or her retainer fee and all or a portion of his or
her meeting fees credited to a deferred compensation account. Payment of
deferred fees, together with interest and/or earnings, may be deferred until the
earlier of: (i) the year next following the date upon which he or she ceases to
be a director of the Company; or (ii) the year selected by the director for
commencement of payment of the deferred amount. The plan provides Outside
Directors with various investment options which include stock equivalent units
of the Company's Common Stock, which may be paid out in either cash or shares of
the Company's Common Stock.
15
<PAGE> 19
The report of the Compensation/Nominating/Governance Committee and the
performance graph that appear immediately below are not deemed to be soliciting
material or to be filed with the Securities and Exchange Commission under the
Securities Act of 1933 or the Securities Exchange Act of 1934 or incorporated by
reference in any document so filed.
PACTIV CORPORATION COMPENSATION/NOMINATING/GOVERNANCE COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The executive compensation philosophy, policies, plans, and programs of the
Company are under the supervision of the Compensation/Nominating/Governance
Committee (the "Committee"), which is composed of the directors named below,
none of whom is an officer or employee of the Company. The Committee has
furnished the following report on executive compensation:
Compensation Philosophy
The basic philosophy underlying the Company's executive compensation
policies, plans, and programs is that executive and shareowner financial
interests should be aligned as closely as possible, and the compensation package
should be based on delivering pay in line with performance.
Accordingly, the executive compensation program for the Company's Chief
Executive Officer ("CEO") and the other executives named in this Proxy Statement
("Named Executives"), as well as other executives of the Company, has been
structured to:
-- Align the interests of the Company's executives and shareowners by
accelerating the acquisition and requiring the retention of Company
shares by senior executives.
-- Reinforce a results-oriented management culture with executive pay that
varies according to overall Company and individual performance against
aggressive business goals and core behavioral standards.
-- Provide incentives, in the form of substantial reward potential, for
executives to remain employees of the Company.
-- Focus on business results that include financial measures such as return
on capital employed, net income, cash flow, working capital, and
earnings per share, with improvement in customer satisfaction, quality,
safety, environmental, effective leadership and workforce diversity.
-- Place greater emphasis on variable performance-based (versus fixed)
compensation.
-- Provide key executives with competitive levels of total current
compensation and incentive earning opportunities commensurate with the
business results achieved and individual performance.
-- Provide a plan that is easy to describe and understand.
16
<PAGE> 20
Based on these objectives, the executive compensation program has been
designed to generate compensation from several sources: salaries, annual cash
incentive awards, stock ownership opportunities, and other benefits typically
offered to executives by major corporations.
The Company's policy is to provide total compensation to its executives
based on performance that is competitive and at market levels, for comparable
companies, when financial and qualitative targets are met. In determining
competitive compensation for each of the components of executive compensation
described below, the Company analyzes data from several independent compensation
surveys. The competitive market data used by the Committee includes a majority
of the companies comprising the Industry Peer Group on the Performance Graph,
which follows this report. However, their inclusion in these data is a function
of their participation in the various nationally recognized compensation surveys
in which the Company participates, rather than an alignment of companies in
similar industry groups. Salary levels are structured within a range of
reputable survey data for comparable companies without regard to the performance
of the companies surveyed. The Company's compensation plans provide that as an
executive's level of responsibility increases, (i) a greater portion of his/her
potential total compensation is based on performance (both corporate and
individual), and a lesser portion is comprised of salary, causing potentially
greater variability in the individual's total compensation from year-to-year,
and (ii) the mix of compensation for that executive shifts to a greater portion
being derived from compensation plans that result in stock ownership.
In designing and administering the components of the executive compensation
program, the Committee strives to balance short- and long-term incentive
objectives and to employ prudent judgment when establishing performance
criteria, evaluating performance, and determining actual incentive payments.
Total executive compensation has two major components: annual cash
compensation comprised primarily of salary and bonus, and long-term incentives
comprised of performance shares and stock options. The following is a
description of each of the components of the executive compensation program
along with a discussion of the decisions and action taken by the Committee with
regard to 1999 compensation. There also follows a specific discussion regarding
the CEO's compensation.
Annual Cash Compensation Program
An executive's annual cash compensation consists of a base salary plus
amounts paid in lieu of Company matching contributions to the Thrift Plan and
bonuses under the Company's Executive Incentive Compensation Plan. Each year the
Committee reviews with the CEO and the senior human resources executive of the
Company an annual salary plan for the Company's executives and other key
management personnel (excluding the CEO), following which the Committee approves
that plan with changes that the Committee deems appropriate. The salary plan
that is developed is based in part on competitive market data and on assessments
of past
17
<PAGE> 21
and anticipated future performance. The Committee employs competitive market
data for directional and guideline purposes in combination with corporate,
divisional, and individual performance results. The Committee also reviews, with
the assistance of the senior human resources executive and an outside
consultant, and sets the salary of the CEO based on similar information and
criteria and the Committee's assessment of his past performance and its
expectations as to his future contribution in leading the Company. Base salaries
for the Company's executive officers were increased by 2.9% for 1999, which was
significantly below the projected industry average of 4.0-4.5% for executives.
The Company uses a lower base salary budget for executives as an offset to
increased "at risk" compensation in the form of competitive annual incentive and
long-term stock awards.
Annual performance goals are established under the Executive Incentive
Compensation Plan at the beginning of each year for purposes of determining
incentive awards for that year. At the conclusion of each year, the Committee
approves incentive award payments to executives based on the degree of
achievement of the goals established at the beginning of that year and on
judgments of individual performance. Using earnings per share and cash flow
objectives as a starting point, the Company establishes an incentive
compensation fund as the "target amount," based upon judgmental considerations
including return on capital employed, working capital, innovation, customer
satisfaction, workforce diversity, the degree of difficulty in meeting targets,
and environmental and safety performance. The performance against such goals is
considered as part of the overall information considered by the Committee. The
Committee makes individual awards based upon its evaluation of the individual's
contribution to the overall performance results of the business.
The 1999 Executive Incentive Compensation Plan payouts were calculated at
85% of the target amount. The key factors considered by the Committee in
determining this amount are discussed below under the caption "Performance
Considerations."
Long-Term Incentives -- Stock Awards
The Company's long-term stock incentive plan (the Stock Ownership Plan) is
designed to align a significant portion of executive compensation with
shareowner interests. This plan permits the granting of a variety of long-term
awards, including stock options, restricted stock, and performance shares.
Shares of stock are awarded based on an analysis of competitive levels of stock
awards and an assessment of individual performance. As an individual's level of
responsibility increases, a greater portion of variable performance-related
compensation is in the form of stock. For example, at the senior officer level
50-55 percent of total compensation is in the form of stock options and
performance shares, while at lower levels 25-30 percent of the total is in
stock.
In 1999, the Company granted the stock options and performance share
equivalent units to the persons identified in the Summary Compensation Table.
The stock option grants represented
18
<PAGE> 22
a three-year award and were made in recognition of the importance of retaining
such persons through the spin-off and the establishment of the Company as a
stand-alone public company.
Performance Considerations
Factors considered by the Committee included the following achievements and
improvements during 1999.
FINANCIAL PERFORMANCE
- The Company's 1999 revenues increased by $130 million, or 4.7%.
- The Company's 1999 net income from continuing operations was $93 million,
excluding restructuring charges and other unusual items.
- Earnings per share from continuing operations were $0.55, excluding
restructuring charges and other unusual items.
- Consumer and foodservice/food packaging product unit volumes grew at a
rate of 7% during 1999.
- Protective and flexible packaging revenues, adjusted for the negative
impact of foreign currency exchange rates, grew by 8.7% during 1999.
STRATEGIC INITIATIVES
- The Company became a stand-alone public company, listed on the New York
Stock Exchange (NYSE:PTV), on November 5, 1999.
- The Company entered into a joint venture (Packaging Corporation of
America) with respect to its containerboard business, generating
approximately $2 billion in proceeds, and subsequently sold the majority
of its interest in the joint venture, generating additional net proceeds
of approximately $400 million.
- The Company exited four non-core businesses, providing approximately $100
million in cash and tax benefits.
- The Company sold its business service unit, and entered into a third
party outsourcing agreement for such services, reducing costs.
- The Company reduced overhead costs by $40 million on an annualized basis.
INNOVATIONS
- The Company's foodservice business introduced 35 new products.
- The Company's consumer business completed the development and
introduction of a new line of premium, extra strong foam plates called
Hefty(R) ElegantWare(TM).
- The Company launched Hefty(R) OneZip(R) sandwich size bags.
- MealMaster(TM) microwaveable containers equipped with handles were
launched.
19
<PAGE> 23
- The first flexible product packages featuring Hefty(R) Slide-Rite(R)
recloseable slider closures appeared on supermarket shelves.
- Pactiv Air 3000(TM) cushion system, specifically targeting the e-commerce
market, was introduced in the fourth quarter.
CEO Compensation
In determining the overall level of Mr. Wambold's compensation and each
component thereof, the Committee took into consideration information provided by
an independent compensation consultant. As reported in the Summary Compensation
Table in this proxy statement, Mr. Wambold's base salary in 1999 was $452,501,
which was increased to $600,000 annually, effective at the time of the spin-off.
Mr. Wambold's base salary is well below the 50th percentile of base salary paid
to chief executive officers at the surveyed companies.
The Committee approved a 1999 annual incentive award of $350,000 for Mr.
Wambold, which was also significantly below the 50th percentile of annual
incentive awards paid to chief executive officers at the surveyed companies.
In November 1999, the CEO received a grant of performance shares in amounts
consistent with awards given to other senior executives and reflecting the
Committee's judgment based on its evaluation of Mr. Wambold's contribution to
the Company. Mr. Wambold also received a special grant of restricted stock in
November 1999. This award is specifically tied to Mr. Wambold's retention as CEO
of the Company.
$1 Million Tax Limitation
The Internal Revenue Code of 1986, as amended, imposes a $1 million limit
on the amount that a publicly-traded corporation may deduct for compensation
paid to the CEO or a Named Executive who is employed on the last day of the
year; provided, however, "performance-based compensation" is excluded from this
$1 million limitation.
The 1999 Stock Ownership Plan incorporates the applicable requirements for
"performance-based compensation" with respect to certain types of awards.
Compensation/Nominating/Governance Committee
Larry D. Brady, Chairman
Mark Andrews
Paul T. Stecko
20
<PAGE> 24
PERFORMANCE GRAPH
The following performance graph compares the cumulative total return on the
Company's Common Stock from October 27, 1999 (the first day on which the
Company's Common Stock began trading on a "when issued" basis on the New York
Stock Exchange), through December 31, 1999, with the cumulative total return of:
(i) the Standard & Poor's 500 Stock Index; (ii) Standard & Poor's Containers and
Packaging (Paper) Index; and (iii) an industry peer group selected by the
Company that includes representative companies with which the Company competes.
Based upon an initial investment of $100 on October 27, 1999 with dividends, if
any, reinvested.
[Performance Graph]
<TABLE>
<CAPTION>
CUSTOM COMPOSITE S&P CONTAINERS &
PACTIV CORPORATION S&P 500 INDEX PACKAGING (PAPER)
------------------ ------- ---------------- -----------------
<S> <C> <C> <C> <C>
10/27/99 100.00 100.00 100.00 100.00
12/31/99 87.00 114.00 97.00 102.00
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
October 27, 1999 December 31, 1999
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Pactiv Corporation $100.00 $ 87.00
- ---------------------------------------------------
S&P 500 $100.00 $114.00
- ---------------------------------------------------
Custom Composite Index (6 Stocks) $100.00 $ 97.00
- ---------------------------------------------------
S&P Containers & Packaging (Paper) $100.00 $102.00
- ---------------------------------------------------
</TABLE>
- ------------
NOTES:
1. The Custom Composite Index is comprised of the following companies:
AptarGroup Inc.; Bemis Co.; Crown Cork & Seal Co. Inc.; Ivex Packaging Corp.;
Sealed Air Corp. and Sonoco Products Co., and was selected by the Company in
good faith based upon similarities in the nature of the businesses in the
Industry Peer Group to the Company's business.
2. The stock performance shown in this graph is not necessarily indicative of
future performance of the Company's Common Stock.
(Notes continued on following page)
21
<PAGE> 25
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company maintains a key executive change-in-control severance benefit
plan designed to enable the Company to continue to attract, retain and motivate
highly qualified employees by eliminating, to the maximum practicable extent,
any concern on the part of those employees that their job security or benefit
entitlements will be jeopardized by a "change-in-control" of the Company, as
that term is defined in the plan. The plan is designed to achieve this purpose
through the provision of severance benefits for key employees and officers whose
positions are terminated following a change-in-control. The plan provides for
severance payments that are calculated on the basis of the executive's annual
base salary in effect at the date of termination of employment and the average
amount of incentive compensation received by the executive over the preceding
three years. Under the plan, Messrs. Wambold, Griswold, Campbell, Faulkner,
Lazaredes and Morris would have been entitled to receive payments in the amount
of $2,604,999, $1,419,999, $1,275,000, $1,265,001, $1,038,999 and $1,140,999,
respectively, if their positions had been terminated on December 31, 1999
following a change-in-control based on their then in effect base salaries and
average incentive compensation over the preceding three years. In addition,
restricted shares held in the name of those individuals under the restricted
stock plan would automatically become payable to those individuals based on the
fair market value of the shares, and all of their performance share equivalent
units would also become fully vested and payable.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company has a confidentiality and non-compete agreement with Mr.
Griswold requiring Mr. Griswold to maintain in strict confidence Company
confidential information, and for a period of two years following his
resignation from the Company, not to compete with the Company or solicit or hire
any employee of the Company. Mr. Griswold resigned effective February 29, 2000,
and under the terms of the agreement Mr. Griswold was paid $650,016.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Andrews, Brady, and Stecko are members of the
Compensation/Nominating/ Governance Committee of the Board of Directors (the
"Committee"). All three members of the Committee are Outside Directors, none of
whom has any direct or indirect material interest in, or relationship with, the
Company or any of its subsidiaries, other than stock ownership, as discussed
above, and as relates to his position as a director. Mr. Stecko was formerly an
executive officer of the Company. During 1999, none of the executive officers of
the Company served on the board of directors or compensation committee of any
entity whose officers served either on the Board of Directors of the Company or
on the Committee.
22
<PAGE> 26
SECTION 16(A) BENEFICIAL PURCHASING REPORTING COMPLIANCE
Mr. Lazaredes inadvertently failed to file a report on Form 4 relating to
his purchase of 10,000 shares of the Company's Common Stock in November 1999. He
filed an amended report regarding such purchase in January 2000.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2)
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL.
Financial statements of the Company and its consolidated subsidiaries are
included in the Company's Annual Report furnished to all Shareowners. Upon
recommendation of the Audit Committee, the Board of Directors has appointed
Arthur Andersen LLP as independent public accountants for the Company to examine
its consolidated financial statements for the year ending December 31, 2000, and
has determined that it would be desirable to request that the Shareowners
approve the appointment. The vote of a majority of the shares, present in person
or by proxy, constituting a quorum at the meeting is required to ratify the
appointment. If the Shareowners should not ratify the appointment, the Audit
Committee and the Board would reconsider the appointment. Arthur Andersen LLP
also acted as the Company's independent public accountants for the fiscal year
ended December 31, 1999. Representatives of Arthur Andersen LLP will be present
at the Annual Meeting, and will have the opportunity to make a statement if they
desire to do so, and will be available to respond to Shareowners' questions.
OTHER MATTERS
The Board of Directors is not aware of any other matters that may properly
come before the Annual Meeting. However, should any such matters come before the
Annual Meeting, it is the intention of the persons named in the enclosed form of
proxy to vote all proxies (unless otherwise directed by Shareowners) in
accordance with their judgment on such matters.
EFFECT OF ABSTENTIONS AND BROKER NON-VOTE
The Company's By-Laws require a majority of the shares authorized to vote
at the Annual Meeting of Shareowners be present, in person or by proxy, to
establish a quorum. Shares abstaining with regard to a matter to be presented to
the Shareowners and shares for which voting power has been withheld, such as
broker non-votes, constitute part of the quorum present with respect to such
matter. Assuming a quorum is present, the affirmative vote of (1) a plurality of
the votes cast at the Annual Meeting (in person or by proxy) is required for the
election of directors, and (2) a majority of the shares present and entitled to
vote is required to ratify Arthur
23
<PAGE> 27
Andersen LLP as the Company's independent public accountants and to approve any
other matters that may properly come before the meeting.
Because the election of directors is determined on the basis of a plurality
of the votes cast, abstentions and broker non-votes have no effect on the
election of directors. Because the vote required for the ratification of Arthur
Andersen LLP and any other matters that may properly come before the meeting is
a majority of shares present and entitled to vote, abstentions have the effect
of a vote against, and broker non-votes, because they are not "entitled to
vote," have no effect on the proposal.
SOLICITATION OF PROXIES AND VOTING
Shareowners may specify their choices by marking the appropriate boxes on
the proxy card. Shares will be voted in accordance with such instructions.
However, it is not necessary to mark any boxes to vote in accordance with the
Board of Directors' recommendations; merely sign, date and return the proxy card
in the envelope provided.
Alternatively, in lieu of returning signed proxy cards, Shareowners can
vote their shares over the internet or by calling a specially designated
telephone number which appears on the proxy cards. Internet and telephone voting
procedures are designed to authenticate Shareowners' identities, allow
Shareowners to provide their voting instructions and confirm the proper
recording of such instructions. Specific instructions for Shareowners who wish
to use the internet or telephone voting procedures are set forth on the enclosed
proxy card.
All properly completed, unrevoked proxies, which are received prior to the
close of voting at the Annual Meeting will be voted in accordance with
Shareowners' instructions. If a properly executed, unrevoked written proxy card
does not specifically direct the voting of shares covered, the proxy will be
voted (i) FOR the election of all nominees for election as director described in
this proxy statement, (ii) FOR the ratification of the appointment of Arthur
Andersen LLP, and (iii) in accordance with the judgement of the persons named in
the proxy as to such other matters as may properly come before the Annual
Meeting.
A proxy may be revoked at any time prior to the voting at the meeting by
submitting a later dated proxy (including a proxy via the internet or telephone)
or by giving timely written notice of such revocation to the Secretary of the
Company.
If you submit a properly completed proxy or if you appear at the Annual
Meeting to vote in person, your shares of Common Stock will be considered part
of the quorum. Directions to withhold authority to vote for any director,
abstentions, and broker non-votes (described above) will be counted to determine
if a quorum for the transaction of business is present. Once a quorum is
present, voting on specific proposals may proceed.
24
<PAGE> 28
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers, and
employees, personally or by telephone, telecopy, or telegram. Proxy cards and
material also will be distributed to beneficial owners of stock through brokers,
custodians, nominees, and other like parties, and the Company expects to
reimburse such parties for their charges and expenses. Georgeson & Co. Inc., New
York, New York, has been retained to assist the Company in the solicitation of
proxies at a fee estimated not to exceed $25,000.
SUBMISSION OF SHAREOWNER PROPOSALS
Shareowner Proposals -- Inclusion in Company Proxy Statement
For a Shareowner proposal to be considered by the Company for inclusion in
the Company's proxy statement and form of proxy relating to the 2001 Annual
Meeting of Shareowners, the proposal must be received by the Company at its
principal executive offices by December 1, 2000.
Other Shareowner Proposals -- Discretionary Voting Authority and By-Law
Requirements
With respect to Shareowner proposals not included in the Company's proxy
statement and form of proxy, the Company may utilize discretionary authority
conferred by proxy in voting on any such proposals if, among other situations,
the Shareowner does not give timely notice of the matter to the Company by the
date determined under the Company's By-Laws for the submission of business by
Shareowners. This notice requirement and deadline are independent of the notice
requirement and deadline described above for a Shareowner proposal to be
considered for inclusion in the Company's proxy statement and form of proxy. The
Company's By-Laws state that to be timely, notice and certain related
information must be received at the principal executive offices not less than 90
and no more than 120 days prior to the first anniversary of the preceding year's
Annual Meeting of Shareowners; provided, however, that if the date of the annual
meeting is more than 30 days before or 70 days after such anniversary date,
notice of the matter must be received not earlier than the close of business on
the 120th day prior to the annual meeting and not later than the close of
business on the 90th day prior to such meeting or the 10th day following the
date of public disclosure of the meeting date, whichever occurs first. It is
currently expected that the 2001 Annual Meeting of Shareowners will be held on
May 9, 2001. Therefore, to be timely under the Company's By-Laws, a proposal not
included by or at the direction of the Board of Directors must be received not
earlier than January 9, 2001 nor later than February 8, 2001.
KARL A. STEWART
Secretary
25
<PAGE> 29
------------------------
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS
AND SCHEDULES THERETO. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE DIRECTED TO
JAMES V. FAULKNER, JR., VICE PRESIDENT AND GENERAL COUNSEL, PACTIV CORPORATION,
1900 WEST FIELD COURT, LAKE FOREST, ILLINOIS 60045.
26
<PAGE> 30
NOTICE OF ANNUAL
MEETING AND
PROXY STATEMENT
-------------------------------------
ANNUAL MEETING
OF SHAREOWNERS
MAY 10, 2000
PACTIV CORPORATION
1900 WEST FIELD COURT, LAKE FOREST,
ILLINOIS 60045
[PACTIV ADVANCED PACKAGING SOLUTIONS
LOGO]
<PAGE> 31
[PACTIV LOGO]
ADVANCED PACKAGING SOLUTIONS
P ANNUAL MEETING OF SHAREOWNERS MAY 10, 2000
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O The undersigned does hereby appoint Richard L. Wambold, Roger B. Porter
and Karl A. Stewart, and any of them, with full power of substitution,
X as Proxies to vote, as directed on the reverse side of this card, or, if
not so directed, in accordance with the Board of Directors'
Y recommendations, all shares of Pactiv Corporation held of record by the
undersigned at the close of business on March 17, 2000, and entitled to
vote at the Annual Meeting of Shareowners of Pactiv Corporation to be
held at 10:30 a.m., May 10, 2000, at the Chicago Botanic Garden, 1000
Lake Cook Road, Glencoe, Illinois 60022, or at any adjournment thereof,
and to vote, in their discretion, upon such other matters as may
properly come before the Annual Meeting.
1. Election of Directors-Nominees:
01 Mark Andrews 05 Roger B. Porter
02 Larry D. Brady 06 Paul T. Stecko
03 Robert J. Darnall 07 Richard L. Wambold
04 Mary R. (Nina) Henderson
2. Ratification of Arthur Andersen LLP as Independent Public Accountants
for 2000.
You are encouraged to specify your choices by marking the appropriate
boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to
vote in accordance with the Board of Directors' recommendations. The
Proxies cannot vote your shares unless you sign and return this card.
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL o
[PACTIV LOGO]
ADVANCED PACKAGING SOLUTIONS
ANNUAL MEETING OF SHAREOWNERS
MAY 10, 2000
10:30 a.m.
CHICAGO BOTANIC GARDEN,
1000 LAKE COOK ROAD, GLENCOE
ILLINOIS, 60022
<PAGE> 32
[X] Please mark your 5260
votes as in this ----
example.
This Proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this Proxy will be voted FOR items 1 and 2.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
- --------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Ratification of [ ] [ ] [ ] 3. In the discretion of the Proxies named herein,
Directors Independent the Proxies are authorized to vote upon other
(See Reverse) Accountants for matters as may properly come before the meeting.
year 2000
For, except vote withheld from the
following nominee(s):
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or any
adjournments thereof.
NOTE: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator,
trustee, or guardian, please give full title
as such.
--------------------------------------------------
--------------------------------------------------
SIGNATURE DATE
</TABLE>
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL o
[PACTIV LOGO]
ADVANCED PACKAGING SOLUTIONS
Dear Shareowner:
Pactiv Corporation encourages you to take advantage of new and convenient
ways by which you can vote your shares. You can vote your shares electronically
through the Internet or the telephone. This eliminates the need to return the
proxy card.
To vote your shares electronically you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the Internet:
o Log on to the Internet and go to the web site
http://www.aproxyvote.com/ptv
2. To vote over the telephone:
o On a touch-tone telephone call 1-877-prx-vote (1-877-779-8683)
24 hours a day, 7 days a week
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need to mail back
your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
<PAGE> 33
PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(847) 482-2000 [PACTIV ADVANCED PACKAGING SOLUTIONS LOGO]
April 4, 2000
Dear Benefit Plan Participant:
The Annual Meeting of Shareowners of Pactiv Corporation is scheduled to be
held at the Chicago Botanic Garden, 1000 Lake Cook Road, Glencoe, Illinois, at
10:30 a.m., on Wednesday, May 10, 2000. A copy of the notice and proxy
statement, which is being sent to all registered Shareowners in connection with
the Annual Meeting is enclosed for your information.
Also enclosed with this letter is a form of proxy card, which designates
the number of shares held in your benefit plan account. By executing this proxy
card you instruct the benefit plan trustee (the "Trustee") how to vote the
shares (eligible to vote) of Pactiv Corporation stock held in your account. The
Trustee will vote all shares eligible to be voted by benefit plan participants
in accordance with their respective instructions.
If you return your form of proxy executed but without furnishing voting
instructions, the eligible shares in your account will be voted by the Trustee,
as holder of record of the shares in your account, FOR the election of the
nominees for Directors named in the Proxy Statement, FOR the ratification of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the year 2000, and as recommended by Management on all other
matters to be considered at the Annual Meeting.
If you do not return your executed form of proxy to the Trustee, then your
shares can be voted by the Trustee only in accordance with the requirements of
your benefit plan, which may or may not reflect your views.
Your vote is important. Please send your executed form of proxy card with
your voting instructions at your earliest opportunity. For your convenience, a
return envelope is enclosed.
YOUR BENEFITS COMMITTEE
