FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number: 1-3203
CHESAPEAKE CORPORATION
Incorporated under the I.R.S. Employer
laws of Virginia Identification
No. 54-0166880
1021 East Cary Street
P. O. Box 2350
Richmond, Virginia 23218-2350
Telephone Number (804) 697-1000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
The number of shares outstanding of each of the issuer's classes of common
stock, as of the close of period covered by this report:
Common stock of $1 par value 23,653,544 shares.
Page 1 of 52 Pages.
PART I
<TABLE>
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE FIRST QUARTER ENDED MARCH 31, 1996 AND 1995
<CAPTION>
First Quarter
1996 1995
(In millions, except
per share data)
<S> <C> <C>
Net sales $277.7 $291.1
Costs and expenses:
Cost of products sold 202.0 201.7
Depreciation and cost of timber harvested 21.9 18.9
Selling, general and administrative expenses 36.5 31.9
Income from operations 17.3 38.6
Other income and expenses, net 2.9 2.4
Interest expense (7.8) (8.0)
Income before taxes 12.4 33.0
Income taxes 4.5 12.2
Net income $ 7.9 $ 20.8
Earnings per share $ .33 $ .87
Weighted average number of common shares and
equivalents outstanding 23.8 24.0
Cash dividends declared per share of common stock $ .20 $ .18
</TABLE>
See accompanying notes.
<TABLE>
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
March 31, 1996 Dec. 31, 1995
(In millions)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6.0 $ 5.2
Accounts receivable, less
allowances for doubtful
accounts of $3.4 and $3.2 143.8 140.4
Inventories, at lower of cost
or market 107.6 112.5
Deferred income taxes 16.6 16.6
Other 7.1 6.9
Total current assets 281.1 281.6
Property, plant and equipment, at cost:
Land, buildings, machinery and
equipment 1,453.5 1,416.4
Less accumulated depreciation (696.3) (675.5)
757.2 740.9
Timber and timberlands, net 39.7 40.0
Net property, plant and equipment 796.9 780.9
Goodwill, net 41.2 41.5
Other assets 41.7 42.3
$1,160.9 $1,146.3
</TABLE>
<TABLE>
March 31, 1996 Dec. 31, 1995
(In millions)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 124.2 $ 130.2
Current maturities of long-term debt .9 .9
Dividends payable 4.7 4.8
Income taxes payable 5.0 3.4
Total current liabilities 134.8 139.3
Long-term debt 411.6 393.6
Postretirement benefits other than
pensions 27.1 26.5
Deferred income taxes 119.7 118.6
Stockholders' equity:
Preferred stock, $100 par value,
issuable in series;
authorized, 500,000 shares;
issued, none
Common stock, $1 par value;
authorized 60,000,000 shares;
outstanding 23,653,544 and
23,792,433 shares 23.7 23.8
Additional paid-in capital 103.6 107.3
Retained earnings 340.4 337.2 467.7 468.3
$1,160.9 $1,146.3
</TABLE>
See accompanying notes.
<TABLE>
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FIRST QUARTER ENDED MARCH 31, 1996 AND 1995
<CAPTION> 1996 1995
(In millions)
<S> <C> <C>
Operating activities
Net income $ 7.9 $20.8
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, cost of timber harvested and
amortization of intangibles 22.4 19.4
Deferred income taxes 1.1 3.0
Gain on sale of property, plant and
equipment - (.9)
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (1.7) (3.2)
Inventories 4.9 (13.8)
Other assets - ( .2)
Accounts payable and accrued expenses (5.3) 5.7
Income taxes payable 1.5 5.9
Other payables .6 .4
Net cash provided by operating activities 31.4 37.1
Investing activities
Purchases of property, plant and equipment (37.8) (34.0)
Acquisitions (1.7) -
Proceeds from sale of property, plant and
equipment .1 1.0
Net cash used in investing activities (39.4) (33.0)
Financing activities
Net borrowings on credit lines 20.3 -
Payments on long-term debt (3.1) (.6)
Proceeds from long-term debt .2 -
Purchases of outstanding common stock (3.8) -
Dividends paid (4.8) (4.3)
Other - .1
Net cash provided by (used in) financing activities 8.8 (4.8)
Increase (decrease) in cash .8 (.7)
Cash at beginning of period 5.2 33.2
Cash at end of period $ 6.0 $32.5
Supplemental cash flow information:
Interest payments $ 6.9 $ 8.5
Income tax payments, net of refunds $ 1.8 $ 3.7
</TABLE>
See accompanying notes. <TABLE>
CHESAPEAKE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements included herein are
unaudited, except for the December 31, 1995 consolidated balance
sheet, have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission, and, in the
opinion of management, reflect all adjustments, all of a normal
recurring nature, necessary to present fairly the Company's
consolidated financial position, results of operations and cash flows.
It is suggested that these condensed consolidated financial statements
be read in conjunction with the consolidated financial statements and
the notes thereto included or incorporated by reference in the
Company's latest Annual Report on Form 10-K. The results of
operations for the 1996 interim period should not be regarded as
necessarily indicative of the results that may be expected for the
entire year.
2. Inventories:
Mar. 31, 1996 Dec. 31, 1995
<CAPTION> (In millions)
<S> <C> <C>
Inventories consist of:
Finished goods $ 42.2 $33.7
Work-in-process 22.7 33.3
Materials and supplies 42.7 45.5
Totals $107.6 $112.5
</TABLE>
3. Commitments and Other Matters:
At March 31, 1996, commitments, primarily for capital expenditures,
approximated $91 million. These commitments include anticipated
expenditures of $10 million in 1996 related to environmental
protection in connection with planned expansions and upgrades mainly
at the Company's paper mills in West Point, Virginia and Menasha,
Wisconsin. The remaining commitments of $81 million are primarily
for various capital projects, none of which is individually material.
Additional non-determinable environmental protection expenditures
could be required in the future when facilities are expanded or if
more stringent standards become applicable. See Note 6.
4. Litigation:
Wisconsin Tissue Mills Inc. ("WT"), a wholly-owned subsidiary of the
Company, has received a notice from the United States Fish and
Wildlife Service that WT has been identified as a potentially
responsible party with respect to possible natural resource damages
in the Fox River and Green Bay System. See "Note 6. Environmental
Matters" for further information regarding this notice.
The Company is a party to various legal actions which are ordinary
and incidental to its business. While the outcome of legal actions
cannot be predicted with certainty, the Company believes the outcome
of any of these proceedings, or all of them combined, will not have a
materially adverse effect on its consolidated financial position or
results of operations.
5. Income Taxes:
The Company's effective income tax rate is 36.5% in 1996 compared to
37.0% for first quarter 1995. The differences between the Company's
effective income tax rate and the statutory federal income tax rate
are primarily due to state income taxes and purchase accounting
adjustments resulting from acquisitions.
6. Environmental Matters:
The Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") and similar state "superfund" laws impose liability,
without regard to fault or to the legality of the original action, on
certain classes of persons (referred to as potentially responsible
parties or "PRPs") associated with a release or threat of a release of
a hazardous substance into the environment. Financial responsibility
for the clean-up or other remediation of contaminated property or for
natural resource damages can extend to previously owned or used
properties, waterways and properties owned by third parties, as well
as to properties currently owned and used by a company even if
contamination is attributable entirely to prior owners. While joint
and several liability is authorized under CERCLA, as a practical
matter the cost of clean-up or other remediation is generally
allocated among the waste generators. Except for the United States
Department of Interior, Fish and Wildlife Service ("FWS") assessment
of the Fox River discussed below, the Company is not presently named
as a PRP at any CERCLA-related sites. However, there can be no
assurance that the Company will not be named as a PRP at any other
sites in the future or that the costs associated with additional
sites would not be material to the Company's financial position or
results of operation.
6. Environmental Matters (continued):
In June 1994, the FWS, a federal natural resources trustee, notified
WT that it had identified WT and four other companies located along
the lower Fox River in northeast Wisconsin as PRPs for purposes of
natural resources liability under CERCLA arising from alleged
releases of polychlorinated biphenyls ("PCBs") in the Fox River and
Green Bay System. The FWS alleges that natural resources, including
endangered species, fish, birds, tribal lands or lands held by the
United States in trust for various tribes, have been exposed to PCBs
that were released from facilities located along the Fox River. The
notice invites the PRPs to participate in the development and
performance of a natural resource damage assessment with respect to
the alleged discharges. WT and the four other PRPs are engaged in
negotiations with the FWS concerning the proposed damage assessment
and restoration plans.
WT and the four other PRPs are also engaged in discussions with the
Wisconsin Department of Natural Resources ("WDNR") with respect to
resolving possible state claims concerning remediation, restoration
and natural resource damage related to the alleged discharge of PCBs
into the Fox River and Green Bay System. The PRPs have proposed a
settlement to WDNR, and are engaged with WDNR in continuing
discussions of the settlement proposal. WT's obligation under the
proposed settlement would not be material to the Company's financial
position or results of operations. Based upon presently available
information, the Company believes that there are additional parties,
some of which may have substantial resources, that may also be
identified as PRPs with respect to this matter and could be expected
to participate in any settlement.
The ultimate cost to WT, if any, associated with this matter cannot
be predicted with certainty at this time, due to: the inability to
determine the outcome of pending settlement discussions or, if a
settlement cannot be reached, the Company's share of any multi-party
clean-up; the unknown magnitude of any contamination; the varying
costs of alternative clean-up methods; the evolving nature of clean-up
technologies and governmental regulations; the extent to which
contribution will be available from other parties; and the scope of
potential recoveries from insurance carriers and prior owners of WT.
The Company believes that it is entitled to indemnification from the
prior owner of WT, pursuant to a stock purchase agreement between the
parties, with respect to all liabilities related to this matter.
That prior owner has reimbursed the Company for out-of-pocket costs
and attorneys'
6. Environmental Matters (continued):
fees related to investigation of the matter. The Company believes
that such prior owner intends to, and has the financial ability to,
honor its indemnification obligation under the stock purchase
agreement.
In March 1995, the United States Environmental Protection Agency
("EPA") issued "Final Guidance" for basin-wide water quality standards
pursuant to the Great Lakes Water Quality Agreement between the U.S.
and Canada regarding the development of water quality standards for
the Great Lakes and their tributaries. Under federal law, the
affected states will be required within two years to implement
specific regulations that are consistent with the provisions of the
Final Guidance. Dischargers would then have an additional period of
up to five years during which to comply with any new, more stringent,
permit limits derived under the Final Guidance. The Final Guidance
is currently the subject of administrative and judicial challenges by
the paper industry and other groups, and of pending legislation in
the U.S. Congress. The WDNR is currently developing regulations to
implement the Final Guidance by a March 1997 deadline. WT is
evaluating the potential effects of the Final Guidance and
regulations on its operations and results, which effects cannot be
predicted with certainty at this time. However, based on the
Company's initial review of the Final Guidance and proposed
regulations, the Company believes that compliance would not have a
material adverse effect on its financial position or results of
operations.
The EPA has published draft rules under the Clean Water Act and the
Clean Air Act which would impose new air and water quality standards
for pulp and paper mills (the "Cluster Rules"). The definitive
Cluster Rules, when proposed, are expected to require compliance
within three years after the date of adoption. Based on the
Company's preliminary estimates, if the Cluster Rules were adopted in
substantially their present form, compliance would require capital
expenditures totaling approximately $55.0 million at the Company's
two paper mills in West Point, Va., and Menasha, Wis. The Company
has joined with the American Forest & Paper Association and most of
its members in stating that they believe that the Cluster Rules, as
proposed, are inappropriate, unjustified and do not comply with
applicable law. The eventual capital expense impact on the Company
of compliance with the definitive Cluster Rules is not presently
determinable, and will depend on a number of factors, including: the
scope of the standards imposed and time permitted for compliance; the
Company's strategic decisions
6. Environmental Matters (continued):
related to compliance, including potential changes in product mix and
markets; and developments in compliance technology. The additional
effect, if any, on the Company's business of compliance with the
definitive Cluster Rules will depend on a number of other factors,
including: the domestic and international competitive effects of
compliance; and the effect of evolving consumer demands related to
environmental issues on the Company and its competitors.
Chesapeake operates under, and believes that it is in substantial
compliance with, the terms of various air emission and water and
effluent discharge permits and other environmental regulations.
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
1st Quarter 1996 vs. 1st Quarter 1995
Net sales for the three months ended March 31, 1996, were $277.7
million, 5% lower than first quarter record net sales of $291.1 million in
1995. The lower sales are primarily the result of weaker market conditions
for certain products in the kraft business.
Net income for the first quarter was $7.9 million, or $.33 a share,
compared to record first quarter 1995 net income of $20.8 million, or $.87
a share. Cost of products sold as a percentage of net sales increased by
approximately 3% compared to the first quarter of last year, primarily due
to lower net sales. Selling, general and administrative expenses as a
percentage of net sales were up about 2%. Expenses were impacted by the
start-up of various growth initiatives, particularly in the packaging
segment. Depreciation was up 16% over 1995's amount as a result of
capital spending and acquisitions in 1995. Other income and expenses, net
was up $.5 million, while interest expense approximated prior year amounts.
<CAPTION>
BUSINESS SEGMENT HIGHLIGHTS
First Quarter Fourth Quarter
<S> 1996 1995 1995
Net Sales: <C> <C> <C>
Packaging $109.2 $106.9 $110.5
Tissue 93.8 78.2 105.1
Kraft products 73.2 104.7 78.7
Corporate 1.5 1.3 2.4
$277.7 $291.1 $296.7
EBIT:
Packaging $ 4.8 $ 8.0 $ 10.3
Tissue 12.5 8.9 16.5
Kraft products 7.3 26.7 18.5
Corporate (4.4) (2.6) (4.5)
$ 20.2 $ 41.0 $ 40.8
</TABLE>
Net sales for the packaging segment were up 2% compared to first
quarter last year because of a higher percentage of specialty packaging in
the sales mix, as both point-of-sale displays and graphic packaging showed
gains. However, earnings for this segment declined as shipments were down
from an exceptionally strong first quarter last year, margins were under
pressure as price decreases out paced the decline of raw material costs,
and costs were incurred related to the start-up of various growth
initiatives. These growth initiatives include: the recent acquisition of
the Display Division of Dyment Limited, with locations in Erlanger, Ky.,
and Toronto, Canada; the planned second quarter start-up of a new custom
packing facility in Memphis, Tenn.; and the addition of a fourth graphic
packaging facility located in Pelahatchie, Miss., which is expected to be
doing business by mid-year.
Net sales for the tissue segment were up 20%, despite the loss of
sales from the Consumer Products business which was sold in the fourth
quarter of 1995. Tissue shipments were 73,000 tons, a 40% increase over
the first quarter of 1995. Nearly 20% of the first quarter 1996 shipments
were from the facilities in Flagstaff, Ariz., and Chicago, Ill., acquired
in 1995. Earnings for the tissue segment were strong for the normally
seasonally slower first quarter and increased 40% compared to first quarter
1995. This increase was due to the sales volume increase, a 7% improvement
in selling prices and further decline in the cost of recovered paper, a
major raw material.
Net sales for the kraft products segment declined 30%. Shipments
of 193,000 tons were down 9% from the first quarter of last year as a
result of market related downtime and lower production relating to the
start-up phase of a recently rebuilt paper machine. Average selling prices
were 16% lower than in the first quarter of 1995 as market conditions
continued to weaken and industry inventory levels remained high. The
decline was most drastic for bleached market pulp, with volume down 38% and
selling prices 24% lower than the first quarter of last year. The negative
impact to earnings of the lower sales volume and prices were offset in part
by lower cost for recovered paper.
1st Quarter 1996 vs. 4th Quarter 1995
Net sales for the first quarter of 1996 were down $19.0 million, or
6%, from net sales of $296.7 million for the fourth quarter of 1995. Weaker
market conditions for certain kraft products coupled with the normally
seasonally slower first quarter are the primary reasons for the decline.
Net income for the first quarter of 1996 was down $16.3 million, or
67%, from net income of $24.2 million for the fourth quarter of 1995,
primarily because of lower sales, higher depreciation and lower
miscellaneous income. Both cost of products sold and selling, general and
administrative expenses as percentages of net sales increased slightly.
Depreciation was up $4.8 million due to capital spending and acquisitions.
Other income and expenses, net decreased by $3.6 million because fourth
quarter 1995 results included the sale of the Consumer Products business
and land no longer considered to be of strategic importance. Interest
expense was slightly higher than fourth quarter amounts because of
increased borrowings.
Net sales of the packaging segment for first quarter 1996
approximated those of fourth quarter 1995. Shipments were up 3% compared to
last quarter. Earnings for the segment declined as margins were under
pressure and costs were incurred related to the start-up of various growth
initiatives.
Net sales of the tissue segment for the first quarter of 1996
declined 11% compared to the fourth quarter of 1995 primarily as a result
of the sale of the Consumer Products business near the end of December
1995. Shipments of converted tissue products were about the same as last
quarter, while selling prices declined 3%. Additional converting equipment
is scheduled to come on line during 1996 which should favorably impact the
sales volume of converted products. Earnings were favorably impacted by a
further decline in recovered paper costs.
Net sales of kraft products for first quarter 1996 declined 7%
compared to the fourth quarter of 1995. Shipments improved 7%, as last
quarter's results reflected the loss of production related to the rebuild
of a paper machine. Average selling prices dropped 17%, with the selling
price of market pulp declining 36%. EBIT was 60% lower than last quarter
due to the impact of lower selling prices, higher depreciation and the
fourth quarter sale of land that was no longer considered to be of
strategic importance.
The weak market conditions in kraft products will continue to put
pressure on earnings during the first half of 1996. Earnings will also
continue to be impacted by costs related to various strategic growth
initiatives for packaging and tissue. The successful implementation these
initiatives is expected to better position the Company for the future.
Capital Expenditures
Capital expenditures and acquisitions for the first three months
of 1996 totaled $39.5 million and related primarily to strategic
initiatives in the packaging and tissue businesses. These expenditures were
up $5.5 million compared to the first quarter of last year. Capital
expenditures and acquisitions for 1996 are expected to be approximately
$200 million, of which about one-half relates to strategic initiatives in
the packaging and tissue businesses. Identified initiatives include: a new
manufacturing plant in Pelahatchie, Miss.; the second phase of the Visalia,
Calif., manufacturing plant for the Company's Color-Box graphic packaging
business; the recent acquisition of the Display Division of Dyment Limited;
and new tissue converting equipment at the Bellemont, Ariz., and Greenwich,
N.Y. facilities. These projects are consistent with Chesapeake's strategy
of expanding the packaging and tissue businesses, lowering costs and
focusing capital spending on projects that are expected to have a high
return on investment. No other 1996 capital projects are expected to
account for more than 5% of the total planned spending. Capital
expenditures for 1996 are expected to be financed with internally generated
cash supplemented by proceeds from borrowings.
Liquidity and Capital Structure
Working capital increased $4.0 million during the first quarter
of 1996 primarily as a result of increased accounts receivable and lower
accounts payable, offset in part by lower inventories. Accounts
receivable increased $3.4 million from year end amounts as the average
collection period for the quarter was up 3 days compared to first quarter
1995's average. Inventories decreased $4.9 million during the first
quarter of 1996. The inventory turnover rate for the quarter approximated
that of the first quarter of 1995. Accounts payable and accrued expenses
decreased $6.0 million during the quarter as a result of lower capital
spending compared to the fourth quarter of 1995. Income taxes payable was
$1.6 million higher than at year end. The ratio of current assets to
current liabilities was 2.1 at the end of both the first quarter of 1996
and first quarter of 1995 and compared to 2.0 at year end 1995.
"EBIT + D" (earnings before interest and income taxes plus non-cash
charges for depreciation, cost of timber harvested and amortization) was
$42.5 million for the first quarter of 1996, or 30% lower than EBIT + D of
$60.4 million for the first quarter of 1995. Lower income before taxes was
primarily responsible for this decrease. EBIT + D for the first quarter of
1996 was 27% lower than EBIT + D of $58.2 million for the fourth quarter of
1995. Net cash provided by operating activities for the first quarter of
1996 was $31.4 million, or $5.7 million less than in the first quarter of
last year, primarily due to lower earnings.
At the end of the first quarter of 1996, long-term debt totaled $411.6
million, or $18 million higher than at year end 1995. The ratio of long-term
debt to total capital was 41% at the end of the first quarter of 1996,
the same as at the end of the first quarter of last year and up slightly
from 40% at year end 1995. The ratio of long-term debt to stockholders'
equity was 88% at the end of the first quarter compared to 84% at year end
1995 and 89% at the end of the first quarter of 1995. Out of a total of
$160 million committed and $120 million uncommitted credit lines available
at the end of the first quarter, $120.3 million were utilized.
<TABLE>
PART II
Item 1. Legal Proceedings
Reference is made to Note 4 of the Notes to Consolidated
Financial Statements included herein.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders on April 24, 1996, the
following business was transacted:
(1) All nominees for election to the Board of
Directors were elected.
<CAPTION>
<S> <C> <C>
Number Number
of of Shares
Shares Authority
For Withheld
William D. McCoy 20,846,935 276,572
John W. Rosenblum 20,848,186 275,321
John Hoyt Stookey 20,842,992 280,515
Richard G. Tilghman 20,837,895 285,612
(2) The Chesapeake Corporation Directors' Stock Option and
Deferred Compensation Plan was approved. There were
19,730,115 votes for the proposal and 1,208,426 against with
184,465 abstentions and 501 broker non-votes.
(3) The appointment of Coopers & Lybrand L.L.P. as independent
accountants for the fiscal year ending December 31, 1996
was ratified. There were 21,019,359 votes for the proposal
and 54,541 against with 49,607 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3.1 - Amended and Restated Bylaws
Exhibit 10.1 - Chesapeake Corporation Directors'
Stock Option and Deferred Compensation Plan
Exhibit 11.1 - Computation of Net Income Per Share of Common Stock.
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CHESAPEAKE CORPORATION
(Registrant)
Date: May 14, 1996 BY: /s/Christopher R. Burgess
Christopher R. Burgess
Controller
Date: May 14, 1996 BY: /s/Andrew J. Kohut
Andrew J. Kohut
Group Vice President -
Specialty Packaging &
Merchandising Services & Chief Financial Officer
EXHIBIT INDEX
Page
Exhibit 3.1
Amended and Restated Bylaws 18
Exhibit 10.1
Chesapeake Corporation Directors'
Stock Option and Deferred Compensation Plan 36
Exhibit 11.1 52
Computation of Net Income per Share of
Common Stock
EXHIBIT 3.1
AMENDED AND RESTATED BYLAWS
of
CHESAPEAKE CORPORATION
(as adopted 2/13/90, with amendments through 4/30/96)
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation in
the Commonwealth of Virginia shall be in the City of Richmond or such other
location as may be designated by the Board of Directors from time to time.
Section 2. Other Offices. The Corporation may have offices at such other
place or places as the Board of Directors may from time to time designate
or appoint.
ARTICLE II
Capital Shares
Section 1. Certificates. Shares of the Corporation shall be evidenced by
certificates in forms prescribed by the Board of Directors and executed in
any manner permitted by law and stating thereon the information required by
law.
Transfer books in which shares shall be transferred shall be kept by
the Corporation or by one or more transfer agents appointed by it. A
record shall be kept of each share certificate that is issued. The
Corporation shall have the right to appoint at any time or from time to
time one or more registrars of its capital shares.
Section 2. Transfer of Shares. Shares of the Corporation shall be
transferable or assignable only on the books of the Corporation by the
holder in person or by an attorney on surrender of the certificate
representing such shares duly endorsed and, if sought to be transferred by
an attorney, accompanied by a written power of attorney. The Corporation
will recognize, however, the exclusive right of the person registered on
its books as the owner of shares to receive dividends and to vote as such
owner.
Section 3. Lost, Destroyed and Mutilated Certificates. After receiving
notice from a shareholder of any loss, destruction or mutilation of a share
certificate, the Secretary or his nominee may in his discretion cause one
or more new certificates for the same number of shares in the aggregate to
be issued to such shareholder upon the surrender of the mutilated
certificate or upon satisfactory proof of such loss or destruction and the
deposit of a bond in such form and amount and with such surety as the
Secretary or his nominee may require.
Section 4. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purpose,
the Board of Directors may fix in advance a date as the record date for any
such determination of shareholders, such date in any case to be not more
than seventy (70) days prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If no record
date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to
receive payment of a dividend, the date on which notices of the meeting are
first mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record
date for such determination of shareholders.
Section 5. Control Share Acquisitions Statute. The provisions of Article
14.1 of Chapter 9 of Title 13.1 of the Code of Virginia (1950), as amended,
entitled Control Share Acquisitions, shall not apply to the Corporation.
ARTICLE III
Shareholders
Section 1. Annual Meeting. Subject to the Board of Directors' ability to
postpone a meeting under Virginia law, the annual meeting and all other
meetings of shareholders shall be held on such date and at such time and
place as may be fixed by the Board of Directors and stated in the notice of
the meeting. The annual meeting shall be held for the purpose of electing
Directors and for the transaction of only such other business as is
properly brought before the meeting in accordance with these bylaws. To be
properly brought before an annual meeting, business must be (i) specified
in the notice of annual meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise properly brought
before the annual meeting by or at the direction of the Board of Directors,
or (iii) otherwise properly brought before the annual meeting by a
shareholder. In addition to any other applicable requirements for business
to be properly brought before an annual meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the
Secretary. To be timely, a shareholder's notice must be in writing and
delivered or mailed to and received by the Secretary not less than sixty
(60) days before the first anniversary of the date of the Corporation's
proxy statement in connection with the last annual meeting. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (ii)
the name and record address of the shareholder proposing such business,
(iii) the class, series and number of the Corporation's shares that are
beneficially owned by the shareholder, and (iv) any material interest of
the shareholder in such business. Notwithstanding anything in these bylaws
to the contrary, no business shall be conducted at the annual meeting
except in accordance with the procedures set forth in this Article III(1);
provided, however, that nothing in this Article III(1) shall be deemed to
preclude discussion by any shareholder of any business properly brought
before the annual meeting. In the event that a shareholder attempts to
bring business before an annual meeting without complying with the
provisions of this Article III(1), the chairman of the meeting shall
declare to the shareholders present at the meeting that the business was
not properly brought before the meeting in accordance with the foregoing
procedures, and such business shall not be transacted.
Section 2. Special Meetings. Special meetings of the shareholders may be
held at any time and at any place designated in the notice thereof, upon
call of the Chairman of the Board of Directors, the President or a majority
of the Board of Directors.
Section 3. Notice. Notice in writing of every annual or special meeting
of the shareholders, stating the date, time and place, and, in case of a
special meeting, the purpose or purposes thereof, shall be mailed not less
than ten (10) nor more than sixty (60) days before any such meeting to each
shareholder of record entitled to vote at such meeting, at his address as
it appears in the share transfer books of the Corporation. Such further
notice shall be given as may be required by law, but meetings may be held
without notice if all of the shareholders entitled to vote at the meeting
waive such notice, by attendance at the meeting or otherwise, in accordance
with law.
Section 4. Quorum. A majority of the votes entitled to be cast by any
voting group on any matter, represented in person or by proxy, shall
constitute a quorum of such voting group with respect to action on such
matter. If at the time and place of the meeting there be present less than
a quorum, the meeting may be adjourned from time to time by the vote of a
majority of the shares present in person or by proxy without notice other
than announcement at the meeting.
Section 5. Voting. Except as otherwise specified in the Articles of
Incorporation or the Virginia Stock Corporation Act, at all meetings of the
shareholders, each holder of an outstanding share may vote in person or by
proxy, and shall be entitled to one vote on each matter voted on at such
meeting for each share registered in the name of such shareholder on the
books of the Corporation on the record date for such meeting. Every proxy
shall be in writing, dated and signed by the shareholder entitled to vote
or his duly authorized attorney-in-fact.
Unless a greater vote is required pursuant to the Articles of
Incorporation or the Virginia Stock Corporation Act, if a quorum exists,
action on a matter (other than the election of Directors) by a voting group
is approved if the votes cast favoring the action exceed the votes cast
opposing the action. Unless otherwise provided in the Article of
Incorporation, Directors shall be elected by a plurality of votes cast by
shares entitled to vote in the election at a meeting at which a quorum is
present.
Section 6. Presiding Officer. All meetings of the shareholders shall be
presided over by the Chairman of the Board of Directors or, in his absence
or at his request, by the President. In case there be present neither the
Chairman of the Board of Directors nor the President, the meeting shall
elect a chairman. The Secretary or, in his absence or at his request, an
Assistant Secretary, shall act as secretary of such meetings. In case
there be present neither the Secretary nor an Assistant Secretary, a
secretary may be appointed by the chairman of the meeting.
Section 7. Inspectors and Tellers. An appropriate number of inspectors
and tellers for any meeting of the shareholders may be appointed by or
pursuant to the direction of the Board of Directors. Inspectors and
tellers so appointed will open and close the polls, will receive and take
charge of proxies and ballots and will decide all questions as to the
qualifications of voters, validity of proxies and ballots and the number of
votes properly cast.
ARTICLE IV
Directors
Section 1. General Powers. The business and the affairs of the
Corporation shall be managed under the direction of the Board of Directors,
and, except as expressly provided by law, the Articles of Incorporation or
these bylaws, all of the powers of the Corporation shall be vested in such
Board of Directors.
Section 2. Number and Election of Directors. The number of Directors
constituting the Board of Directors shall be twelve (12), who shall be
divided into three classes, Class I, Class II and Class III, as nearly
equal in number as possible. Directors of each class shall be elected by
the shareholders to serve for the terms specified in the Articles of
Incorporation and, unless sooner removed in accordance with the Articles of
Incorporation and applicable law, shall serve until their respective
successors are duly elected and qualified. The Board of Directors may
increase the number of Directors by two (2) during any twelve month period
and may decrease the number of Directors by thirty (30) percent or less of
the number of Directors last elected by the shareholders. Any vacancy,
including a vacancy resulting from an increase in the number of Directors
as specified above, may be filled by the affirmative vote of a majority of
the remaining Directors, though less than a quorum of the Board of
Directors, and Directors so chosen shall hold office until the next meeting
of the shareholders at which Directors are elected. At such meeting of the
shareholders, the shareholders shall elect a Director to fill the vacancy,
and the newly elected Director shall hold office for a term expiring at the
annual meeting of the shareholders at which the term of the class to which
he has been elected expires.
Subject to any rights of holders of preferred shares, only persons who
are nominated in accordance with the procedures set forth in this Article
IV(2) shall be eligible for election as Directors. Notice of nominations
made by shareholders entitled to vote for the election of Directors shall
be received in writing by the Secretary not less than fifty (50) nor more
than seventy-five (75) days before the first anniversary of the date of the
Corporation's proxy statement in connection with the last meeting of
shareholders called for the election of Directors. Each notice shall set
forth (i) the name, age, business address and, if known, residence address
of each nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee, and (iii) the number of capital shares of
the Corporation beneficially owned by each such nominee. The Secretary
shall deliver all such notices to the Corporation's Nominating Committee,
or such other committee as may be appointed by the Board of Directors from
time to time for such purpose, for review. The Nominating Committee shall
thereafter make its recommendation with respect to nominees to the Board of
Directors. The chairman of any meeting of shareholders called for the
election of Directors may, if the facts warrant, determine that a
nomination was not made in accordance with the foregoing procedures, and if
he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 3. Annual Meeting. A regular annual meeting of the Board of
Directors shall be held following the adjournment of the annual meeting of
the shareholders at such place as the Board of Directors may designate.
The regular annual meeting of the Board of Directors then just elected by
the shareholders shall be held for the election of officers of the
Corporation and the transaction of all other business as shall come before
the said meeting.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called at any time by the Chairman of the Board of Directors, the
President or by any two members of the Board of Directors on such date and
at such time and place as may be designated in such call, or may be held on
any date and at any time and place without notice by the unanimous written
consent of all the members or by the presence of all of the members at such
meeting.
Section 5. Notice of Meetings. Notice of the time and place of every
meeting of the Board of Directors shall be mailed, telephoned or
transmitted by any other means of telecommunication by or at the direction
of the Secretary or other officer of the Corporation to each Director at
his last known address not less than twenty-four (24) hours before such
meeting, provided that notice need not be given of the annual meeting or of
regular meetings held at times and places fixed by resolution of the Board
of Directors. Such notice need not describe the purpose of a special
meeting. Meetings may be held at any time without notice if all the
Directors waive such notice, by attendance at the meeting or otherwise, in
accordance with law.
Section 6. Quorum; Presence at Meeting. A quorum at any meeting of the
Board of Directors shall consist of a majority of the number of Directors
fixed from time to time in these bylaws. Members of the Board of Directors
may participate in any meeting of the Board of Directors by means of a
conference telephone or similar communications equipment whereby all
persons participating in the meeting may simultaneously hear each other,
and participation by such means shall be deemed to constitute presence in
person at such meeting.
Section 7. Voting. If a quorum is present when a vote is taken, the
affirmative vote of a majority of Directors present is the act of the Board
of Directors, unless the Articles of Incorporation or these bylaws require
the vote of a greater number of Directors. A Director who is present at a
meeting of the Board of Directors or any committee thereof when corporate
action is taken is deemed to have assented to the action unless (i) he
objects at the beginning of the meeting, or promptly upon his arrival, to
holding it or transacting specified business at the meeting, or (ii) he
votes against, or abstains from, the action taken.
Section 8. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, except that, by resolution of
the Board of Directors, Directors may be paid (i) a retainer in an amount
determined by the Board of Directors for their services as such, (ii) an
additional retainer in an amount determined by the Board of Directors for
their services as Chairman of the Board of Directors or chairman of any
special or standing committee of the Board of Directors, and (iii) a fixed
sum and expenses for attendance at each regular, adjourned, or special
meeting of the Board of Directors or any special or standing committee
thereof. Nothing herein contained shall be construed to preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 9. Eligibility. Except as hereinafter provided, no person shall
be elected or re-elected to the Board of Directors if at the time of any
proposed election or re-election he shall have attained the age of 70
years; provided, however, that the foregoing provision shall not apply to
persons who were members of the Board of Directors on January 1, 1966. Any
Director who (i) separates from employment with the business or
professional organization by which he was principally employed as of the
date of his most recent election or re-election to the Board of Directors,
or (ii) ceases to serve as an officer in any of the capacities in which he
served with such business or professional organization as of the date of
his most recent election or re-election to the Board of Directors, shall be
deemed to have submitted his resignation as a Director effective upon such
separation from employment or cessation of service as an officer. Such
resignation shall be considered by the Board of Directors at its next
regularly scheduled meeting.
ARTICLE V
Executive and Other Committees
Section 1. Creation of Executive Committee. The Board of Directors may,
whenever it sees fit, by a majority vote of the number of Directors fixed
from time to time in these bylaws, designate an Executive Committee which
shall consist of three (3) or more Directors, including the Chairman of the
Board of Directors and the President, provided that the President shall be
a member of the Executive Committee only if designated the Chief Executive
Officer. The Chairman of the Board shall be the Chairman of the Executive
Committee. The members of the Executive Committee shall serve until their
successors are designated by the Board of Directors or until removed or
until the Executive Committee is dissolved by a majority vote of the number
of Directors fixed from time to time in these bylaws.
Section 2. Powers of Executive Committee. Except as otherwise provided by
the Articles of Incorporation or these bylaws, the Executive Committee,
when the Board of Directors is not in session, shall have all powers vested
in the Board of Directors by law, by the Articles of Incorporation or by
these bylaws; provided, that the Executive Committee shall not have the
authority to take any action that may not be delegated to a committee under
the Virginia Stock Corporation Act. The Executive Committee shall report
at the next regular or special meeting of the Board of Directors on all
action it has taken since the last regular or special meeting of the Board
of Directors.
Section 3. Committee of Outside Directors. The Directors who are not
employees or former employees of the Corporation ("Outside Directors"),
shall constitute the Committee of Outside Directors. The Committee of
Outside Directors shall (a) evaluate the performance of the Chairman of the
Board and the Chief Executive Officer, (b) recommend, when appropriate, a
successor for the Chairman of the Board and the Chief Executive Officer,
(c) in consultation with the Chairman of the Board, consider and make
recommendations to the Board of Directors for the election of the other
officers of the Corporation and (d) perform such other duties as may be
delegated to the Committee of Outside Directors by the Board of Directors.
The Committee of Outside Directors shall at the annual meeting of the Board
of Directors elect from their number by a majority vote of the number of
Outside Directors a Chairman of the Committee of Outside Directors who
shall preside at meetings of the Committee of Outside Directors and perform
such other duties as may be assigned by the Committee of Outside Directors.
No Director shall be elected Chairman of the Committee of Outside Directors
for more than three (3) consecutive full terms, provided that a director
shall be eligible for election as Chairman if he has not served as Chairman
during the immediately preceding eleven (11) months.
Section 4. Audit Committee. The Board of Directors, by resolution adopted
by a majority of the number of Directors fixed in accordance with these
bylaws, shall elect an Audit Committee which shall consist of a Chairman
and not less than two (2) Directors, all of whom shall be Outside
Directors. The Audit Committee shall review and discuss with the
corporation's independent accountants the financial records of the
Corporation and report to the Board of Directors with respect thereto, and
shall perform such other duties as may be assigned by the Board of
Directors. The Audit Committee shall report regularly to the Board of
Directors all action which it has taken.
Section 5. Executive Compensation Committee. The Board of Directors, by
resolution adopted by a majority of the number of Directors fixed in
accordance with these bylaws, shall elect an Executive Compensation
Committee which shall consist of a Chairman and not less than two (2) other
members, all of whom shall be Outside Directors. The Executive
Compensation Committee shall approve officers' incentive awards and stock
option grants, recommend to the Board of Directors remuneration levels for
executive officers, and perform such other duties as may be assigned to it
by the Board of Directors. The Executive Compensation Committee shall
report regularly to the Board of Directors all action which it has taken.
Section 6. Nominating Committee. The Board of Directors, by resolution
adopted by a majority of the number of Directors fixed in accordance with
these bylaws, shall elect a Nominating Committee which shall consist of a
Chairman and not less than two (2) other members, all of whom shall be
Outside Directors. The Nominating committee shall review annually the
attendance and performance of the Directors, review the compensation of
Directors and make recommendations to the Board of Directors as to such
compensation, recommend nominees for election to the Board of Directors and
perform such other duties as may be assigned to it by the Board of
Directors. The Nominating Committee shall report regularly to the Board of
Directors all action which it has taken.
Section 7. Other Committees. The Board of Directors, by resolution
adopted by a majority of the number of Directors fixed in accordance with
these bylaws, may establish such other standing or special committees of
the Board of Directors as it may deem advisable, consisting of two (2) or
more Directors. The members, terms and authority of such committees shall
be set forth in the resolutions establishing the same.
Section 8. Meetings. Regular and special meetings of any committee
established pursuant to this Article may be called by the Chairman of the
Board, the President, the Chairman of the committee involved or any two (2)
members of the committee involved and held subject to the same requirements
with respect to date, time, place and notice as are specified in these
bylaws for regular and special meetings of the Board of Directors.
Section 9. Quorum and Manner of Acting. A quorum of the members of any
committee serving at the time of any meeting thereof for the transaction of
business at such meeting shall consist of (i) one-third (but not fewer than
two (2)) of such members in the case of any committee other than the
Executive Committee, and (ii) a majority of such members in the case of the
Executive Committee. The action of a majority of those members present at
a committee meeting at which a quorum is present shall constitute the act
of the committee.
Section 10. Term of Office. Members and the chairman of any committee,
excluding the Committee of Outside Directors, shall be elected at the
annual meeting of the Board of Directors and shall hold office until the
next annual meeting of the Board of Directors and until their successors
are elected by the Board of Directors, or until such committee is dissolved
by the Board of Directors.
Section 11. Resignation and Removal. Any member of a committee may resign
at any time by giving written notice of his intention to do so to the
Chairman of the Board or the Secretary, or may be removed, with or without
cause, at any time by such vote of the Board of Directors or, in the case
of the Committee of Outside Directors, by such vote of the Committee as
would suffice for his election.
Section 12. Vacancies. Any vacancy occurring in a committee resulting
from any cause whatever may be filled by a vote of a majority of the number
of Directors fixed by these bylaws.
ARTICLE VI
Officers
Section 1. Required Officers. The officers of the Corporation shall be a
Chairman of the Board, a President and a Secretary, together with such
other officers, including one or more Vice Presidents (whose seniority and
titles may be specified by the Board of Directors) and a Treasurer, as may
be elected from time to time by the Board of Directors. Any two or more
offices may be held by the same person.
Section 2. Election of Officers; Compensation. The officers of the
Corporation shall be elected by the Board of Directors and shall hold
office until the next annual meeting of the Board of Directors and until
their successors are duly elected and qualified; provided, however, that
any officer may be removed and the resulting vacancy filled at any time,
with or without cause, by the Board of Directors. The salaries or
compensation of all officers of the Corporation shall be fixed by or
pursuant to the direction of the Board of Directors.
Section 3. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the shareholders, Directors and the Executive Committee
and shall have such other powers as may be conferred upon him by the Board
of Directors. If the Chairman of the Board is not the Chief Executive
Officer, he shall, in the absence of or inability of the Chief Executive
Officer to act, be the Acting Chief Executive Officer until such time as
another person is designated by the Board of Directors as Chief Executive
Officer or Acting Chief Executive Officer. He may sign and execute in the
name of the Corporation share certificates, deeds, mortgages, bonds,
contracts or other instruments except in cases where the signing and the
execution thereof shall be expressly and exclusively delegated by the Board
of Directors or by these bylaws to some other officer or agent of the
Corporation or shall be required by law otherwise to be signed or executed.
Section 4. President. The President shall perform such duties as shall be
required of him by the Chairman of the Board or the Board of Directors. If
the President is not the Chief Executive Officer, he shall, in the absence
of or inability of the Chief Executive Officer to act, be the Acting Chief
Executive Officer until such time as another person is designated by the
Board of Directors as Chief Executive Officer or Acting Chief Executive
Officer. He may sign and execute in the name of the Corporation share
certificates, deeds, mortgages, bonds, contracts or other instruments
except in cases where the signing and the execution thereof shall be
expressly and exclusively delegated by the Board of Directors or by these
bylaws to some other officer or agent of the Corporation or shall be
required by law otherwise to be signed or executed.
Section 5. Chief Executive Officer. The Board of Directors shall
designate one of the officers of the Corporation as the Chief Executive
Officer of the Corporation. The Chief Executive Officer shall be primarily
responsible for the implementation of policies of the Board of Directors.
He shall have authority over the general management and direction of the
business and operations of the Corporation and its divisions, if any,
subject only to the ultimate authority of the Board of Directors
Section 6. Vice Presidents. The Vice Presidents shall perform such duties
as shall be required of them by the Chairman of the Board, the President or
the Board of Directors. Any Vice President may sign and execute in the
name of the Corporation deeds, mortgages, bonds, contracts or other
instruments authorized by the Board of Directors, except where the signing
and execution of such documents shall be expressly and exclusively
delegated by the Board of Directors, the Chairman of the Board or the
President to some other officer or agent of the Corporation or shall be
required by law or otherwise to be signed or executed.
Section 7. Secretary. The Secretary shall prepare and maintain custody of
the minutes of all meetings of the Board of Directors and stockholders of
the Corporation. When requested, he shall also act as secretary of the
meetings of the committees of the Board of Directors. He shall see that
all notices required to be given by the Corporation are duly given and
served; he shall have custody of all deeds, leases, contracts and other
important corporate documents; he shall have charge of the books, records
and papers of the Corporation relating to its organization and management
as a Corporation; and he shall in general perform all the duties incident
to the office of Secretary and such other duties as from time to time may
be assigned to him by the Chairman of the Board, the President or the Board
of Directors. An Assistant Secretary may exercise any of the functions or
perform any of the duties of the Secretary.
Section 8. Treasurer. The Treasurer shall have custody of the moneys and
securities of the Corporation, shall sign or countersign such instruments
as require his signature and shall perform such other duties as may be
incident to his office or are properly required of him by the Chairman of
the Board, the President, or the Board of Directors. An Assistant
Treasurer may exercise any of the functions or perform any of the duties of
the Treasurer.
ARTICLE VII
Limit on Liability; Indemnification
Section 1. Definitions. In this Article:
"applicant" means the person seeking indemnification pursuant to this
Article;
"expenses" includes counsel fees;
"liability" means the obligation to pay a judgment, settlement,
penalty, fine, including any excise tax assessed with respect to an
employee benefit plan, or reasonable expenses incurred with respect to
a proceeding;
"party" includes an individual who was, is or is threatened to be made
a named defendant or respondent in a proceeding; and
"proceeding" means any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal.
Section 2. Limitation on Liability. To the full extent that the Virginia
Stock Corporation Act, as it exists on the date hereof or may hereafter be
amended, permits the limitation or elimination of the liability of
Directors and officers, no Director or officer of the Corporation shall be
liable to the Corporation or its shareholders for monetary damages with
respect to any transaction, occurrence or course of conduct, whether prior
or subsequent to the effective date of this Article.
Section 3. Indemnification. The Corporation shall indemnify (a) any
person who was or is a party to any proceeding, including a proceeding
brought by or in the right of the Corporation, by reason of the fact that
he is or was a Director or officer of the Corporation, and (b) any Director
or officer of the Corporation who is or was serving at the request of the
Corporation as a director, trustee, partner or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against any liability incurred by him in connection with
such proceeding unless he engaged in willful misconduct or a knowing
violation of the criminal law. A person is considered to be serving an
employee benefit plan at the Corporation's request if his duties to the
Corporation also impose duties on, or otherwise involve services by, him to
the plan or to participants in or beneficiaries of the plan. The Board of
Directors is hereby empowered, by a majority vote of a quorum of
disinterested Directors, to enter into a contract to indemnify any Director
or officer in respect of any proceeding arising from any act or omission,
whether occurring before or after the execution of such contract.
Section 4. Application; Amendment. The provisions of this Article shall
be applicable to all proceedings commenced after the adoption hereof by the
shareholders of the Corporation, arising from any act or omission, whether
occurring before or after such adoption. No amendment or repeal of this
Article shall have any effect on the rights provided under this Article
with respect to any act or omission occurring prior to such amendment or
repeal. The Corporation shall promptly take all such actions, and make all
such determinations, as shall be necessary or appropriate to comply with
its obligation to make any indemnity under this Article and shall promptly
pay or reimburse all reasonable expenses, including attorneys' fees,
incurred by any Director or officer in connection with such actions and
determinations or proceedings of any kind arising therefrom.
Section 5. Termination of Proceeding. The termination of any proceeding
by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not of itself create a presumption that
the applicant engaged in willful misconduct or a knowing violation of the
criminal law.
Section 6. Determination of Availability. Any indemnification under
Section (3) of this Article (unless ordered by a court) shall be made by
the Corporation only as authorized in the specific case upon a
determination that indemnification of the applicant is proper in the
circumstances because he did not engage in willful misconduct or a knowing
violation of the criminal law. The determination shall be made:
(a) by the Board of Directors by a majority vote of a quorum
consisting of Directors not at the time parties to the proceeding;
(b) if a quorum cannot be obtained under subsection (a) of this
section, by majority vote of a committee duly designated by the Board of
Directors (in which designation Directors who are parties may participate),
consisting solely of two or more Directors not at the time parties to the
proceeding;
(c) by special legal counsel:
(i) selected by the Board of Directors or its committee in
the manner prescribed in subsection (a) or (b) of this section;
or (ii) if a quorum of the Board of Directors cannot be obtained
under subsection (a) of this section and a committee cannot be
designated under subsection (b) of this subsection, selected by
majority vote of the full Board of Directors, in which selection
Directors who are parties may participate; or (d) by the
shareholders, but shares owned by or voted under the control of
Directors who are at the time parties to the proceeding may not
be voted on the determination.
Any evaluation as to the reasonableness of expenses shall be made in
the same manner as the determination that indemnification is permissible,
except that if the determination is made by special legal counsel, such
evaluation as to reasonableness of expenses shall be made by those entitled
under subsection (c) of this section to select counsel.
Notwithstanding the foregoing, in the event there has been a change in
the composition of a majority of the Board of Directors after the date of
the alleged act or omission with respect to which indemnification is
claimed, any determination as to indemnification and advancement of
expenses with respect to any claim for indemnification made pursuant to
this Article shall be made by special legal counsel agreed upon by the
Board of Directors and the applicant. If the Board of Directors and the
applicant are unable to agree upon such special legal counsel, the Board of
Directors and the applicant each shall select a nominee, and the nominees
shall select such special legal counsel.
Section 7. Advances. (a) The Corporation may pay for or reimburse the
reasonable expenses incurred by any applicant who is a party to a
proceeding in advance of final disposition of the proceeding or the making
of any determination under Section (6) if:
(i) the applicant furnishes the Corporation a written statement
of his good faith belief that he has met the standard of conduct
described in Section (3); and
(ii) the applicant furnishes the Corporation a written
undertaking, executed personally or on his behalf, to repay the
advance if it is ultimately determined that he did not meet such
standard of conduct.
Section 8. Indemnification of Others. The Board of Directors of Directors
is hereby empowered, by majority vote of a quorum of disinterested
Directors, to cause the Corporation to indemnify or contract to indemnify
any person not specified in Section (3) of this Article who was, is or may
become a party to any proceeding, by reason of the fact that he is or was
an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, to the same extent as if such person were
specified as one to whom indemnification is granted in Section (3). The
provisions of Sections (4) through (7) of this Article shall be applicable
to any indemnification provided hereafter pursuant to this Section (8).
Section 9. Insurance. The Corporation may purchase and maintain insurance
to indemnify it against the whole or any portion of the liability assumed
by it in accordance with this Article and may also procure insurance, in
such amounts as the Board of Directors may determine, on behalf of any
person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
any liability asserted against or incurred by him in any such capacity or
arising from his status as such, whether or not the Corporation would have
power to indemnify him against such liability under the provisions of this
Article.
Section 10. Further Indemnity. Every reference herein to Directors,
officers, employees and agents shall include former Directors, officers,
employees and agents and their respective heirs, executors and
administrators. The indemnification hereby provided and provided hereafter
pursuant to the power hereby conferred on the Board of Directors shall not
be exclusive of any other rights to which any person may be entitled,
including any right under policies of insurance that may be purchased and
maintained by the Corporation or others, with respect to claims, issues or
matters in relation to which the Corporation would not have the power to
indemnify such person under the provisions of this Article. Such rights
shall not prevent or restrict the power of the Corporation to make or
provide for any further indemnity, or provisions for determining
entitlement to indemnity, pursuant to one or more indemnification
agreements, bylaws, or other arrangements (including, without limitation,
creation of trust funds or security interests funded by letters of credit
or other means) approved by the Board of Directors (whether or not any of
the Directors of the Corporation shall be a party to or beneficiary of any
such agreements, bylaws or arrangements); provided, however, that any
provision of such agreements, bylaws or other arrangements shall not be
effective if and to the extent that it is determined to be contrary to this
Article or applicable laws of the Commonwealth of Virginia.
Section 11. Further Board Action. Any other provision of this Article
notwithstanding, the Board of Directors shall be empowered to amend this
Article from time to time, to the extent permitted by then applicable law,
to limit, eliminate or extend the rights provided hereunder, provided that
no such amendment shall limit or reduce the rights provided under this
article with respect to any act or omission occurring prior to such
amendment.
Section 12. Severability. Each provision of this Article shall be
severable, and an adverse determination as to any such provision shall in
no way affect the validity of any other provision.
ARTICLE VIII
Emergency Bylaws
The emergency bylaws provided in this Article shall be operative
during any emergency, notwithstanding any different provision in the
preceding Articles of these bylaws, in the Articles of Incorporation or in
the Virginia Stock Corporation Act (other than those provisions relating to
emergency bylaws). An emergency exists if a quorum of the Board of
Directors cannot readily be assembled because of some catastrophic event.
To the extent not inconsistent with these emergency bylaws, the bylaws
provided in the preceding Articles shall remain in effect during such
emergency. Upon the termination of such emergency, the emergency bylaws
shall cease to be operative unless and until another such emergency shall
occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be called by any
officer of the Corporation or by any Director. The notice thereof shall
specify the date, time and place of the meeting. To the extent feasible,
notice shall be given in accord with Article IV, Section (5) above, but
notice may be given only to such of the Directors as it may be feasible to
reach at the time, by such means as may be feasible at the time, including
publication or radio, and at a time less then twenty-four (24) hours before
the meeting if deemed necessary by the person giving notice. Notice shall
be similarly given, to the extent feasible, to the other persons referred
to in Subsection (b) below.
(b) At any meeting of the Board of Directors, a quorum shall
consist of a majority of the number of Directors fixed at the time in
accordance with Article IV, Section (6) of these bylaws. If the Directors
present at any particular meeting shall be fewer than the number required
for such quorum, other persons present as referred to below to the number
necessary to make up such quorum shall be deemed Directors for such
particular meeting as determined by the following provisions and in the
following order of priority:
(i) the President, if not already serving as a Director;
(ii) Vice Presidents not already serving as Directors, first in
the order of the seniority of their title as designated by the Board
of Directors before the emergency, and then in the order of their
seniority of first election to such offices; provided, that if two or
more shall have the same seniority of title or shall have been first
elected to such offices on the same day, then in the order of their
seniority in age;
(iii) [reserved for future use]
(iv) all other officers of the Corporation in the order of their
seniority of first election to such offices, or if two or more shall
have been first elected to such offices on the same day, then in the
order of their seniority in age; and
(v) any other persons who are designated on a list that shall
have been approved by the Board of Directors before the emergency,
such persons to be taken in such order of priority and subject to such
conditions as may be provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any such
emergency, may provide, and from time to time modify, lines of succession
in the event that during such an emergency any or all officers or agents of
the Corporation shall for any reason be rendered incapable of discharging
their duties.
(d) The Board of Directors, during as well as before any such
emergency, may, effective in the emergency, change the principal office, or
designate several alternative offices, or authorize the officers so to do.
No officer, Director or employee shall be liable for action taken in
good faith in accordance with these emergency bylaws.
These emergency bylaws shall be subject to repeal or change by further
action of the Board of Directors or by action of the shareholders, except
that no such repeal or change shall modify the provisions of the next
preceding paragraph with regard to action or inaction prior to the time of
such repeal or change. Any such amendment of these emergency bylaws may
make any further or different provisions that may be practical and
necessary for the circumstances of the emergency.
ARTICLE IX
Miscellaneous
Section 1. Voting of Shares. Shares of any corporation which this
Corporation shall be entitled to vote may be voted, either in person or by
proxy, by this Corporation's Chairman of the Board or President or by any
other officer expressly authorized by this Corporation's Board of Directors
or Executive Committee, and each such officer is authorized to give this
Corporation's consent in writing to any action of such corporation, and to
execute waivers and take all other necessary action on behalf of the
Corporation with respect to such shares.
Section 2. Seal. The corporate seal of the Corporation shall consist of a
flat-faced circular die, of which there may be any number of counterparts,
on which there shall be engraved two concentric circles between which is
inscribed the name of the corporation, and in the center the year of its
organization and the words "corporate seal".
Section 3. Amendments to Bylaws. Unless proscribed by the Articles of
Incorporation, the Board of Directors of the Corporation shall have the
power to adopt and from time to time amend, alter, change or repeal these
bylaws with or without the approval of the shareholders of the Corporation,
but bylaws so made, amended, altered or changed, may be further amended,
altered, changed or repealed by the shareholders. The shareholders in
adopting or amending a particular bylaw may provide expressly that the
Board of Directors may not amend or repeal that bylaw.
EXHIBIT 10.1
CHESAPEAKE CORPORATION
DIRECTORS' STOCK OPTION AND
DEFERRED COMPENSATION PLAN
Effective June 1, 1996<PAGE>
</TABLE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Section Page
<S> <C> <C>
ARTICLE I DEFINITIONS
1.01. Administrator. . . . . . . . . . . . . . . . . . . . 39
1.02. Agreement. . . . . . . . . . . . . . . . . . . . . . 39
1.03. Beneficiary or Beneficiaries . . . . . . . . . . . . 39
1.04. Beneficiary Designation Form . . . . . . . . . . . . 39
1.05. Board. . . . . . . . . . . . . . . . . . . . . . . . 39
1.06. Change in Control. . . . . . . . . . . . . . . . . . 39
1.07. Code . . . . . . . . . . . . . . . . . . . . . . . . 39
1.08. Common Stock . . . . . . . . . . . . . . . . . . . . 39
1.09. Company. . . . . . . . . . . . . . . . . . . . . . . 39
1.10. Compensation . . . . . . . . . . . . . . . . . . . . 39
1.11. Control Change Date. . . . . . . . . . . . . . . . . 39
1.12. Date of Grant. . . . . . . . . . . . . . . . . . . . 40
1.13. Deferral Election Form . . . . . . . . . . . . . . . 40
1.14. Deferral Year. . . . . . . . . . . . . . . . . . . . 40
1.15. Deferred Benefit . . . . . . . . . . . . . . . . . . 40
1.16. Deferred Cash Account. . . . . . . . . . . . . . . . 40
1.17. Deferred Cash Benefit. . . . . . . . . . . . . . . . 40
1.18. Deferred Stock Account . . . . . . . . . . . . . . . 40
1.19. Deferred Stock Benefit . . . . . . . . . . . . . . . 40
1.20. Distribution Election Form . . . . . . . . . . . . . 40
1.21. Election Date. . . . . . . . . . . . . . . . . . . . 41
1.22. Fair Market Value. . . . . . . . . . . . . . . . . . 41
1.23. Meeting Fees . . . . . . . . . . . . . . . . . . . . 41
1.24. Option . . . . . . . . . . . . . . . . . . . . . . . 41
1.25. Participant. . . . . . . . . . . . . . . . . . . . . 41
1.26. Plan . . . . . . . . . . . . . . . . . . . . . . . . 41
1.27. Retainer Fee . . . . . . . . . . . . . . . . . . . . 41
1.28. Terminate, Terminating, or Termination . . . . . . . 41
ARTICLE II PURPOSES . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE III ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IV GRANT OF OPTIONS
4.01. Option Grants. . . . . . . . . . . . . . . . . . . . 42
4.02. Option Price . . . . . . . . . . . . . . . . . . . . 43
4.03. Exercisability . . . . . . . . . . . . . . . . . . . 43
4.04. Maximum Option Period. . . . . . . . . . . . . . . . 44
4.05. Nontransferability . . . . . . . . . . . . . . . . . 44
4.06. Stock Subject to Options . . . . . . . . . . . . . . 44
4.07. Shareholder Rights . . . . . . . . . . . . . . . . . 44<PAGE>
ARTICLE V DEFERRED BENEFITS
5.01. Deferral Election. . . . . . . . . . . . . . . . . . 44
5.02. Deferred Cash Benefits . . . . . . . . . . . . . . . 45
5.03. Deferred Stock Benefits. . . . . . . . . . . . . . . 45
5.04. Distribution of Deferred Benefits. . . . . . . . . . 47
5.05. Hardship Distributions . . . . . . . . . . . . . . . 48
ARTICLE VI ADJUSTMENT UPON CHANGE IN COMMON STOCK. . . . . . . . . . 49
ARTICLE VII COMPLIANCE WITH LAW AND APPROVAL OF
REGULATORY BODIES . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VIII GENERAL PROVISIONS
8.01. Effect on Service. . . . . . . . . . . . . . . . . . 50
8.02. Unfunded Plan. . . . . . . . . . . . . . . . . . . . 50
8.03. Notices. . . . . . . . . . . . . . . . . . . . . . . 50
8.04. Rules of Construction. . . . . . . . . . . . . . . . 50
ARTICLE IX AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE X TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XI DURATION OF OPTION GRANTS . . . . . . . . . . . . . . . . 51
ARTICLE XII EFFECTIVE DATE OF PLAN. . . . . . . . . . . . . . . . . . 51
</TABLE>
ARTICLE I
DEFINITIONS
1.01. Administrator means the Company's Corporate Secretary.
1.02. Agreement means a written Agreement (including any amendment or
supplement thereto) between the Company and a Participant
specifying the terms and conditions of an Option granted to such
Participant.
1.03. Beneficiary or Beneficiaries means a person or persons or other
entity designated on a Beneficiary Designation Form by a
Participant as allowed in subsection 5.04(c) to receive Deferred
Benefits. If there is no valid designation by the Participant, or
if the designated Beneficiary or Beneficiaries fail to survive the
Participant or otherwise fail to take the benefit, the
Participant's Beneficiary is the first of the following who
survives the Participant: a Participant's spouse (the person
legally married to the Participant when the Participant dies); the
Participant's surviving children and the issue of Participant's
deceased children, per stirpes; the Participant's parents; and the
Participant's estate.
1.04. Beneficiary Designation Form means a form acceptable to the
Administrator or his designee used by a Participant according to
this Plan to name the Participant's Beneficiary or Beneficiaries
who will receive Deferred Benefits under this Plan on account of
the Participant's death.
1.05. Board means the board of directors of the Company.
1.06. Change in Control means a "Change in Control" as defined in the
Chesapeake Corporation Benefits Plan Trust.
1.07. Code means the Internal Revenue Code of 1986, as amended.
1.08. Common Stock means the common stock of the Company.
1.09. Company means Chesapeake Corporation and any successor business by
merger, purchase, or otherwise that maintains the Plan.
1.10. Compensation means a Participant's Meeting Fees and Retainer Fees
for the Deferral Year.
1.11. Control Change Date means a "Control Change Date" as defined in the
Chesapeake Corporation Benefits Plan Trust.
1.12. Date of Grant means each May 1 beginning May 1, 1997, and ending
May 1, 2007.
1.13. Deferral Election Form means a document governed by the provisions
of Article V of this Plan, including the portion that is the
Distribution Election Form and the related Beneficiary Designation
Form that applies to all of that Participant's Deferred Benefits
under the Plan.
1.14. Deferral Year means a calendar year for which a Participant has an
operative Deferral Election Form.
1.15. Deferred Benefit means either a Deferred Cash Benefit or a Deferred
Stock Benefit under the Plan for a Participant who has submitted an
operative Deferral Election Form pursuant to section 5.01 of this
Plan.
1.16. Deferred Cash Account means that bookkeeping record established for
each Participant who elects a Deferred Cash Benefit under this
Plan. A Deferred Cash Account is established only for purposes of
measuring a Deferred Cash Benefit and not to segregate assets or to
identify assets that may or must be used to satisfy a Deferred Cash
Benefit. A Deferred Cash Account will be credited with the
Participant's Compensation deferred as a Deferred Cash Benefit
according to a Deferral Election Form and according to section 5.02
of this Plan. A Deferred Cash Account will be credited
periodically with amounts based upon interest rates in accordance
with subsection 5.02(b) of this Plan.
1.17. Deferred Cash Benefit means the Deferred Benefit elected by a
Participant under section 5.01 that results in payments governed by
sections 5.02 and 5.04 of this Plan.
1.18. Deferred Stock Account means that bookkeeping record established
for each Participant who elects a Deferred Stock Benefit under this
Plan. A Deferred Stock Account is established only for purposes of
measuring a Deferred Stock Benefit and not to segregate assets or
to identify assets that may or must be used to satisfy a Deferred
Stock Benefit. A Deferred Stock Account will be credited with the
Participant's Compensation deferred as a Deferred Stock Benefit
according to a Deferral Election Form and according to section 5.03
of this Plan. A Deferred Stock Account will be credited
periodically with amounts in accordance with subsection 5.03(b) of
this Plan.
1.19. Deferred Stock Benefit means the Deferred Benefit elected by a
Participant under section 5.01 that results in payments governed by
sections 5.03 and 5.04 of this Plan.
1.20. Distribution Election Form means that part of a Deferral Election
Form used by a Participant according to this Plan to establish the
duration of deferral and the frequency of payments of a Deferred
Benefit. If a Deferred Benefit has no Distribution Election Form
that is operative according to section 5.01 of this Plan,
distribution of that Deferred Benefit is governed by section
5.04(b) of this Plan.
1.21. Election Date means the date established by this Plan as the date
before which a Participant must submit a valid Deferral Election
Form to the Administrator. For each Deferral Year, the Election
Date is December 31 of the preceding calendar year. However, for
an individual who becomes a Participant during a Deferral Year, the
Election Date is the thirtieth day following the date that he
becomes a member of the Board. Despite the two preceding
sentences, the Administrator may set an earlier date as the
Election Date for any Deferral Year. The Election Date for the
1996 Deferral Year is the thirtieth day following the date that the
Plan is approved by the Company's shareholders in accordance with
Article XII.
1.22. Fair Market Value means the average closing sales price of the
Common Stock on the New York Stock Exchange, composite tape, for
the twenty trading days before the Option's Date of Grant.
1.23. Meeting Fees means the amount paid to a member of the Board for
attendance at Board meetings and meetings of the Board's
committees, according to the Company's established rules and
procedures for compensating members of the Board.
1.24. Option means a stock option that entitles the holder to purchase
from the Company a stated number of shares of Common Stock at the
shares' Fair Market Value.
1.25. Participant means a member of the Board who is not an employee of
the Company on the applicable Date of Grant. For purposes of
Article V of this Plan, a Participant, with respect to any Deferral
Year, means a member of the Board who is not an employee of the
Company and whose Deferral Election Form is operative for that
Deferral Year.
1.26. Plan means the Chesapeake Corporation Directors' Stock Option and
Deferred Compensation Plan.
1.27. Retainer Fee means that portion of the cash compensation payable to
a member of the Board that is fixed and paid without regard to the
member's attendance at meetings, including any payment that is made
on account of the individual's service as chairman of a committee
of the Board.
1.28. Terminate, Terminating, or Termination, with respect to a
Participant, mean cessation of the Participant's relationship with
the Company as a member of the Board whether by death, disability
or severance for any other reason.
ARTICLE II
PURPOSES
The Plan is intended to promote a greater identity of interest between
Participants and the Company's shareholders. The Plan is also intended to
provide an attractive investment opportunity for Participants by allowing
Participants to receive a Deferred Benefit in lieu of all or part of the
Compensation otherwise payable to the Participant.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Administrator. The Administrator
shall have complete authority to interpret all provisions of this Plan; to
prescribe the form of Agreements; to adopt, amend, and rescind rules and
regulations pertaining to the administration of this Plan; and to make all
other determinations necessary or advisable for the administration of this
Plan. The express grant in the Plan of any specific power to the
Administrator shall not be construed as limiting any power or authority of
the Administrator. Any decision made, or action taken, by the Administrator
or in connection with the administration of this Plan shall be final and
conclusive. The Administrator shall not be liable for any act done in good
faith with respect to this Plan or any Agreement or Option or Deferred
Benefit. All expenses of administering this Plan shall be borne by the
Company.
ARTICLE IV
GRANT OF OPTIONS
<TABLE>
4.01. Option Grants. On each Date of Grant during the term of this Plan,
each Participant will be granted an Option for the number of shares
of Common Stock determined in accordance with the following
schedule:
Date of Grant Number of Shares
<CAPTION>
<S> <C> <C>
May 1, 1997 1500
May 1, 1998 1700
May 1, 1999 1900
May 1, 2000 2100
May 1, 2001 2300
May 1, 2002 2500
May 1, 2003 2700
May 1, 2004 2900
May 1, 2005 3100
May 1, 2006 3300
May 1, 2007 3500
</TABLE>
All Options shall be evidenced by Agreements which shall be subject
to applicable provisions of the Plan and to such other provisions as
the Administrator may adopt.
4.02. Option Price. The price per share for Common Stock purchased on
the exercise of an Option shall be the share's Fair Market Value.
Payment of the Option price shall be made in cash or a cash
equivalent acceptable to the Administrator. In addition, all or
part of the Option price may be paid by surrendering shares of
Common Stock to the Company. If Common Stock is used to pay all or
part of the Option price, the fair market value of the shares
surrendered (determined as of the day before the date of exercise
and based on the closing sales price on the New York Stock Exchange
composite tape on such date), together with any cash and cash
equivalents paid, must not be less than the Option price for the
number of shares for which the Option is being exercised.
4.03. Exercisability. Subject to the provisions of this Plan, an Option
may be exercised on or after the day before the Annual Meeting of
the Company's shareholders next following its Date of Grant. The
preceding sentence to the contrary notwithstanding, an Option shall
be exercisable in whole or in part as of a Control Change Date or
the date that the Participant's membership on the Board terminates
as a result of the Participant's death or permanent and total
disability (as such term is defined in Section 22(e)(3) of the
Code). An Option shall be forfeited if, as of the termination of
the Participant's membership on the Board, the Option is not then
exercisable and such termination occurs for any reason other than
the Participant's death or permanent and total disability (as
defined above). Options that are exercisable or that become
exercisable upon the Participant's termination of membership on the
Board will remain exercisable until the tenth anniversary of the
Option's Date of Grant. An Option may be exercised with respect to
any number of whole shares less than the full number for which the
Option could be exercised. A partial exercise of an Option shall
not affect the right to exercise the Option from time to time in
accordance with this Plan and the applicable Agreement with respect
to the shares remaining subject to the Option.
4.04. Maximum Option Period. No Option shall be exercisable after the
expiration of ten years from its Date of Grant.
4.05. Nontransferability. Options granted under this Plan shall be
nontransferable except by will or the laws of descent and
distribution. During the lifetime of the Participant to whom the
Option is granted, the Option may be exercised only by the
Participant. No right or interest of a Participant in any Option
shall be subject to, any lien, obligation, or liability of such
Participant.
4.06. Stock Subject to Options. Upon the exercise of any Option, the
Company shall deliver to the Participant (or the Participant's
broker if the Participant so directs) shares of its previously
authorized but unissued Common Stock.
4.07. Shareholder Rights. No Participant shall have any rights as a
shareholder with respect to shares subject to his Option until the
date of the exercise of such Option.
ARTICLE V
DEFERRED BENEFITS
5.01. Deferral Election. A deferral election is valid when a Deferral
Election Form is completed, signed by the electing Participant, and
received by the Administrator or the Administrator's delegate.
Deferral elections are governed by the provisions of this section.
(a) Before each Deferral Year's Election Date, each Participant will
be provided with a Deferral Election Form and a Beneficiary
Designation Form. Under the Deferral Election Form for a single
Deferral Year, a Participant may elect on or before the Election Date
to defer the receipt of all or part of the Participant's Retainer Fee
(in 10% increments) or the Participant's Meeting Fees (in 10%
increments) or both for the Deferral Year.
(b) A Participant's Deferral Election Form may specify either a
Deferred Cash Benefit, a Deferred Stock Benefit or a combination
thereof (in 10% increments of the deferred amount).
(c) Except as permitted by Rule 16b-3 of the Securities Exchange
Commission, as in effect from time to time or any successor rule or
regulation, a Participant may not elect to convert a Deferred Cash
Benefit to a Deferred Stock Benefit or to convert a Deferred Stock
Benefit to a Deferred Cash Benefit.
(d) Each Distribution Election Form is part of the Deferral Election
Form on which it appears or to which it states that it is related.
The Administrator may allow a Participant to file one Distribution
Election Form for all of the Participant's Deferred Cash Benefits, all
of the Participant's Deferred Stock Benefits, or all of the
Participant's Deferred Benefits. The provisions of section 5.04(b)
of this Plan apply to any Deferred Benefit under this Plan if there
is no operative Distribution Election Form for that Deferred Benefit.
(e) On or before the Election Date of a Deferral Year, the
Administrator may reject any Deferral Election Form or any
Distribution Election Form or both, and the Administrator is not
required to state a reason for any rejection. The Administrator
may modify any Distribution Election Form at any time to the extent
necessary to comply with any federal securities laws or
regulations. However, the Administrator's rejection of any
Deferral Election Form or any Distribution Election Form or the
Administrator's modification of any Distribution Election Form must
be based upon action taken without regard to any vote of the
Participant whose Deferral Election Form or Distribution Election
Form is under consideration, and the Administrator's rejections
must be made on a uniform basis with respect to similarly situated
Participants. If the Administrator rejects a Deferral Election
Form, the Participant must be paid the amounts that the Participant
would then have been entitled to receive if the Participant had not
submitted the rejected Deferral Election Form.
(f) A Participant may not revoke a Deferral Election Form or a
Distribution Election Form after the Deferral Year begins. Any
revocation before the beginning of the Deferral Year is the same as
a failure to submit a Deferral Election Form or a Distribution
Election Form. Any writing signed by a Participant expressing an
intention to revoke a Deferral Election Form or a related
Distribution Election Form and delivered to the Administrator
before the close of business on the relevant Election Date is a
revocation.
(g) A Participant who has not submitted a valid Deferral Election
Form to the Administrator on or before the relevant Election Date
may not defer any part of the Participant's Compensation for the
Deferral Year. The Deferred Benefit of a Participant who submits a
valid Deferral Election Form but fails to submit a valid
Distribution Election Form for that Deferred Benefit before the
relevant Election Date or who otherwise has no valid Distribution
Election Form for that Deferred Benefit is governed by
section 5.04(b).
5.02. Deferred Cash Benefits.
(a) Deferred Cash Benefits will be set up in a Deferred Cash
Account for each Participant and credited with interest in
accordance with subsection 5.02(b). A Deferred Cash Benefit
attributable to a deferred Retainer Fee is credited to the
Participant's Deferred Cash Account as of the day that the
deferred Retainer Fee would have been paid but for the
Participant's Deferral Election. A Deferred Cash Benefit
attributable to a deferred Meeting Fee is credited to the
Participant's Deferred Cash Account as of the first day of the
month following the month in which the deferred Meeting Fee would
have been paid but for the Participant's Deferral Election.
(b) Interest will be credited to Deferred Cash Accounts on the
first day of each month based on the Deferred Cash Account balance
at the end of the preceding day. The applicable rate for each
month will be the prime rate established by the Company's principal
lender, as of the last business day of each calendar quarter
preceding the date on which interest is credited to Deferred Cash
Accounts. Interest is accrued through the end of the month
preceding the month of distribution of a Deferred Cash Benefit.
5.03. Deferred Stock Benefits.
(a) Deferred Stock Benefits will be set up in a Deferred Stock
Account for each electing Participant and credited with earnings in
accordance with subsection 5.02(b). A Deferred Stock Benefit
attributable to a deferred Retainer Fee is credited to the
Participant's Deferred Stock Account as of the day that the
deferred Retainer Fee would have been paid but for the
Participant's Deferral Election. A Deferred Stock Benefit
attributable to a deferred Meeting Fee is credited to the
Participant's Deferred Stock Account as of the first day of the
month following the month in which the deferred Meeting Fee would
have been paid but for the Participant's Deferral Election.
(b) Credits will be added to Deferred Stock Accounts at variable
rates equal to the value of dividends paid on Common Stock when the
additional credit is made. The value of a Deferred Stock Account
at any relevant time equals the value of the shares of Common Stock
(based on the average closing price of the Common Stock on the New
York Stock Exchange, composite type), as if the Compensation
deferred by the Participant under the Plan and any additional
credits under this subsection had been used to purchase Common
Stock on the date those amounts were credited to the Deferred Stock
Account. Additional credits are credited on the last day of each
calendar quarter on accumulated Deferred Stock Accounts.
Additional credits are accrued through the end of the month
preceding the month of distribution of a Deferred Stock Benefit.
5.04. Distribution of Deferred Benefits.
(a) A Deferred Cash Benefit must be distributed in cash. Except as
provided in Plan subsection 5.04(e) and section 5.05, a Deferred
Stock Benefit must be distributed in shares of Common Stock.
However, cash must be paid in lieu of fractional shares of Common
Stock otherwise distributable.
(b) Deferred Benefits will be paid in a single sum unless the
Participant's Distribution Election Form specifies annual
installment payments over a period which shall not be more than
ten years. For a Deferred Cash Benefit, interest credits under
Plan subsection 5.02(b) continue to accrue on the unpaid balance
of a Deferred Cash Account. For a Deferred Stock Benefit,
additional credits under Plan subsection 5.03(b) continue to
accrue on the unpaid balance of a Deferred Stock Account.
Notwithstanding the preceding paragraph, if a Participant
Terminates as a result of permanent and total disability (as
defined in Section 22(e)(3) of the Code), Deferred Benefits will
be paid to such Participant in installment payments over a period
of ten years commencing on the date the Participant's disability
is certified by the Administrator unless the Administrator, in its
sole discretion, approves a longer or shorter payment period. If,
after the Participant's Termination as a result of permanent and
total disability (as defined above), such Participant recovers
before the balance of the Participant's Deferred Cash and Deferred
Stock Accounts under the Plan are exhausted, the Participant's
distributions will be discontinued and any remaining Deferred
Benefits under the Plan will be governed by the provisions of this
section and the Participant's Distribution Election Forms.
Unless otherwise specified in a Participant's Distribution
Election Form or if there is no Distribution Election Form that is
operative according to section 5.01 of this Plan, any lump sum
payment will be paid or installment payments will begin to be paid
as of February 15 of the year after the Participant's Termination
or as of February 15 of the year after the Participant's
attainment of age sixty-five, if earlier. For distributions that
would automatically be caused under the preceding sentence by a
Participant's Termination (other than by death or disability) or
for distributions that would otherwise automatically begin because
a Participant reaches age sixty-five, the Participant may elect on
his Distribution Election Form that payments are to begin (i) on
the February 15 following the Participant's Termination, without
regard to the Participant's age; or (ii)on the February 15
following the Participant's Termination and the Participant's
attainment of a specified age; or (iii) even if the Participant
does not Terminate, on the February 15 following attainment of a
specified age.
For purposes of these distribution election alternatives, the
specified age must be not less than the Participant's age two
years from the Election Date pertaining to the applicable Deferral
Year and not greater than the age at which there are no earnings
limitations in order to receive full social security benefits.
(c) Deferred Benefits may not be assigned by a Participant or
Beneficiary. A Participant may use only one Beneficiary
Designation Form to designate one or more Beneficiaries for all of
the Participant's Deferred Benefits under the Plan; such
designations are revocable. Each Beneficiary will receive the
Beneficiary's portion of the Participant's Deferred Cash Account
and Deferred Stock Account as of February 15 of the year following
the Participant's death unless the Beneficiary's request for
accelerated payment is approved at the Administrator's discretion
under section 5.05 of this Plan. The Administrator may require
that multiple Beneficiaries agree upon a single distribution
method.
(d) Any Common Stock distributed in settlement of a Deferred Stock
Benefit shall be issued from the Company's previously authorized
but unissued Common Stock.
(e) Notwithstanding any other provision of this Plan or any
Distribution Election Form, in the event of a Change in Control,
all Deferred Benefits credited to Participants and Beneficiaries
shall be paid in a lump sum, in cash, on the Control Change Date.
5.05. Hardship Distributions.
(a) At its sole discretion and at the request of a Participant
before or after the Participant's Termination, or at the request
of any of the Participant's Beneficiaries after the Participant's
death, the Administrator may accelerate and pay all or part of any
amount attributable to a Participant's Deferred Benefits under
this Plan. Accelerated distributions may be allowed only in the
event of a financial emergency beyond the Participant's or
Beneficiary's control and only if disallowance of a distribution
would create a severe hardship for the Participant or Beneficiary.
An accelerated distribution must be limited to the amount
determined by the Administrator to be necessary to satisfy the
financial emergency.
(b) For purposes of an accelerated distribution of a Deferred
Stock Benefit under this section, the Deferred Stock Benefit's
value is determined by the value of the Deferred Stock Account at
the time of the distribution.
(c) Only cash distributions are permitted under this section.
Distributions under this section must first be made from the
Participant's Deferred Cash Account before accelerating the
distribution of any amount attributable to a Deferred Stock
Benefit.
(d) A distribution under this section is in lieu of that portion
of the Deferred Benefit that would have been paid otherwise. A
Deferred Cash Benefit is adjusted for a distribution under this
section by reducing the Participant's Deferred Cash Account
balance by the amount of the distribution. A Deferred Stock
Benefit is adjusted for a distribution under this section by
reducing the value of the Participant's Deferred Stock Account by
the amount of the distribution.
ARTICLE VI
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The number of shares as to which Options may be granted under this Plan,
the terms of outstanding Options and each Deferred Stock Account shall be
proportionately adjusted as the Administrator determines to be equitably
required in the event that the Company (a) effects one or more stock
dividends, stock split-ups, subdivisions or consolidations of shares or (b)
engages in a transaction described in Section 424 of the Code. Any
determination made under this Article VI by the Administrator shall be final
and conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, outstanding Options or Deferred Stock Accounts.
ARTICLE VII
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment
shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations, any listing agreement to which the
Company is a party, and the rules of all domestic stock exchanges on which
the Company's shares may be listed. The Company shall have the right to
rely on an opinion of its counsel as to such compliance. Any share
certificate issued to evidence Common Stock for which an Option is
exercised or that is distributed under this Plan may bear such legends and
statements as the Board may deem advisable to assure compliance with
federal and state laws and regulations. No Option shall be exercisable, no
Common Stock shall be issued, no certificate for shares of Common Stock
shall be delivered, and no payment shall be made under this Plan until the
Company has obtained such consent or approval as the Board may deem
advisable from regulatory bodies having jurisdiction over such matters.
ARTICLE VIII
GENERAL PROVISIONS
8.01. Effect on Service. Neither the adoption of this Plan, its operation,
nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any Participant any right to continue
service as a member of the Board.
8.02. Unfunded Plan. The Plan, insofar as it provides for grants and
Deferred Benefits, shall be unfunded, and the Company shall not be
required to segregate any assets that may at any time be represented
by grants or Deferred Benefits under this Plan. Any liability of the
Company to any person with respect to any grant under, or Deferred
Benefit payable under, this Plan shall be based solely upon any
contractual obligations that may be created pursuant to this Plan.
No such obligation of the Company shall be deemed to be secured by
any pledge of, or other encumbrance on, any property of the Company.
8.03. Notices. Notices and elections under this Plan must be in writing.
A notice or election is deemed delivered if it is delivered
personally or if it is mailed by registered or certified mail to the
person at such person's last known business address.
8.04. Rules of Construction. Headings are given to the Articles and
Sections of this Plan solely as a convenience to facilitate
reference. The reference to any statute, regulation, or other
provision of law shall be construed to refer to any amendment to
or successor of such provision of law. This Plan is created,
adopted and maintained according to the laws of the Commonwealth of
Virginia (other than its choice-of-law rules).
ARTICLE IX
AMENDMENT
The Board may amend this Plan from time to time; provided, however,
that no amendment may become effective until shareholder approval is
obtained if the amendment (I) materially increases the aggregate number of
shares of Common Stock that may be issued under the Plan (other than an
adjustment authorized by Article VI), (ii) materially changes the class of
individuals eligible to become Participants or (iii) materially increases
the benefits that may accrue to Participants under the Plan. The preceding
sentence to the contrary notwithstanding, the Plan may not be amended more
than once in any six month period unless such amendment is required to
comply with the Code or the Employee Retirement Income Security Act of
1974. No amendment shall, without a Participant's consent, adversely
affect any rights of such Participant under the Plan or any Option as in
effect at the time such amendment is made.
ARTICLE
TERMINATION
The Board may terminate the Plan at any time. The termination of this
Plan shall not affect any rights of a Participant under any Option or to any
Deferred Benefit payable under this Plan pursuant to the terms of this Plan
as in effect at the time of such termination.
ARTICLE X
DURATION OF OPTION GRANTS
No Option may be granted under this Plan after May 1, 2007. Options
granted on or before May 1, 2007 shall remain valid in accordance with their
terms.
ARTICLE XI
EFFECTIVE DATE OF PLAN
No Option will be granted under this Plan and no Deferral Election shall
be effective before this Plan is approved by a majority of the votes entitled
to be cast by the Company's shareholders, voting either in person or by
proxy, at a duly held shareholders' meeting.
<TABLE>
EXHIBIT 11.1
CHESAPEAKE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
FOR THE FIRST QUARTER ENDED MARCH 31, 1996 AND 1995
(Share amounts in thousands, dollar amounts in millions,
except for per share amounts)
<CAPTION>
<S> <C> <C>
1996 1995
Primary:
Weighted average number of common shares
outstanding 23,722 3,759
Net additions to common shares assuming
exercise of dilutive options, determined by
treasury stock method 119 256
Common shares and equivalents 23,841 4,015
Net Income $ 7.9 $20.8
Per share amount $ .33 $ .87
Fully diluted:
Common shares and equivalents 23,841 4,015
Net additional common shares issuable upon
exercise of dilutive options, determined
by treasury stock method using period end
market price, if higher than average
price 37 1
Common shares, equivalents and other
potentially dilutive securities 23,878 24,016
Net income for fully diluted
computation $ 7.9 $ 20.8
Per share amount $ .33 $ .87
</TABLE>
NOTE: (a) Dilution is less than 3%<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000019731
<NAME> CHESAPEAKE CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,000,000
<SECURITIES> 0
<RECEIVABLES> 143,800,000
<ALLOWANCES> 3,400,000
<INVENTORY> 107,600,000
<CURRENT-ASSETS> 281,100,000
<PP&E> 1,453,500,000
<DEPRECIATION> 696,300,000
<TOTAL-ASSETS> 1,160,900,000
<CURRENT-LIABILITIES> 134,800,000
<BONDS> 411,600,000
0
0
<COMMON> 23,700,000
<OTHER-SE> 444,000,000
<TOTAL-LIABILITY-AND-EQUITY> 1,160,900,000
<SALES> 277,700,000
<TOTAL-REVENUES> 281,000,000
<CGS> 202,000,000
<TOTAL-COSTS> 260,400,000
<OTHER-EXPENSES> 400,000
<LOSS-PROVISION> 3,400,000
<INTEREST-EXPENSE> 7,800,000
<INCOME-PRETAX> 12,400,000
<INCOME-TAX> 4,500,000
<INCOME-CONTINUING> 7,900,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,900,000
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
