SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CHESAPEAKE CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[L O G O]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 22, 1996
To the Stockholders of
Chesapeake Corporation:
We are pleased to invite you to attend the annual meeting of stockholders
of Chesapeake Corporation to be held at the EXHIBITION HALL AT THE FAIRGROUNDS
ON STRAWBERRY HILL, 600 EAST LABURNUM AVENUE, RICHMOND, VIRGINIA, on Wednesday,
April 24, 1996, at 11:00 A.M., for the following purposes:
(1) to elect four directors to serve until the 1999 annual
meeting of stockholders;
(2) to approve the Chesapeake Corporation Directors' Stock Option and
Deferred Compensation Plan;
(3) to ratify the appointment by the Board of Directors of Coopers &
Lybrand L.L.P. as independent accountants for 1996; and
(4) to transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on March 8, 1996, are
entitled to notice of, to vote at and to participate in the meeting.
YOU ARE REQUESTED TO MARK, DATE, SIGN AND RETURN THE ENCLOSED FORM OF
PROXY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING
IN PERSON.
By order of the Board of Directors:
J. P. Causey Jr.
Secretary
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
[LOGO]
GENERAL INFORMATION
Solicitation of the enclosed proxy is made by and on behalf of Chesapeake
Corporation for use at the annual meeting of stockholders to be held at the
EXHIBITION HALL AT THE FAIRGROUNDS ON STRAWBERRY HILL, 600 EAST LABURNUM AVENUE,
RICHMOND, VIRGINIA, on Wednesday, April 24, 1996, and at any adjournments of
such meeting. An annual report, including financial statements for the year
ended December 31, 1995, is enclosed with this proxy statement.
The expense of this solicitation will be paid by the Corporation. Officers,
directors and employees of the Corporation may make solicitations of proxies by
telephone or telegraph or by personal calls. The firm of D.F. King & Co., Inc.
has been retained to assist in the solicitation of proxies at a fee estimated
not to exceed $7,000, plus direct out-of-pocket expenses. Brokerage houses,
nominees and fiduciaries have been requested to forward proxy soliciting
material to the beneficial owners of the stock held of record by them, and the
Corporation will reimburse them for their charges and expenses.
The Corporation's charter authorizes the issuance of up to 60,000,000
shares of Common Stock ($1 par value) ("Common Stock") and 500,000 shares of
Preferred Stock ($100 par value). Only stockholders of record at the close of
business on March 8, 1996, are entitled to notice of, to vote at and to
participate in the meeting. On the record date, the stock issued and outstanding
consisted of 23,675,728 shares of Common Stock. Holders of Common Stock will
vote as a single class at the annual meeting. Each outstanding share will
entitle the holder to one vote. All shares represented by properly executed and
delivered proxies will be voted at the meeting or any adjournments.
A majority of the votes entitled to be cast on matters to be considered at
the meeting constitutes a quorum. If a share is represented for any purpose at
the meeting, it is deemed to be present for quorum purposes for all matters
considered at the meeting. Abstentions and shares held of record by a broker or
its nominee ("Broker Shares") that are voted on any matter are included in
determining the number of votes present or represented at the meeting. Broker
Shares that are not voted on any matter at the meeting will not be included in
determining whether a quorum is present at such meeting. Directors are elected
by a plurality of the votes cast by holders of Common Stock at a meeting at
which a quorum is present. Votes that are withheld and Broker Shares that are
not voted in the election of directors will not be included in determining the
number of votes cast. Approval of the Chesapeake Corporation Directors' Stock
Option and Deferred Compensation Plan (the "1996 Directors' Plan") requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present or represented by properly executed and delivered proxies, and entitled
to vote with respect thereto, at a meeting at which a quorum is present.
Abstentions will have the same effect as a negative vote for purposes of
approving the 1996 Directors' Plan. Broker Shares that are not voted with
respect to the approval of the 1996 Directors' Plan will not be included in
determining the number of shares entitled to vote thereon.
This proxy statement and the enclosed form of proxy were first mailed to
stockholders on March 22, 1996.
1
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Corporation's Board of Directors is divided into three classes. At the
annual meeting, four directors are expected to be elected to Class I to hold
office for a term of three years and until their respective successors are duly
elected and qualified.
Information Concerning Nominees
<TABLE>
<CAPTION>
Name and Age; Director
Principal Occupation or Continuously
Employment During Last Five Years Since
Class I (to serve until the 1999 annual meeting of stockholders)
<S> <C>
[PHOTO]
WILLIAM D. MCCOY, 66 1985
Retired (since 1994); former Chairman of the Board, Chief Executive Officer and
Director, Koch Label Co., a consumer products label printing company.
[PHOTO]
JOHN W. ROSENBLUM, 52 1984
Tayloe Murphy Professor of Business Administration (since 1993) and former Dean,
Darden Graduate School of Business Administration, University of Virginia;
Director of Cadmus Communications Corporation, Comdial Corporation, Cone Mills
Corporation, Providence Journal Telecommunications, Inc. and T. Rowe Price
Associates, Inc.
[PHOTO]
JOHN HOYT STOOKEY, 66 1990
Nonexecutive Chairman of the Board of Suburban Propane, a gas distribution
company (since 1996), and former Nonexecutive Chairman of the Board, Quantum
Chemical Corporation, a subsidiary of Hanson Industries, a British industrial
management corporation (1993-1995), and Chairman of the Board, Chief Executive
Officer and Director of Quantum Chemical Corporation; Director of ACX
Technologies, Inc., Cyprus Amax Minerals Company and U.S. Trust Corporation.
[PHOTO]
RICHARD G. TILGHMAN, 55 1986
Chairman of the Board, Chief Executive Officer and Director, Crestar Financial
Corporation, a bank holding company.
</TABLE>
Unless authority to do so is withheld, shares represented by properly executed
proxies in the enclosed form will be voted for the election of the four persons
named above. Each of the nominees is currently a director and has served
continuously since the year he joined the Corporation's Board. If any of the
nominees should become unavailable, the Board of Directors may designate
substitute nominees, for whom the proxies will be voted. In the alternative, the
Board may reduce the size of the Class to the number of remaining nominees, for
whom the proxies will be voted.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 1 TO
ELECT MESSRS. MCCOY, ROSENBLUM, STOOKEY AND TILGHMAN TO THE BOARD OF DIRECTORS
TO SERVE UNTIL THE 1999 ANNUAL MEETING.
2
<PAGE>
DIRECTORS CONTINUING IN OFFICE
There are eight directors whose present term of office will continue
until 1997 or 1998, as indicated below, and until their respective successors
are duly elected and qualified. Each has served continuously since the year he
or she joined the Corporation's Board. Paul A. Dresser, Jr., formerly a member
of Class III, resigned in March 1996.
<TABLE>
<CAPTION>
Name and Age; Director
Principal Occupation or Continuously
Employment During Last Five Years Since
Class II (to serve until the 1997 annual meeting of stockholders)
<S> <C>
[PHOTO]
C. ELIS OLSSON, 31 1994
Vice President - Operations, Mid-South Division, Color-Box, Inc., a subsidiary
of Chesapeake Packaging Co. (since 1995) and former Midwest Regional Sales
Manager, Color-Box, Inc. (1994-1995), Assistant to the President, Chesapeake
Packaging Co., a subsidiary of Chesapeake Corporation (1994), Assistant Manager
of Manufacturing (1993-1994), Manager - Maintenance Planning (1992-1993) and
Assistant to the Vice President of Manufacturing (1991-1992), Chesapeake Paper
Products Company, a subsidiary of Chesapeake Corporation.
[PHOTO]
WALLACE STETTINIUS, 63 1980
Retired (since 1995); former Chairman of the Board, Cadmus Communications
Corporation, a graphic communications holding company; Director of American
Filtrona Corporation and Cadmus
Communications Corporation.
[PHOTO]
JOSEPH P. VIVIANO, 57 1988
President and Chief Operating Officer (since 1993) and Director, Hershey Foods
Corporation, a manufacturer of confectionery products, and former President,
Hershey Chocolate U.S.A., a division of Hershey Foods Corporation.
[PHOTO]
HARRY H. WARNER, 60 1978
Financial Consultant; Director of Allied Research Corporation, American Filtrona
Corporation and Pulaski Furniture Corporation.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Class III (to serve until the 1998 annual meeting of stockholders)
<S> <C>
[PHOTO]
M. KATHERINE DWYER, 47 1995
President, Revlon Cosmetics, U.S.A., an international fragrance and cosmetics
company (since 1995), and former Executive Vice President and General Manager
for Mass Cosmetics, Revlon Group, Inc. (1995), Executive Vice President -
Marketing, Revlon Group, Inc. (1993-1994), Vice President - Marketing, Clairol,
Inc. (1991-1993) and Executive Vice President - Marketing and Product
Development, Victoria Creations, Inc. (1989-1991).
[PHOTO]
J. CARTER FOX, 56 1980
Chairman, President & Chief Executive Officer, Chesapeake Corporation (since
1996) and former Chairman & Chief Executive Officer (1995-1996), Chairman,
President & Chief Executive Officer (1994-1995) and President & Chief Executive
Officer (1980-1994), Chesapeake Corporation; Director of Crestar Financial
Corporation.
[PHOTO]
ROBERT L. HINTZ, 65 1985
Chairman of the Board, R. L. Hintz and Associates, a management services
consulting firm; Director of Ashland Coal, Inc., Reynolds Metals Company and
Scott & Stringfellow Financial, Inc.
[PHOTO]
FRANK S. ROYAL, 56 1990
Physician; Director of Crestar Financial Corporation, CSX Corporation, Dominion
Resources, Inc. and Columbia/HCA Healthcare Corporation.
</TABLE>
4
<PAGE>
The Board of Directors meets regularly every two months and following
each annual meeting of stockholders. During the last year, there were eight
meetings of the Board.
The Board has standing Executive, Audit, Executive Compensation and
Nominating Committees. Members of the Executive Committee are Messrs. Fox,
Stettinius, Tilghman, Viviano and Warner. During the last year, there were two
meetings of the Executive Committee. The Executive Committee reviews various
matters and submits proposals or recommendations to the Board of Directors. The
Executive Committee is empowered to and does act for the Board of Directors on
certain matters.
Members of the Audit Committee are Ms. Dwyer and Messrs. Hintz, Royal,
Tilghman and Viviano. During the last year, there were two meetings of the Audit
Committee. The Audit Committee recommends an independent accounting firm to be
selected by the Board of Directors for the upcoming year. The Audit Committee
reviews and approves various audit functions including the year-end audit
performed by the Corporation's independent accountants. The Corporation's
internal auditors and independent accountants regularly report directly to the
Audit Committee.
Members of the Executive Compensation Committee (the "Compensation
Committee") are Messrs. McCoy, Rosenblum, Stettinius, Stookey and Warner. During
the last year, there were five meetings of the Compensation Committee. The
Compensation Committee approves officer incentive awards, grants stock options
and performance share awards and recommends to the Board of Directors
remuneration levels for officers, general remuneration plans for all management
personnel and other employee remuneration plans.
Members of the Nominating Committee are Messrs. Rosenblum, Royal,
Stettinius and Stookey. During the last year, there were two meetings of the
Nominating Committee. The Nominating Committee reviews the performance and
attendance of directors, recommends to the full Board of Directors persons to
serve as directors of the Corporation and establishes such procedures as it
deems proper to receive and review information concerning potential candidates
for election or reelection to the Board of Directors. Stockholders entitled to
vote for the election of directors may nominate candidates for consideration by
the Nominating Committee. Notice of nominations made by stockholders with
respect to the 1997 annual meeting must be received in writing by the Secretary
of the Corporation no earlier than January 6, 1997, and no later than January
31, 1997, and must set forth (i) the name, age, business address and, if known,
residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee and (iii) the number of shares of capital stock
of the Corporation beneficially owned by each such nominee.
The Board of Directors has also established a Committee of Outside
Directors composed of those directors who are not and have never been employees
of the Corporation. The Committee of Outside Directors meets regularly, usually
in conjunction with, but separately from, regular meetings of the Board of
Directors. The Committee of Outside Directors evaluates the performance of the
chief executive officer of the Corporation, reviews the senior organizational
structure of the Corporation and, when appropriate, will recommend a successor
for the chief executive officer. The chairman of the Committee of Outside
Directors acts as spokesperson for the outside directors and as their liaison
with the chief executive officer.
During 1995, all directors attended at least 75% of the meetings of the
Board of Directors and the committees to which they were assigned, except Ms.
Dwyer. As Chairman of Quantum Chemical Corporation ("Quantum"), Mr. Stookey, a
director of the Corporation, served from 1989 to 1993 as an executive officer of
Petrolane Incorporated, Petrolane Finance Corp. and QJV Corp., affiliates of
Quantum, which companies were reorganized on July 15, 1993, under the U. S.
Bankruptcy Code. Mr. McCoy, a director of the Corporation, retired as Chairman
of the Board, Chief Executive Officer and Director of Koch Label Co. ("Koch") on
January 1, 1994. Koch filed for protection under the U.S. Bankruptcy Code in
September 1994.
5
<PAGE>
COMPENSATION OF DIRECTORS
Employee directors of the Corporation are not paid for their service on
the Board of Directors or any Board committee. For the period prior to April 1,
1995, non-employee directors received an annual retainer of $12,000 for Board
service and an attendance fee of $950, plus travel expenses, for each day
attending a Board or committee meeting. The chairman of the Committee of Outside
Directors received an additional retainer at the annual rate of $12,000, and
other committee chairmen received an additional annual retainer of $3,500. For
the period following April 1, 1995: non-employee directors received an annual
retainer of $15,000 for Board service and an attendance fee of $1,000, plus
travel expenses, for each day attending a Board or committee meeting; the
additional annual retainer for the chairman of the Committee of Outside
Directors was increased to $30,000; and the additional annual retainer for the
other committee chairmen was increased to $5,000.
The Corporation has a Directors' Deferred Compensation Plan under which
directors may defer all or a portion of their fees until their retirement or
another specified date. Interest accrues on the balance of the deferred account
at a New York bank's prime rate. The Corporation also has established an
unfunded Outside Directors' Retirement Plan (the "Outside Directors' Plan").
Under the Outside Directors' Plan, non-employee directors retiring at or after
age 65 after at least five years of service or prior to age 65 after at least
ten years of service are paid an amount equal to their retainer at the time of
their retirement for a period equal to their period of service, up to ten years.
At the 1992 annual meeting, the stockholders approved the Non-Employee
Director Stock Option Plan (the "1992 Directors' Plan"). Under the 1992
Directors' Plan, each non-employee director will receive an annual award of an
option to purchase Common Stock (an "Automatic Award"). The number of shares of
Common Stock covered by Automatic Awards reflects assumptions made in 1992
regarding (i) future increases in directors' fees that would have been approved
but for adoption of the 1992 Directors' Plan, and (ii) the fair market value of
the option privilege. Based on the advice of an independent compensation
consultant, the value of an option to purchase Common Stock under the 1992
Directors' Plan was set at $8.00 per share. Pursuant to the 1992 Directors'
Plan, each non-employee director received on May 1, 1995, an Automatic Award of
a stock option to purchase 625 shares of Common Stock at an exercise price of
$33.54 per share. Unless the director's service terminates earlier for reasons
other than death or disability, these options are first exercisable on April 23,
1996, and remain exercisable for a period of ten years from their date of grant.
On May 1, 1996, non-employee directors will receive a final Automatic Award of
stock options to purchase 750 shares. Non-employee directors are also eligible
to choose to receive an annual award pursuant to the 1992 Directors' Plan in
lieu of all or a part of the director's cash retainer for a period of one or
more future years (an "Elective Award"). A non-employee director choosing to
receive an Elective Award will receive an option to purchase 125 shares of
Common Stock for each $1,000 of foregone retainer. Elective Awards are first
exercisable on the day of the annual meeting next following the date of grant in
installments, the number of which corresponds to the number of years covered by
the Elective Award. The option price per share for Automatic and Elective Awards
is the average closing sales price of the Common Stock for the twenty trading
days before the October 31st that immediately precedes the date of grant.
The cash retainer and attendance fees described above, together with
Automatic Awards under the 1992 Directors' Plan, represent the Corporation's
standard arrangements for compensation of its non-employee directors. Subject to
the approval of the Corporation's stockholders, each non-employee director will
be entitled to participate in the 1996 Directors' Plan, as described under
"Proposal 2" below.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of February 2, 1996, the direct and
indirect beneficial ownership of Common Stock by: each director; each executive
officer named in the Summary Compensation Table; all directors and executive
officers of the Corporation as a group; and all persons beneficially owning more
than 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
Sole Voting and Aggregate
Investment Percentage
Name Power (1) Other (2) Total Owned (3)
<S> <C> <C> <C> <C>
Thomas Blackburn...................... 10,151 10,151
Paul A. Dresser, Jr.................... 57,088 14,963 72,051
M. Katherine Dwyer..................... 200 200
J. Carter Fox.......................... 205,097 30,801 235,898 1.0%
Robert L. Hintz........................ 4,525 4,525
Andrew J. Kohut........................ 16,268 5,955 22,223
William D. McCoy....................... 3,625 3,625
C. Elis Olsson......................... 39,278 31,082(4) 70,360
John W. Rosenblum...................... 2,125 2,125
Frank S. Royal......................... 4,625 4,625
Wallace Stettinius..................... 7,125 7,125
John Hoyt Stookey...................... 2,125 2,125
Samuel J. Taylor....................... 36,089 5,205 41,294
Richard G. Tilghman................... 2,580 1,270 3,850
Joseph P. Viviano...................... 14,419 14,419
Harry H. Warner........................ 3,775 3,775
All Directors and Executive Officers
as a Group (19 persons)............... 478,218 92,889 571,107 2.3
Crestar Bank
919 E. Main Street
Richmond, Virginia.................... 1,471,025 1,582,711(4)(5) 3,053,736(4)(5) 12.8
Sture G. Olsson
Box 311
West Point, Virginia................. 851,355 1,600,494(5) 2,451,849(5) 10.3
MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York.................... 2,072,550 2,072,550 8.7
</TABLE>
- ---------------
(1) Includes shares held in fiduciary capacities and (a) an aggregate
190,063 shares that may be acquired by employee directors and the Corporation's
executive officers within 60 days under the Corporation's 1993 Incentive Plan
and 1987 Stock Option Plan, and (b) an aggregate 19,875 shares that may be
acquired by certain non-employee directors within 60 days under the 1992
Directors' Plan.
(2) Includes shares, if any: (a) owned by certain relatives; (b) held
in various fiduciary capacities; (c) held by certain corporations; (d) held by
the Corporation's Employee Stock Ownership Plan; and (e) held by the
Corporation's 401(k) Savings Plan for Salaried Employees. These shares may be
deemed to be beneficially owned under the rules and regulations of the
Securities and Exchange Commission (the "SEC"), but the inclusion of such shares
in the table does not constitute an admission of beneficial ownership. Certain
shares may be deemed to be beneficially owned by more than one person or group
listed and, accordingly, must be reported as being beneficially owned by each.
(3) Except as indicated, each person or group beneficially owns less
than 1% of the outstanding Common Stock.
(4) Includes 27,500 shares held in a trust as to which Crestar Bank and
Mr. C. Elis Olsson may be deemed to share beneficial ownership.
(5) Includes 977,720 shares held in various trusts as to which Crestar
Bank and Mr. Sture G. Olsson may be deemed to share beneficial ownership.
7
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's executive compensation programs are administered by
the Compensation Committee. The Compensation Committee is composed of the
individuals listed below, each of whom is a non-employee director of the
Corporation. The Compensation Committee grants stock options, stock appreciation
rights ("SARs"), performance shares ("Performance Shares") and stock units, and
approves incentive awards, under the 1993 Incentive Plan for management
employees and recommends to the Board of Directors the salary levels for
executive officers. The Compensation Committee has retained Frederic W. Cook &
Co., Inc., an independent compensation consultant, to advise the Compensation
Committee with respect to executive compensation matters.
Overview of Compensation Philosophy
The Corporation's executive compensation program is designed to enable
the Corporation to attract, develop and retain executives and motivate them to
attain the Corporation's business goals. The Compensation Committee intends to
keep executive compensation externally competitive and internally equitable to
reflect differences in job responsibility and individual contribution to company
success. The Corporation's goal is to pay base salaries that are in the
mid-range of salaries offered in the packaging, paper and forest products
industry, local competing industries or industry in general, as appropriate,
while offering appropriate incentive opportunities for executives. The
Corporation's intent with respect to incentive programs is to provide executives
the opportunity to earn total compensation that exceeds the targeted mid-range
in return for superior Corporation, individual business unit and individual
executive performance. The compensation programs also encourage employee
ownership of the Corporation's Common Stock.
The individual elements of the Corporation's executive compensation
program are (i) base salaries, (ii) annual incentive opportunities, which focus
on short-term objectives, and (iii) grants of stock options and Performance
Shares, which focus on long-term objectives. In designing and administering the
individual elements of the executive compensation program, the Compensation
Committee strives to balance short- and long-term incentive objectives. In the
case of the Corporation's Chief Executive Officer (the "CEO"), the individual
elements have been set by the Compensation Committee to provide that more than
50% of total compensation will consist of short- and long-term incentive
opportunities, with long-term elements being the more significant. This results
in the expected value of the CEO's total compensation being set at the mid-range
of competitive levels, as discussed below, with a large portion of such
compensation being at risk based on actual performance.
The Compensation Committee's policy on the tax deductibility of
compensation for the CEO and other executive officers is to maximize the
deductibility, to the extent possible, while preserving the Compensation
Committee's flexibility to maintain a competitive compensation program. All
executive compensation paid or awarded during 1995 is considered to be fully
deductible by the Corporation under the Revenue Reconciliation Act of 1993.
1995 Compensation
Base Salaries. Base salaries for executive officers are approved by the
Board of Directors based upon recommendations by the Compensation Committee. The
Compensation Committee's recommendations result from a subjective review of
individual performances and competitive data supplied by its consultant. The
Compensation Committee first establishes a pay range for each job classification
by reference to the Project 777 Executive Compensation Survey published by
Management Compensation Services (the "MCS Survey"). The MCS Survey is a
broad-based survey of U.S. industrial companies, including most publicly held
paper and forest products companies and most companies represented in the S&P
Paper and Forest Products Group used in the stock performance graph. The MCS
Survey is used for the purpose because it provides detailed compensation
information by job classification (weighted to reflect the relative sizes of the
participating companies) for a diverse sample of participating companies. The
midpoint of the base salary range for each executive job classification is set
at the average salary for similar positions reported in the MCS Survey (subject
to adjustment by the Compensation Committee based on its subjective evaluation
of the relationship of various job classifications within the Corporation). In
determining recommendations for specific salaries for executive officers within
8
<PAGE>
the resulting pay ranges, the Compensation Committee considered the individual
officer's performance and the position of each individual's salary within the
respective pay range.
The Compensation Committee recommended and the Board of Directors
approved an increase in the CEO's salary of approximately 6.7% in 1995. As in
the case of executive officers generally, the Compensation Committee first
established a pay range for the CEO based on the MCS Survey. In determining a
recommendation for the CEO's salary within that range, in addition to the
considerations stated above for executive officers generally, the Compensation
Committee considered his achievement of individual goals, which primarily
involved the strategic direction of the Corporation and personal performance
objectives, and the Compensation Committee's subjective evaluation of the CEO's
performance based on the Corporation's financial performance, both in absolute
terms and in comparison with an internally-generated peer group of companies.
The peer group used for this purpose (the "Compensation Peer Group") consists of
17 paper and forest products companies with which the Corporation competes
(including most of the companies represented in the S&P Paper and Forest
Products Group used in the stock performance graph), which the Compensation
Committee believes is an appropriate comparison group for evaluating relative
financial performance. In evaluating the Corporation's financial performance,
several measures were reviewed, including absolute and relative earnings, return
on equity, cash flow generated by operations and stock price performance.
Without assigning relative weights to the different measures, the Compensation
Committee placed primary emphasis on cash flow generated by operations. The
Compensation Committee noted that the Corporation achieved record financial
results for 1995, and that the Corporation's financial results compared
favorably with the financial performance of the Compensation Peer Group. The
Compensation Committee also concluded that the CEO's achievement of his
individual goals substantially met the Compensation Committee's expectations.
The CEO's performance was evaluated in the aggregate without assigning specific
weights to the individual elements upon which his performance was evaluated.
Annual Incentive Program. The Compensation Committee also approves
annual incentive awards to executive officers in the form of bonuses under the
1993 Incentive Plan. The Compensation Committee reviewed and discussed
Chesapeake's 1995 financial performance and compared it to the Corporation's
1994 financial performance, the 1995 business plan, long-term standards of
financial performance and the relative financial performance of the Compensation
Peer Group (based on the same criteria discussed under "Base Salaries" above).
The Compensation Committee did not determine the awards based on pre-set
performance targets, but subjectively evaluated the various performance measures
and the aggregate amount deemed appropriate for incentive awards. Based on this
review, the Compensation Committee established a total award pool for 1995
incentive awards for executive officers other than the CEO and the President &
Chief Operating Officer. The Compensation Committee then allocated the pool
among the individual officers based on the recommendations of the CEO and a
subjective evaluation of each officer's individual performance and, where
applicable, the financial performance of certain business units of the
Corporation. The financial performance of the business units was evaluated
primarily based on earnings and cash flow generated by operations. The incentive
award for the CEO was $480,000 for 1995, which was approximately 100% of his
year-end base salary, compared to incentive awards of approximately 50% of
year-end base salary for 1994 and 11% for 1993. The CEO's incentive award was
based upon the Compensation Committee's subjective assessment of his individual
performance against his individual goals approved by the Compensation Committee
at the beginning of the year (primarily relating to achieving profitability,
managing cash flow and operating safely in compliance with applicable laws) and
the Compensation Committee's evaluation of the Corporation's financial
performance, both in absolute terms and relative to the Compensation Peer Group
(based on the same criteria discussed above under "Base Salaries"). The CEO's
performance was evaluated in the aggregate without assigning specific weights to
the individual elements upon which his performance was evaluated.
Long-Term Incentive Programs. The Compensation Committee also approves
long-term incentive awards to executive officers in the form of stock options
and Performance Shares. The Compensation Committee's recommendations result from
a subjective review of individual performance and competitive data supplied by
its consultant. The Compensation Committee first considers competitive data
supplied by its consultant with respect to average long-term incentive levels,
by job classification, derived from the consultant's proprietary data base of
long-term incentive practices of approximately 35 U.S. industrial companies,
which is weighted to reflect the relative sizes of the participating companies.
The data base does not include any of the companies represented in the S&P Paper
and Forest Products Group used in the stock performance graph. The Compensation
Committee relies on the consultant's data base for this purpose based in part on
the consultant's advice that the data base provides a fair comparison group for
determining competitive long-term incentive practices, and because the data base
provides a consistent methodology for valuing and comparing grants. In
determining recommendations for specific long-term incentive awards to executive
officers, the Compensation Committee adjusts the average reflected in the
consultant's data in light of its subjective evaluation of: the relationship of
various job
9
<PAGE>
classifications within the Corporation; contributions by each executive officer
to overall company performance and such officer's potential to contribute in the
future; and, in the case of stock option awards, prior grant levels.
Stock options are awarded to executives as a long-term incentive to
align the executives' interests with those of other stockholders and to
encourage significant stock ownership. In 1995, the Compensation Committee
granted options to purchase an aggregate of 208,475 shares of Common Stock to
the Corporation's employees, including options to purchase 24,000 shares of
Common Stock that were granted to the CEO (which, in the case of the CEO,
represented the same number of options as were granted in 1994). In determining
a recommendation for the CEO's option grants, in addition to the factors set
forth above for executive officers generally, the Compensation Committee
considered his individual performance against his individual goals approved by
the Compensation Committee at the beginning of the year (primarily relating to
sustained growth, cash flow generated by operations and returns for
stockholders) and the overall financial performance of the Corporation, both in
absolute terms and relative to the Compensation Peer Group (based on the same
criteria discussed under "Base Salaries" above). The Compensation Committee
noted that the Corporation achieved record financial results for 1995, and that
the Corporation's financial results compared favorably with the financial
performance of the Compensation Peer Group. The Compensation Committee also
concluded that the CEO's achievement of his individual goals substantially met
the Compensation Committee's expectations. The CEO's performance was evaluated
in the aggregate without assigning specific weights to the individual elements
upon which his performance was evaluated. The stock options become exercisable
in one-third installments on each of the first three anniversaries of the date
of grant. The grant price was the average of the closing prices of the
Corporation's Common Stock on the twenty days up to and including the date of
the grant. The option recipients, including the CEO, will receive value from
these grants only if the price of the Common Stock increases above the grant
price.
Performance Shares are awarded under the 1993 Incentive Plan, and
provide an incentive that focuses the executives' attention on the long-term
growth and financial success of the Corporation. A Performance Share award
represents the opportunity to earn up to the specified number of shares of
Common Stock over the course of the designated performance cycle by achieving
certain performance criteria specified by the Compensation Committee. During
1994, the Compensation Committee granted the CEO the opportunity to earn up to
17,500 Performance Shares for the 1994-1997 performance cycle. Performance
Shares were also granted to other executive officers. Each year, a portion of
the Performance Share award may be earned based upon the Corporation's cash flow
return on capital in excess of its cost of capital and its relative cash flow
return on capital compared to the Compensation Peer Group; provided, however,
that all Performance Shares will be deemed to have been earned in the event of a
"change in control" of the Corporation (as defined below under the caption
"Description of Compensation Plans"). As Performance Shares are earned, the
participant receives shares of Restricted Stock and Stock Units, each as defined
below under the caption "Description of Compensation Plans," that remain
forfeitable until the end of the performance cycle (except that such shares will
become transferable and nonforfeitable, and such units will become
nonforfeitable, upon the death, disability or retirement of the executive or
upon the occurrence of certain events following a "change in control" of the
Corporation). The CEO earned an estimated 9,625 Performance Shares during 1995.
Executive Compensation Committee
Wallace Stettinius, Chairman
William D. McCoy
John W. Rosenblum
John Hoyt Stookey
Harry H. Warner
10
<PAGE>
DESCRIPTION OF COMPENSATION PLANS
Executive officers of the Corporation were entitled to participate in
the compensation plans described below during 1995.
1993 INCENTIVE PLAN. The 1993 Incentive Plan provides that the
Compensation Committee or its delegate (the "Administrator") may, from time to
time, grant stock options, SARs, stock awards, Performance Shares or stock units
and may make incentive awards to the Corporation's key employees and officers
("Participants"). Options granted under the 1993 Incentive Plan may be either
incentive stock options ("ISOs") or nonqualified stock options. A stock option
entitles the Participant to purchase shares of Common Stock from the Corporation
at the option price. The option price will be fixed by the Administrator at the
time the option is granted, but the price cannot be less than the fair market
value of the stock on the date of grant in the case of an ISO, or 85% of that
amount in the case of a nonqualified stock option.
SARs may be granted in relation to option grants ("Corresponding SARs")
or independently of option grants. The difference between these two types of
SARs is that to exercise a Corresponding SAR, the Participant must surrender
unexercised that portion of the stock option to which the Corresponding SAR
relates. SARs entitle the Participant to receive the lesser of (i) the excess of
the fair market value of a share of Common Stock on the date of exercise over
the initial value of the SAR, or (ii) the initial value of the SAR. The initial
value of the SAR is the option price of the related option in the case of a
Corresponding SAR and the fair market value of a share of Common Stock on the
date of grant in the case of independent SARs.
Participants may also be awarded shares of Common Stock pursuant to a
stock award. Such shares may either be fully vested and transferable at the time
of grant, or may be non-transferable and subject to forfeiture until certain
conditions prescribed by the Administrator (such as a specific period of
employment with the Corporation) are satisfied ("Restricted Stock"). Shares of
Restricted Stock may either be granted alone or together with Restricted Stock
Units ("Stock Units") that are to be used to satisfy the Participant's income
and employment tax withholding obligations with respect to the related
Restricted Stock as such stock vests in accordance with its terms. The 1993
Incentive Plan also provides for the award of Performance Shares, stated with
reference to a specified number of shares of Common Stock, that may entitle the
Participant to receive shares of Restricted Stock together with Stock Units. The
Administrator will prescribe the requirements (such as a specified period of
employment with the Corporation or the attainment by the Corporation of certain
stated financial objectives) that must be satisfied before a Performance Share
award is earned. To the extent that Performance Shares are earned, the
obligation will be settled in shares of Restricted Stock and Stock Units. The
Corporation pays to holders of Stock Units amounts equal to the dividends that
would be payable on the number of shares of Common Stock represented thereby,
less applicable income and employment taxes required to be withheld.
The 1993 Incentive Plan also allows the Administrator to make incentive
awards to Participants on such terms and conditions as the Administrator
prescribes. To the extent that any incentive awards are granted, they may be
settled in cash, in Common Stock or by a combination of the two.
The 1993 Incentive Plan provides that outstanding options and SARs will
become exercisable, outstanding stock awards will be earned in full and
outstanding Performance Shares will be deemed to have been earned in their
entirety and converted into shares of Restricted Stock and Stock Units in the
event of a "change in control" of the Corporation (as defined below). Such
Restricted Stock and Stock Units, together with all other outstanding Restricted
Stock and Stock Unit awards, will thereafter become transferable and
nonforfeitable upon the earlier of (i) the vesting dates set forth in the
agreements governing their grant, or (ii) the termination of the Participant's
employment without cause or following the Participant's refusal to move to
another location or upon a material reduction in the Participant's compensation
or duties.
11
<PAGE>
SALARIED EMPLOYEES' STOCK PURCHASE PLAN. Under the Salaried Employees'
Stock Purchase Plan (the "Stock Purchase Plan"), approximately 1,600 full-time
salaried employees of the Corporation or one of its designated subsidiaries may
authorize a contribution of up to 5% of their basic compensation to the plan
through payroll deductions. At the end of each plan year, each participant's
employer makes a specific matching contribution, from which is deducted the
amount required to be withheld under income tax, FICA and similar laws. The
amount of the matching contribution, which may not exceed 60% of the
participant's contribution, or the manner in which the matching contribution
will be determined (such as a formula relating to the Corporation's financial
performance), is prescribed by the Compensation Committee prior to each plan
year. The matching contribution for the plan year that commenced April 1, 1995,
was set at 3.5 times the Corporation's return on equity, subject to a minimum
matching contribution of 20% and a maximum of 60%. The amount contributed by the
participants and the net amount contributed by their employers are applied to
purchase Common Stock.
401(K) SAVINGS PLAN FOR SALARIED EMPLOYEES. All salaried employees of
the Corporation who have attained age 18 are eligible to participate in the
Chesapeake Corporation 401(k) Savings Plan for Salaried Employees (the "Savings
Plan") after completing six months of employment. Plan participants may elect to
reduce their current compensation and have pre-tax contributions of 1% to 10% of
their gross earnings, up to maximum amounts allowable under applicable Internal
Revenue Service regulations ($9,240 in 1995), made on their behalf to the
Savings Plan. The Corporation makes a matching contribution equal to one-half of
the pre-tax contribution made on behalf of the employee. The maximum matching
contribution that may be made by the Corporation is 2 1/2% of the employee's
gross earnings.
BENEFITS CONTINUATION PLAN. The Chesapeake Corporation Salaried
Employee's Benefits Continuation Plan (the "Benefits Continuation Plan") will
provide benefits to all salaried employees of the Corporation and its
subsidiaries, including the executive officers named in the Summary Compensation
Table, who are terminated within twenty-four months of a "change in control" of
the Corporation (as defined below). The Benefits Continuation Plan provides
severance pay based on the participant's credited service and compensation, with
such severance pay not to exceed twenty-four months' compensation. The
participant's health and life insurance benefits also will be provided for the
period during which the participant receives severance pay or until the
participant obtains other employment, whichever is earlier.
LONG-TERM INCENTIVE PLAN. The Long-Term Incentive Plan (the "Long-Term
Plan") provides that the Compensation Committee may from time to time grant to
selected employees of the Corporation and its subsidiaries (i) shares of
Restricted Stock, either alone or together with Stock Units, and (ii) award
potentials (an "Award Potential"), stated with reference to a specified number
of shares of Common Stock, that may entitle the participant to receive shares of
Restricted Stock together with Stock Units. As an Award Potential is earned, the
participant receives shares of Restricted Stock and Stock Units totaling the
number of shares of Common Stock earned. The Compensation Committee, on the date
of grant of an Award Potential, may provide that the participant's right to
receive Restricted Stock and Stock Units in relation to an Award Potential will
be forfeited unless certain conditions (such as a specified period of employment
with the Corporation or the attainment by the Corporation of certain stated
financial objectives) are satisfied. The Corporation pays to holders of Stock
Units amounts equal to the dividends that would be payable on the number of
shares of Common Stock represented thereby, less applicable income and
employment taxes required to be withheld.
The Long-Term Plan provides that upon a "change in control" of the
Corporation (as defined below), each outstanding Award Potential will be deemed
to have been earned in its entirety and shall be converted into Restricted Stock
and Stock Units. Such Restricted Stock and Stock Units, together with all other
outstanding Restricted Stock and Stock Unit awards, will thereafter become
transferrable and nonforfeitable upon the earlier of (i) the vesting dates set
forth in the agreements governing their grant, or (ii) the termination of the
participant's employment without cause or following the participant's refusal to
move to another location or upon a material reduction in the participant's
compensation or duties.
12
<PAGE>
The Compensation Committee has not made any grants under the Long-Term
Plan since 1993. The Compensation Committee has indicated that it does not
intend to make any additional grants or awards under the Long-Term Plan in the
future.
DEFINITION OF "CHANGE IN CONTROL." For purposes of the 1993 Incentive
Plan, the Long-Term Plan and the Benefits Continuation Plan, "change in control"
means, in general, the occurrence of any of the following events: (i) any person
or group becomes the beneficial owner of 20% or more of the combined voting
power of the then-outstanding voting securities of the Corporation entitled to
vote generally in the election of directors (with certain exceptions); (ii)
those persons who were members of the Corporation's Board of Directors prior to
the adoption of such plan, and those persons whose subsequent nominations were
approved by such directors, cease to constitute a majority of the Board of
Directors (with certain exceptions); (iii) the stockholders of the Corporation
approve a reorganization, merger, share exchange or consolidation involving the
Corporation unless immediately following such transaction all or substantially
all of the persons who beneficially own Common Stock and any other
then-outstanding voting securities of the Corporation beneficially own at least
80% of the common stock and voting securities, respectively, of the surviving
entity in such transaction in substantially the same proportions as their
ownership immediately prior to such transaction; or (iv) the stockholders of the
Corporation approve a complete liquidation or dissolution of the Corporation or
the sale of all or substantially all of its assets (with certain exceptions).
The foregoing summary is qualified in its entirety by reference to the terms of
the 1993 Incentive Plan, the Long-Term Plan and the Benefits Continuation Plan,
copies of which will be provided promptly upon request and without charge to
each person to whom a copy of this proxy statement is delivered. Requests
should be directed to: J. P. Causey Jr., Secretary, Chesapeake Corporation,
1021 East Cary Street, Box 2350, Richmond, Virginia 23218-2350.
SECTION 16(A) COMPLIANCE. Section 16(a) of the Securities Exchange Act
of 1934, as amended, requires the Corporation's executive officers, directors
and persons owning more than 10% of the Common Stock to file reports of
ownership and changes in ownership of the Common Stock and derivative securities
of the Corporation with the SEC and the New York Stock Exchange. M. Katherine
Dwyer, J. Carter Fox and C. Elis Olsson each failed to file on a timely basis
one report of ownership and changes in ownership of the Common Stock during
1995.
13
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended December 31,
1993, 1994 and 1995, the cash compensation paid by the Corporation and its
subsidiaries, as well as certain other compensation paid or accrued, to the
Corporation's CEO and its four other most highly compensated executive officers
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUTS
Other
Name and Annual All Other
Principal Position Compen- Options/ LTIP Compen-
as of December 31, 1995 Year Salary Bonus sation(1) SARs Payouts (2) sation (3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Carter Fox 1995 $465,000 $480,000 24,000 $285,141 $ 8,813
Chairman & Chief 1994 433,000 225,000 24,000 149,160 9,990
Executive Officer 1993 408,000 44,000 20,000 49,547 10,497
Paul A. Dresser, Jr. 1995 326,365 330,000 16,500 195,525 7,183
President & Chief 1994 291,500 175,000 15,000 102,300 7,995
Operating Officer 1993 277,500 40,000 13,500 35,649 8,577
Thomas Blackburn 1995 207,000 200,000 7,500 97,763 6,000
Group Vice 1994 190,250 150,000 $25,731 7,500 51,150 43,286
President - 1993 177,000 27,000 6,000 15,836 7,100
Kraft Products
Samuel J. Taylor 1995 209,000 180,000 7,500 97,763 6,039
Group Vice 1994 192,000 125,000 7,500 51,150 6,457
President - 1993 175,750 44,000 6,000 17,825 7,062
Packaging
Andrew J. Kohut 1995 196,971 185,000 7,500 65,175 5,767
Group Vice 1994 166,500 110,000 6,000 34,089 6,120
President - 1993 153,000 38,000 4,500 9,894 6,717
Finance & Strategic
Development &
Chief Financial
Officer
</TABLE>
- --------------------
(1) None of the Named Executive Officers received perquisites or other
personal benefits, securities or property with an aggregate value in excess of
the lesser of $50,000 or 10% of the total of his salary and bonus shown above.
(2) The amounts appearing in the Long-Term Incentive Plan ("LTIP")
payouts column represent the value of Restricted Stock and Stock Units earned
under the 1993 Incentive Plan for 1995 (estimated) and 1994 (actual) and the
actual amounts earned under the Long-Term Plan for 1993. The amounts are based
on the closing price for Common Stock of $29.625, $33.00 and $25.50 on December
31, 1995, 1994 and 1993, respectively. As of December 31, 1995, the Named
Executive Officers held the following shares of Restricted Stock of the
Corporation: Mr. Fox, 2,893 shares; Mr. Dresser, 1,984 shares; Mr. Blackburn,
992 shares; Mr. Taylor, 992 shares; and Mr. Kohut, 661 shares. Each of the Named
Executive Officers earned shares of Restricted Stock under the 1993 Incentive
Plan for 1995; however, the definitive number of such shares earned will not be
determined, and such shares will not be issued, until later in 1996. None of
such shares will vest, in whole or in part, in less than three years from the
date of grant of the underlying Performance Share award (except upon the death,
disability or retirement of the executive or upon the occurrence of certain
events following a "change in control" of the Corporation, as described above
under the caption "Description of Compensation Plans"). Dividends will be paid
on shares of Restricted Stock at the same rate and times as on all other shares
of Common Stock.
(3) "All Other Compensation" for 1995 includes the following: (a) the
Corporation's 50% matching contributions under the Savings Plan of $3,750 on
behalf of each of the Named Executive Officers; and (b) the Corporation's
matching contribution under the Stock Purchase Plan of the following amounts
made to the Named Executive Officers: Mr. Fox, $5,063; Mr. Dresser, $3,433; Mr.
Blackburn, $2,250; Mr. Taylor, $2,289; and Mr. Kohut, $2,017.
14
<PAGE>
STOCK OPTIONS AND SARS
The following table contains information concerning the grants of
options and SARs made during 1995 under the 1993 Incentive Plan to the Named
Executive Officers.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
-------------------------------------------
% of
Total 0% 5% (4) 10%
Number of Options/
Securities SARs (Assumes (Assumes
Underlying Granted to a Common a Common (4)
Options/ Employees Exercise Expira- Stock Stock
SARs in Fiscal or Base tion Price of Price of (Assumes
Name Granted (2) Year Price (3) Date $32.98) $53.72) a Common
$85.54)
<S> <C> <C> <C> <C> <C> <C> <C>
J. Carter Fox 24,000 11.5% $32.98 8/6/05 $0 $497,760 $1,261,440
Paul A. Dresser, Jr. 16,500 7.9 32.98 8/6/05 0 342,210 867,240
Thomas Blackburn 7,500 3.6 32.98 8/6/05 0 155,550 394,200
Samuel J. Taylor 7,500 3.6 32.98 8/6/05 0 155,550 394,200
Andrew J. Kohut 7,500 3.6 32.98 8/6/05 0 155,550 394,200
</TABLE>
- --------------------
(1) The potential realizable value is based upon assumed future prices
for the Common Stock that are derived from the specified assumed rates of
appreciation. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the actual future performance of the Common Stock.
There can be no assurance that the amounts reflected in this table will be
achieved.
(2) All grants consisted of nonqualified stock options granted under
the 1993 Incentive Plan. These grants become exercisable in one-third
installments on each of the first three anniversaries of the date of grant
(August 7, 1995).
(3) The exercise price was set at the average of the closing prices of
Common Stock on the twenty trading days up to and including the date of the
grant. The exercise price may be paid in cash or in Common Stock valued at fair
market value on the date preceding the date of exercise, or a combination of
cash and Common Stock.
(4) The 5% and 10% assumed annual rates of stock price appreciation
used to calculate potential option gains shown above are required by the rules
of the SEC. The actual gains that will be realized, if and when the Named
Executive Officers exercise the options granted in 1995, will be dependent on
the future performance of the Common Stock. To put the hypothetical gains shown
in the table into perspective, the following is provided:
Annual Rate of Stock Price
Appreciation
5% 10%
------------ ----
Resulting stock price based on $32.98 starting
price $ 53.72 $ 85.54
Per share gain 20.74 52.56
Aggregate hypothetical gain that would be
realized by all stockholders (based on 23,819,
shares outstanding on August 7, 1995) 494,014,584 1,251,948,242
Aggregate hypothetical gain on all 1995 options
granted to the Named Executive Officers if
$53.72 and $85.54 prices, respectively, are achieved 1,306,620 3,311,280
Hypothetical aggregate gains for the Named Executive
Officers as a percentage of all
stockholders' gains 0.3% 0.3%
15
<PAGE>
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options and SARs during 1995, and
unexercised options and SARs held by them on December 31, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND YEAR-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at at Year-End (1)
Year-End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable (2) Unexercisable (2)
---- ----------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
J. Carter Fox 18,000 $275,625 92,433/46,667 $772,679/$98,877
Paul A. Dresser, Jr. 14,500 225,163 24,000/31,000 144,245/65,288
Thomas Blackburn 9,500 119,525 0/14,500 0/30,025
Samuel J. Taylor 3,600 41,659 24,000/14,500 190,533/30,025
Andrew J. Kohut 0 0 13,500/13,000 101,908/22,973
</TABLE>
- --------------------
(1) The value of unexercised in-the-money options/SARs represents the
positive spread between the December 31, 1995, closing price of Common Stock
($29.625) and the exercise price of any unexercised options and SARs.
(2) The shares represented could not be acquired by the named executive
as of December 31, 1995, and future exercisability is subject to the executive
remaining employed by the Corporation for up to three years from the date of
grant, subject to acceleration for retirement, death or total disability of the
executive or a "change in control" of the Corporation (as defined in the 1993
Incentive Plan and the 1987 Stock Option Plan).
PENSION PLANS TABLE
The following table illustrates the approximate aggregate annual
retirement benefits payable to covered participants retiring at age 65 pursuant
to the Corporation's funded retirement plan for its salaried employees and
unfunded supplemental retirement plan for certain officers and other key
employees.
<TABLE>
<CAPTION>
Estimated Annual Retirement Benefit at Age 65
--------------------------------------------------------------------
Years of Credited Service (2)
--------------------------------------------------------------------
Annual
Compensation (1) 15 20 25 30 35
- ------------ --- --- --- --- --
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 60,000 $ 80,000 $ 96,000 $112,000 $128,000
400,000 120,000 160,000 192,000 224,000 256,000
600,000 180,000 240,000 288,000 336,000 384,000
800,000 240,000 320,000 384,000 448,000 512,000
1,000,000 300,000 400,000 480,000 560,000 640,000
1,200,000 360,000 480,000 576,000 672,000 768,000
</TABLE>
- -----------------
(1) Annual compensation is the average of the highest five consecutive
years' salary and bonus paid during the last ten consecutive years and, in the
case of the Named Executive Officers, approximates such amounts as set forth in
the Summary Compensation Table.
(2) The years of credited service for the Named Executive Officers as
of March 1, 1996, were: Mr. Fox, 32; Mr. Dresser, 14; Mr. Blackburn, 5; Mr.
Taylor, 17; and Mr. Kohut, 16 (Mr. Taylor has 10 years credited service under
the supplemental retirement plan).
The above amounts are stated as payments in the form of a life annuity.
Other actuarially equivalent forms of benefit may be selected. The amounts shown
in the table are subject to reduction for a portion of Social Security benefits.
16
<PAGE>
CERTAIN TRANSACTIONS
C. Elis Olsson, a member of the Board of Directors, served during 1995
as Midwest Regional Sales Manager for Color-Box, Inc., a subsidiary of
Chesapeake Packaging Co. In late 1995, he was named Vice President-Operations
for the Color-Box division to be located in Pelahatchie, Mississippi. During
1995, the total cash compensation paid by the Corporation and its subsidiaries
to Mr. Olsson (including bonus, reimbursement of moving expenses and the
Corporation's contributions under certain employee benefit plans) was $114,110.
Mr. Olsson's compensation was consistent with that paid by the Corporation and
its subsidiaries in 1995 to other employees with similar job titles and
responsibilities.
PERFORMANCE GRAPH
The following graph compares the cumulative total return for the Common
Stock to the cumulative total returns for the S&P 500 Composite Index and the
S&P Paper & Forest Products Group Index for the Corporation's last ten fiscal
years. The graph assumes an investment of $100 in the Common Stock and in each
index as of December 31, 1990, and that all dividends were reinvested.
[GRAPH APPEARS HERE]
(December 31st of each year)
'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95
CSK 82 109 109 136 140 100 182 161 207 276 254
S&P 500 54 64 67 78 103 100 130 140 155 157 215
S&P Paper & Forest 60 76 83 91 111 100 127 145 160 167 183
17
<PAGE>
PROPOSAL TO APPROVE THE
DIRECTORS' STOCK OPTION AND DEFERRED COMPENSATION PLAN
(PROPOSAL 2)
The Corporation proposes that the stockholders approve the 1996
Directors' Plan. The Board of Directors adopted the 1996 Directors' Plan on
February 13, 1996, subject to the approval of stockholders.
The following paragraphs summarize the more significant features of the
1996 Directors' Plan. The summary is subject, in all respects, to the terms of
the 1996 Directors' Plan, which terms are incorporated herein by reference. The
Corporation will provide promptly, upon request and without charge, a copy of
the full text of the 1996 Directors' Plan to each person to whom a copy of this
proxy statement is delivered. Requests should be directed to: J. P. Causey Jr.,
Secretary, Chesapeake Corporation, 1021 East Cary Street, Box 2350, Richmond,
Virginia 23218-2350 (804-697-1000).
SUMMARY OF THE 1996 DIRECTORS' PLAN
Purposes. In 1992 the stockholders approved the 1992 Directors' Plan.
The 1992 Directors' Plan provides for the grant of stock options to non-employee
directors, as more fully described above under the caption "Compensation of
Directors." The Board of Directors believes that the 1992 Directors' Plan has
promoted a greater identity of interest between its participants and the
stockholders. The 1992 Directors' Plan will terminate, however, with the option
grants scheduled for May 1, 1996.
The Board of Directors believes that the 1996 Directors' Plan will
serve the same objectives as the 1992 Directors' Plan through the grant of
options to purchase Common Stock. Those objectives will also be served by
affording each participant the opportunity to reduce the cash fees otherwise
payable to the director in return for the right to receive Common Stock in the
future.
Eligibility. Each director who is not an employee of the Corporation is
eligible to participate in the 1996 Directors' Plan. Options will be granted
automatically to each participant. A participant will be eligible to receive the
optional deferred benefit only if he submits a Deferral Election Form.
Options. Each participant will be granted an option to purchase Common
Stock on May 1 of each year (the "Grant Date"). The first Grant Date will be May
1, 1997, and options granted on that date will cover 1,500 shares of Common
Stock. The number of shares of Common Stock subject to successive grants will
increase by 200 shares each year. The final Grant Date will be May 1, 2007, and
options granted on that date will cover 3,500 shares. The number of shares of
Common Stock covered by such options reflects assumptions regarding (i) the
future amount of directors' fees that would be approved but for the adoption of
the 1996 Directors' Plan, and (ii) the fair market value of the option
privilege.
The option price per share of Common Stock will be the average closing
sales price of the Common Stock on the New York Stock Exchange for the twenty
trading days immediately preceding the Grant Date. The option price may be paid
in cash, in a cash equivalent, or by tendering shares of Common Stock.
Options will become exercisable on the day before the annual meeting of
the Corporation's stockholders that next follows the Grant Date. The
exercisability of options will be accelerated in the event of the participant's
death or disability or in the event of a "change in control" (as defined above
under the heading "Description of Compensation Plans"). Options that are not
exercisable on the date that a participant ceases to be a director will be
forfeited. No option may be exercised more than ten years after its Grant Date.
Deferred Benefits. A participant's Deferral Election Form may direct
that all or part of the participant's retainer fee, meeting fees or both be
deferred under the 1996 Directors' Plan. Deferred fees will be credited to
either a deferred cash account or a deferred stock account, as directed by the
participant.
Deferred cash accounts are not funded and are maintained for
recordkeeping purposes only. Interest will be credited to a participant's
deferred cash account on the first day of each month. The applicable interest
rate will be the prime rate established as of the last business day of the
preceding calendar quarter by the Corporation's principal lender. Interest will
be credited through the end of the month preceding the month in which a deferred
cash benefit is paid.
18
<PAGE>
Deferred fees that are credited to the participant's deferred stock
account will be recorded by reference to the number of whole and fractional
shares of Common Stock that could have been purchased with the deferred amount,
based on the fair market value of the Common Stock on (i) for the retainer fee,
the date that the deferred retainer fee would have been paid but for the
Deferral Election Form, and (ii) for meeting fees, the first day of the month
following the date the deferred meeting fee would have been paid. Additional
credits will be made to the deferred stock account, in whole and fractional
shares of Common Stock, based on the value of dividends paid on the Common Stock
and the fair market value of the Common Stock on the date that the dividends are
paid; provided, however, that such additional credits will be made only through
the end of the year preceding the distribution of a deferred stock benefit.
Deferred stock accounts are not funded, and no actual shares of Common Stock are
purchased or held by or on behalf of the accounts; such accounts are maintained
for recordkeeping purposes only.
Each participant's Deferral Election Form will also specify when
amounts attributable to each year's deferred fees will be paid. Distributions
cannot begin within two years of the beginning of the deferral year.
Distributions must begin no later than the date that the participant attains the
age at which there are no earnings limitations on the receipt of full social
security benefits. With the consent of the Corporation's Secretary, who has
responsibility for administering the 1996 Directors' Plan, a participant may
accelerate distributions in the event of the participant's disability (as
defined by reference to Section 22(e)(3) of the Internal Revenue Code) or a
financial emergency beyond the participant's control.
Deferred benefits under the 1996 Directors' Plan will be paid in a
single sum or in installments over a period not extending beyond ten years.
Deferred cash benefits will be paid in cash and deferred stock benefits will be
paid in whole shares of Common Stock and cash representing the value of any
fractional share. Such shares of Common Stock may be newly issued shares or
shares purchased by the Corporation on the open market. The total number of
shares issuable under the 1996 Directors' Plan is not presently determinable and
will depend on (i) with respect to shares of Common Stock issuable upon the
exercise of Options granted under the plan, the number of non-employee directors
of the Corporation over the term of the plan, and (ii) with respect to shares of
Common Stock issuable upon the distribution of deferred stock benefits under the
plan, the amounts of compensation that such directors elect to defer, the amount
of dividends paid upon shares credited to deferred stock accounts and the price
of the Common Stock at the time deferred fees and dividends are credited.
AMENDMENT AND TERMINATION
The Board of Directors may amend or terminate the 1996 Directors' Plan
at any time; provided, however, that no amendment will become effective without
the approval of stockholders if the amendment (i) materially increases the
number of shares of Common Stock that may be issued under the 1996 Directors'
Plan, (ii) materially increases the benefits accruing to participants under the
1996 Directors' Plan or (iii) materially changes the class of individuals who
may participate in the 1996 Directors' Plan. In addition, the Board of Directors
may amend the 1996 Directors' Plan only once within a six month period other
than to comply with changes in the Internal Revenue Code or the Employee
Retirement Income Security Act of 1974.
FEDERAL INCOME TAX CONSEQUENCES
The Corporation has been advised by counsel regarding the federal
income tax consequences of the 1996 Directors' Plan. No income is recognized by
a participant on account of the grant of an Option. Income is recognized on the
date that an Option is exercised. The amount of the income recognized by the
participant is equal to the difference between the fair market value of the
shares received upon the exercise and the Option price paid by the participant.
That income is taxed as ordinary income. Any gain or loss that is recognized on
a subsequent disposition of the shares is taxed as long-term or short-term
capital gain or loss, as applicable.
Deferred fees are includible in income when the deferred cash benefit
or deferred stock benefit is paid to the participant. The income is equal to the
amount of cash received and the fair market value of any stock that is received
in the distribution. That income is taxed as ordinary income. Any gain or loss
that is recognized on a subsequent disposition of shares issued as a deferred
stock benefit is taxed as long-term or short-term capital gain or loss, as
applicable.
The Corporation is entitled to claim a federal income tax deduction on
account of the exercise of an Option. The amount of the deduction is equal to
the amount of ordinary income recognized by the participant. The Corporation is
also
19
<PAGE>
entitled to claim a federal income tax deduction on account of the payment of
deferred benefits, in an amount equal to the ordinary income recognized by the
participant.
NEW PLAN BENEFITS
The Corporation cannot determine the amounts that participants will
elect to defer, or the interest or dividends that will be credited to
participants' accounts, for the plan year commencing July 1, 1996. The
Corporation also cannot determine the amounts that participants would have
elected to defer, or the interest or dividends that would have been credited to
participants' accounts, if the 1996 Directors' Plan had been in effect for any
period prior to June 1, 1996.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2 TO
APPROVE THE CHESAPEAKE CORPORATION DIRECTORS' STOCK OPTION AND DEFERRED
COMPENSATION PLAN
SELECTION OF AUDITORS
(PROPOSAL 3)
The Board of Directors has appointed Coopers & Lybrand L.L.P. to serve
as independent certified public accountants of the Corporation and its
subsidiaries for 1996. Stockholders are requested to ratify this appointment.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
meeting and will be given an opportunity to make a statement and to respond to
appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 3 TO
RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR 1996.
20
<PAGE>
MATTERS TO BE PRESENTED FOR INCLUSION IN THE PROXY
STATEMENT FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS
Any proposal submitted by a stockholder for inclusion in the proxy
materials for the annual meeting of stockholders in 1997 must be delivered to
the Corporation at its principal office in Richmond, Virginia not later than
November 22, 1996.
OTHER MATTERS
As of the date of this proxy statement, management knows of no business
that will be presented for consideration at the annual meeting of stockholders
other than that stated herein. As to other business, if any, and matters
incident to the conduct of the meeting that may properly come before the
meeting, it is intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the best judgment of the person or persons
voting the proxies.
STOCKHOLDERS, WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL MEETING
IN PERSON, ARE REQUESTED TO MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
TO THE CORPORATION. PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE ACCOMPANYING
PROXY. STOCKHOLDERS MAY REVOKE THEIR PROXY BY DELIVERING A WRITTEN NOTICE OF
REVOCATION TO THE CORPORATION AT ITS PRINCIPAL OFFICE TO THE ATTENTION OF J.P.
CAUSEY JR., SECRETARY, AT ANY TIME BEFORE THE PROXY IS EXERCISED.
J. P. Causey Jr.
Secretary
March 22, 1996
21
<PAGE>
NOTICE
AND
PROXY STATEMENT
FOR THE
ANNUAL MEETING
OF
STOCKHOLDERS
TO BE HELD
APRIL 24, 1996
[LOGO]
<PAGE>
[LOGO]Chesapeake
April 8, 1996
A REMINDER
Dear Stockholder:
Proxy material for the annual meeting of stockholders of Chesapeake
Corporation was sent to you under date of March 22, 1996.
According to our records, your proxy for this meeting, which will be
held on Wednesday, April 24, 1996, has not yet been received. Regardless of
the number of shares you may own, it is important that they be represented.
If you have not already returned your proxy card, I urge you to sign, date
and mail the enclosed duplicate promptly. If you returned the original card but
did so more than a week ago, I request that you sign, date and mail the enclosed
duplicate.
Sincerely,
/s/ J. P. Causey Jr.
J. P. Causey Jr.
Secretary
Chesapeake Corporation
James Center II, 1021 E. Cary St., Box 2350, Richmond, VA 23218-2350
804/697-1000 Fax 804/697-1199
<PAGE>
PROXY CHESAPEAKE CORPORATION PROXY
RICHMOND, VIRGINIA 23218
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders, April 24, 1996
The undersigned hereby appoints J. Carter Fox, Wallace Stettinius and Harry H.
Warner and each of them as proxies (and if the undersigned is a proxy, as
substitute proxies), each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all of the shares
of Common Stock of the Corporation held of record by the undersigned on March 8,
1996, at the annual meeting of stockholders to be held at 11:00 a.m. on April
24, 1996, or any adjournments thereof.
PLEASE MARK, SIGN, DATE AND
MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued on reverse side.)
<PAGE>
CHESAPEAKE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
<TABLE>
<S> <C> <C> <C> <C>
1. ELECTION OF FOUR DIRECTORS FOR A THREE-YEAR TERM: For All
Class I (to serve until the 1999 annual meeting of For Withhold Except those whose name(s) appear below.
stockholders) [ ] [ ] [ ]
Nominees: William D. McCoy, John W. Rosenblum,
John Hoyt Stookey and Richard G. Tilghman _______________________________________
For Against Abstain 4. In their discretion, the proxies are
2. To approve the Chesapeake Corporation Directors' Stock [ ] [ ] [ ] authorized to vote upon such other
Option and Deferred Compensation Plan. business and matters incident to
the conduct of the meeting as may
properly come before the meeting.
For Against Abstain
3. To ratify the appointment of Coopers & Lybrand L.L.P. as [ ] [ ] [ ] The Board of Directors unanimously
independent accountants for 1996. recommends a vote FOR each of the
above proposals.
This proxy when properly executed will
be voted in the manner directed
herein by the undersigned
stockholder. If no direction is
made, this proxy will be voted for
each proposal presented.
Dated:___________________________, 1996
Signature(s)___________________________
---------------------------------------
Please sign exactly as your name
appears. Joint owners should each sign
personally. Where applicable, indicate
your official position or
representative capacity.
</TABLE>
Detach Admittance Card Before Mailing Proxy
[CHESAPEAKE CORPORATION LOGO]
ADMITTANCE CARD
ANNUAL STOCKHOLDERS MEETING
APRIL 24, 1996, 11:00 A.M.
FAIRGROUNDS ON STRAWBERRY HILL
600 EAST LABURNUM AVENUE
RICHMOND, VIRGINIA
PLEASE PRESENT THIS CARD AT THE DOOR TO GAIN ADMITTANCE.
<PAGE>
[LOGO]CHESAPEAKE March 22, 1996
Dear Fellow Employee:
The instruction card to vote your Chesapeake Corporation common stock held in
the Chesapeake Corporation 401(k) Savings Plan for Salaried Employees, the
Chesapeake Packaging Co. 401(k) Savings Plan for Hourly Employees, or the
Chesapeake Paper Products Company 401(k) Plan for Hourly Employees (the "Plans")
is on the lower portion of this page. It is important that you instruct the
trustee to vote your shares held in the Plans by completing the instruction card
below and returning it to The Bank of New York.
As a participant in the Plans, you are entitled to attend the annual meeting of
stockholders of Chesapeake Corporation to be held at the Exhibition Hall at the
Fairgrounds on Strawberry Hill, 600 East Laburnum Avenue, Richmond, Virginia, on
Wednesday, April 24, 1996, at 11:00 A.M. If you plan to attend the meeting and
have not otherwise requested an admittance card, you may request an admittance
card by contacting the corporate office in Richmond at (804) 697-1000.
Sincerely,
J. P. Causey Jr.
Secretary
DETACH PROXY CARD HERE
The Board of Directors Unanimously Recommends a Vote FOR Each of the Following
Proposals:
<TABLE>
<S> <C> <C> <C>
(1) Election of Four Directors For a Three FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
Year Term. Class I (To serve until the listed below. for all nominees listed below.
1999 annual meeting of stockholders):
Nominees: William D. McCoy, John W. Rosenblum, John Hoyt Stookey and Richard G. Tilghman.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's name in
the space provided below.)
*Exceptions_______________________________________________________________________________________________________________________
(2) To approve the Chesapeake Corporation Directors' Stock (3) To ratify the appointment of Coopers & Lybrand L.L.P. as
Option and Deferred Compensation Plan. independent accountants for 1996.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
(4) In their discretion, the proxies are authorized to vote upon such other
business and matters incident to the conduct of the meeting as may properly Address Change and
come before the meeting and any adjournments. or Comments Mark Here
Please sign exactly as name is
printed to the left.
Dated. __________________, 1996
-------------------------------
-------------------------------
Votes MUST be indicated
(Please sign, date and return this card in the enclosed envelope.) (x) in Black or Blue ink. X
<PAGE>
TO: THE BANK OF NEW YORK
Trustee of the Chesapeake Corporation 401(k) Savings
Plan for Salaried Employees, the Chesapeake Packaging Co.
401(k) Savings Plan for Hourly Employees and the Chesapeake Paper
Products Company 401(k) Plan for Hourly Employees
With respect to the shares of Common Stock of Chesapeake Corporation
represented by my interest in the Trust Funds of the Chesapeake Corporation
401(k) Savings Plan for Salaried Employees, the Chesapeake Packaging Co. 401(k)
Savings Plan for Hourly Employees, and the Chesapeake Paper Products Company
401(k) Plan for Hourly Employees, you are directed to sign and forward a proxy
in the form being solicited by the Board of Directors of Chesapeake Corporation
to instruct the persons named therein, or their substitutes, to vote in
accordance with the proxy statement as designated on the reverse.
PLEASE SIGN AND DATE ON THE REVERSE
(Continued on the reverse side)
CHESAPEAKE CORPORATION
P.O. BOX 11241
NEW YORK, N.Y. 10203-0241
<PAGE>
VOTING INSTRUCTIONS
TO: ASSOCIATED BANK
Trustee of the Wisconsin Tissue Mills Inc. 401(k) Savings Plan for Hourly
Employees
With respect to the full shares of Common Stock of Chesapeake
Corporation allocated to my account in the Wisconsin Tissue Mills Inc. 401(k)
Savings Plan for Hourly Employees, you are directed to sign and forward a
proxy in the form being solicited by the Board of Directors of Chesapeake
Corporation to instruct the persons named therein, or their substitutes, to
vote in accordance with the proxy statement as designated below.
The Board of Directors unanimously recommends a vote FOR each of the
following proposals:
The Board of Directors Unanimously Recommends a Vote FOR Each of the Following
Proposals:
(1) Election of Four Directors For a Three Year Term. Class I (To serve until
the 1999 annual meeting of stockholders): William D. McCoy, John W.
Rosenblum, John Hoyt Stookey and Richard G. Tilghman.
[ ] FOR [ ] WITHHOLD [ ] EXCEPTIONS: Withhold
all nominees listed above vote for all nominees vote on the following
nominee(s) only
-----------------------
(2) To approve the Chesapeake Corporation Directors' Stock Option and Deferred
Compensation Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion, the proxies are authorized to vote upon such other
business and matters incident to the conduct of the meeting as may properly
come before the meeting and any adjournments.
PLEASE MARK ALL
CHOICES LIKE THIS [X]
Signature_____________________________ Date______________________, 1996.
PLEASE MAIL THESE INSTRUCTIONS IN THE ENCLOSED ENVELOPE TO ASSOCIATED BANK
</TABLE>
