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) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) 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:
<PAGE>
[L O G O] Chesapeake
Corporation
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 21, 1997
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 23, 1997, at 11:00 A.M., for the following purposes:
(1) to elect four directors to serve until the 2000 annual meeting of
stockholders;
(2) to approve the Chesapeake Corporation 1997 Incentive Plan (the
"1997 Incentive Plan");
(3) to ratify the appointment by the Board of Directors of Coopers &
Lybrand L.L.P. as independent accountants for 1997; 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 7, 1997,
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
[L O G O] Chesapeake
Corporation
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 23, 1997, and at any
adjournments of such meeting. An annual report, including financial statements
for the year ended December 31, 1996, 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 7, 1997, 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 23,434,708 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 1997 Incentive 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 1997 Incentive Plan. Broker Shares that are not voted with respect
to the approval of the 1997 Incentive 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 21, 1997.
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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 II to
hold office for a term of three years and until their respective successors are
duly elected and qualified.
Information Concerning Nominees
Name and Age; Director
Principal Occupation or Continuously
Employment During Last Five Years Since
Class II (to serve until the 2000 annual meeting of stockholders)
C. Elis Olsson, 32 1994
PHOTO Vice President - Operations, Mid-South Division,
Color-Box, Inc., a subsidiary of the Corporation
(since 1995) and former Midwest Regional Sales
Manager, Color-Box, Inc. (1994- 1995), Assistant
to the President, Chesapeake Packaging Co., a
subsidiary of the 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
the Corporation.
Wallace Stettinius, 64 1980
PHOTO 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.
Joseph P. Viviano, 58 1988
PHOTO 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; Director of Huffy
Corporation.
Harry H. Warner, 61 1978
PHOTO Financial Consultant; Director of Allied Research
Corporation, American Filtrona Corporation and
Pulaski Furniture Corporation.
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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. OLSSON, STETTINIUS, VIVIANO AND WARNER TO THE BOARD OF
DIRECTORS TO SERVE UNTIL THE 2000 ANNUAL MEETING.
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Directors Continuing in Office
There are eight directors whose present term of office will continue
until 1998 or 1999, 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.
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)
William D. McCoy, 67 1985
PHOTO Retired (since 1994); former Chairman of the
Board, Chief Executive Officer and Director, Koch
Label Co., a consumer products label printing
company.
John W. Rosenblum, 53 1984
PHOTO Dean, Jepson School of Leadership Studies,
University of Richmond (since 1996); former Tayloe
Murphy Professor of Business Administration
(1993-1996) and former Dean (1982- 1993), 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.
John Hoyt Stookey, 67 1990
PHOTO Nonexecutive Chairman of the Board and Director of
Suburban Propane Partners, L.P., a propane
distribution company (since 1996); former
Nonexecutive Chairman of the Board, Quantum
Chemical Corporation, a subsidiary of Hanson
Industries, a British industrial management
corporation (1993-1995), and former 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.
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Richard G. Tilghman, 56 1986
PHOTO Chairman of the Board, Chief Executive Officer and
Director, Crestar Financial Corporation, a bank
holding company.
Class III (to serve until the 1998 annual meeting of stockholders)
M. Katherine Dwyer, 48 1995
PHOTO President, Revlon Cosmetics U.S.A. and Senior Vice
President, Revlon, Inc., 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) and Vice President
- Marketing, Clairol, Inc. (1991-1993).
J. Carter Fox, 57 1980
PHOTO Chairman, President & Chief Executive Officer of
the 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) of the Corporation; Director of
Crestar Financial Corporation.
Robert L. Hintz, 66 1985
PHOTO 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.
Frank S. Royal, 57 1990
PHOTO Physician; Director of Crestar Financial
Corporation, CSX Corporation, Dominion Resources,
Inc. and Columbia/HCA Healthcare Corporation.
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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 five
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,
Rosenblum, Tilghman and Viviano. During the last year, there were three 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, Royal, Stettinius, Stookey and Warner. During the
last year, there were six 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 was one meeting 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 1998 annual meeting must be received in writing by the Secretary
of the Corporation no earlier than January 5, 1998, and no later than January
30, 1998, 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 1996, all directors attended at least 75% of the meetings of the
Board of Directors and the committees to which they were assigned, except Mr.
Stookey. 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.
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Compensation of Directors
Employee directors of the Corporation are not paid for their service on
the Board of Directors or any Board committee. Non-employee directors receive 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
chairman of the Committee of Outside Directors receives an additional annual
retainer of $30,000 and the other committee chairmen each receive an additional
annual retainer of $5,000.
Prior to 1997, the Corporation had a Directors' Deferred Compensation
Plan under which directors could 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
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 received an annual award of an
option to purchase Common Stock (an "Automatic Award"). The number of shares of
Common Stock covered by Automatic Awards reflected 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, 1996, an Automatic Award of
a stock option to purchase 750 shares of Common Stock at an exercise price of
$32.24 per share. Unless the director's service terminates earlier for reasons
other than death or disability, these options are first exercisable on April 22,
1997, and remain exercisable for a period of ten years from their date of grant.
Non-employee directors were 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 received an option
to purchase 125 shares of Common Stock for each $1,000 of foregone retainer.
Elective Awards are first exercisable on the day before 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 was the average closing sales price of the
Common Stock for the twenty trading days before the October 31st that
immediately preceded the date of grant. No Automatic Awards will be made under
the 1992 Directors' Plan after December 31, 1996 and Elective Awards will not be
made for compensation after December 31, 1996.
Effective January 1, 1997, non-employee directors participate in the
Chesapeake Corporation Directors' Stock Option and Deferred Compensation Plan,
which was approved by the stockholders at the 1996 annual meeting (the "1996
Plan"). The 1996 Plan provides that each non-employee director will receive an
annual grant of stock options each May 1st beginning May 1, 1997, and ending May
1, 2007. The number of shares of Common Stock covered by such options reflects
assumptions made in 1996 regarding (i) the future amount of directors' fees that
would be approved but for the adoption of the 1996 Plan, and (ii) the fair
market value of the option privilege. An option to purchase 1,500 shares of
Common Stock will be granted to each non-employee director on May 1, 1997. The
exercise price of such options will be the average closing price of the Common
Stock for the 20 trading days preceding May 1, 1997. Such options will become
exercisable on the day before the 1998 annual meeting of stockholders, except
that the exercisability of such options will be accelerated in the event of the
director's death or disability or in the event of a "change in control" (as
defined below 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. In addition, non-employee directors may elect to defer all or part
of their annual retainer or meeting fees, or both, under the 1996 Plan. The
deferred fees may be held, at the election of the participant, in either a
deferred cash account or a deferred stock account. Deferred cash accounts are
not funded and are maintained for recordkeeping purposes only. Interest will
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be credited to a participant's deferred cash account based on the prime rate
established from time to time by the Corporation's principal lender. 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. 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. 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.
The cash retainer and attendance fees described above, together with
annual awards under the 1996 Plan, represent the Corporation's standard
arrangements for compensation of its non-employee directors.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of February 1, 1997, 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>
Thomas Blackburn...................... 26,227 26,227
J.P. Causey Jr........................ 41,970 2,346 44,316
M. Katherine Dwyer.................... 625 625
J. Carter Fox......................... 236,305 23,658 259,963 1.1%
Robert L. Hintz....................... 6,650 6,650
Andrew J. Kohut....................... 30,299 5,863 36,162
William D. McCoy...................... 4,750 4,750
C. Elis Olsson........................ 39,833 33,082(4) 72,915
William A. Raaths..................... 23,443 910 24,353
John W. Rosenblum..................... 2,750 2,750
Frank S. Royal........................ 6,750 6,750
Wallace Stettinius.................... 7,750 7,750
John Hoyt Stookey..................... 2,750 2,750
Richard G. Tilghman................... 3,248 1,308 4,556
Joseph P. Viviano..................... 16,544 16,544
Harry H. Warner....................... 4,400 4,400
All Directors and
Executive Officers as
a Group (18 persons)................ 488,696 67,346 556,042 2.4
Crestar Bank
919 E. Main Street
Richmond, Virginia.................. 1,449,939 1,846,685(4)(5) 3,296,624(4)(5) 14.1
Sture G. Olsson
Box 311
West Point, Virginia................ 848,355 1,600,494(5) 2,448,849(5) 10.5
MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York.................. 2,266,550 2,266,550 9.7
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109......... 866,300 865,600 1,731,900 7.4
</TABLE>
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(1) Includes shares held in fiduciary capacities and (a) an aggregate
192,341 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 32,250 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; and (d) 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 held in a trust as to which Crestar Bank and Mr. C.
Elis Olsson may be deemed to share beneficial ownership.
(5) Includes 1,661,130 shares held in various trusts as to which Crestar
Bank and Mr. Sture G. Olsson may be deemed to share beneficial ownership.
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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 long-term
incentive opportunities, 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 1996 is considered to be fully
deductible by the Corporation under the Revenue Reconciliation Act of 1993.
1996 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
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performance graph. The MCS Survey is used 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 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 4.2% in 1996. 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
16 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's financial results for 1996
were below the record levels achieved in 1995, but 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 1996 financial performance and compared it to the Corporation's
1995 financial performance, the 1996 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 1996
incentive awards for executive officers other than the CEO. 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 $265,000 for 1996, which
represented a 45% reduction from his award for 1995 and which was approximately
53% of his year-end base salary, compared to incentive awards of approximately
100% of year-end base salary for 1995 and 50% for 1994. 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.
11
<PAGE>
Long-Term Incentive Programs. The Compensation Committee also approves
long-term incentive awards to executive officers in the form of stock options,
Performance Shares and other incentive opportunities. 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 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 1996, the Compensation Committee
granted options to purchase an aggregate of 220,200 shares of Common Stock to
the Corporation's employees, including a grant of nonqualified options to
purchase 12,000 shares of Common Stock and a grant of incentive stock options to
purchase an additional 12,000 shares that were granted to the CEO (which, in the
case of the CEO, totaled grants for 24,000 shares, and represented the same
total number of options that were granted in each of 1995 and 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's financial results trailed the record levels
achieved in 1995, but 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 for the nonqualified options 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, while the grant price for the incentive stock options was the
closing price for the Common Stock on the date of 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.
Opportunities for long-term incentives are awarded under the 1993
Incentive Plan, and are intended to focus the executives' attention on the
long-term growth and financial success of the Corporation. The opportunity may
be in the form of an incentive award, based on achieving pre-set objectives, or
Performance Shares. 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 1996, the Compensation Committee granted
the CEO the opportunity to earn an incentive award of up to $360,000 and up to
4,900 Performance Shares for the 1996-2000 performance cycle. Incentive award
opportunities and Performance Shares were also granted to other executive
officers and key employees. Each year of the performance cycle, a portion of the
incentive award may be earned based upon the Corporation's cumulative cash flow
during the performance cycle and on individual goals relating to cumulative cash
flow, sales growth or volume growth for each business unit. In addition, during
each year of the performance cycle, a portion of the Performance Shares may be
earned based on the price of the Corporation's Common Stock. A portion of the
Performance Share award will be earned when the Common Stock price equals or
exceeds $35 and at each $5
12
<PAGE>
increment in excess thereof up to $60. The incentive award opportunity for the
1996-2000 performance cycle will be deemed to have been earned in full in the
event of a "change in control" of the Corporation (as defined below under the
caption "Description of Compensation Plans"), while a portion of the Performance
Shares granted for the 1996-2000 performance cycle will be deemed to have been
earned in the event of a "change in control" based on the price of the Common
Stock. 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 2,450 Performance Shares during 1996 pursuant to previously reported
grants for the 1994-1997 performance cycle. No awards were earned during 1996
under the 1996-2000 performance cycle.
Executive Compensation Committee
Wallace Stettinius, Chairman
William D. McCoy
Frank S. Royal
John Hoyt Stookey
Harry H. Warner
Description of Compensation Plans
Executive officers of the Corporation were entitled to participate in
the compensation plans described below during 1996.
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
13
<PAGE>
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.
Salaried Employees' Stock Purchase Plan. Under the Salaried Employees'
Stock Purchase Plan (the "Stock Purchase Plan"), approximately 1,700 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, 1996,
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 ($9,500 in 1996), 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 (up to $150,000 for 1996).
401(k) Restoration Plan. Under the Chesapeake Corporation 401(k)
Restoration Plan (the "401(k) Restoration Plan"), employees designated by the
Compensation Committee may elect to defer up to 10% of their annual
compensation. At the election of the participant, amounts deferred will be
invested either in (i) an interest fund, which is credited with earnings based
on the prime rate of interest established from time to time by the Corporation's
principal lender, or (ii) a stock fund, which is recorded with reference to the
number of whole and fractional shares of Common Stock that could have been
purchased with the deferred amount and which earns additional credits based on
the value of dividends paid on the Common Stock. The 401(k) Restoration Plan is
not funded, and no actual shares of Common Stock are purchased, and no cash is
held, by or on behalf of the deferred accounts. The accounts are maintained for
recordkeeping purposes only.
14
<PAGE>
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.
Definition of "Change in Control." For purposes of the 1993 Incentive
Plan, the Benefits Continuation Plan and the 1997 Incentive 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 Benefits Continuation Plan and the 1997 Incentive
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.
15
<PAGE>
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended December 31,
1994, 1995 and 1996, 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").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------------- ----------------------
Awards Payouts
Name and ------ ------- All Other
Principal Position Other Annual Options/ LTIP Compen-
as of December 31, 1996 Year Salary Bonus Compensation(1) SARs Payouts (2) sation (3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
J. Carter Fox 1996 $490,000 $265,000 24,000 $ 77,788 $17,925
Chairman, President 1995 465,000 480,000 24,000 311,833 8,813
& Chief Executive 1994 433,000 225,000 24,000 149,160 9,990
Officer
William A. Raaths 1996 191,250 170,000 9,500 20,003 8,906
Group Vice President 1995 166,254 180,000 7,500 80,195 5,438
- Tissue Products
(since 1995)
Thomas Blackburn 1996 230,667 110,000 13,500 26,670 10,065
Group Vice 1995 207,000 200,000 7,500 106,917 6,000
President - 1994 190,250 150,000 $25,731 7,500 51,150 43,286
Kraft, Packaging
& Organizational
Development
Andrew J. Kohut 1996 215,000 110,000 13,500 17,780 9,750
Group Vice 1995 196,971 185,000 7,500 71,278 5,767
President - Specialty 1994 166,500 110,000 6,000 34,089 6,120
Packaging &
Merchandizing
Services
J. P. Causey Jr. 1996 180,000 87,500 9,500 17,780 8,887
Senior Vice 1995 167,500 170,000 6,500 71,278 5,550
President, Secretary 1994 143,000 110,000 6,000 34,089 5,940
& General Counsel
</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
for the 1994-1997 performance cycle under the 1993 Incentive Plan for 1996
(estimated), 1995 (actual) and 1994 (actual). The amounts are based on the
closing price for the Common Stock of $31.375, $29.625 and $33.00 on December
31, 1996, 1995 and 1994, respectively. As of December 31, 1996, the Named
Executive Officers held the following shares of Restricted Stock: Mr. Fox, 9,630
shares; Mr. Raaths, 1,732 shares; Mr. Blackburn, 3,302 shares; Mr. Kohut, 2,201
shares; and Mr. Causey, 2,201 shares. Each of the Named Executive Officers
earned shares of Restricted Stock under the 1993 Incentive Plan for 1996;
however, the definitive number of such shares earned will not be determined, and
such shares will not be issued, until later in 1997. 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 1996 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, $14,175; Mr. Raaths, $5,156; Mr.
Blackburn, $6,315; Mr. Kohut, $6,000; and Mr. Causey, $5,137.
16
<PAGE>
Stock Options and SARs
The following table contains information concerning the grants of
options and SARs made during 1996 under the 1993 Incentive Plan to the Named
Executive Officers.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for Option Term (1)
- --------------------------------------------------------------------------------- ------------------------------------------
% of Total
Number of Options/
Securities SARs
Underlying Granted to
Options/ Employees Exercise Expira-
SARs in Fiscal or Base tion
Name Granted (2) Year Price (3) Date 0% 5% (4) 10%(4)
- ---------------------------------------------------------------------------------- ------------------------------------------
<S> <C>
J. Carter Fox 12,000 5.45% $24.50 8/11/06 $0 $184,920 $468,600
12,000 5.45 24.28 8/11/06 0 183,300 464,460
William A. Raaths 9,500 4.31 24.50 8/11/06 0 146,395 370,975
Thomas Blackburn 4,000 1.82 27.13 3/03/06 0 68,260 172,980
9,500 4.31 24.50 8/11/06 0 146,395 370,975
Andrew J. Kohut 4,000 1.82 27.13 3/03/06 0 68,260 172,980
9,500 4.31 24.50 8/11/06 0 146,395 370,975
J. P. Causey Jr. 9,500 4.31 24.50 8/11/06 0 146,395 370,975
</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) The option granted to Mr. Fox for 12,000 shares with an exercise
price of $24.28 and the options granted to each of Messrs. Blackburn and Kohut
for 4,000 shares are nonqualified options. All other grants to the Named
Executive Officers were ISOs. All grants were made under the 1993 Incentive Plan
and become exercisable in one-third installments on each of the first three
anniversaries of the date of grant.
(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 for the nonqualified options and at the closing price on the date of grant
for the ISOs. 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 1996, 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:
<TABLE>
<CAPTION>
Annual Rate of Stock Price
Appreciation
-------------------------------------
5% 10%
---------------- ---------------
<S> <C>
Resulting stock price based on $24.50 starting price $ 39.91 $ 63.55
Per share gain 15.51 39.05
Aggregate hypothetical gain that would be realized by all stockholders (based on
23,689,017 shares outstanding on August 12, 1996) 365,047,752 925,056,114
Aggregate hypothetical gain on all 1996 options granted to the Named Executive Officers
if assumed prices are achieved 1,090,320 2,762,920
Hypothetical aggregate gains for the Named Executive Officers as a percentage of all
stockholders' gains 0.3% 0.3%
</TABLE>
17
<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 1996, and
unexercised options and SARs held by them on December 31, 1996.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<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>
J. Carter Fox 0 $0 115,100/48,000 $1,044,461/$196,220
William A. Raaths 0 0 10,433/15,667 71,182/69,473
Thomas Blackburn 0 0 7,000/21,000 33,363/91,225
Andrew J. Kohut 0 0 19,500/20,500 151,000/89,443
J. P. Causey Jr. 0 0 23,666/15,834 199,000/72,443
</TABLE>
- --------------------
(1) The value of unexercised in-the-money options/SARs represents the
positive spread between the December 31, 1996, closing price of Common Stock
($31.375) 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, 1996, 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).
Long-Term Incentive Awards
The following table contains information concerning the award of
Performance Shares made during 1996 under the 1993 Incentive Plan to the Named
Executive Officers for the 1996-2000 performance cycle.
<TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<CAPTION>
Performance Estimated Future Payouts
Number of or Other Period Under Non-Stock Price-Based Plans(1)
Shares, Units or Until Maturation ------------------------------------
Name Other Rights(1) or Payout Threshold Target Maximum
- ---- --------------- --------- --------- ------ -------
<S> <C>
J. Carter Fox 4,900 Performance Shares 1996-2000
$360,000 Incentive Opportunity 1996-2000 $135,000 $360,000 $360,000
William A. Raaths 4,100 Performance Shares 1996-2000
$300,000 Incentive Opportunity 1996-2000 112,500 300,000 300,000
Thomas Blackburn 4,100 Performance Shares 1996-2000
$300,000 Incentive Opportunity 1996-2000 112,500 300,000 300,000
Andrew J. Kohut 4,100 Performance Shares 1996-2000
$300,000 Incentive Opportunity 1996-2000 112,500 300,000 300,000
J. P. Causey Jr. 4,100 Performance Shares 1996-2000
$300,000 Incentive Opportunity 1996-2000 112,500 300,000 300,000
</TABLE>
- --------------------
(1) Awards consist of incentive award opportunities and Performance
Shares granted under the 1993 Incentive Plan for the 1996-2000 performance
cycle. A portion of the incentive award opportunities will be earned when the
Corporation's cumulative cash flow from operating activities exceeds the
threshold amount and any of the business units exceeds the threshold performance
(cumulative cash flow, sales growth or volume growth) for the individual unit.
The target and maximum amounts will be earned if the Corporation and each
business unit achieves 100% of their goals during the performance cycle. A
portion of the Performance Shares will be earned when the Common Stock price
equals or exceeds $35 and at each $5 increment in excess thereof, with the total
award earned when the Common Stock price equals $60. Performance Shares earned
each year are settled with Restricted Stock and Stock Units. See "Description of
Compensation Plans - 1993 Incentive Plan."
18
<PAGE>
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>
$ 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, 1997, were: Mr. Fox, 33; Mr. Raaths, 17; Mr. Blackburn, 6; Mr.
Kohut, 17; and Mr. Causey, 13 (Mr. Raaths has 11 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.
Certain Transactions
C. Elis Olsson, a member of the Board of Directors, served during 1996
as Vice President-Operations for the Mid-South Division of Color-Box, Inc., a
subsidiary of the Corporation. During 1996, the total cash compensation paid by
the Corporation and its subsidiaries to Mr. Olsson (including bonus and the
Corporation's contributions under certain employee benefit plans) was $105,175.
Mr. Olsson's compensation was consistent with that paid by the Corporation and
its subsidiaries in 1996 to other employees with similar job titles and
responsibilities.
19
<PAGE>
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, 1991, and that all dividends were reinvested.
10 Year Compararison: Chesapeake Corporation vs.
S&P 500 vs. S&P Paper & Forest Products Group
(Decemeber 31st of each year)
86 87 88 89 90 91 92 93 94 95 96
------------------------------------------------------
CSK 60 60 75 77 55 100 88 151 151 139 152
S&P 500 49 52 60 79 77 100 108 118 120 165 203
S&P Paper & 60 66 72 87 79 100 114 126 131 45 160
Forest
20
<PAGE>
PROPOSAL TO APPROVE THE 1997 INCENTIVE PLAN
(PROPOSAL 2)
The Corporation proposes that the stockholders approve the 1997
Incentive Plan. The 1997 Incentive Plan was adopted by the Board of Directors on
February 11, 1997, subject to the approval of the Corporation's stockholders.
The more significant features of the 1997 Incentive Plan are described
below. This summary is subject, in all respects, to the terms of the 1997
Incentive 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 1997 Incentive 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.
Purposes
For many years the Corporation has provided cash incentive and
stock-based compensation opportunities for its executives and key employees. The
1993 Incentive Plan is currently maintained for this purpose. If the
stockholders approve the 1997 Incentive Plan, the Compensation Committee will
not approve additional grants or awards under the 1993 Incentive Plan.
The Board of Directors believes that the 1997 Incentive Plan will
benefit the Corporation by (i) assisting it in recruiting and retaining
employees with ability and initiative, (ii) providing greater incentive for
employees of the Corporation and its related entities and (iii) enabling such
employees to participate in the future success of the Corporation and to
associate their interests with those of the Corporation and its stockholders.
Administration
The Compensation Committee will administer the 1997 Incentive Plan. The
Compensation Committee will have the authority to select the individuals who
will participate in the 1997 Incentive Plan ("Participants") and to grant
options, SARs, stock awards, incentive awards and awards of Performance Shares
and Stock Units upon such terms (not inconsistent with the terms of the 1997
Incentive Plan) as the Compensation Committee considers appropriate. In
addition, the Compensation Committee will have complete authority to interpret
all provisions of the 1997 Incentive Plan, to prescribe the form of agreements
evidencing awards under the 1997 Incentive Plan, to adopt, amend and rescind
rules and regulations pertaining to the administration of the 1997 Incentive
Plan and to make all other determinations necessary or advisable for the
administration of the 1997 Incentive Plan.
The Compensation Committee may delegate its authority to administer the
1997 Incentive Plan to an officer of the Corporation. The Compensation
Committee, however, may not delegate its authority with respect to individuals
who are subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). As used in this summary, the term "Administrator" means
the Compensation Committee and any delegate, as appropriate.
Eligibility
Any employee of the Corporation or a related entity of the Corporation
is eligible to participate in the 1997 Incentive Plan if the Administrator, in
its sole discretion, determines that such person has contributed significantly
or can be expected to contribute significantly to the profits or growth of the
Corporation or a related entity. The Corporation is not able to determine the
number of individuals that the Administrator will select to participate in the
1997 Incentive Plan or the type or size of awards that the Administrator will
approve. The Corporation also cannot determine the number of individuals that
the Administrator would have selected to participate in the 1997 Incentive Plan,
or the type or size of awards that the Administrator would have approved, had
the plan been in effect for the last fiscal year.
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<PAGE>
Awards
The 1997 Incentive Plan permits the grant of options to purchase shares
of Common Stock from the Corporation, SARs, stock awards, incentive awards and
awards of Performance Shares and Stock Units.
Options. Options granted under the 1997 Incentive Plan may be 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 shares' fair market value on the date of grant
in the case of an ISO, or 85% of that amount in the case of a nonqualified stock
option. The fair market value of the Common Stock for purposes of option grants
is determined by the Administrator. By way of example, for purposes of grants of
nonqualified options under the 1993 Incentive Plan, the Compensation Committee
has generally determined that fair market value equals the average closing price
of the Common Stock for the twenty trading days up to and including the date of
grant. The option price may be paid in cash, a cash equivalent acceptable to the
Administrator, with shares of Common Stock, or a combination thereof.
An option may be granted with the right to receive a new option
covering the number of shares surrendered pursuant to the exercise of the
related option. The new option will have an exercise price equal to the fair
market value of Common Stock on the date such shares are surrendered, will be
exercisable six months from the date of grant and will otherwise be subject to
the terms and conditions applicable to the related option. In addition, an
option may be granted with a deferral feature allowing a Participant to elect to
defer the receipt of Common Stock otherwise issuable upon the exercise of an
option.
Options may be exercised in whole or in part at such times and subject
to such conditions as may be prescribed by the Administrator. The maximum period
in which an option may be exercised will be fixed by the Administrator at the
time the option is granted but, in the case of an ISO, cannot exceed ten years
from the date of grant. No employee may be granted ISOs (under the 1997
Incentive Plan or any other plan of the Corporation) that are first exercisable
in a calendar year for Common Stock having an aggregate fair market value
(determined as of the date the option is granted) exceeding $100,000.
SARs. SARs may be granted as Corresponding SARs or independent of
option grants. SARs generally 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 fair market value of a share of Common
Stock on the date of grant in the case of independent SARs, or the option price
per share of the related option in the case of a Corresponding SAR. To exercise
a Corresponding SAR, the Participant must surrender unexercised that portion of
the stock option to which the Corresponding SAR relates.
SARs may be exercised at such times and subject to such conditions as
may be prescribed by the Administrator. The maximum period in which a SAR may be
exercised will be fixed by the Administrator at the time the SAR is granted,
except that no Corresponding SAR that is related to an ISO shall have a term of
more than ten years from the date such related option was granted. The amount
payable upon the exercise of a SAR may, in the Administrator's discretion, be
settled in cash, Common Stock or a combination of cash and Common Stock.
Stock Awards. The 1997 Incentive Plan also permits the grant of shares
of Common Stock as stock awards. A stock award may be, but is not required to
be, forfeitable or otherwise restricted until certain conditions are satisfied.
These conditions may include, for example, a requirement that the Participant
complete a specified period of service or the attainment of certain performance
objectives. Any restrictions imposed on a stock award will be prescribed by the
Administrator. As described below, stock awards may be used to settle incentive
awards.
Performance Shares. The 1997 Incentive Plan also provides for the award
of Performance Shares. A Performance Share award entitles the Participant to
receive a payment equal to the fair market value of a specified number of shares
of Common Stock. The Administrator will prescribe the requirements that must be
satisfied before a Performance Share award is earned. The Performance Share
award requirements may include, for example, a requirement that the Participant
continue employment with the Corporation or a related entity for a
22
<PAGE>
specified period or that the Corporation, a related entity or the Participant
achieve stated objectives. To the extent that Performance Shares are earned, the
obligation will be settled in Common Stock, cash or a combination of Common
Stock and cash.
Stock Units. A Participant also may be awarded Stock Units under the
1997 Incentive Plan. A Stock Unit is an award, stated with reference to a
specified number of shares of Common Stock, that entitles the Participant to
receive a payment for each specified share equal to the fair market value of the
Common Stock on the date of settlement and accumulated dividends. The
Administrator, in its discretion, may prescribe that a Participant's rights in
Stock Units will be forfeitable or otherwise terminable for a period of time
unless certain conditions are satisfied. These conditions may include, for
example, a requirement that the Participant continue employment with the
Corporation or a related entity for a specified period or that the Corporation,
a related entity or the Participant achieve stated objectives. To the extent
that any such requirements are satisfied, the obligation may be settled in cash,
in Common Stock or by a combination of the two.
Incentive Awards. The 1997 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 cash and
Common Stock. No Participant, however, may receive in any calendar year an
incentive award that exceeds $1.5 million. Subject to approval of the 1997
Incentive Plan by the stockholders, the Compensation Committee expects to
establish at year end a total award pool for 1997 incentive awards based on its
review of the financial performance of the Corporation for 1997. In that review,
the Compensation Committee will evaluate the Corporation's performance compared
to its prior year's performance, the business plan, long-term standards and the
Compensation Peer Group. The Compensation Committee will then allocate the pool
among individual officers based on each officer's individual performance during
1997. The Compensation Committee has determined that a portion of any 1997
incentive awards may be settled with Common Stock rather than a cash payment and
that Participants will be afforded the opportunity to defer the receipt of all
or part of any incentive award that is earned for 1997.
Transferability
In general, options, SARs, Performance Shares and stock awards will be
nontransferable except by will or the laws of descent and distribution. If
provided in the agreement governing the grant, options (other than ISOs) and
SARs (other than Corresponding SARs that are related to ISOs), may be
transferred by the Participant to his spouse, children or grandchildren or to a
trust or trusts for the benefit of such family members or to a partnership in
which such family members are the only partners, on such terms as are permitted
by Rule 16b-3 under the Exchange Act.
Performance Objectives
The Compensation Committee may prescribe that: (i) an option or SAR is
exercisable; (ii) a stock award is vested or transferable or both; or (iii) that
payment under a Performance Share award, an incentive award, or an award of a
Stock Unit is earned only upon the attainment of certain performance objectives.
Such performance objectives may be based on one or more of the Corporation's, a
related entity's or an operating unit's (i) gross, operating or net earnings
before or after taxes, (ii) return on equity, (iii) return on capital, (iv)
return on sales, (v) return on assets or net assets, (vi) earnings per share,
(vii) cash flow per share, (viii) book value per share, (ix) earnings growth,
(x) sales growth, (xi) volume growth, (xii) cash flow (as defined by the
Compensation Committee), (xiii) fair market value, (xiv) share price or total
shareholder return, (xv) market share, (xvi) economic value added, (xvii) market
value added, (xviii) productivity, (xix) level of expenses, (xx) quality, (xxi)
safety, (xxii) customer satisfaction or (xxiii) peer group comparisons of any of
the aforementioned objectives.
Change in Control
The 1997 Incentive Plan provides that outstanding options and SARs will
become exercisable, and that outstanding stock awards will become transferable
and nonforfeitable, in the event that, following a "change in control" (as
described above under the caption "Description of Compensation Plans") (i) the
Participant's employment is terminated without cause or following his refusal to
move to another location, or (ii) there is a
23
<PAGE>
material reduction in the Participant's compensation or duties. In addition,
each Performance Share will be earned in full and converted into a stock award
which will become transferable and nonforfeitable as provided in the preceding
sentence.
Share Authorization
The maximum aggregate number of shares of Common Stock that may be
issued under the 1997 Incentive Plan is the sum of 5% of the outstanding shares
of Common Stock as of December 31, 1996, plus the number of shares of Common
Stock surrendered in payment of all or part of the option price of any option.
In addition, the maximum aggregate number of shares of Common Stock that may be
covered by Performance Share awards and that may be issued in any calendar year
pursuant to a stock award, incentive award or the settlement of Stock Units, is
30% of the limit described in the preceding sentence. The maximum aggregate
number of shares that may be issued pursuant to the exercise of options may not
exceed the lesser of (i) 1,100,000 shares, or (ii) the sum of 5% of the
outstanding shares of Common Stock as of December 31, 1996, plus the number of
shares of Common Stock surrendered in payment of all or part of the option price
of any option. These limitations will be adjusted as the Compensation Committee
determines is appropriate in the event of a change in the number of outstanding
shares of Common Stock by reason of a stock dividend, stock split, combination,
reclassification, recapitalization or other similar events. The terms of
outstanding awards and the limitations on individual grants also may be adjusted
by the Administrator to reflect such changes. On March 10, 1997, the last
reported sale price of the Common Stock on the New York Stock Exchange was
$29.75 per share.
Individual Limitations
No individual may be granted or awarded, in any calendar year, options,
Corresponding SARS and SARS granted independently of options covering more than
100,000 shares of Common Stock in the aggregate. In addition, no individual may,
in any calendar year, be granted or awarded in the aggregate, stock awards,
Performance Shares, Stock Units or an incentive award covering more than 100,000
shares of Common Stock.
Amendment and Termination
No option, SAR or stock award may be granted and no Performance Shares
may be awarded under the 1997 Incentive Plan after December 16, 2006. The Board
may, without further action by shareholders, terminate or suspend the 1997
Incentive Plan in whole or in part. The Board also may amend the 1997 Incentive
Plan, except that no amendment that materially increases the number of shares of
Common Stock that may be issued under the 1997 Incentive Plan, materially
changes the class of individuals who may be selected to participate in the 1997
Incentive Plan or materially increases the benefits that may be provided under
the Incentive Plan will become effective until it is approved by stockholders.
Federal Income Tax Consequences
The Corporation has been advised by counsel regarding the federal
income tax consequences of the 1997 Incentive Plan. No income is recognized by a
Participant at the time an option is granted. If the option is an ISO, no income
will be recognized upon the Participant's exercise of the option. Income is
recognized by a Participant when he disposes of shares acquired under an ISO.
The exercise of a nonqualified stock option generally is a taxable event that
requires the Participant to recognize, as ordinary income, the difference
between the shares' fair market value and the option price.
The Participant will recognize income on account of the settlement of a
Performance Share award or Stock Unit and the making of an incentive award. The
Participant will recognize income equal to any cash that is paid and the fair
market value of Common Stock (on the date that the shares are first transferable
or not subject to a substantial risk of forfeiture) that is received under the
award.
Income is recognized on account of the grant of a stock award when the
shares first become transferable or are no longer subject to a substantial risk
of forfeiture. At that time the Participant recognizes income equal to the fair
market value of the Common Stock.
24
<PAGE>
No income is recognized on account of the award of Performance Shares.
The Participant must recognize income equal to any cash that is paid and the
fair market value of Common Stock that is received in settlement of a
Performance Share award.
The employer (either the Corporation or its affiliate) will be entitled
to claim a federal income tax deduction on account of the exercise of a
nonqualified stock option or SAR or the vesting of a stock award or the
settlement of Performance Shares or the making of an incentive award. The amount
of the deduction is equal to the ordinary income recognized by the Participant.
The employer will not be entitled to a federal income tax deduction on account
of the grant or the exercise of an ISO. The employer may claim a federal income
tax deduction on account of certain dispositions of stock issued upon the
exercise of an ISO.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2
TO APPROVE THE 1997 INCENTIVE 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 1997. 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 1997.
25
<PAGE>
MATTERS TO BE PRESENTED FOR INCLUSION IN THE PROXY
STATEMENT FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
Any proposal submitted by a stockholder for inclusion in the proxy
materials for the annual meeting of stockholders in 1998 must be delivered to
the Corporation at its principal office in Richmond, Virginia not later than
November 21, 1997.
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 21, 1997
26
<PAGE>
PROXY CHESAPEAKE CORPORATION PROXY
RICHMOND, VIRGINIA 23218
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders, April 23, 1997
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 7,
1997, at the annual meeting of stockholders to be held at 11:00 a.m. on April
23, 1997, 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 II (to serve until the 2000 annual meeting of For Withhold Except those whose name(s) appear below.
stockholders) [ ] [ ] [ ]
Nominees: C. Ellis Olsson, Wallace Stettinius,
Joseph P. Viviano and Harry H. Warner. _______________________________________
For Against Abstain 4. In their discretion, the proxies are
2. To approve the Chesapeake Corporation 1997 Incentive [ ] [ ] [ ] authorized to vote upon such other
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 1997. 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:___________________________, 1997
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>
<PAGE>
TO: 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)
<PAGE>
- -------------------------------------------------------------------------------
SALARIED 401(K) 00.0000 PACKAGING 401(K) 00.0000 PAPER 401(k) 00.0000
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 II (To serve until
the 2000 annual meeting of stockholders): C. Elis Olsson, Wallace
Stettinius, Joseph P. Viviano and Harry H. Warner.
<TABLE>
<S> <C>
/_/ FOR /_/ WITHHOLD /_/ EXCEPTIONS: Withhold vote
all nominees listed above vote for all nominees on the following nominee(s) only
------------------------------------
</TABLE>
(2) To approve the Chesapeake Corporation 1997 Incentive Plan.
/_/ FOR /_/ AGAINST /_/ ABSTAIN
(3) To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for 1997.
/_/ 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]
- ----------------------
Account Number
Signature________________________ Date _____________________, 1997.
<PAGE>
April 7, 1997
A REMINDER
Dear Stockholder:
Proxy material for the annual meeting of stockholders of Chesapeake
Corporation was sent to you under date of March 21, 1997.
According to our records, your proxy for this meeting, which will be
held on Wednesday, April 23, 1997, 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,
J. P. Causey Jr.
Secretary
kmh
Enclosure
<PAGE>
March 21, 1997
TO: Participants in the Wisconsin Tissue Mills Inc. 401(k) Savings Plan
for Hourly Employees
Enclosed are proxy materials in connection with Chesapeake
Corporation's stockholders meeting to be held on April 23, 1997. Also enclosed
are the instructions for Associated Bank to vote your full shares of Chesapeake
Corporation common stock held in the Wisconsin Tissue Mills Inc. 401(k) Savings
Plan for Hourly Employees (the "Plan"). It is important that you instruct
Associated Bank, the trustee of the Plan, to vote your shares held in the Plan
and allocated to your account by completing and returning the instructions
enclosed. All voting instructions given to Associated Bank will be confidential.
To be effective, your proxy must be received by Associated Bank by the
close of business (4:00 p.m. CDT), April 21, 1997. If you do not direct the vote
of the shares of common stock allocated to your account, Associated Bank will
not vote those shares. You may revoke your proxy by delivering a written notice
of revocation to Associated Bank at the address below by the close of business
(4:00 p.m. CDT), April 21, 1997. Any notice of change must be timely, contain
your name, your social security number, and be signed and dated.
Associated Bank, Trustee
P. O. Box 408
Neenah, Wisconsin 54957-0408
As a participant in the Plan, 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 23, 1997, at 11:00 A.M. If you plan to attend the
meeting and have not otherwise received an admittance card, you may request an
admittance card by contacting the Chesapeake corporate office in Richmond at
(804) 697-1000.
Sincerely,
J. P. Causey Jr.
Secretary
NOTE: PLEASE MARK THE ENCLOSED VOTING
INSTRUCTIONS AND MAIL TO ASSOCIATED
BANK IN THE ENVELOPE PROVIDED.
<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:
(1) Election of Four Directors For a Three Year Term. Class II (To serve until
the 2000 annual meeting of stockholders): C. Elis Olsson, Wallace
Stettinius, Joseph P. Viviano, and Harry H. Warner.
<TABLE>
<S> <C>
/_/ FOR /_/ WITHHOLD /_/ EXCEPTIONS: Withhold vote
all nominees listed above vote for all nominees on the following nominee(s) only
---------------------------------------
</TABLE>
(2) To approve the Chesapeake Corporation 1997 Incentive Plan.
/_/ FOR /_/ AGAINST /_/ ABSTAIN
(3) To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for 1997.
/_/ 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 _____________________, 1997.
PLEASE MAIL THESE INSTRUCTIONS IN THE ENCLOSED ENVELOPE TO ASSOCIATED BANK
<PAGE>
CHESAPEAKE CORPORATION
1997 INCENTIVE PLAN
<PAGE>
Chesapeake Corporation
1997 Incentive Plan
ARTICLE I
DEFINITIONS
1.01. Administrator means the Committee and any delegate of the Committee that
is appointed in accordance with Article III.
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 award of Performance Shares or Stock Units or a Stock Award,
Option or SAR granted to such Participant.
1.03. Board means the Board of Directors of the Company.
1.04. Change in Control has the same meaning as such term is defined in the
Chesapeake Corporation Long-Term Incentive Plan.
1.05. Code means the Internal Revenue Code of 1986, and any amendments thereto.
1.06. Committee means the Executive Compensation Committee of the Board.
1.07. Common Stock means the common stock of the Company.
1.08. Company means Chesapeake Corporation.
1.09. Control Change Date has the same meaning as such term is defined in the
Chesapeake Corporation Long-Term Incentive Plan.
1.10. Corresponding SAR means an SAR that is granted in relation to a particular
Option and that can be exercised only upon the surrender to the Company,
unexercised, of that portion of the Option to which the SAR relates.
1.11. Deferral Feature means the right to receive an award of Stock Units in
connection with a related Option subject to the conditions described in Plan
section 4.03.
1.12. Exchange Act means the Securities Exchange Act of 1934, as amended and as
in effect on the date of this Agreement.
<PAGE>
1.13. Fair Market Value means, on any given date, the closing price of a share
of Common Stock as reported on the New York Stock Exchange composite tape on
such date, or if the Common Stock was not traded on the New York Stock Exchange
on such day, then on the next preceding day that the Common Stock was traded on
such exchange, all as reported by such source as the Administrator may select.
1.14. Incentive Award means an award which, subject to such terms and conditions
as may be prescribed by the Administrator, entitles the Participant to receive a
cash payment from the Company or a Related Entity.
1.15. Initial Value means, with respect to a Corresponding SAR, the option price
per share of the related Option and, with respect to a SAR granted independently
of an Option, the Fair Market Value of one share of Common Stock on the date of
grant.
1.16. Option means a stock option that entitles the holder to purchase from the
Company a stated number of shares of Common Stock at the price set forth in an
Agreement.
1.17. Participant means an employee of the Company or a Related Entity,
including an employee who is a member of the Board, who satisfies the
requirements of Article IV and is selected by the Administrator to receive an
award of Performance Shares or Stock Units, a Stock Award, an Option, an SAR, or
an Incentive Award or a combination thereof.
1.18. Performance Shares means an award which, in accordance with and subject to
an Agreement, will entitle the Participant, or his estate or beneficiary in the
event of the Participant's death, to receive cash or a Stock Award or a
combination thereof.
1.19. Plan means the Chesapeake Corporation 1997 Incentive Plan.
1.20. Related Entity means (i) any entity that directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Company or (ii) any entity that is designated by the Board as
a participating company in the Plan.
1.21. Restoration Feature means the right to receive a new Option covering the
number of shares surrendered pursuant to the exercise of a related Option. The
new Option shall have an exercise price equal to the Fair
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Market Value of Common Stock on the date such shares are surrendered, shall be
exercisable six months from the date of grant and shall otherwise be subject to
the same terms and conditions applicable to a related Option.
1.22. SAR means a stock appreciation right that entitles the holder to receive,
with respect to each share of Common Stock encompassed by the exercise of such
SAR, the lesser of (a) the excess of the Fair Market Value at the time of
exercise over the Initial Value, or (b) the Initial Value. References to "SARs"
include both Corresponding SARs and SARs granted independently of Options,
unless the context requires otherwise.
1.23. Stock Award means Common Stock awarded to a Participant under Article IX
or in accordance with an award of Performance Shares.
1.24. Stock Unit means an award, in the amount determined by the Administrator
and specified in an Agreement, stated with reference to a specified number of
shares of Common Stock, that entitles the holder to receive a payment for each
specified share equal to the Fair Market Value of Common Stock on the date of
payment and the accumulated dividends on such share, in the form of additional
Stock Units as if such dividends had been invested in Common Stock on the
dividend payment date, from the date of grant to the date of payment.
ARTICLE II
PURPOSES
The Plan is intended to assist the Company and Related Entities in
recruiting and retaining key employees by enabling such employees to participate
in the future success of the Company and the Related Entities and to associate
their interests with those of the Company and its shareholders. The Plan is
intended to permit the award of Performance Shares and Stock Units, the grant of
Stock Awards, SARs, the grant of both Options qualifying under Section 422 of
the Code ("incentive stock options") and Options not so qualifying, and the
grant of Incentive Awards. No Option that is intended to be an incentive stock
option shall be invalid for failure to qualify as an incentive stock option. The
proceeds received by the Company from the sale of Common Stock pursuant to this
Plan shall be used for general corporate purposes.
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ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Administrator. The
Administrator shall have authority to award Performance Shares and Stock Units
and to grant Stock Awards, Incentive Awards, Options and SARs upon such terms
(not inconsistent with the provisions of this Plan) as the Administrator may
consider appropriate. Such terms may include conditions (in addition to those
contained in this Plan) on the exercisability of all or any part of an Option or
SAR or on the transferability or forfeitability of a Stock Award, Incentive
Award, Performance Shares, or Stock Units, including by way of example and not
limitation, conditions on which Participants may defer receipt of benefits under
the Plan, requirements that the Participant complete a specified period of
employment with the Company or a Related Entity, that the Company achieve a
specified level of financial performance or that the Company achieve a specified
level of financial return. Notwithstanding any such conditions, the Committee
may, in its discretion, accelerate the time at which any Option or SAR may be
exercised, or the time at which a Stock Award may become transferable or
nonforfeitable or the time at which a Stock Unit or Incentive Award may be
settled. In addition, 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 the 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. Neither the Administrator nor any member of the Committee shall be
liable for any act done in good faith with respect to this Plan or any
Agreement, Option, SAR, Stock Award, Incentive Award or an award of Performance
Shares or Stock Units. All expenses of administering this Plan shall be borne by
the Company.
The Committee, in its discretion, may delegate to one or more
officers of the Company all or part of the Committee's authority and duties with
respect to grants and awards to individuals who are not subject to the reporting
and other provisions of Section 16 of the Exchange Act. The Committee may revoke
or amend the terms of a delegation at any time but such action shall not
invalidate any prior actions of the Committee's delegate or delegates that were
consistent with the terms of the Plan.
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ARTICLE IV
ELIGIBILITY
4.01. General. Any employee of the Company or a Related Entity (including a
corporation that becomes a Related Entity after the adoption of this Plan) is
eligible to participate in this Plan if the Administrator, in its sole
discretion, determines that such person has contributed significantly or can be
expected to contribute significantly to the profits or growth of the Company or
a Related Entity. Directors of the Company who are employees of the Company or a
Related Entity may be selected to participate in this Plan. A person who is a
member of the Committee may not be granted Options, SARs or Stock Awards or
awarded Performance Shares, Stock Units or Incentive Awards under this Plan.
4.02. Grants. The Administrator will designate individuals to whom an award of
Stock Units or Performance Shares are to be granted and to whom Stock Awards,
Incentive Awards, Options and SARs are to be granted and will specify the number
of shares of Common Stock subject to each award or grant. An Option may be
granted with or without a related SAR, with or without a Restoration Feature, or
with or without a Deferral Feature. An SAR may be granted with or without a
related Option. Each award of Performance Shares or Stock Units, and all Stock
Awards, Options and SARs granted under this Plan shall be evidenced by
Agreements which shall be subject to the applicable provisions of this Plan and
to such other provisions as the Administrator may adopt. No Participant may be
granted incentive stock options or related SARs (under all incentive stock
option plans of the Company and any Related Entity) which are first exercisable
in any calendar year for stock having an aggregate Fair Market Value (determined
as of the date an Option is granted) that exceed the limitation prescribed by
Code section 422(d). The preceding annual limitation shall not apply with
respect to Options that are not incentive stock options.
4.03. Deferral Feature. In accordance with rules prescribed by the
Administrator, the Participant may elect to defer receipt of Common Stock
otherwise issuable upon the exercise of an Option.
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ARTICLE V
STOCK SUBJECT TO PLAN
5.01. Shares Issued. Upon the award of shares of Common Stock pursuant to a
Stock Award, or when an award of Stock Units is earned, the Company may issue
shares of Common Stock from its authorized but unissued Common Stock. Upon the
exercise of any Option or SAR, the Company may deliver to the Participant (or
the Participant's broker if the Participant so directs), shares of Common Stock
from its authorized but unissued Common Stock.
5.02. Aggregate Limit. The maximum aggregate number of shares of Common Stock
that may be issued under this Plan is the sum of 5% of the outstanding shares of
Common Stock as of December 31, 1996, plus the number of shares of Common Stock
surrendered in payment of all or part of the option price of any Option.
Moreover, the maximum aggregate number of shares of Common Stock that may be
covered by Performance Share awards and that may be issued in any calendar year
pursuant to Stock Award, Incentive Award, or the settlement of Stock Units, is
30% of the aggregate limitation described above. The maximum aggregate number of
shares of Common Stock that may be issued under this Plan and the maximum number
of shares that may be issued as Stock Awards and in settlement of Performance
Shares or Stock Units shall be subject to adjustment as provided in Article
XIII.
5.03. Individual Limitations. Subject to the limitations set forth in the
preceding sections, no individual may, in any calendar year, be granted or
awarded (i) in the aggregate, Options, Corresponding SARs, and SARs granted
independently of Options covering more than 100,000 shares of Common Stock, and
(ii) in the aggregate, Stock Awards, Performance Shares, Stock Units or an
Incentive Award covering more than 100,000 shares of Common Stock.
5.04. Stock Options. Subject to the limitations set forth in the preceding
sections, the maximum aggregate number of shares that may be issued pursuant to
the exercise of Options is 1,100,000 shares. The maximum aggregate number of
shares of Common Stock that may be issued pursuant to the exercise of Options
under this Plan shall be subject to adjustment as provided in Article XIII.
5.05. Reallocation of Shares. If an Option is terminated, in whole or in part,
for any reason other than its exercise or the exercise of a Corresponding SAR,
the number of shares of Common Stock allocated to the Option or portion thereof
may be reallocated to other Options, SARs, Stock Awards and awards of Stock
Units and
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Performance Shares to be granted under this Plan. If an SAR is terminated, in
whole or in part, for any reason other than its exercise or the exercise of a
related Option, the number of shares of Common Stock allocated to the SAR or
portion thereof may be reallocated to other Options, SARs, Stock Awards and
awards of Stock Units and Performance Shares to be granted under this Plan. If
an award of Performance Shares is forfeited, in whole or in part, without the
issuance of a Stock Award, the number of shares of Common Stock allocated to the
Performance Share Award or portion thereof may be reallocated to other Options,
SARs, Stock Awards and awards of Stock Units and Performance Shares to be
granted under this Plan. If an award of Stock Units is forfeited, in whole or in
part, to the extent that no settlement is made for such Stock Units, the number
of shares of Common Stock allocated to the awards of Stock Units or portion
thereof may be reallocated to other Options, SARs, Stock Awards and awards of
Stock Units and Performance Shares to be granted under this Plan.
ARTICLE VI
OPTION PRICE
The price per share for Common Stock purchased on the exercise of
an Option shall be determined by the Administrator on the date of grant;
provided, however, that (i) the price per share for Common Stock purchased on
the exercise of any Option shall not be less than 85% of the Fair Market Value
on the date the Option is granted, (ii) the price per share for Common Stock
purchased on the exercise of an Option that is an incentive stock option shall
not be less than the Fair Market Value on the date the Option is granted and
(iii) the price per share for Common Stock purchased on the exercise of an
Option shall not be repriced unless shareholder approval is obtained for such
repricing.
ARTICLE VII
EXERCISE OF OPTIONS AND SARS
7.01. Maximum Option or SAR Period. The maximum period in which an Option or SAR
may be exercised shall be determined by the Administrator on the date of grant,
except that no Option that is an incentive stock option or its Corresponding SAR
shall be exercisable after the expiration of ten years from the date such Option
or Corresponding SAR was granted. The terms of any Option
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or SAR may provide that it is exercisable for a period less than such maximum
period.
7.02. Nontransferability. Any Option or SAR granted under this Plan shall be
nontransferable except by will or by the laws of descent and distribution. In
the event of any such transfer, the Option and any Corresponding SAR that
relates to such Option must be transferred to the same person or person(s).
During the lifetime of the Participant to whom the Option or SAR is granted, the
Option or SAR may be exercised only by the Participant. No right or interest of
a Participant in any Option or SAR shall be liable for, or subject to, any lien,
obligation, or liability of such Participant.
7.03. Transferable Options and SARs. Section 7.02 to the contrary
notwithstanding, if the Agreement provides, an Option that is not an incentive
stock option or an SAR, other than a Corresponding SAR that is related to an
incentive stock option, may be transferred by a Participant to the Participant's
children, grandchildren, spouse, one or more trusts for the benefit of such
family members or a partnership in which such family members are the only
partners, on such terms and conditions as may be permitted under Securities
Exchange Commission Rule 16b-3 as in effect from time to time. The holder of an
Option or SAR transferred pursuant to this section shall be bound by the same
terms and conditions that governed the Option or SAR during the period that it
was held by the Participant; provided, however, that such transferee may not
transfer the Option or SAR except by will or the laws of descent and
distribution. In the event of any transfer of an Option or SAR (by the
Participant or his transferee), any Corresponding SAR that relates to such
Option or Corresponding SAR and related Option must be transferred to the same
person or persons or entity or entities.
7.04. Employee Status. For purposes of determining the applicability of Section
422 of the Code (relating to incentive stock options), or in the event that the
terms of any Option or SAR provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Administrator may decide to what extent leaves of absence for governmental
or military service, illness, temporary disability, or other reasons shall not
be deemed interruptions of continuous employment.
7.05. Change in Control. Section 7.01 to the contrary notwithstanding, after a
Control Change Date each Option or SAR shall be fully exercisable thereafter in
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accordance with the terms of the applicable Agreement. If not sooner exercisable
under the terms of the applicable Agreement, a Participant's Option or SAR shall
be fully exercisable (i) as of his termination of employment if his employment
terminates after a Control Change Date and he is terminated without cause or
following his refusal to move to another location or (ii) as of the date that
there is a material reduction in the Participant's compensation or duties if
such reduction occurs after a Control Change Date. For purposes of the preceding
sentence the term "cause" means a willful neglect of responsibilities to the
Company or a Related Entity.
7.06. Performance Objectives. The Committee may prescribe that an Option or SAR
is exercisable only to the extent that certain performance objectives are
attained. Such performance objectives may be based on one or more of the
Company's, Related Entity's or an operating unit's (i) gross, operating or net
earnings before or after taxes, (ii) return on equity, (iii) return on capital,
(iv) return on sales, (v) return on assets or net assets, (vi) earnings per
share, (vii) cash flow per share, (viii) book value per share, (ix) earnings
growth, (x) sales growth, (xi) volume growth, (xii) cash flow (as defined by the
Committee), (xiii) Fair Market Value, (xiv) share price or total shareholder
return, (xv) market share, (xvi) economic value added, (xvii) market value
added, (xviii) productivity, (xix) level of expenses, (xx) quality, (xxi)
safety, (xxii) customer satisfaction, or (xxiii) peer group comparisons of any
of the aforementioned objectives. If the Committee, on the date of the award,
prescribes that an Option or SAR shall become exercisable only upon the
attainment of performance objectives stated with respect to one or more of the
foregoing criteria, the Option or SAR shall become exercisable only to the
extent the Committee certifies that such objectives have been achieved.
ARTICLE VIII
METHOD OF EXERCISE
8.01. Exercise. Subject to the provisions of Articles VII and XIV, an Option or
SAR may be exercised in whole at any time or in part from time to time at such
times and in compliance with such requirements as the Administrator shall
determine; provided, however, that a Corresponding SAR that is related to an
incentive stock option may be exercised only to the extent that the
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related Option is exercisable and when the Fair Market Value exceeds the option
price of the related Option. An Option or SAR granted under this Plan may be
exercised with respect to any number of whole shares less than the full number
for which the Option or SAR could be exercised. A partial exercise of an Option
or SAR shall not affect the right to exercise the Option or SAR from time to
time in accordance with this Plan and the applicable Agreement with respect to
the remaining shares subject to the Option or related to the SAR. The exercise
of either an Option or Corresponding SAR shall result in the termination of the
other to the extent of the number of shares with respect to which the Option or
Corresponding SAR is exercised.
8.02. Payment. Unless otherwise provided by the Agreement, payment of the Option
price shall be made in cash or a cash equivalent acceptable to the
Administrator. Subject to rules established by the Committee, payment of all or
part of the Option price may be made with shares of Common Stock to the Company.
If Common Stock is used to pay all or part of the Option price, the sum of the
cash and cash equivalent and the Fair Market Value of the shares (on the day
preceding the exercise date) must not be less than the Option Price of shares
for which the Option is being exercised.
8.03. Determination of Payment of Cash and/or Common Stock Upon Exercise of SAR.
At the Administrator's discretion, the amount payable as a result of the
exercise of an SAR may be settled in cash, Common Stock, or a combination of
cash and Common Stock. A fractional share shall not be deliverable upon the
exercise of an SAR but a cash payment will be made in lieu thereof.
8.04. Shareholder Rights. No Participant shall have any rights as a stockholder
with respect to shares subject to his Option or SAR until the date of exercise
of such Option or SAR.
ARTICLE IX
STOCK AWARDS
9.01. Awards. In accordance with the provisions of Article IV, and subject to
the limitations set forth in Plan section 5.03, the Administrator will designate
each individual to whom a Stock Award is to be made and will specify the number
of shares of Common Stock covered by such awards. The preceding sentence shall
not limit the
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issuance of Stock Awards in settlement of Performance Share awards.
9.02. Vesting. The Administrator, on the date of the award, may prescribe that a
Participant's rights in the Stock Award shall be forfeitable or otherwise
restricted for a period of time set forth in the Agreement. The period of
restriction shall be at least one year. By way of example and not of limitation,
the restrictions may postpone transferability of the shares until the attainment
of performance objectives prescribed by Committee or may provide that the shares
will be forfeited if the Participant separates from the service of the Company
and its Related Entities before the expiration of a stated term.
9.03. Performance Objectives. In accordance with Section 9.02, the Committee
may prescribe that Stock Awards will become vested or transferable or both based
on objectives stated with respect to one or more of the Company's, a Related
Entity's or an operating unit's (i) gross, operating or net earnings before or
after taxes, (ii) return on equity, (iii) return on capital, (iv) return on
sales, (v) return on assets or net assets, (vi) earnings per share, (vii) cash
flow per share, (viii) book value per share, (ix) earnings growth, (x) sales
growth, (xi) volume growth, (xii) cash flow (as defined by the Committee),
(xiii) Fair Market Value, (xiv) share price or total shareholder return, (xv)
market share, (xvi) economic value added, (xvii) market value added, (xviii)
productivity, (xix) level of expenses, (xx) quality, (xxi) safety, (xxii)
customer satisfaction, or (xxiii) peer group comparisons of any of the
aforementioned objectives. If the Committee, on the date of the award,
prescribes that a Stock Award shall become nonforfeitable and transferrable only
upon the attainment of performance objectives stated with respect to one or more
of the foregoing criteria, the shares subject to such Stock Award shall become
nonforfeitable and transferrable only to the extent the Committee certifies that
such objectives have been achieved.
9.04. Change in Control. Sections 9.02 and 9.03 to the contrary
notwithstanding, after a Control Change Date each Stock Award will become
transferable and nonforfeitable thereafter in accordance with the terms of the
applicable Agreement. If not sooner transferable and nonforfeitable under the
terms of the applicable Agreement, a Participant's interest in a Stock Award
shall be transferable and nonforfeitable (i) as of his termination of employment
if his employment terminates after a Control Change Date and he is terminated
without
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cause or following his refusal to move to another location or (ii) as of the
date that there is a material reduction in the Participant's compensation or
duties if such reduction occurs after a Control Change Date. For purposes of the
preceding sentence the term "cause" means a willful neglect of responsibilities
to the Company or a Related Entity.
9.05. Shareholder Rights. Prior to their forfeiture (in accordance with the
terms of the Agreement and while the shares of Common Stock granted pursuant to
the Stock Award may be forfeited), a Participant will have all rights of a
shareholder with respect to a Stock Award, including the right to receive
dividends and vote the shares; provided, however, that (i) a Participant may not
sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of shares of
Common Stock granted pursuant to a Stock Award, (ii) the Company shall retain
custody of the certificates evidencing shares of Common Stock granted pursuant
to a Stock Award, and (iii) the Participant will deliver to the Company a stock
power, endorsed in blank, with respect to each Stock Award. The limitations set
forth in the preceding sentence shall not apply after the shares of Common Stock
granted under the Stock Award are no longer forfeitable.
ARTICLE X
PERFORMANCE SHARE AWARDS
10.01. Award. In accordance with the provisions of Article IV and subject to the
limitations set forth in paragraph 5.03, the Administrator will designate
individuals to whom an award of Performance Shares is to be granted and will
specify the number of shares of Common Stock covered by the award.
10.02. Earning the Award. The Administrator, on the date of the grant of an
award, may prescribe that the Performance Shares, or portion thereof, will be
earned, and the Participant will be entitled to receive Common Stock pursuant to
a Stock Award only upon the satisfaction of certain requirements or the
attainment of certain objectives. By way of example and not of limitation, the
restrictions may provide that Performance Shares shall be earned only upon the
Participant's completion of a specified period of employment with the Company or
Related Entity or upon the attainment of stated performance objectives or goals.
Such performance objectives or goals may be based on one or more of the
Company's, a Related Entity's or an operating unit's (i)
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gross, operating or net earnings before or after taxes, (ii) return on equity,
(iii) return on capital, (iv) return on sales, (v) return on assets or net
assets, (vi) earnings per share, (vii) cash flow per share, (viii) book value
per share, (ix) earnings growth, (x) sales growth, (xi) volume growth, (xii)
cash flow (as defined by the Committee), (xiii) Fair Market Value, (xiv) share
price or total shareholder return, (xv) market share, (xvi) economic value
added, (xvii) market value added, (xviii) productivity, (xix) level of expenses,
(xx) quality, (xxi) safety, (xxii) customer satisfaction, or (xxiii) peer group
comparisons of any of the aforementioned objectives. If the Committee, on the
date of the award, prescribes that Performance Shares shall be earned only upon
the attainment of performance objectives stated with respect to one or more of
the foregoing criteria, such Performance Shares shall be earned only to the
extent the Committee certifies that such objectives have been achieved.
10.03. Change in Control. Section 10.02 to the contrary notwithstanding, each
Performance Share shall be earned in its entirety and converted into a Stock
Award as of a Control Change Date. Each Performance Share award will become
transferable and nonforfeitable thereafter as described in Plan section 9.04 in
accordance with the terms of the applicable Agreement.
10.04. Shareholder Rights. No Participant shall, as a result of receiving an
award of Performance Shares, have any rights as a shareholder until and to the
extent that the award of Performance Shares is earned and a Stock Award is made.
If the Agreement so provides, a Participant may receive a cash payment equal to
the dividends that are payable with respect to the number of shares of Common
Stock covered by the award between the date the Performance Shares are awarded
and the date a Stock Award is made. A Participant may not sell, transfer,
pledge, exchange, hypothecate, or otherwise dispose of a Performance Share award
or the right to receive Common Stock thereunder other than by will or the laws
of descent and distribution. After an award of Performance Shares is earned and
a Stock Award is made, a Participant will have all the rights of a shareholder
as described in Plan section 9.05.
ARTICLE XI
STOCK UNITS
11.01. Award. In accordance with the provisions of Article IV, and subject to
the limitations set forth in Plan section 5.03, the Administrator will designate
individuals to whom an award of Stock Units is to be made
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and will specify the number of Stock Units covered by the award provided,
however, that no Participant may be awarded Stock Units in any calendar year for
more than 100,000 shares of Common Stock.
11.02. Vesting. The Administrator, on the date of the award, may prescribe that
the Participant's right to receive a payment pursuant to a Stock Unit award
shall be forfeitable or otherwise terminated for a period of time set forth in
the Agreement or upon the failure to satisfy such other conditions as the
Administrator may prescribe consistent with the Plan. The period of restriction
shall be at least one year. By way of example and not limitation, the
restrictions may provide that the shares shall be earned only upon the
Participant's completion of a specified period of employment with the Company or
Related Entity or upon the attainment of stated performance objectives of goals.
Such performance objectives or goals may be based on one or more of the
Company's, a Related Entity's or an operating unit's (i) gross, operating or net
earnings before or after taxes, (ii) return on equity, (iii) return on capital,
(iv) return on sales, (v) return on assets or net assets, (vi) earnings per
share, (vii) cash flow per share, (viii) book value per share, (ix) earnings
growth, (x) sales growth, (xi) volume growth, (xii) cash flow (as defined by the
Committee), (xiii) Fair Market Value, (xiv) share price or total shareholder
return, (xv) market share, (xvi) economic value added, (xvii) market value
added, (xviii) productivity, (xix) level of expenses, (xx) quality, (xxi)
safety, (xxii) customer satisfaction, or (xxiii) peer group comparisons of any
of the aforementioned objectives. If the Committee, on the date of the award,
prescribes that Stock Units shall be earned only upon the attainment of
performance objectives stated with respect to one or more of the foregoing
criteria, such Stock Units shall be earned only to the extent the Committee
certifies that such objectives have been achieved.
11.03. Payment. In accordance with the Agreement, the amount payable when an
award of Stock Units is earned may be settled in cash, Common Stock or a
combination of cash and Common Stock. A fractional share shall not be
deliverable when a award of Stock Units is earned, but a cash payment will be
made in lieu thereof.
11.04. Shareholder Rights. No Participant shall, as a result of receiving a
Stock Unit award, have any rights as a shareholder of the Company or Related
Entity. A Participant may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of a Stock Unit award
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other than by will or the laws of descent and distribution. The limitations set
forth in the preceding sentence shall not apply to Common Stock issued as
payment pursuant to a Stock Unit award.
ARTICLE XII
INCENTIVE AWARDS
12.01. Awards. The Administrator shall designate Participants to whom Incentive
Awards are made for annual incentive payments. All Incentive Awards shall be
finally determined exclusively by the Administrator under the procedures
established by the Administrator; provided, however, that in any calendar year
no Participant may receive an Incentive Award that exceeds $1.5 million.
12.02. Terms and Conditions. The Administrator, at the time an Incentive Award
is made, shall specify the terms and conditions which govern the award. Such
terms and conditions may include, by way of example and not of limitation,
requirements that the Participant complete a specified period of employment with
the Company or a Related Entity or that the Company, a Related Entity, or the
Participant attain stated objectives or goals as a prerequisite to payment under
an Incentive Award. Such performance objectives or goals may be based on one or
more of the Company's, a Related Entity's or an operating unit's (i) gross,
operating or net earnings before or after taxes, (ii) return on equity, (iii)
return on capital, (iv) return on sales, (v) return on assets or net assets,
(vi) earnings per share, (vii) cash flow per share, (viii) book value per share,
(ix) earnings growth, (x) sales growth, (xi) volume growth, (xii) cash flow (as
defined by the Committee), (xiii) Fair Market Value, (xiv) share price or total
shareholder return, (xv) market share, (xvi) economic value added, (xvii) market
value added, (xviii) productivity, (xix) level of expenses, (xx) quality, (xxi)
safety, (xxii) customer satisfaction, or (xxiii) peer group comparisons of any
of the aforementioned objectives. If the Committee, on the date of the award,
prescribes that the Incentive Award shall be earned only upon the attainment of
performance objectives stated with respect to one or more of the foregoing
criteria, such Incentive Award shall be earned only to the extent that the
Committee certifies that such objectives have been achieved. The Administrator,
at the time an Incentive Award is made, shall also specify when amounts shall be
payable under the Incentive Award and whether amounts shall be payable in the
event of the Participant's death, disability, or retirement.
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Except with respect to those Participants who are covered employees
(as determined under Code section 162(m)(3)) and notwithstanding any other
provision of the Plan, the Administrator, in its discretion may adjust the
terms, conditions or other requirements applicable to Incentive Awards and may
increase or decrease the amounts otherwise payable under an Incentive Award, to
reflect unusual or extraordinary transactions or events. The Administrator may
make such adjustments with respect to one or more Participants, with respect to
all Participants as to Incentive Awards made during a particular year, or with
respect to all outstanding Incentive Awards.
ARTICLE XIII
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options that are incentive
stock options and SARs may be granted under this Plan shall be proportionately
adjusted, and the terms of outstanding awards of Performance Shares, Stock
Awards, Stock Units, Options, and SARs shall be adjusted, as the Committee shall
determine to be equitably required in the event that (a) the Company (i) effects
one or more stock dividends, stock split-ups, subdivisions or consolidations of
shares or (ii) engages in a transaction to which Section 424 of the Code applies
or (b) there occurs any other event which, in the judgment of the Committee
necessitates such action. Any determination made under this Article XIII by the
Committee 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 awards of Performance Shares, Stock Awards, Stock Units, Options or
SARs.
The Committee may make Stock Awards and may grant awards of
Performance Shares, Stock Units, Options, and SARs in substitution for
performance shares, phantom shares, stock awards, stock options, stock
appreciation rights, or similar awards held by an individual who becomes an
employee of the Company or a Related Entity in
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connection with a transaction described in the first paragraph of this Article
XIII. Notwithstanding any provision of the Plan (other than the limitation of
Article V), the terms of such substituted awards of Performance Shares, Stock
Units, Stock Awards, Option or SAR grants shall be as the Committee, in its
discretion, determines is appropriate.
ARTICLE XIV
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES
No Option or SAR 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 (including, without limitation,
withholding tax requirements), 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 when a Stock Award is granted, in payment when a Stock Unit is
earned or for which an Option or SAR is exercised may bear such legends and
statements as the Administrator may deem advisable to assure compliance with
federal and state laws and regulations. No Option or SAR shall be exercisable,
no Stock Award shall be granted, no Common Stock shall be issued, no certificate
for shares shall be delivered, and no payment shall be made under this Plan
until the Company has obtained such consent or approval as the Administrator may
deem advisable from regulatory bodies having jurisdiction over such matters.
ARTICLE XV
GENERAL PROVISIONS
15.01. Effect on Employment. 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 individual any right to continue in the employ or service
of the Company or a Related Entity or in any way affect any right and power of
the Company or a Related Entity to terminate the employment or service of any
individual at any time with or without assigning a reason therefor.
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15.02. Unfunded Plan. The Plan, insofar as it provides for grants, shall be
unfunded, and the Company shall not be required to segregate any assets that may
at any time be represented by grants under this Plan. Any liability of the
Company to any person with respect to any grant 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.
15.03. Disposition of Stock. A Participant shall notify the Administrator of any
sale or other disposition of Common Stock acquired pursuant to an Option that
was an incentive stock option if such sale or disposition occurs (i) within two
years of the grant of an Option or (ii) within one year of the issuance of the
Common Stock to the Participant. Such notice shall be in writing and directed to
the Secretary of the Company.
15.04. 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.
15.05. Employee Status. In the event that the terms of any award of Performance
Shares, Stock Unit or Stock Award or Incentive Award or the grant of any Option
or SAR provide that shares may be issued or become transferable and
nonforfeitable thereunder only after completion of a specified period of
employment, the Administrator may decide in each case to what extent leaves of
absence for governmental or military service, illness, temporary disability, or
other reasons shall not be deemed interruptions of continuous employment.
15.06. Withholding Taxes. Each Participant shall be responsible for satisfying
any income and employment tax withholding obligations attributable to
participation in the Plan. Unless otherwise provided by the Agreement, any such
withholding tax obligations may be satisfied in cash (including from any cash
payable in settlement of an award of Performance Shares, an SAR or Incentive
Award) or a cash equivalent acceptable to the Committee. Any withholding tax
obligations may also be satisfied by surrendering shares of Common Stock to the
Company, by withholding or reducing the number of shares of Common Stock
otherwise issuable to the Participant upon the exercise of an Option or SAR, the
settlement of an award
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of Performance Shares or the grant or vesting of a Stock Award, or by any other
method as may be approved by the Committee. If shares of Common Stock are used
to pay all or part of such withholding tax obligation, the Fair Market Value of
the shares surrendered, withheld or reduced shall be determined as of the day
preceding the date the Option or SAR is exercised, the Stock Award vests or the
Performance Shares or Stock Units are earned, as applicable.
15.07. Certain Reduction of Restrictive Payments. Any benefit, payment,
accelerated vesting or other right under this Plan may constitute a "parachute
payment" (as defined in Code section 280G(b)(2)(A), but without regard to Code
section 280G(b)(2)(A)(ii)), with respect to a Participant and the Participant
may incur a liability under Code section 4999. In accordance with the terms of
an Agreement, the Company shall reduce any such parachute payments, if, and only
to the extent that a reduction will allow the Participant to receive a greater
"net after-tax amount" than such Participant would receive absent a reduction.
For purposes of this Plan section, "net after tax amount" means the amount of
any parachute payments, as applicable, net of taxes imposed under Code sections
1, 3101(b) and 4999 and any State or local income taxes applicable to the
Participant as in effect on the date of the first payment under this Agreement.
The determination of the net after tax amount shall be imposed by the foregoing
taxes on income of the same character as the parachute payments or capped
parachute payments, as applicable, in effect for the year in which the
determination is made. "Capped parachute payments" means the largest amount of
parachute payments that may be paid without liability under Code section 4999.
ARTICLE XVI
AMENDMENT
The Board may amend or terminate this Plan from time to time;
provided, however, that no amendment may become effective until shareholder
approval is obtained if (i) the amendment increases the aggregate number of
shares of Common Stock that may be issued under the Plan or (ii) the amendment
changes the class of individuals eligible to become Participants. No amendment
shall, without a Participant's consent, adversely affect any rights of such
Participant under any outstanding award of Performance Shares, Stock Unit, or
under any Stock Award, Option or SAR outstanding at the time such amendment is
made.
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ARTICLE XVII
DURATION OF PLAN
No Performance Shares or Stock Units may be awarded and no Stock
Award, Option, SAR or Incentive Award may be granted under this Plan more than
ten years after the earlier of the date that the Plan is adopted by the Board or
the date that the Plan is approved by shareholders as provided in Article XVIII.
Performance Shares and Stock Units awarded, and Stock Awards, Options, SARs and
Incentive Awards granted before that date shall remain valid in accordance with
their terms.
ARTICLE XVIII
EFFECTIVE DATE OF PLAN
Performance Shares and Stock Units may be awarded and Stock Awards,
Options, SARs and Incentive Awards may be granted under this Plan upon its
adoption by the Board, provided that no award of Performance Shares, Stock Unit,
Stock Award, Option or SAR will be effective unless 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 or by the
unanimous consent of shareholders within twelve months of such adoption.
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