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]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 20, 1998
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 Crestar Bank
Auditorium, 4th Floor, 919 East Main Street, Richmond, Virginia, on Wednesday,
April 22, 1998, at 10:00 A.M., for the following purposes:
(1) to elect three directors to serve until the 2001
annual meeting of stockholders;
(2) to ratify the appointment by the Board of Directors
of Coopers & Lybrand L.L.P. as independent
accountants for 1998; and
(3) to transact such other business as may properly come
before the meeting.
Only stockholders of record at the close of business on March 6, 1998,
are entitled to notice of, to vote at and to participate in the meeting.
You are requested to mark, date, sign and return the enclosed form of
proxy in the enclosed envelope whether or not you expect to attend the meeting
in person.
By order of the Board of Directors:
J. P. Causey Jr.
Secretary
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
[logo]
GENERAL INFORMATION
Solicitation of the enclosed proxy is made by and on behalf of
Chesapeake Corporation for use at the annual meeting of stockholders to be held
at the Crestar Bank Auditorium, 4th Floor, 919 East Main Street, Richmond,
Virginia, on Wednesday, April 22, 1998, and at any adjournments of such meeting.
An annual report, including financial statements for the year ended December 31,
1997, 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 $6,000, 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 6, 1998, 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 21,198,856 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.
This proxy statement and the enclosed form of proxy were first mailed
to stockholders on March 20, 1998.
1
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ELECTION OF DIRECTORS
(PROPOSAL 1)
The Corporation's Board of Directors is divided into three classes. At
the annual meeting, three directors are expected to be elected to Class III to
hold office for a term of three years and until their respective successors are
duly elected and qualified. Mr. Fox, a director in Class III, has elected to
retire and has declined to be nominated for re-election. Ms. Dwyer, a director
in Class III, has declined to be nominated for reelection due to business
commitments. Mr. Olsson, formerly a director in Class II, resigned on August 1,
1997, because of personal and business commitments. Mr. Stookey, a director in
Class I, is resigning as of April 22, 1998, for personal reasons. The Board of
Directors has amended the bylaws of the Corporation, effective as of April 22,
1998, to reduce the number of directors to nine.
Information Concerning Nominees
<TABLE>
<CAPTION>
Name and Age; Director
Principal Occupation or Continuously
Employment During Last Five Years Since
<S> <C>
Class III (to serve until the 2001 annual meeting of stockholders)
Robert L. Hintz, 67 1985
Chairman of the Board, R. L. Hintz and Associates, a management
services consulting firm; Director of Ashland Coal, Inc.,
Reynolds Metals Company and Scott & Stringfellow Financial, Inc.
Thomas H. Johnson, 48 1997
President & Chief Executive Officer of the
Corporation (since 1997), and former Vice
Chairman (1996-1997) and President and Chief
Executive Officer (1989-1996), Riverwood
International Corporation, a forest products
and packaging company.
Frank S. Royal, 58 1990
Physician; Director of Crestar Financial Corporation, CSX
Corporation, Dominion Resources, Inc. and Columbia/HCA
Healthcare Corporation.
</TABLE>
2
<PAGE>
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 three 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. HINTZ, JOHNSON AND ROYAL TO THE BOARD OF DIRECTORS TO SERVE UNTIL
THE 2001 ANNUAL MEETING.
3
<PAGE>
Directors Continuing in Office
There are six directors whose present term of office will continue
until 1999 or 2000, as indicated below, and until their respective successors
are duly elected and qualified. Each has served continuously since the year he
joined the Corporation's Board.
<TABLE>
<CAPTION>
Name and Age; Director
Principal Occupation or Continuously
Employment During Last Five Years Since
<S> <C>
Class I (to serve until the 1999 annual meeting of stockholders)
William D. McCoy, 68 1985
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, 54 1984
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 and T. Rowe Price Associates, Inc.
Richard G. Tilghman, 57 1986
Chairman of the Board, Chief Executive
Officer and Director, Crestar Financial
Corporation, a bank holding company.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Class II (to serve until the 2000 annual meeting of stockholders)
Wallace Stettinius, 65 1980
Retired (since 1995); former Chairman of the
Board, Cadmus Communications Corporation, a
graphic communications holding company;
Director of Cadmus Communications
Corporation.
Joseph P. Viviano, 59 1988
President and Chief Operating Officer (since
1993) and Director, Hershey Foods
Corporation, a manufacturer of confectionery
products, and former President, Hershey
Chocolate U.S.A., a division of Hershey
Foods Corporation; Director of Huffy
Corporation.
Harry H. Warner, 62 1978
Financial Consultant; Director of Allied Research Corporation
and Pulaski Furniture Corporation.
</TABLE>
The Board of Directors meets regularly every two months and following
each annual meeting of stockholders. During the last year, there were nine
meetings of the Board.
The Board has standing Executive, Audit, Executive Compensation and
Nominating Committees. Members of the Executive Committee are Messrs. Fox,
Johnson, Stettinius, Tilghman, Viviano and Warner. During the last year, there
were four 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 four 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 five meetings of the Compensation Committee. The
Compensation Committee approves officer incentive awards, grants stock options,
stock awards 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.
5
<PAGE>
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 1999 annual meeting must be received in writing by the Secretary
of the Corporation no earlier than January 6, 1999, and no later than January
31, 1999, 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 1997, all directors attended at least 75% of the meetings
of the Board of Directors and the committees to which they were assigned,
except Ms. Dwyer. As Chairman of Quantum Chemical Corporation
("Quantum"), Mr. Stookey, a director of the Corporation, served from 1989
to 1993 as an executive officer of Petrolane Incorporated, Petrolane Finance
Corp. and QJV Corp., affiliates of Quantum, which companies were
reorganized on July 15, 1993, under the U. S. Bankruptcy Code. Mr. McCoy, a
director of the Corporation, retired as Chairman of the Board, Chief
Executive Officer and Director of Koch Label Co. ("Koch") on January 1,
1994. Koch filed for protection under the U.S. Bankruptcy Code in September
1994.
6
<PAGE>
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 Director's Retirement Plan (the "Outside Director's 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.
The Outside Director's Plan was terminated in 1997 and will not be provided to
future directors. The non-employee directors who served while the Outside
Director's Plan was in effect will continue to accrue credit for service under
the plan and will receive retirement benefits earned under the plan, but the
retirement benefit for directors retiring after 1997 will be based on the
retainer paid in 1997.
At the 1996 annual meeting, the stockholders approved the Chesapeake
Corporation Directors' Stock Option and Deferred Compensation Plan (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 at an exercise price of $32.31 was granted to each non-employee
director on May 1, 1997, and an option to purchase 1,700 shares of Common Stock
will be granted to each non-employee director on May 1, 1998. The exercise price
of the options to be granted in 1998 will be the average closing price of the
Common Stock for the 20 trading days preceding May 1, 1998. Options granted
under the 1996 Plan will become exercisable on the day before the next
succeeding 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
caption "Definition of Change in Control"). 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 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.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of February 2, 1998, 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>
J.P. Causey Jr................... 49,474 2,780 52,254
M. Katherine Dwyer............... 1,375 1,375
J. Carter Fox.................... 237,519 15,504 253,023 1.2%
Robert L. Hintz.................. 8,900 8,900
Thomas H. Johnson................ 70,000 70,000
Andrew J. Kohut.................. 41,479 5,863 47,342
William D. McCoy................. 6,000 6,000
William A. Raaths................ 30,175 817 30,992
John W. Rosenblum................ 3,500 3,500
Frank S. Royal................... 9,000 9,000
Wallace Stettinius............... 8,500 8,500
John Hoyt Stookey................ 3,500 3,500
Richard G. Tilghman.............. 4,027 1,333 5,360
William T. Tolley................ 6,878 6,878
Joseph P. Viviano................ 16,119 3,000 19,119
Harry H. Warner.................. 5,150 5,150
All Directors and
Executive Officers as
a Group (17 persons)........... 535,515 29,402 564,917 2.7
MacKay-Shields Financial Corporation
9 West 57th Street
New York, NY 10019............. 2,086,850 2,086,850 9.8
FMR Corp.
82 Devonshire Street
Boston, MA 02109............... 692,700 742,400 1,435,100 6.7
The Capital Group Companies, Inc.
333 South Hope Street
Los Angeles, CA 90071.......... 1,418,100 1,418,100 6.6
</TABLE>
- ---------------
(1) Includes shares held in fiduciary capacities and (a) an aggregate
223,430 shares that may be acquired by employee directors and the Corporation's
executive officers within 60 days under the Corporation's 1997 Incentive Plan,
1993 Incentive Plan and 1987 Stock Option Plan, and (b) an aggregate 45,075
shares that may be acquired by certain non-employee directors within 60 days
under the 1996 Plan and the 1992 Non-Employee Director Stock Option 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.
8
<PAGE>
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
The Corporation's executive compensation programs are administered by
the Compensation Committee. The Compensation Committee is composed of the
individuals listed below, each of whom is a non-employee director of the
Corporation. The Compensation Committee grants stock options, stock appreciation
rights ("SARs"), performance shares ("Performance Shares"), stock awards and
stock units to, and approves incentive awards 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, tissue 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, stock awards 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. The expected value of the CEO's total compensation is 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. The
Corporation expects all executive compensation paid or awarded during 1997 to be
fully deductible by the Corporation under the Revenue Reconciliation Act of
1993, except that the deductibility of a portion of the stock awards granted to
Mr. Johnson at the time of his employment will depend upon his total
compensation in the year such awards vest.
1997 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 approximately 20 paper
and forest products companies, two of which are included in the S&P Midcap 400
Paper & Forest Products group used in the Stock Performance Graph. The MCS
9
<PAGE>
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 considers 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 Mr. Fox's salary of 5% in 1997. 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
Mr. Fox'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 his 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 nine companies in the
packaging and tissue industries with which the Corporation competes (one of
which is in the S&P Midcap 400 Paper & 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
earnings and cash flow generated by operations. The Compensation Committee noted
that the Corporation's financial results for 1997 were below the levels achieved
in 1996, but were consistent with the financial performance of the Compensation
Peer Group. The Compensation Committee also concluded that Mr. Fox's achievement
of his individual goals substantially met the Compensation Committee's
expectations. Mr. Fox's performance was evaluated in the aggregate without
assigning specific weights to the individual elements upon which his performance
was evaluated.
Based on advice from its compensation consultant, the Compensation
Committee recommended and the Board of Directors approved a starting salary of
$500,000 for Mr. Johnson, which was within the competitive pay range for the CEO
based on the MCS Survey. The Compensation Committee believed that this was an
appropriate level based on Mr. Johnson's extensive experience and knowledge of
the industry.
Annual Incentive Program. The Compensation Committee also approves
annual incentive awards to executive officers in the form of bonuses under the
1997 Incentive Plan. The Compensation Committee reviewed and discussed
Chesapeake's 1997 financial performance and compared it to the Corporation's
1996 financial performance, the 1997 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 1997
incentive awards for executive officers other than Messrs. Fox and Johnson. 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 Mr. Fox was $523,900
for 1997, which represents a 98% increase from his award for 1996 and which was
approximately 100% of his year-end base salary, compared to incentive awards of
approximately 53% of year-end base salary for 1996 and 100% for 1995. Mr. Fox'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 award for Mr. Fox also included a special award in
recognition of his efforts in completing the sale of the West Point mill and
four packaging plants. The CEO's performance was evaluated in the aggregate
without assigning specific weights to the individual elements upon which his
performance was evaluated.
10
<PAGE>
The incentive award for Mr. Johnson was $106,600 for his period of
employment during 1997. Mr. Johnson'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 on his
employment (primarily relating to the strategic direction of the Corporation)
and the Compensation Committee's evaluation of the Corporation's performance
since August 1, 1997 (based on the same criteria as discussed above for Mr.
Fox).
Long-Term Incentive Programs. The Compensation Committee also approves
long-term incentive awards to executive officers in the form of stock options,
Performance Shares, stock awards 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 Midcap 400
Paper & Forest Products group used in the Stock Performance Graph. The
Compensation Committee relies on the consultant's data base for this purpose
based 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 1997, the Compensation Committee
granted options to purchase an aggregate of 211,900 shares of Common Stock to
the Corporation's employees, including nonqualified options to purchase 50,000
shares of Common Stock that were granted to Mr. Johnson in connection with his
employment by the Corporation. In determining a recommendation for Mr. Johnson's
option grants, in addition to the factors set forth above for executive officers
generally, the Compensation Committee believed it was important for Mr. Johnson
to have a significant opportunity to purchase the Corporation's Common Stock to
align his interests with those of other stockholders. 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. The option recipients, including
Mr. Johnson, will receive value from these grants only if the price of the
Common Stock increases above the grant price. The Compensation Committee did not
grant any stock options to Mr. Fox in anticipation of his retirement from the
Corporation.
Opportunities for long-term incentives 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
1997, the Compensation Committee granted Mr. Johnson 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 for this performance cycle were granted to other executive officers and
key employees in 1996. Each year during 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 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 was earned in 1997 when the Common Stock price exceeded $35 and additional
amounts will be earned when the price equals or exceeds each $5 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
"Definition of Change in Control"), while a portion of the Performance Shares
granted for the 1996-2000 performance cycle will be deemed to have been earned
11
<PAGE>
in the event of a "change in control" based on the price of the Common Stock.
Mr. Fox earned 490 Performance Shares for the 1996-2000 performance cycle in
June 1997. No awards were earned for the 1996-2000 performance cycle after Mr.
Johnson's employment in August 1997, nor were any awards earned during 1997
pursuant to the previously reported 1994-97 performance cycle.
During 1997, the Compensation Committee also granted stock awards to
executive officers for 63,000 restricted shares, including awards to Mr. Johnson
for 40,000 restricted shares (see "Agreement with Mr. Johnson" under the caption
"Certain Agreements With Executive Officers" below). The awards vest in periods
ranging from two to five years. The awards were granted to Mr. Johnson in
connection with his employment by the Corporation to align his interest with
those of other stockholders.
Executive Compensation Committee
Wallace Stettinius, Chairman
William D. McCoy
Frank S. Royal
John Hoyt Stookey
Harry H. Warner
Certain Agreements With Executive Officers
The Corporation has entered into certain agreements with the following
executive officers named in the Summary Compensation Table.
Agreement with Mr. Fox
In recognition of his approximately 35 years service with the
Corporation, 17 of which were in the capacity of CEO, the Corporation entered
into a Supplemental Retirement Agreement with Mr. Fox in October 1997. The
agreement provides that Mr. Fox will continue as an active employee in his
current position through March 31, 1998, at his current compensation and benefit
levels. The agreement also provides that upon Mr. Fox's early retirement on
April 1, 1998, his retirement benefits will be enhanced by adding 5 years to his
age and service. The agreement includes customary confidentiality and
non-competition provisions.
Agreement with Mr. Johnson
In connection with his employment as President & CEO, the Corporation
entered into an Employment and Severance Benefits Agreement in July 1997 with
Mr. Johnson. The agreement provides for Mr. Johnson's employment as President &
CEO with a salary of not less than $500,000 per year through July 31, 2000, with
one year extensions automatically granted each July 31. During the term of the
agreement Mr. Johnson may participate in the benefit programs available to
executive officers generally. The agreement provides for minimum annual
incentives of $100,000 for 1997 and $200,000 for 1998. In addition, the
agreement provides for the grant in 1997 of nonqualified stock options for
50,000 shares of the Corporation's Common Stock and a stock award in 1997 of
10,000 shares of Restricted Stock. Further, the agreement provided that upon Mr.
Johnson's purchase of at least 10,000 shares of the Corporation's Common Stock
on the open market, the Corporation would grant to him a one-to-one matching
number of shares of Restricted Stock (not to exceed 30,000 matching shares). Mr.
Johnson purchased 30,000 shares of the Corporation's Common Stock on the open
market in November 1997, and the Compensation Committee granted a stock award of
30,000 shares.
The agreement also provides for payment of salary, benefits and annual
incentive amounts for the remaining term of the agreement in the event Mr.
Johnson is terminated during the term of the agreement by the Corporation
without cause (as defined in the agreement).
12
<PAGE>
In addition, in connection with his employment, the Corporation agreed
to reimburse Mr. Johnson for certain expenses related to his relocation to
Richmond, Virginia, and the sale of his former principal residence. During 1997,
the Corporation reimbursed Mr. Johnson for $52,159 of such expenses.
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 Benefits Continuation Plan, the 1993 Incentive 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 Benefits Continuation Plan, the 1993 Incentive 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.
13
<PAGE>
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended December 31,
1995, 1996 and 1997, the cash compensation paid by the Corporation and its
subsidiaries, as well as certain other compensation paid or accrued, to each
person who served as the Corporation's CEO during 1997 and to its four other
most highly compensated executive officers (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------- ----------------------------------
Awards Payouts
-------------------- -----------
Name and Other All
Principal Position Annual Other
as of Compen- Restricted Options/ LTIP Compen-
December 31, 1997 Year Salary Bonus(1) sation(2) Stock (3) SARs Payouts (4) sation(5)
- ---------------------- ------- ---------- ---------- ----------- ------------- ------- ------------- ----------
<S> <C>
J. Carter Fox 1997 $512,500 $523,900 0 $ 16,844 $ 9,544
Chairman (President & 1996 490,000 265,000 24,000 0 17,925
Chief Executive Officer 1995 465,000 480,000 24,000 311,833 8,813
through July 1997)
Thomas H. Johnson 1997 208,333 106,600 $31,735 $1,350,000 50,000 0 52,159
President & Chief
Executive Officer
(since August 1997)
J. P. Causey Jr. 1997 189,750 215,000 9,500 14,094 6,044
Senior Vice 1996 180,000 87,500 9,500 0 8,887
President, Secretary 1995 167,500 170,000 6,500 71,278 5,550
& General Counsel
William A. Raaths 1997 221,500 135,000 188,250 9,500 14,094 6,233
Group Vice President 1996 191,250 170,000 9,500 0 8,906
- Tissue Products 1995 166,254 180,000 7,500 80,195 5,438
William T. Tolley 1997 200,000 135,600 21,836 156,875 14,500 11,344 39,224
Group Vice 1996 28,125 115,000 0 0 0
President - Finance
& Chief Financial
Officer (since 1996)
Andrew J. Kohut 1997 223,000 55,000 188,250 9,500 14,094 6,458
Group Vice 1996 215,000 110,000 13,500 0 9,750
President - Display 1995 196,971 185,000 7,500 71,278 5,767
& Packaging
</TABLE>
- --------------------
(1) The 1997 bonus amounts include special one time payments relating
to the sale of the West Point mill and four packaging plants for Messrs. Fox,
Causey, Tolley and Kohut.
(2) 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.
Amounts for Mr. Johnson and Mr. Tolley represent reimbursement of taxes on
relocation payments.
(3) The amounts appearing in the Restricted Stock column represent the
value of Restricted Stock awards granted during 1997 based on the closing price
for the Company's Common Stock on the date of grant. The Restricted Stock earned
in 1997 under Performance Shares appears under "LTIP Payouts."
(4) The amounts appearing in the LTIP Payouts column represent the
value of Restricted Stock and Stock Units earned for the 1994-1997 and 1996-2000
performance cycles under the 1993 Incentive Plan for 1997 (estimated), 1996
(actual) and 1995 (actual). The amounts are based on the closing price for the
Common Stock of $34.375, $31.375, and $29.625 on December 31, 1997, 1996, and
1995, respectively. As of December 31, 1997, the number and value (based on the
closing price of $34.375 for the Common Stock on such date) of shares of
Restricted Stock held by the Named Executive Officers were as follows: Mr. Fox,
313 shares, $10,759; Mr. Johnson, 40,000 shares, $1,375,000; Mr. Causey, 262
shares, $9,006; Mr. Raaths, 6,262 shares, $215,256; Mr. Tolley, 5,211 shares,
$179,128; and Mr. Kohut, 6,262 shares, $215,256. Stock awards in 1997 for 5,000
shares for Mr. Johnson and 2,500 shares each for Mr. Raaths, Mr. Tolley and Mr.
Kohut will vest in two years. None of the other shares will vest, in whole or in
part, in less than three years from the date of grant (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 "Definition of Change in Control"). Dividends will be paid on
shares of Restricted Stock at the same rate and times as on all other shares of
Common Stock.
(5) "All Other Compensation" for 1997 includes the following: (a) the
Corporation's 50% matching contributions under the Corporation's 401(k) Savings
Plan for Salaried Employees of $2,349 for Mr. Tolley and $4,000 for each of the
other Named Executive Officers except Mr. Johnson, who was not eligible to
participate in 1997; (b) the Corporation's matching contribution under the
Corporation's Salaried Employees' Stock Purchase Plan of the following amounts
made to the Named Executive Officers: Mr. Fox, $5,544; Mr. Johnson, $0; Mr.
Causey, $2,044; Mr. Raaths, $2,233; Mr. Tolley, $0; and Mr. Kohut, $2,458; and
(c) reimbursement to cover relocation expenses in the amount $52,159 for Mr.
Johnson and $36,875 for Mr. Tolley.
14
<PAGE>
Stock Options and SARs
The following table contains information concerning the grants of
options and SARs made during 1997 under the 1993 Incentive Plan and the 1997
Incentive Plan to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for Option Term (1)
- ------------------------------------------------------------------------ -------------------------------------------------
Number % of Total
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 0 0% - - $0 $ 0 $ 0
Thomas H. Johnson 50,000 23.5 $33.28 8/10/07 0 1,046,500 2,652,000
J.P. Causey Jr. 9,500 4.48 33.28 8/10/07 0 198,835 503,880
William A. Raaths 9,500 4.48 33.28 8/10/07 0 198,835 503,880
William T. Tolley 5,000 2.36 31.75 1/19/07 0 99,850 253,000
9,500 4.48 33.28 8/10/07 0 198,835 503,880
Andrew J. Kohut 9,500 4.48 33.28 8/10/07 0 198,835 503,880
</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. Tolley for 5,000 shares with an exercise
price of $31.75 is an Incentive Stock Option and was intended to replace, in
part, options from Mr. Tolley's previous employer that terminated upon his
employment by the Corporation. All other grants to the Named Executive Officers
were nonqualified options. The Incentive Stock Option grant to Mr. Tolley was
made under the 1993 Incentive Plan and all other grants were made under the 1997
Incentive Plan. All grants 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 Incentive Stock Options. 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 1997, will be dependent on
the future performance of the Common Stock. To put the hypothetical gains shown
in the table for options expiring on August 10, 2007, into perspective, the
following is provided:
<TABLE>
<CAPTION>
Annual Rate of Stock Price
Appreciation
------------------------------------
5% 10%
------------ ---------------
<S> <C>
Resulting stock price based on $33.28 starting price $ 54.21 $ 86.32
Per share gain 20.93 53.04
Aggregate hypothetical gain that would be realized by all stockholders
(based on 23,563,002 shares outstanding on August 11, 1997) 493,173,632 1,249,781,626
Aggregate hypothetical gain on options granted to the Named Executive
Officers if assumed prices are achieved 1,841,840 4,667,520
Hypothetical aggregate gains for the Named Executive Officers as a
percentage of all stockholders' gains 0.4% 0.4%
</TABLE>
15
<PAGE>
Option/SAR Exercises and Holdings
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options and SARs during 1997, and
unexercised options and SARs held by them on December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities In-the-Money
Underlying Options/SARs at
Unexercised Year-End (1)
Options/SARs at
Year-End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable (2) Unexercisable(2)
---- ----------- -------- ----------------- ----------------
<S> <C>
J. Carter Fox 15,600 $258,522 123,500/24,000 $1,283,430/$170,960
Thomas H. Johnson 0 0 0/50,000 0/54,750
J. P. Causey Jr. 0 0 30,999/18,001 313,939/75,974
William A. Raaths 0 0 17,266/18,334 140,882/76,438
William T. Tolley 0 0 0/14,500 0/23,528
Andrew J. Kohut 0 0 28,499/21,001 263,034/95,774
</TABLE>
- --------------------
(1) The value of unexercised in-the-money options/SARs represents the
positive spread between the December 31, 1997, closing price of Common Stock
($34.375) 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, 1997, 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 1997
Incentive Plan, 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 and incentive award opportunities made during 1997 under the
1997 Incentive Plan to the Named Executive Officers for the 1996-2000
performance cycle.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Estimated Future Payouts
Performance Under Non-Stock Price-Based
Number of or Other Period Plans(1)
Shares, Units or Until Maturation ----------------------------
Name Other Rights(1) or Payout Threshold Target Maximum
---- --------------- --------- --------- ------ -------
<S> <C>
Thomas H. Johnson 4,900 Performance Shares 1997-2000
$360,000 Incentive Opportunity 1997-2000 $135,500 $360,000 $360,000
</TABLE>
- --------------------
(1) Awards consist of incentive award opportunities and Performance
Shares granted under the 1997 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
(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 $40 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 "Long-Term Incentive Programs" caption
under the Compensation Committee Report on Executive Compensation. All other
Named Executive Officers received awards of incentive award opportunities and
Performance Shares for the 1996-2000 performance cycle in 1996.
16
<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, 1998, were: Mr. Fox, 34; Mr. Johnson, 0; Mr. Causey, 14; Mr.
Raaths, 18; Mr. Tolley, 1; and Mr. Kohut, 18 (Mr. Raaths has 12 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
On November 5, 1997, in a privately negotiated transaction and as a
part of the Corporation's previously announced stock purchase program, the
Corporation repurchased 1,490,000 shares of Common Stock beneficially owned by
Sture G. Olsson or Crestar Bank, in its capacity as trustee of certain trusts
related to Mr. Olsson and his family. Immediately prior to the purchase, each of
Mr. Olsson and Crestar Bank was the direct or indirect beneficial owner of more
than 5% of the shares of Common Stock then outstanding. The purchase price of
$34.25 per share, which was determined and approved by the Board of Directors,
represented the ten-day average closing price for the Common Stock for a period
prior to the sale.
17
<PAGE>
Performance Graph
The following graph compares the cumulative total return for the Common
Stock to the cumulative total returns for the S&P Midcap 400 Composite Index and
the S&P Midcap 400 Paper & Forest Products Group Index for the Corporation's
last five fiscal years. The graph assumes an investment of $100 in the Common
Stock and in each index as of December 31, 1992, and that all dividends were
reinvested.
5-Year Comparison: Chesapeake Corporation vs.
S&P 400 vs. S&P 400 Paper & Forest Products Group
[GRAPH]
<TABLE>
<CAPTION>
92 93 94 95 96 97
<S> <C>
CSK 100 129 171 157 172 193
S&P 400 100 114 110 144 172 227
S&P 400 Paper
& Forest 100 117 115 135 139 150
</TABLE>
18
<PAGE>
The Corporation's Proxy Statement for the 1997 Annual Meeting of
Stockholders presented a Stock Performance Graph which compared the
Corporation's cumulative total stockholder return for the ten-year period ended
December 31, 1996, to the S&P 500 Composite Index and the S&P Paper and Forest
Products Group Index. The Corporation decided to change from the S&P 500 Indices
to the S&P Midcap 400 Indices as a result of the sale in 1997 of the West Point
mill and four packaging plants and because the Midcap Indices represent
comparisons with companies more similar in size to the Corporation. In addition,
the Corporation is included in the S&P Midcap 400 Index. Rules of the Securities
Exchange Commission require that if an index is selected which is different from
an index used for the immediately-preceding year, the Corporation's total return
must be presented in the Stock Performance Graph for both the newly selected
index and the index used in the immediately-preceding year. Because of the
change in the comparative indices, the following graph is presented to compare
the cumulative total return (assuming reinvestment of all dividends) for the
Common Stock to the cumulative total return of the S&P 500 Composite Index and
the S&P Paper & Forest Products Group Index as contained in the Corporation's
1997 Proxy Statement.
5-Year Comparison: Chesapeake Corporation vs.
S&P 500 vs. S&P 500 Paper & Forest Products Group
[GRAPH]
<TABLE>
<CAPTION>
92 93 94 95 96 97
<S> <C>
CSK 100 129 171 157 172 193
S&P 400 100 110 112 153 189 252
S&P 400 Paper
& Forest 100 117 115 126 140 150
</TABLE>
19
<PAGE>
SELECTION OF AUDITORS
(PROPOSAL 2)
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 1998. 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 2 TO
RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR 1998.
MATTERS TO BE PRESENTED FOR INCLUSION IN THE PROXY
STATEMENT FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
Any proposal submitted by a stockholder for inclusion in the proxy
materials for the annual meeting of stockholders in 1999 must be delivered to
the Corporation at its principal office in Richmond, Virginia, not later than
November 20, 1998.
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 20, 1998
20
<PAGE>
NOTICE
and
PROXY STATEMENT
for the
ANNUAL MEETING
of
STOCKHOLDERS
To Be Held
April 22, 1998
[LOGO]
<PAGE>
CHESAPEAKE CORPORATION
RICHMOND, VIRGINIA 23218
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders, April 22, 1998
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 6,
1998, at the annual meeting of stockholders to be held at 10:00 a.m. on April
22, 1998, or any adjournments thereof.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued on reverse side.)
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
(1) ELECTION OF THREE DIRECTORS FOR A THREE-YEAR TERM:
Class III (to serve until the 2001 annual meeting of stockholders)
Nominees: Robert L. Hintz, Thomas H. Johnson and Frank S. Royal.
/_/ FOR /_/ WITHHOLD /_/ FOR ALL EXCEPT THOSE
WHOSE NAME(S) APPEAR
BELOW.
---------------------
(2) To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for 1998.
/_/ FOR /_/ AGAINST /_/ ABSTAIN
(3) 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.
The Board of Directors
unanimously 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: _______________ 1998
Signature(s) _____________
__________________________
Please sign exactly as your
name appears. Joint owners
should each sign
personally. Where
applicable, indicate your
official position or
representative capacity.
<PAGE>
March 20, 1998
Dear Plan Participant:
The instruction card to vote your Chesapeake Corporation common stock
held in the Chesapeake Corporation 401(k) Savings Plan for Salaried Employees,
the Chesapeake Packaging CO. 401(k) Savings Plan for Hourly Employees, or the
St. Laurent Paperboard (U.S.) 401(k) Savings Plan (the "Plans") is on the lower
portion of this page. It is important that you instruct the trustee to vote your
shares held in the Plans by completing the instruction card below and returning
it to The Bank of New York.
As a participant in the Plans, you are entitled to attend the annual
meeting of stockholders of Chesapeake Corporation to be held in the auditorium
of Crestar Bank, 9th & Main Streets, Richmond, Virginia, on Wednesday, April 22,
1998, at 10:00 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 corporate office in Richmond at (804) 697-1000.
Sincerely,
J. P. Causey Jr.
Secretary
<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 St. Laurent
Paperboard (U.S.) 401(k) Savings Plan
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 St. Laurent Paperboard (U.S.) 401(k)
Savings Plan, 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>
- -------------------------------------------------------------------------------
The Board of Directors Unanimously Recommends a Vote FOR Each of the Following
Proposals:
(1) Election of Three Directors For a Three Year Term. Class III (To
serve until the 2001 annual meeting of stockholders):
Robert L. Hintz, Thomas H. Johnson and Frank S. Royal.
<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 ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for 1998.
/_/ FOR /_/ AGAINST /_/ ABSTAIN
(3) 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 _____________________, 1998.
<PAGE>
March 20, 1998
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 22, 1998. 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 20, 1998. 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 20, 1998. 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 Crestar Bank,
9th and Main Streets, Richmond, Virginia, on Wednesday, April 22, 1998, at 10:00
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 three directors for a three year term. Class III (to serve
until the 2001 annual meeting of stockholders): Robert L. Hintz,
Thomas H. Johnson and Frank S. Royal.
<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 ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) 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 _____________________, 1998
PLEASE MAIL THESE INSTRUCTIONS IN THE ENCLOSED ENVELOPE TO ASSOCIATED BANK
<PAGE>
April 6, 1998
A REMINDER
Dear Stockholder:
Proxy material for the annual meeting of stockholders of Chesapeake
Corporation was sent to you under date of March 20, 1998.
According to our records, your proxy for this meeting, which will be
held on Wednesday, April 22, 1998, 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
