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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[L O G O]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 24, 1999
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 28, 1999, at 10:00
A.M., for the following purposes:
(1) to elect three directors to serve until the 2002 annual meeting
of stockholders;
(2) to approve amendments to the Chesapeake Corporation 1997
Incentive Plan (the "1997 Incentive Plan");
(3) to ratify the appointment by the Board of Directors of
PricewaterhouseCoopers LLP as independent accountants for
1999; 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 12, 1999,
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
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
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 28, 1999, and at any adjournments of such meeting. An annual
report, including financial statements for the year ended December 31, 1998, 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 12, 1999, 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 21,474,005 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 amendments to 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 and Broker Shares that are included for purposes of
determining whether a quorum is present but are not voted with respect to the
approval of the amendments to the 1997 Incentive Plan will have the same effect
as a negative vote for purposes of approving the amendments to the 1997
Incentive Plan.
This proxy statement and the enclosed form of proxy were first mailed to
stockholders on March 24, 1999.
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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 I to hold
office for a term of three years and until their respective successors are duly
elected and qualified. Mr. McCoy, a director in Class I, has elected to retire
and has declined to be nominated for re-election.
Information Concerning Nominees
Name and Age; Director
Principal Occupation or Continuously
Employment During Last Five Years Since
Class I (to serve until the 2002 annual meeting of stockholders)
John W. Rosenblum, 55 1984
Dean, Jepson School of Leadership Studies,
University of Richmond (since 1996);
former Tayloe Murphy Professor of Business
Administration (1993-1996), Darden Graduate
School of Business Administration, University
of Virginia; Director of Cadmus Communications
Corporation, Comdial Corporation, Cone Mills
Corporation and Grantham, Mayo, van Otterloo, LLP.
Richard G. Tilghman, 58 1986
Chairman of the Board, Chief Executive
Officer and Director, Crestar Financial
Corporation, a bank holding company; Vice
Chairman of the Board, Executive Vice
President and Director, SunTrust
Banks, Inc., a bank holding company.
Hugh V. White, Jr., 65 _____
Partner, Hunton & Williams, the Corporation's
principal law firm (retiring March 31, 1999);
Director of Pulaski Furniture Corporation.
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. Messrs. Rosenblum and Tilghman are currently directors and have
served continuously since the year each 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. ROSENBLUM, TILGHMAN AND WHITE TO THE BOARD OF DIRECTORS TO
SERVE UNTIL THE 2002 ANNUAL MEETING.
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Directors Continuing in Office
There are six directors whose present term of office will continue until
2000 or 2001, 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.
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)
Wallace Stettinius, 66 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, 60 1988
Vice Chairman (1999) and Director,
Hershey Foods Corporation, a manufacturer of
confectionery products, and former President
and Chief Operating Officer (1993-1998),
Hershey Foods Corporation; Director of
Harsco Corporation and Huffy Corporation.
Harry H. Warner, 63 1978
Chairman of the Board (Non-executive) of the
Corporation (since 1998); Financial
Consultant; Director of Allied Research
Corporation, Pulaski Furniture Corporation and
Virginia Management Investment Corp.
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Class III (to serve until the 2001 annual meeting of stockholders)
Robert L. Hintz, 68 1985
Chairman of the Board, R. L. Hintz and
Associates, a management services consulting
firm; Director of Arch Coal, Inc., Reynolds
Metals Company and Scott & Stringfellow
Financial, Inc.
Thomas H. Johnson, 49 1997
President & Chief Executive Officer of the
Corporation (since 1997); 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, 59 1990
Physician; Director of Columbia/HCA Healthcare
Corporation, CSX Corporation, Dominion
Resources, Inc. and SunTrust Banks, Inc.
The Board of Directors meets regularly every two months and following each
annual meeting of stockholders. During the last year, there were seven meetings
of the Board.
The Board has standing Executive, Audit, Executive Compensation and
Nominating Committees. Members of the Executive Committee are Messrs. Warner
(Chairman), Hintz, Johnson, Rosenblum and Stettinius. During the last year,
there were no 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 Messrs. Hintz (Chairman), McCoy,
Rosenblum and Royal. 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.
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Members of the Executive Compensation Committee (the "Compensation
Committee") are Messrs. Stettinius (Chairman), McCoy, Royal and Tilghman. During
the last year, there were four 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.
Members of the Nominating Committee are Messrs. Rosenblum (Chairman),
Royal, Stettinius and Viviano. During the last year, there were three meetings
of the Nominating Committee. The Nominating Committee reviews the performance
and attendance of directors, recommends to the full Board of Directors persons
to serve as directors of the Corporation and establishes such procedures as it
deems proper to receive and review information concerning potential candidates
for election or re-election 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 2000 annual meeting must be received in writing by the Secretary
of the Corporation no earlier than January 4, 2000, and no later than January
29, 2000, 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 1998, all directors, except for Ms. Dwyer and Mr. Stookey, attended
at least 75% of the meetings of the Board of Directors and the committees to
which they were assigned.
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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 $1,200,
plus travel expenses, for each day attending a Board or committee meeting. The
chairman of the Board receives an additional annual retainer of $100,000 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.
The Outside Directors' Plan was terminated in 1997 and will not be provided to
future directors. The non-employee directors who served while the Outside
Directors' 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 1,700 shares of
Common Stock at an exercise price of $35.425 was granted to each non-employee
director on May 1, 1998, and an option to purchase 1,900 shares of Common Stock
will be granted to each non-employee director on May 1, 1999. The exercise price
of the options to be granted in 1999 will be the average closing price of the
Common Stock for the 20 trading days preceding May 1, 1999. 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.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of February 1, 1999 (unless otherwise
indicated), the direct and indirect beneficial ownership of Common Stock by:
each director; each nominee for director; each executive officer named in the
Summary Compensation Table; all directors, nominees for director and executive
officers of the Corporation as a group; and all persons beneficially owning more
than 5% of the outstanding Common Stock.
Sole Voting
and Aggregate
Name Investment Percentage
Power (1) Other (2) Total Owned (3)
Robert L. Hintz........ 10,400 10,400
Thomas H. Johnson...... 121,091 121,091
Andrew J. Kohut........ 67,983 5,863 73,846
William A. Raaths...... 59,990 1,180 61,170
John W. Rosenblum...... 5,000 5,000
Frank S. Royal......... 10,500 10,500
Robert F. Schick....... 24,403 24,403
Wallace Stettinius..... 10,000 10,000
Richard G. Tilghman.... 5,570 1,371 6,941
William T. Tolley...... 25,106 25,106
Joseph P. Viviano...... 19,774 3,000 22,774
Harry H. Warner........ 6,650 6,650
Hugh V. White, Jr. .... 1,000 12,400 13,400
All Directors, Nominees
for Director and Executive
Officers as a Group
(18 persons)........... 508,806 26,624 535,430 2.5%
FMR Corp.(4)
82 Devonshire Street
Boston, MA 02109.... 973,500 2,202,000 3,175,500 14.8
- - ---------------
(1) Includes shares held in fiduciary capacities and (a) an aggregate
150,151 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 53,200
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.
(4) As reported in a Form 13G, dated February 16, 1999, as of December 31,
1998, Fidelity Management & Research Company ("FMRC"), a subsidiary of FMR
Corp., beneficially owned 2,089,800 shares of Common Stock as a result of acting
as an investment advisor to several investment companies. The ownership of one
such investment company, Fidelity Value Fund, amounted to 1,171,400 shares of
Common Stock. Fidelity Management Trust Company ("Fidelity Management"), a
wholly-owned subsidiary of FMR Corp. and a bank as defined in Section 3(a)(6) of
the Securities Exchange Act of 1934, is the beneficial owner of 1,083,600 shares
of Common Stock. Edward C. Johnson 3d and FMR Corp., through its control of FMRC
and Fidelity Management, each has sole dispositive power over 3,173,400 shares
of Common Stock and sole power to vote or to direct the voting of 971,400 shares
of Common Stock.
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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 recommends salary levels for executive
officers, approves incentive awards for officers and administers the
Corporation's 1997 Incentive Plan. 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 the
Corporation's 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 industries, 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 1998 to be
fully deductible for income tax purposes, except that the deductibility of a
portion of the restricted stock awards granted to Mr. Johnson during 1998 will
depend upon his total compensation in the year such awards vest.
1998 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 the compensation
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, one of which is included in the S&P Midcap
400 Paper & Forest Products group used in the Stock Performance Graph. The MCS
Survey is used because it provides detailed compensation information by job
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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, a 5% increase in Mr. Johnson's salary in 1998. 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. Johnson's salary within that range, in addition to the considerations stated
above for executive officers generally, the Compensation Committee considered
the achievement of his stated individual goals, which primarily related to
achieving profitability, managing cash flow, operating safely in compliance with
applicable laws and the strategic direction of the Corporation, and the
Compensation Committee's subjective evaluation of his performance based on the
Corporation's financial performance. In evaluating the Corporation's financial
performance, several measures were reviewed, including earnings, earnings per
share ("EPS"), 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, EPS and cash
flow generated by operations. The Compensation Committee noted that the
Corporation's financial results for 1998 showed significant improvement over the
levels achieved in 1997 and were in line with the Corporation's 1998 business
plan. The Compensation Committee also concluded that Mr. Johnson's achievement
of his individual goals substantially met the Compensation Committee's
expectations. Mr. Johnson'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 approves annual
incentive awards to officers in the form of bonuses under the 1997 Incentive
Plan. For 1998, at the start of the year the Compensation Committee established
individual award guidelines based on (i) the Corporation's performance relative
to 1998 business plan EPS and 1998 business plan earnings before interest and
taxes ("EBIT") for each business unit, and (ii) the officer's performance
relative to his or her established individual goals. The Compensation Committee
also determined each officer's target award, ranging from 35% to 60% of such
officer's base salary, with the CEO having a 60% target award; actual awards
could range from 0% to 200% of each officer's target award depending on
performance relative to the award guidelines. If performance relative to the
award guidelines was exceeded, the Compensation Committee could, in its
discretion, award an additional amount to the officer. At the end of the year,
the Compensation Committee reviewed corporate, business unit and individual
performance and calculated the awards. The individual award guidelines
established at the beginning of the year for the CEO were based 75% on EPS and
25% on the achievement of stated individual goals. The incentive award for Mr.
Johnson was $349,790 for 1998, which was approximately 67% of his year-end base
salary, compared to an incentive award of approximately 21% of year-end base
salary for his five months' service in 1997. Mr. Johnson's incentive award was
based upon the Corporation's EPS for 1998 and the Compensation Committee's
subjective assessment of his performance against his stated individual goals
(which were identical to those discussed under the caption "Base Salaries"
above).
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 under the
1997 Incentive Plan. Individual grants are based on the Compensation Committee's
subjective review of individual performance and competitive data supplied by the
compensation consultant. The Compensation Committee first considers competitive
data supplied by the compensation 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 40 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
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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
compensation consultant's data to reflect 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 1998, the Compensation Committee granted options
to purchase an aggregate of 245,450 shares of Common Stock to the Corporation's
employees, including options to purchase 50,000 shares of Common Stock that were
granted to Mr. Johnson. In determining Mr. Johnson's option grant, 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 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.
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. In 1996
(or 1997, in the case of Mr. Johnson), the Compensation Committee granted
incentive award opportunities and performance shares to Chesapeake's officers
and other management employees for the 1996-2000 performance cycle. 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 will be earned when the
Common Stock price exceeds $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 in the event of a "change
in control" based on the price of the Common Stock. No awards were earned for
the 1996-2000 performance cycle during 1998.
During 1998, the Compensation Committee made a grant of restricted stock
to the Corporation's officers and other management employees for the 1998-2001
performance cycle. In order to receive these awards, the participants were
required to place shares of the Corporation's Common Stock owned by the
participant on deposit with the Corporation. At least one-half of such shares
were required to be newly acquired shares (except in the case of Mr. Johnson,
for whom all such shares were required to be newly acquired shares). For each
share of stock placed on deposit within the individual participant's grant
range, the participant received up to two shares of time-based restricted stock,
and up to one and one-half shares of performance-based restricted stock,
depending on the participant's position with the Corporation. The time-based
restricted stock vests in 25% installments at the end of each year from 1998 to
2001. The performance-based restricted stock will be earned any time after June
30, 1999, that the Corporation's return on equity ("ROE") over the prior five
(5) calendar quarters meets the goals set by the Compensation Committee at the
beginning of the 1998-2001 performance cycle. The restricted stock granted for
the 1998-2001 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") and, with respect to the
10
<PAGE>
time-based restricted stock, in the event of the death, disability or retirement
of the participant. Mr. Johnson placed 12,000 shares on deposit with the
Corporation and was granted 12,000 shares of time-based restricted stock and
9,000 shares of performance-based restricted stock.
Executive Compensation Committee
Wallace Stettinius, Chairman
William D. McCoy
Frank S. Royal
Richard Tilghman
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. Johnson
In connection with his employment in 1997 as President & CEO, the
Corporation entered into an Employment and Severance Benefits Agreement 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 provided for minimum annual
incentives of $100,000 for 1997 and $200,000 for 1998. 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). On July 31, 1998, the term of Mr. Johnson's agreement was
automatically extended through July 31, 2001.
Agreement with Mr. Schick
In anticipation of the sale of the Corporation's West Point, Virginia,
kraft products mill and four container plants, which was completed on May 23,
1997, the Corporation entered into an Employment and Severance Benefits
Agreement with Mr. Schick. In addition to providing incentives for Mr. Schick to
remain with the Corporation through the closing date of the sale, the agreement
provides for severance benefits payments to Mr. Schick should the Corporation
terminate his employment with the Corporation within two years following the
sale. In addition, the agreement provides that if Mr. Schick retires after two
years following the closing date of the sale, his retirement benefits will be
enhanced by adding five (5) years to his credited age and service under the
Corporation's retirement plans.
11
<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 Benefits Continuation Plan, the 1996 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 1996 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.
12
<PAGE>
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended December 31, 1996,
1997 and 1998, 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 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 Securities
Principal Position Annual Restricted Underlying All Other
as of Compen- Stock Options/ LTIP Compen-
December 31, 1998 Year Salary Bonus(1) sation(2) Awards(3) SARs Payouts(4) sation(5)
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas H. Johnson 1998 $512,500 $349,700 $18,251 $ 418,500 50,000 $ 0 $ 4,000
President & Chief 1997 208,333 106,600 31,735 1,350,000 50,000 0 52,159
Executive Officer
and
Director
(since August
1997)
William A. Raaths 1998 256,500 171,063 306,900 15,000 0 6,248
Executive Vice 1997 221,500 135,000 188,250 9,500 14,094 6,233
President - 1996 191,250 170,000 9,500 0 8,906
Tissue Products
William T. Tolley 1998 210,000 113,595 6,789 251,100 10,000 0 4,000
Senior Vice 1997 200,000 135,600 21,836 156,875 14,500 11,344 39,224
President - 1996 28,125 115,000 0 0
Finance
& Chief Financial
Officer (since
1996)
Andrew J. Kohut 1998 231,500 81,865 306,900 5,000 0 6,255
Senior Vice 1997 223,000 55,000 188,250 9,500 14,094 6,458
President - 1996 215,000 110,000 13,500 0 9,750
Strategic
Development
Robert F. Schick 1998 194,433 102,717 251,100 10,000 0 5,805
Senior Vice
President -
Containers (since
September 1998)
</TABLE>
- - --------------------
(1) The 1997 bonus amounts include special one time payments for Messrs.
Tolley and Kohut relating to the sale of the West Point mill and four packaging
plants.
(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 Awards column represent
the value of time-based restricted stock awards granted during 1998 and 1997
based on the closing price for the Company's Common Stock on the date of grant.
As of December 31, 1998, the number and value (based on the closing price of
$36.875 for the Common Stock on such date) of shares of restricted stock held by
the Named Executive Officers were as follows: Mr. Johnson, 58,000 shares,
$2,138,750; Mr. Raaths, 16,962 shares, $625,474; Mr. Tolley, 13,511 shares,
$498,218; Mr. Kohut, 16,692 shares, $625,474; and Mr. Schick, 10,985 shares,
$405,072. None of such shares will vest, in whole or in part, in less than three
years from the date of grant, except that (a) restricted stock awards in 1998
for 12,000 shares for Mr. Johnson, 8,800 shares each for Mr. Raaths and Mr.
Kohut, and 7,200 shares each for Mr. Tolley and Mr. Schick will vest in annual
installments over four years, and (b) such shares will vest 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.
(4) The amounts appearing in the LTIP Payouts column represent the value
of performance-based restricted stock and stock units earned in 1997 with
respect to the 1996-2000 performance cycle under the 1993 Incentive Plan. The
amounts are based on the closing price of $34.375 for the Common Stock on
December 31, 1997. No awards were earned in 1998 or 1996.
(5) "All Other Compensation" for 1998 includes the following: (a) the
Corporation's 50% matching contributions under the Corporation's 401(k) Savings
Plan for Salaried Employees of $4,000 for each of the Named Executive Officers;
and (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. Johnson, $0; Mr. Raaths, $2,248; Mr. Tolley, $0; Mr.
Kohut, $2,255; and Mr. Schick, $1,805.
13
<PAGE>
Stock Options and SARs
The following table contains information concerning the grants of options
and SARs made during 1998 under 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)
- - ------------------------------------------------------------- ------------------------------------
% 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> <C> <C> <C> <C> <C> <C>
Thomas H. Johnson 50,000 20.4% $38.45 8/9/08 $0 $1,209,000 $3,064,000
William A. Raaths 15,000 6.1 38.45 8/9/08 0 362,700 919,200
William T. Tolley 10,000 4.1 38.45 8/9/08 0 241,800 612,800
Andrew J. Kohut 5,000 2.0 38.45 8/9/08 0 120,900 306,400
Robert F. Schick 10,000 4.1 38.45 8/9/08 0 241,800 612,800
</TABLE>
- - --------------------
(1) The potential realizable value is based upon assumed future prices for
the Common Stock that are derived from the specified assumed rates of
appreciation. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the actual future performance of the Common Stock.
There can be no assurance that the amounts reflected in this table will be
achieved.
(2) All grants were nonqualified options 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 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 1998, 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> <C>
Resulting stock price based on $38.45 starting price $ 62.63 $ 99.73
Per share gain 24.18 61.28
Aggregate hypothetical gain that would be realized by
all stockholders (based on 21,385,668 shares
outstanding on August 10, 1998) 517,105,452 1,310,513,735
Aggregate hypothetical gain on options granted to the
Named Executive Officers if assumed prices are achieved 2,176,200 5,515,200
Hypothetical aggregate gains for the Named Executive
Officers as a percentage of all stockholders' gains 0.4% 0.4%
</TABLE>
14
<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 1998, and
unexercised options and SARs held by them on December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION/SAR VALUES
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs at
Options/SARs Year-End (1)
at
Year-End
Shares
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable(2) Unexercisable(2)
---- ----------- -------- ---------------- -----------------
Thomas H. Johnson 0 $ 0 16,666/83,334 $59,914/$119,836
William A. Raaths 0 0 26,099/24,390 244,358/61,563
William T. Tolley 0 0 4,832/19,668 19,920/39,857
Andrew J. Kohut 0 0 38,665/15,835 407,589/74,969
Robert F. Schick 3,700 63,623 6,899/13,401 49,243/18,671
- - --------------------
(1) The value of unexercised in-the-money options/SARs represents the
positive spread between the December 31, 1998, closing price of the Common Stock
($36.875) and the exercise price of any unexercised options and SARs.
(2) The shares represented could not be acquired by the Named Executive
Officer as of December 31, 1998, 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-based restricted stock made during 1998 under the 1997 Incentive
Plan to the Named Executive Officers for the 1998-2001 performance cycle.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<TABLE>
<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> <C> <C> <C> <C>
Thomas H. Johnson 9,000 shares 1998-2001 4,500 shares 9,000 shares 9,000 shares
William A. Raaths 6,600 shares 1998-2001 3,300 shares 6,600 shares 6,600 shares
William T. Tolley 5,400 shares 1998-2001 2,700 shares 5,400 shares 5,400 shares
Andrew J. Kohut 6,600 shares 1998-2001 3,300 shares 6,600 shares 6,600 shares
Robert F. Schick 5,400 shares 1998-2001 2,700 shares 5,400 shares 5,400 shares
</TABLE>
- - --------------------
(1) Awards consist of performance-based restricted stock granted under the
1997 Incentive Plan for the 1998-2001 performance cycle. The performance-based
restricted stock will be earned any time after June 30, 1999, that the
Corporation's ROE over the previous five (5) calendar quarters meets the goals
set by the Compensation Committee, with a portion of the restricted stock earned
when the Corporation's ROE exceeds a specified threshold amount, an additional
amount of restricted stock earned when the Corporation's ROE exceeds a specified
intermediate amount and the balance earned if the Corporation achieves 100% of
the specified goal. The performance-based restricted stock for the 1998-2001
cycle will be deemed to have been earned in full in the event of a "change in
control" of the Corporation (as defined in the 1997 Incentive Plan).
15
<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.
Estimated Annual Retirement Benefit at Age 65
-------------------------------------------------------
Years of Credited Service (2)
-------------------------------------------------------
Annual
Compensation (1) 15 20 25 30 35
---------------- --------- ----------- ---------- ---------- -----------
$ 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
- - -----------------
(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, 1999, were: Mr. Johnson, 1; Mr. Raaths, 19; Mr. Tolley, 2;
Mr. Kohut, 19; and Mr. Schick, 16 (Mr. Raaths has 13 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 Relationships and Related Transactions
During January 1999, in connection with the employment of Mr. Octavio Orta
as the Corporation's Executive Vice President -- Display and Packaging, the
Corporation unconditionally guaranteed the repayment of a third party loan to
Mr. Orta in the principal amount of $600,000. As of March 12, 1999, the loan was
current and the principal amount outstanding was $600,000.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is composed of Messrs. Stettinius (Chairman),
McCoy, Royal and Tilghman. No member of the Compensation Committee had
relationships, or engaged in transactions, with the Corporation during 1998
of the type required to be disclosed under the caption "Certain Relationships
and Related Transactions."
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's executive officers and directors, and persons who own more
than 10% of the Common Stock, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the SEC and the New York Stock Exchange.
Executive officers, directors and owners of more than 10% of the Common Stock
are required by regulation to furnish the Corporation with copies of all Forms
3, 4 and 5 they file.
Based solely on the Corporation's review of the copies of such forms it
has received and written representations from certain reporting persons who were
not required to file a Form 5 for 1998, the Corporation believes that all of its
executive officers, directors and owners of more than 10% of the Common Stock
complied with all Section 16(a) filing requirements applicable to them with
respect to transactions during 1998.
16
<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, 1993, and that all dividends were
reinvested.
5 Year Comparison: Chesapeake Corporation vs.
S&P Midcap 400 Index vs. S&P Midcap 400 Paper & Forest Index
[GRAPH]
(December 31st of each year)
'93 '94 '95 '96 '97 '98
Chesapeake Corporation 100 133 122 133 150 164
S&P Midcap 400 Index 100 96 126 150 199 237
S&P Midcap 400 Paper & Forest Index 100 98 116 119 128 127
17
<PAGE>
PROPOSAL TO AMEND THE 1997 INCENTIVE PLAN
(PROPOSAL 2)
The Corporation proposes that the stockholders approve amendments to the
1997 Incentive Plan (the "Plan Amendments"). The Plan Amendments were adopted by
the Board of Directors on February 17, 1999, subject to the approval of the
Corporation's stockholders.
The Plan Amendments are summarized in the following paragraphs. This
summary is subject, in all respects, to the terms of the 1997 Incentive Plan and
the text of the Plan Amendments, 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 and the Plan
Amendments 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.
Eligibility
Any employee of the Corporation or a related entity of the Corporation is
eligible to participate in the 1997 Incentive Plan if the Compensation Committee
or its delegate, as administrator of the 1997 Incentive Plan (as used in this
summary, 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 in the future. Awards
granted to (i) the Named Executive Officers, (ii) all current executive officers
as a group, (iii) all current non-executive directors as a group and (iv) all
employees as a group under the 1997 Incentive Plan would not have differed
during 1998 if the Plan Amendments had been in effect during such time.
Share Authorization
The Plan Amendments increase the maximum aggregate number of shares that
may be issued under the 1997 Incentive Plan by 1,000,000 shares, plus the number
of shares of Common Stock (i) forfeited or cashed out in connection with the
grant of SARs, stock awards, stock units or performance shares, (ii) surrendered
to satisfy income and withholding tax obligations under the 1997 Incentive Plan
or surrendered in payment of all or part of the option price of any option or
(iii) surrendered to satisfy income and withholding tax obligations under any
prior stock compensation plan maintained by the Corporation. The Plan Amendments
also provide that the maximum aggregate number of shares that may be issued
pursuant to the exercise of options granted on or after February 17, 1999, and
prior to February 11, 2007, is 1,400,000 shares.
In addition, the Plan Amendments modify the limit on the number of shares
that may be covered by performance share awards or issued pursuant to a stock
award, incentive award or the settlement of stock units. The 1997 Incentive Plan
currently provides that, in any calendar year, no more than 30 percent of the
maximum aggregate number of shares that may be issued under the 1997 Incentive
Plan may be covered or issued pursuant to such awards. The Plan Amendments
provide that, beginning in 1999 and during the remainder of the term of the 1997
Incentive Plan, no more than 40 percent of the maximum aggregate number of
shares that may be issued under the 1997 Incentive Plan may be covered by
performance share awards or issued pursuant to a stock award, incentive award or
the settlement of stock units.
Individual Limitations
The Plan Amendments provide that during any consecutive five-year period,
no individual may be granted or awarded (i) options, corresponding SARs and SARs
granted independently of options covering more than 500,000 shares of Common
Stock in the aggregate, or (ii) stock awards, performance shares, stock units or
an incentive award covering more than 500,000 shares of Common Stock in the
aggregate. The 1997 Incentive Plan currently limits such awards and grants to
100,000 shares of Common Stock annually.
18
<PAGE>
Plan Administration
The Plan Amendments limit the Administrator's right to accelerate the
vesting or exercisability of outstanding grants or awards, except in the case of
unusual or extraordinary circumstances (which may include, but are not limited
to, death, disability or retirement) as determined by the Compensation Committee
in its sole discretion. The 1997 Incentive Plan currently does not contain such
a limitation.
Awards
Foreign Alternatives. The Plan Amendments provide the Compensation
Committee with discretion to specify that grants and awards to any individual
who is employed outside of the United States or who is a foreign national may be
made on terms and conditions that are different from those currently specified
in the 1997 Incentive Plan and which are necessary and desirable to further the
1997 Incentive Plan's purposes.
Options. The Plan Amendments provide that the option price per share of
Common Stock purchased upon the exercise of any nonqualified stock option cannot
be less than 100% of the share's Fair Market Value (as defined below) on the
date the option is granted. The 1997 Incentive Plan currently permits
nonqualified stock options to be priced at 85% of the shares' Fair Market Value
on the date of grant.
Stock Awards. The Plan Amendments provide that the restrictions applicable
to shares granted in the form of a stock award must include a holding period of
at least three years or the attainment of performance objectives specified by
the Compensation Committee; provided, however, that such restrictions will not
apply in the case of a stock award granted in connection with the purchase of
Common Stock by the participant, with respect to stock awards issued in
settlement of a performance award, or for up to a total of 100,000 shares of
Common Stock covered by the grant of stock awards.
Fair Market Value. For purposes of grants and awards under the 1997
Incentive Plan and the Plan Amendments, the term "Fair Market Value" means, on
any given date, either of the following as determined by the Administrator: (i)
the closing price of a share of Common Stock on such date, as reported on the
New York Stock Exchange composite tape for such date, or, if the Common Stock
was not traded on the New York Stock Exchange on such date, on the next
preceding day that the Common Stock was traded on the New York Stock Exchange;
or (ii) the average of the closing price of a share of Common Stock on the 20
consecutive trading days immediately preceding and including the date of
determination, as reported on the New York Stock Exchange composite tape for
such dates, all as reported by such source as the Administrator may select;
provided, however, that with respect to an option that is an incentive stock
option or SAR related to an incentive stock option, Fair Market Value means the
closing price of a share of Common Stock on the date of grant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2 TO
---
APPROVE THE AMENDMENTS TO THE 1997 INCENTIVE PLAN.
19
<PAGE>
SELECTION OF AUDITORS
(PROPOSAL 3)
The Board of Directors has appointed PricewaterhouseCoopers LLP to serve
as independent certified public accountants of the Corporation and its
subsidiaries for 1999. Stockholders are requested to ratify this appointment.
Representatives of PricewaterhouseCoopers LLP 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 PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR 1999.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
Any proposal submitted by a stockholder for inclusion in the proxy
materials for the annual meeting of stockholders in 2000 must be delivered to
the Corporation at its principal office in Richmond, Virginia, not later than
November 24, 1999.
In addition to any other applicable requirements, for business to be
properly brought before the 2000 annual meeting by a stockholder, even if the
proposal is not to be included in the Corporation's proxy statement, the
Corporation's bylaws provide that the stockholder must give notice in writing to
the Secretary of the Corporation not later than January 19, 2000. As to each
such matter, the notice must contain (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (ii) the name, record address of, and
class, series and number of shares beneficially owned by, the stockholder
proposing such business and (iii) any material interest of the stockholder in
such business.
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 24, 1999
20
<PAGE>
NOTICE
and
PROXY STATEMENT
for the
ANNUAL MEETING
of
STOCKHOLDERS
To Be Held
April 28, 1999
[LOGO]
<PAGE>
PROXY PROXY
CHESAPEAKE CORPORATION
RICHMOND, VIRGINIA 23218
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders, April 28, 1999
The undersigned hereby appoints Thomas H. Johnson, 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
12, 1999, at the annual meeting of stockholders to be held at 10:00 a.m. on
April 28, 1999, or any adjournments thereof.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued on reverse side.)
Detach Admittance Card Before Mailing Proxy
[LOGO] Chesapeake
ADMITTANCE CARD
ANNUAL STOCKHOLDERS MEETING
APRIL 28, 1999, 10:00 A.M.
(Light refreshments will be available before the meeting)
AUDITORIUM, 4TH FLOOR
CRESTAR BANK, 9TH & MAIN STREETS
RICHMOND, VIRGINIA
Please present this card at the door to gain admittance.
<PAGE>
CHESAPEAKE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. ELECTION OF THREE DIRECTORS FOR A THREE-YEAR TERM: For All
Class I (to serve until the 2002 annual meeting of For Withhold Except
stockholders) [ ] [ ] [ ]
Nominees:01-John W. Rosenblum, 02-Richard G. Tilghman
and 03-Hugh V. White, Jr.
_____________________________________________________
(Except nominees written above)
2. To approve amendments to the Chesapeake Corporation For Against Abstain
1997 Incentive Plan. [ ] [ ] [ ]
3. To ratify the appointment of For Against Abstain
PricewaterhouseCoopers LLP as independent [ ] [ ] [ ]
accountants for 1999.
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.
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: _________________________________________, 1999
Signature(s) ___________________________________________________________________
________________________________________________________________________________
Please sign exactly as your name appears. Joint owners should each sign
personally. Where applicable, indicate your official position or representative
capacity.
^ FOLD AND DETACH HERE ^
CONTROL NUMBER
_______________
VOTE BY TELEPHONE
QUICK * * * EASY * * * IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed and returned your proxy card.
o There is NO CHARGE for this call.
o On a touch tone telephone call TOLL FREE 1-877-587-0758 24 hours a day--7 days
a week.
o You will be asked to enter a Control Number which is located in the box on the
middle-left of this form.
OPTION #1: To vote as the Board of Directors recommends on ALL proposals:
Press 1.
Your vote will be confirmed and cast as you directed. END OF CALL.
OPTION #2: To vote on each proposal separately, press 0. You will hear these
instructions:
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9; To WITHHOLD FOR AN INDIVIDUAL nominee, press 0. If you press 0, enter
the two digit number that precedes the nominee(s) for whom you withhold your
vote; then press 0 again.
Proposals 2 and 3: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Your vote will be confirmed and cast as you directed. END OF CALL.
If you vote by telephone, there is no need for you to return your proxy.
THANK YOU FOR VOTING!
<PAGE>
[LOGO] CHESAPEAKE March 24, 1999
Dear Plan Participant:
The instruction card to vote your Chesapeake Corporation common stock
held in the St. Laurent Paperboard (U.S.) 401(k) Savings Plan (the "Plan") is on
the lower portion of this page. It is important that you instruct the trustee to
vote your shares held in the Plan by completing the instruction card below and
returning it to The Bank of New York.
As a participant in the Plan, 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 28,
1999, at 10:00 A.M. If you plan to attend the meeting and have not otherwise
requested an admittance card, you may request an admittance card by contacting
our corporate office in Richmond at (804) 697-1000.
Sincerely,
J.P. Causey Jr.
Secretary
<PAGE>
DETACH PROXY CARD HERE
<TABLE>
<CAPTION>
[ ]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING PROPOSALS:
<S> <C> <C> <C>
(1)Election of three FOR all [ ] WITHHOLD AUTHORITY [ ] *EXCEPTIONS [ ]
directors for a three nominees to vote
year term. Class 1 (to listed for all nominees
serve until the 2002 below. listed below.
annual meeting of
stockholders):
Nominees: John W. Rosenblum, Richard G. Tilghman and Hugh V. White, Jr.
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE
"EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
Exceptions __________________________________________________________________
(2) To approve amendments to the Chesapeake Corporation 1997 Incentive (3) To ratify the appointment of PricewaterhouseCoopers
Plan. LLP as Independent Accountants for 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4)In their discretion, the proxies are authorized to vote upon such other
business and matters incident to the conduct of the meeting as may properly
come before the meeting and any adjournments.
ADDRESS CHANGE AND
OR COMMENTS MARK HERE
Please sign exactly as name is
printed to the left
Dated: ________________________________, 1999
______________________________________________
______________________________________________
</TABLE>
<PAGE>
TO: THE BANK OF NEW YORK
Trustee of 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 Fund of 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)
CHESAPEAKE CORPORATION
P.O. BOX 11248
NEW YORK, N.Y. 10203-0248
<PAGE>
[LOGO] CHESAPEAKE March 24, 1999
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 or
the Chesapeake Packaging Co. 401(k) Savings Plan for Hourly Employees (the
"Plans") is on the lower portion of this page. It is important that you instruct
the trustee to vote your shares held in the Plans by completing the instruction
card below and returning it to The Bank of New York.
As a participant in the Plans, you are entitled to attend the annual
meeting of stockholders of Chesapeake Corporation to be held in the auditorium
of Crestar Bank, 9th & Main Streets, Richmond, Virginia, on Wednesday, April 28,
1999, at 10:00 A.M. If you plan to attend the meeting and have not otherwise
requested an admittance card, you may request an admittance card by contacting
our corporate office in Richmond at (804) 697-1000.
Sincerely,
J.P. Causey Jr.
Secretary
<PAGE>
DETACH PROXY CARD HERE
<TABLE>
<CAPTION>
[ ]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING PROPOSALS:
<S> <C> <C> <C>
(1)Election of three FOR all [ ] WITHHOLD AUTHORITY [ ] *EXCEPTIONS [ ]
directors for a three nominees to vote
year term. Class 1 (to listed for all nominees
serve until the 2002 below. listed below.
annual meeting of
stockholders):
Nominees: John W. Rosenblum, Richard G. Tilghman and Hugh V. White, Jr.
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE
"EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
Exceptions
---------------------------------------------------------------------
(2) To approve amendments to the Chesapeake Corporation 1997 Incentive (3) To ratify the appointment of PricewaterhouseCoopers LLP
Plan. as Independent Accountants for 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4)In their discretion, the proxies are authorized to vote upon such other
business and matters incident to the conduct of the meeting as may properly
come before the meeting and any adjournments.
ADDRESS CHANGE AND
OR COMMENTS MARK HERE
Please sign exactly as name is
printed to the left
Dated: _________________________, 1999
_______________________________________
_______________________________________
</TABLE>
<PAGE>
TO: THE BANK OF NEW YORK
Trustee of the Chesapeake Corporation 401(k) Savings
Plan for Salaried Employees and the Chesapeake Packaging Co.
401(k) Savings 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 and
the Chesapeake Packaging Co. 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 on the reverse.
PLEASE SIGN AND DATE ON THE REVERSE
(Continued on the reverse side)
CHESAPEAKE CORPORATION
P.O. BOX 11241
NEW YORK, N.Y. 10203-0241
<PAGE>
[LOGO] Chesapeake
March 24, 1999
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 28, 1999. 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 26, 1999. 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 26, 1999. 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 28, 1999, 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,
/s/ J.P. Causey Jr.
J.P. Causey Jr.
Secretary
NOTE: PLEASE MARK THE ENCLOSED VOTING INSTRUCTIONS AND MAIL TO ASSOCIATED
BANK IN THE ENVELOPE PROVIDED.
<PAGE>
VOTING INSTRUCTIONS
[LOGO]
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 I (to serve until
the 2002 annual meeting of stockholders): John W. Rosenblum,
Richard G. Tilghman and Hugh V. White, Jr.
[ ] FOR [ ] WITHHOLD [ ] EXCEPTIONS: Withhold vote
all nominees vote for on the
listed above all nominees following nominee(s) only
--------------------------
(2) To approve amendments to the Chesapeake Corporation 1997 Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants for 1999.
[ ] 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 _____________________, 1999
PLEASE MAIL THESE INSTRUCTIONS IN THE ENCLOSED ENVELOPE TO ASSOCIATED BANK
<PAGE>
[CHESAPEAKE CORPORATION LETTERHEAD]
April 12, 1999
A REMINDER
----------
Dear Stockholder:
Proxy material for the annual meeting of stockholders of Chesapeake
Corporation was sent to you under date of March 24, 1999.
According to our records, your proxy for this meeting, which will be
held on Wednesday, April 28, 1999, 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 or telephoned your
vote, or if you did so more than a week ago, I urge you to promptly sign, date
and mail the enclosed duplicate card or telephone the proxy voting number shown
on your proxy card to vote your shares.
Sincerely,
/s/ J.P. Causey Jr.
J. P. Causey Jr.
Secretary
kmh
Enclosure
